Infrastructure Spin-off Decision in the Telecommunication Company: Project Valuation and AHP Analysis

Abstract

The telecommunication industry faced a negative headwind due to the emergence of OTT (over the top) services, resulting in lower service prices, limited network-based services, and increased network capex. This led to a scissor effect, with significant growth in capex and stagnant revenue growth. In Indonesia, telco operators attempted to enter the digital economy market but failed to increase revenue. To address this, European operators spun off the service telecommunication company (ServeCo) and the telecommunications network provider company (InfraCo, NetCo, and FiberCo), a strategy in the consolidation of the telecommunications industry. The largest telecommunications company in Indonesia is currently conducting a diversification strategy review to encourage growth by leveraging its market leadership in the FTTH (Fiber to the Home) business. This study calculates the business potential and valuation of each potential scenario implemented by Telkom using DCF and conducts a decision analysis using the AHP method to determine the most appropriate scenario. After calculating the projections and valuation, the authors conduct interviews with experts to weigh each criteria required and targeted by Telkom for analysis using AHP.