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top retailer in indonesia, modi maybe keen
Hengky Setiawan: Ringing in a $40 Million Fortune
Written by Administrator Thursday, 04 March 2010 00:00
A Rags to Riches Story to Warm the Heart. March 2010 edition of GlobeAsia out now, Get your copy at newsstands.
Call voucher king
Hengky Setiawan works hard to help build a fortune for Indonesia’s top-ranked cellular provider. In the process, he earns a lot of money.
For many successful businessmen, having a private chauffeur is both a status symbol and a part of the required lifestyle. Entrepreneur Hengky Setiawan, on the other hand, sits behind the wheel negotiating Jakarta’s heavy traffic whether he’s driving a Ferrari or Lexus SUV.
“He won't have a private chauffeur until he can find someone who drives as fast as he does," says a business associate.
Hengky not only tackles the road with speed but the business circuit as well, expanding the retail network of Telesindo Shop. He is the sole owner of a business that distributes mobile phone vouchers for the country’s largest cellular phone operator, PT Telkomsel, 65% controlled by state-owned PT Telkom and 35% by Singapore Telecom Mobile Pte Ltd (Singtel).
Telkomsel controls a huge chunk of the industry, owning half of the cellular telecommunication services market in the country and dealing with more than 72 million customers. The remainder of the market is divided among PT Indosat, PT XL Axiata, and smaller players.
Hengky has no intention of taking second place, and aims to double the number of shops this year by expanding into other areas of the retail business. “We are now ready to shift to a higher gear,” says the 40-year-old president and founding owner of Telesindo Shop, which currently owns 500 outlets and employs more than 3,000 employees. In addition, 70,000 phone voucher resellers work for Telesindo, scattered across the country from Sabang in Aceh to Merauke in Papua.
He declines to reveal the company’s sale figures for now as he is preparing to take the company public in an IPO expected to take place in the second half of the year to raise funds for an expansion drive.
Expansion is by no means essential for Hengky, since the young entrepreneur with a taste for expensive toys has already made a fortune just from selling phone vouchers.
GlobeAsia estimates the market value of Telesindo to be about $40 million. Hengky’s own share of that has paid for more than 20 classic Mercedes Benz, a Rolls Royce, other expensive cars, a premium BMW Ultra Stream motorbike and a yacht.
Hard work ethic
A combination of hard work, focus and luck have been Hengky’s recipe for success in building his business. None of it would have been possible without a lesson on the value of hard work administered by his father, who owned a small car showroom in Jakarta.
While other school children would normally play after school or go on vacation during holidays, Hengky had to work two to three hours every day after school to earn pocket money. He would run errands for neighbors, work at shops near his house, or help in a small garment workshop owned by his uncle.
“Since childhood, I have been drilled to work hard, to have initiative and not to be lazy. My mind was forced to work on how to make money,” Hengky muses. He admits that working after school affected his studies because he was already too tired to do homework, but he harbors no regrets.
“Education at school only provides us with the basics and not many of the subjects I studied at university have been useful in real life. It’s experience that makes us smarter and forces us to innovate,” says Hengky.
“Just look at the big tycoons like Eka Tjipta Widjaja (founding owner of the Sinar Mas Group) and Sudono Salim (founding owner of the Salim Group): they didn’t have a proper education.”
Those who have been following Hengky’s entrepreneurial life admire his hard work. “Hengky is a very hard working and tough businessman,” says Jahja Setiaatmadja, vice president of BCA, the country’s third largest bank by assets, which has been providing financial support for Telesindo.
After his years in business, Hengky’s energy and passion for hard work show no signs of subsiding. David Tirta Widjaja, retail director of Telesindo Shop, recalls that when the company first launched its own cell phone brand, the TI-phone, in September last year, the demand proved much greater than the 2,000 units anticipated by the company.
Hengky, who led the launch, told customers to come to the company’s headquarters in the Sawah Besar business district area of Central Jakarta the next day to collect the phones, which were still waiting for customs clearance at Tanjung Priok Port. To ensure his customers were comfortable while they waited, Hengky instructed his staff to set up a large tent equipped with air conditioning in front of the office.
Again, the turnout was much greater than expected. Rather than see his loyal customers disappointed, Hengky flew to the manufacturers in China the next morning to make sure the TI-phones would be delivered on time.
