EVALUATION OF INVESTMENT IN IOT STARTUP AT PT TMI

• Main Author: Hermawan, Wiwit
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/48715
• Institution: Institut Teknologi Bandung

Smartphone revolution, rise of OTT (Over the Top) technology, and growth of mobile application drive explosion in data demand and erosion of legacy service, which voice and SMS (Short Messaging Service) revenue. It forces mobile telecommunication operators to explore new revenue sources through new business development by taking the opportunity across technology, media, and telecommunication (TMT). Telkomsel Mitra Inovasi (TMI), Telkomsel Corporate Venture Capital (CVC) who conducts non-organic business development through investment in an early-stage startup from TMT sectors. In January 2020, TMI invested in Internet of Things (IoT) startup at series B1 funding. The investment evaluation utilizes two factors which capital gain and incremental revenue to existing Telkomsel business. As uncertainty in financial return on high-risk investment in a new startup company, and it is also beyond TMI’s control, so this final project utilizes an incremental revenue approach for investment evaluation. However, existing Telkomsel IoT provides smart connectivity services to its subscribers, and connectivity will become increasingly commoditized, declining from 9% of total IoT revenue in 2018 to 5% in 2025. Consequently, Telkomsel IoT should expand its role to seize the incremental revenue opportunities. This final project is intended to predict an expected financial return after capturing possible risk investment assumptions for sound management decisions. Analysis of the business situation uses the PESTEL framework for the external environment, the Porter Five Forces framework for industry analysis, SWOT and VRIO framework for internal and capability analysis, and Five Major Elements of Strategy and Business Model Canvas for business strategy analysis. Projection incremental revenue utilizes a discounted cash flow (DCF) method. Based on the projection result, the investment enhances the service line of Telkomsel IoT beyond the connectivity provider. Funded IoT startup supports creating new incremental business through delivering new service in the Professional Service and Application, Platform, and Services areas. With a discount rate of 18% and a perpetuity growth of 0.1%, the new incremental business has NPV of IDR 69.38 billion with Terminal Value at the end of projection period of IDR 110.01 billion and IRR of 43.77%. The investment will experience a break-even point when it reaches about three years and eight months. With this, TMI can start a new investment to fulfill market needs.