Hengky Setiawan has built Telesindo into the top seller of
prepaid phone cards. Now he’s preparing for the next stage of growth as a
soon-to-be listed company.
Hengky Setiawan. © Ahmad Zamroni/Forbes Indonesia
Hengky
Setiawan’s face smiles down from billboards promoting his Telesindo
company and its signature TiPhone in more than 200 billboards across
Indonesia. Print ads also use his image. “At first, the decision to use
myself as a model was merely to save money but then I got used to it,”
says Hengky, the founder and owner of Telesindo.
Hengky’s
unabashed promotion of himself and his company is part of his success in
building Telesindo group from a single, two-square meter stall selling
prepaid phone cards in 1992 into a diversified group focused on cell
phones with an expected Rp 6 trillion-plus in revenues this year and
profits of Rp 200 billion. By far the largest part of the group is the
stores selling prepaid cards under PT Telesindo Shop and PT Excel Utama
Indonesia, which produce 90% of revenues.
These shops are the
biggest distributor of prepaid phone cards in Indonesia, and the largest
seller for market leader PT Telekomunikasi Selular (Telkomsel). “We
have more than a 10% market share in prepaid cards for Telkomsel. The
opportunity for us is huge,” says Hengky, 42. He also sells cards from
Indosat and XL Axiata, a business that is managed by his younger brother
Ferry Setiawan.
The two other businesses that make up the
remaining 10% are the cellular phone distributor PT TiPhone Mobile
Indonesia, selling major brands such Samsung, Apple and BlackBerry, and
his own brand TiPhone. Then there’s the content developer PT Setia Utama
Media Aplikasi.
While Telesindo’s growth has been rapid so far,
Hengky is aiming to go to the next stage with a number of major
initiatives. First off, he is planning to double the number of retail
shops to 1,000 and add 50% more resellers, to 300,000, by next year. To
boost sales of the TiPhone, he aims to grow the number of service
centers to 142 from today’s 50.
All this expansion requires funds,
and the second major step underway is a public listing to raise the
money later this year. The first to list will be Tiphone Mobile
Indonesia. He plans to sell 40% of this firm (now owned 100% by himself
and family members) for a reported Rp 900 billion, valuing the company
at Rp 2.3 trillion. The valuation seems conservative—a similar company
in the same industry is the listed PT Trikomsel Oke, which last year had
similar revenues of Rp 5.5 trillion and Rp 204 billion profits. It
sells at about 14 times earnings, or a market capitalization of Rp 3.4
trillion, as of late September. Hengky has selected Sinarmas Sekuritas
as the lead underwriter.
In order to expand, Hengky is also
looking to move beyond cell phones. He sells an e-book reader, named
James, after his first son, and a “TiPad” tablet named Justin, after his
second son. He also has a suite of services and an Internet service.
All come with the prefix of “T,” such as T-Internet Service, T-Mail and
T-Messenger, available in various packages starting as low as Rp 5,000 a
day. “We can not sell the TiPhone as a standalone product. It has to be
a package of voice and data services since 70% of people now use their
cell phone to access data and Internet,” says Chief Operation Officer
Telesindo Lily Salim. As the Indonesian market reaches saturation point,
all telecom firms will look to sell more value-added services over
their phones rather than rely on new phone sales for growth. He also
wants to morph his Telesindo shops from selling primarily phones into
one selling a wide range of electronic gear.
Hengky Setiawan. © Ahmad Zamroni/Forbes Indonesia
Hengky
has long had a knack for technology and business. His father had a
business selling cars out of small showroom in Pontianak (Hengky also
has a side business selling cars, mostly top-end brands such as Ferrari
or Mercedes-Benz). While in college, young Hengky worked as a Mitsubishi
spare parts courier for Istana Motor in Jakarta. He got his start in
phones in 1989. He borrowed Rp 5 million from his boss at Istana Motor
to buy a used Motorola mobile phone. To make it look newer, he repainted
the outside of the phone, taking out a newspaper ad and finally selling
it for Rp 6.5 million. With the profits on the sale, he became hooked,
buying and selling mostly used phones through newspaper ads.
When
GSM phones were first introduced in 1994, PT Satelit Palapa Indonesia
(Satelindo) was the first operator to adopt the technology. Hengky took
part by acting as a dealer for Satelindo. Later the operator, which was
linked to the family of then President Suharto, failed to pay some
commission on sales. That lack of funds pushed him to declare
bankcruptcy. Fortunately, Hengky was able to switch to being a dealer
for Telkomsel, which entered the cell phone market in 1995 (Satelindo
was eventually absorbed into PT Indosat). After Singapore Telecom
acquired a 35% stake in Telkomsel in 2002 he gained a reputation as a
doer—someone able to meet the aggressive growth targets set by SingTel.
As
competition rose in the market, operators started to ask their dealers
for exclusivity agreements. Telesindo became a victim when Indosat ended
its contract in 2004. Ferry Setiawan took over the Telesindo business
with XL Axiata, and developed his own company, PT Excel Utama
Indonesia.Ferry was able to develop the company into the largest prepaid
card distributor for the second largest operator in the country. “Back
then, I think it was a gamble for Hengky to choose which operator to
continue the business with. But he’s a good gambler and he chose the
right operator. Telkomsel now is the market leader,” says Iwan Setiawan,
Chief Operating Officer at MarkPlus Consulting.
