Axiata slashes costs to forge path to platform player

Malaysian-based Axiata has halved its network costs in the last two years. And, as impressive as that sounds, the carrier is remaining focused on bringing costs down as it is still struggling to keep pace with falling ARPU.

But the bigger picture is the low unit cost, the starting point for the company's evolution to a digital platform provider.

That was the message from Thomas Hundt, chief strategy and technology officer, as he set out Axiata's digital road map at the Huawei mobile broadband event in Bangkok this week.

Axiata is one of the largest operator groups in Asia, with 163 million customers in 11 countries including Malaysia and Indonesia.

Figure 1: Axiata halves unit cost and revamps IT system as it evolves to becoming a platform play.
(Source: mkjr_ on Unsplash)

Hundt said Axiata's problem, and the industry's problem, is the ever-growing "data hunger" of mobile users.

Two years ago, senior executives had set an ambitious target – reduce the unit production cost to 10 cents per gigabyte. "Because we can't afford any higher," Hundt said.

The initial cost was 35 cents in 2020. Last year, it was 25 cents and this year the company has hit the 18-cent mark.

The improvements that have helped squeeze out cost include improved spectrum efficiency, 3G shutdowns, virtualization, distributed network architecture, lean and autonomous operations, open networks, procurement harmonization and green energy programs.

Capex tsunami

"Literally every year [has been] a significant decline, which is fantastic, but at the same time the yields are declining as well. ARPU is flat, but traffic is going through the roof.

"That's something we will have to address further through structural transformation," Hundt said.

But in addition to the falling margins, Axiata also has to deal with a "very, very challenging capex tsunami."

The company came to realize not only was there no long-term future for just connectivity, but that the assets created by this heavy investment "are eventually utilized better if we share and collaborate with the industry and partners."

The result is it aspires to become a platform company but that also means acquiring tech company capabilities. To do that, it has restructured its old IT system into a standardized digital stack and has developed an open source platform that supports microservices and open APIs.

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"It is enabling exactly the platform play that we believe goes towards this model," said Hundt.

He says Axiata is now evolving from a traditional CSP towards being both a platform play and a digital CSP.

"We believe that this low-cost bit factory and the IT transformation that we have gone through is enabling us to make those steps."

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— Robert Clark, contributing editor, special to Light Reading