Axiata shows the way to network transformation in low-ARPU markets

Any network transformation demands a heady mix of ambition, strategic vision, operational rigor, leadership, new technology and fresh skills. But in very low-ARPU markets it also calls for a large dose of pragmatism, as Thomas Hundt, Group Chief Strategy & Technology Officer, Axiata Group Berhad, discusses in an interview with Inform.

Operating in markets where ARPU (average revenue per user) typically ranges from $2 to $4 means Axiata has “limited capex and opex envelopes, and raising efficiency is, obviously, tremendously more important than [in] other markets,” says Hundt.

“Take for example Indonesia or Cambodia. We have 20 plus gigabytes of mobile data per user, closer to 30. That is at least twice, probably three times, the data consumption for an operator in Europe, and [they are] … commanding probably 10x ARPU. But the vendors are not giving us any discounts just because we have lower ARPU,” explains Hundt.

Unsurprisingly, therefore, he has prioritized improving network operational efficiency through automation, while takin g a practical approach to network sharing and Open RAN (radio access network).

Delayering as a strategy

At the same, Hundt is working to ensure Axiata’s future networks can support the company’s business strategy.

“We are very actively considering delayering as a concept as part of our telco-techco transformation [with the aim of creating] netcos,” he explains. “It can be a mobile network, it can be fixed.”

Hundt adds: “The netco concept is very much part of an interim, or permanent, step of delayering.”

One example of a netco model is Axiata’s Indonesian ISP, Link Net. “It will become a pure, in future open market, fiber play and [we are] keeping it separate from our mobile or … future converged operator XL Axiata, which will inherit all of Link Net’s fixed customers.”

When it comes to delayering, Axiata has so far retained majority control of its tower company, which is one of the world’s largest.

“In Asia we have been ahead of the curve by creating EDOTCO as a tower company,” says Hundt. Established in 2012, and 63% owned by Axiata, EDOTCO operates more than 58,000 towers across Malaysia, Bangladesh, Philippines, Indonesia, Cambodia, Pakistan, Sri Lanka, Laos and Myanmar, although it is reported to be selling the latter due to challenging local conditions.

5G network sharing

Axiata has yet to roll out 5G networks in most of the countries in which it operates. The exception is Malaysia, where the government is building and managing a national 5G wholesale network for use by existing 4G operators, including CelcomDigi in which Axiata has an 33% stake, following the merger in late 2022 between Axiata’s Celcom and Telenor’s Digi.

Hundt believes 5G network sharing will be essential in other markets, too, albeit using different models to the one deployed in Malaysia.

“Sharing is, I think, a factor of survival. It's not just a nice to have,” Hundt says.

One reason is the competitive landscape.

“In Indonesia you have … a market leader which is government owned and has 50% of the market. And the others have the other 50%,” Hundt explains. “In Bangladesh, it is relatively similar: a market leader has 50% market share, and there are three other operators having the other 50%. So those constellations, by logic, need to reconfigure.”

Indeed, Axiata is helping reconfigure the Sri Lankan market, where it is acquiring Bharti Airtel’s subsidiary, Airtel Lanka.

Another challenge is the sheer size of investment needed to build out 5G networks beyond a few urban hotspots. Not only do low ARPUs equate to a low return, a lack of 5G devices and the means to buy them dampen consumer appetite for services: Hundt points to 5G device penetration of between 3% to 5% in several markets.

Market conditions are also shaping 5G network choices. Axiata has transferred some network functions to the cloud, and the “5G core is very actively considered to go cloud native,” according Hundt. Nonetheless, Axiata will not leapfrog 5G non-standalone.

“Should you in 2024 go straight to 5G standalone (SA)? The device ecosystem is problematic and so is coverage at the WAN,” explains Hundt. As a result, “starting only with SA is not an option. So, it is hybrid SA simply for the fact that the coverage is not homogeneous enough,” he says.

Automating network operations

In the meantime, Hundt’s teams are busy automating network operations as they look to increase efficiency and reduce costs.

‘We're focusing very much on the operations side … starting with a virtual NOC [network operations center], our fault management and anomaly detection, going obviously into the field management and self-optimization, self-healing, and advancing on the lifecycle of the network management,” says Hundt.

In the interest of efficiency and cost, he is spreading the work of testing and implementing dozens of automation use cases across Axiata’s different operating companies.

“Opcos are advancing on use cases, which can be replicated … so that not every opco has to go through the same learning,” says Hundt, adding that the company “is being helped through the use of TM Forum assets, including the Open Digital Architecture and the Autonomous Networks Framework.

Open RAN as a tool

Where Axiata is changing track is in the adoption of Open RAN, having been an early pioneer in conducting commercial trails of the technology with multiple vendors.

Hundt still describes Open RAN as “obviously a good alternative when it comes to building future networks,” and he values the leverage it gives telcos in their relationships with major vendors.

However, unlike operators in the US or Europe, Axiata faces no pressure to rip out Huawei equipment. Nor can the company “afford our own super heavy R&D laboratory,” says Hundt.

“What we are doing it is straight live in the network … we don’t have the time to experiment,” he adds. As a result “O-RAN has to stand on its own in terms of technology, capability … costs – as well as, opening up and [enabling] … integrated networks. And the maturity has to be there,” says Hundt.

Not only has Open-RAN lacked maturity, but a multi-vendor deployment also typically requires substantial systems integration, while blurring responsibility if things go wrong.

“If a drama happens in the network, whom to call? In an O-RAN scenario you have to deal with a lot more players, and I don't think it is ideal,” says Hundt. “At the end of the day, you're fragmenting your purchase power. You're missing the scale. That doesn't make any sense to us.”

Instead “O-RAN is a tool to get to open networks, which at the end of day will be heavily dominated by the tier-one [vendors] but in an O-RAN combined architecture,” Hundt predicts. “So, credit to those pioneers that have moved the needle on the Nokia and Ericsson side. And to AT&T, which has muscles. These are muscles which are changing the industry. And it is great for all of us.”

Network transformation will be one of the hot topics under discussion at TM Forum's DTW24 – Ignite in Copenhagen, June 18-20.