Even though
dealers can pocket at least Rp 1,000 for every prepaid card they sell,
the dealer does better on selling new sim cards. Therefore, Telesindo
pushes its 2,000 salesmen to make as much profit as possible for the
company through selling new sim cards. On the prepaid business, Hengky
says he could book up to an 8% gross profit since the prepaid business
in pretty stable, increasing 15% per annum. “Its just like gasoline,
every driver needs it,” says Hengky. To keep his market share high, he
often acquires smaller dealers to expand his own network.
The next
evolution came in 2009, when Chinese-made phones started to flood the
market with their low prices but reasonably good quality. Hengky took
advantage of the availability of these phones to make his own branded
Chinese-made phone, the TiPhone. The TiPhone hit a sweet spot in the
market. Many wanted a stylish, feature-packed phone even if they
couldn’t afford a top branded phone such as a BlackBerry. Thus Hengky
came along and offered them various TiPhones, packed with features but
priced to sell. “The best selling TiPhones are within the price range of
Rp 250,000 to 750,000 per unit. The cheaper the price, the more we can
sell. The market is just like a pyramid, the mass is at the bottom,”
says Hengky. Now he sells 100,000 TiPhones per month.
With the
company growing larger, Hengky has had to learn to delegate, and has
been bringing more professionals to help him manage the group. “He is no
longer a one man show. It is good for someone at his age. Not to
mention that his four sons are still too small to join the company [the
oldest is 11 years],” says Alie Cendrawan, who is also the chairman of
the cell phone importers and businessmen association, and often done
business with Telesindo.
He is also investing in the staff. During
the year, Telesindo conducts training meetings for 200 managers from
across the country every quarter, and another training session for all
resellers twice a year. The meetings are meant to provide networking
opportunities, promote team spirit and explain company strategy and
targets. He tries to inspire them with talks given by notable
motivational speakers such as James Gwee or
Forbes Indonesia
columnist Hermawan Kartajaya. The meetings also feature award ceremonies
where top performers receive recognition and rewards. On the flip side,
Telesindo will also weed out the worst performers in the group, thus
ensuring a high productivity and growth for the group as a whole.
One
irony of Hengky’s career is his use of cell phones. Despite selling
sophisticated smartphones, he admits that most of the time he only has
time to use his own phones (two of them) for calls and SMS.
BRAND BUILDER
To
sell its cards, Hengky’s Telesindo brand needs widespread recognition
in a mass market, and thus any publicity is good publicity, whether paid
or from outlets such as press coverage or an event. Hengky is proud of
his various awards, such a recent “lifetime achievement” award that
recognizes his work but he also is aware that such awards can also help
build recognition and value of his Telesindo brand. Even real estate can
help brand. Hengky already owns a four-story facing busy Jalan Hayam
Wuruk, painted bright red, complete with a luxury car showroom on the
ground floor. Across the street, he will make Telesindo even more
visible, with a new 16-story building going up soon, dubbed the
Telesindo Tower.
LARGER THAN LIFE
Hengky Setiawan. © Ahmad Zamroni/Forbes Indonesia
With
his success, Hengky likes to live large. He recently purchased a corner
lot home—complete with an elevator—in the exclusive Pantai Mutiara
gated community with a view of the newly constructed Regatta complex.
The four-story house has been expanded and renovated from its original
design. He can swim in his pool or soak in a Jacuzzi in the backyard or
easily drive one of several speedboats or other boats tied to his
private dock. To add to the list he counts a yacht and even private
islands among his playthings.
His car collection is especially
impressive. He owns 73 Mercedes-Benzs including one each of every model
year going back decades. He is especially proud of 2011 SLS AMG gull
wing, complete with the carbon fiber aero kit option and custom painted
in the factory with an identical silver gray of the original
Mercedes-Benz 300SL. His non-Mercedes collection includes a Roll Royce
Phantom, and a red Ferrari Enzo among others. Despite his huge house, he
doesn’t have enough space to park all his cars in the garage, so they
are lined up along the road in front of his house, even parked in the
field across from it. Some are put in Telesindo’s headquarter and a
garage lot in Bandung. “I will put them all into my new 16-story office
tower,” he says. With the Jakarta’s traffic jam he doesn’t ride them all
one by one. He only uses a white Lexus for daily ride to work. He also
enjoys motorbike riding. He own two Harley Davidsons and has been to
visit the famous annual motorcycle gathering in Sturgis, South Dakota.
He also has dozens of vintage Vespas in his bike collection.
He is
also fond of collecting smaller items as well, such as golf balls,
refrigerator magnets, ashtrays, model Mercedes Benz cars and especially
anything in the form of a rooster, his Chinese astrological symbol. Many
of them can be found in his office on the top floor of his
headquarters, where he also has a mini golf course set up, complete with
artificial grass.
* This story appears as the cover story on
October 2011 issue of Forbes Indonesia magazine. All photos in this
article made by Ahmad Zamroni/Forbes Indonesia.