Such dedication was evident much earlier in his career. Hengky made his first big money selling second-hand mobile phones to students. Then he borrowed money from his father to buy more used mobile phones, advertising them in the newspapers. The demand proved to be huge at a time when mobile phones had suddenly become one of the most sought-after lifestyle accessories among middle to upper class Jakartans.
Hengky continued this for several years, earning more money than a middle-level banker, and gaining the initial capital used to set up his own company in the early 1990s. Since then, he has abandoned his initial dream of setting up an automotive spare parts dealership, focusing instead on telecom retailing.
It hasn't always been smooth sailing. Hengky went through turbulent times in 1995 when he was almost forced to declare bankruptcy after PT Satelindo failed to pay promised commission. The company was linked to the family of then President Suharto, leaving little he could do to make the company pay. “The entire profit I earned from the hard work in the previous years was wiped out,” Hengky recalls.
He struggled to recover from the setback, buoyed by his underlying beliefs. “My principle in life is never to easily lose hope. You have to be optimistic and work hard. If you hold on to this, there’s always hope,” he says.
When Hengky spotted an opportunity to re-emerge in the market offering a cellular telecommunications service, he immediately applied for the facility as an authorized outlet rather than a dealer. His initial application was rejected but hard work and commitment proved successful once again when Telkomsel appointed his company as an authorized dealer three years later.
Hengky recalls that it was tough to sell the GSM-based technology service to customers when it was still pricey and many doubted the reliability of the relatively new service. The years of experience Hengky had accrued working part time in various businesses and marketing second-hand mobile phones came in handy, enabling him to meet the sales quota allotted by Telkomsel.
“Another key to success in business is that you have to be committed to your words. I did whatever it took to meet the quota set by Telkomsel, although sometimes it caused losses for me. Telkomsel later appreciated my hard work,” Hengky explains.
Telesindo, then the third largest cellular telecommunications service outlet, also distributed vouchers for XL and enjoyed huge profits when the industry started to boom in 2000. Telkomsel immediately moved to protect market share by telling Telesindo it could not sell its competitor’s phone vouchers. Fortunately for Hengky, Telkomsel has consistently dominated the market.
Trying hard to keep his promises also meant Hengky was able to gain the trust of bankers, a crucial part of any business. “Even when times are bad, you have to repay your loans. You have to swallow the bitter medicine, never run away from your debt.”
Calls from SingTel
When SingTel acquired a stake in Telkomsel, the Singapore-based company made major changes to how dealers operated, requiring them to expand their outlets. While other dealers were hesitant, complaining that opening more outlets would cause losses and didn’t make 'business sense,' Hengky embraced the new strategy, convinced that the Singapore giant was transferring a valuable strategy.
The common practice of dealers was to open only one outlet and have people on motorbikes distribute vouchers to small retailers. “SingTel changed our mindset, forcing us to grow,” Hengky recalls.
Again, he strove to always surpass the targets set by SingTel. “When they wanted me to open 20 new outlets, I would make 25. When they raised the target to 40, I did 50 and so on. What was on my mind at the time was that I wanted to prove to them that I could work, I didn’t think too much about the potential losses.”
That strategy later proved essential for Telesindo's survival, when margins continued to decline with the entry of more competitors into the cellular industry. Volume played a significant role in ensuring a profitable retail business.
“Without SingTel, perhaps Telesindo would not be as big as it is now. I think the entry of a foreign company into the country was a good thing because it enabled transfer of knowledge,” declares Hengky. SingTel and Telkomsel were also happy with the performance of Telesindo, which has been named its best performing dealer for the past four years in a row.
“One of Hengky’s strengths is that he has always been focused on the business of distributing vouchers. It was only several months ago that he entered the handset business,” says Hendri Mulya Sjam, vice president for marketing at Telkomsel.
Expansion
In order to improve synergies, critics have said Telesindo must adopt a more modern management and marketing strategy, particularly as it aims to bolster the size of its business. Yet a company insider tells of Hengky's ability to successfully execute a business plan that initially appears to his staff not to make commercial sense.
“When he was implementing a brand campaign strategy for the TI-phone products, he exceeded the original budget, creating worries among his managers. He convinced us not to worry as the company would gain greater benefit later on. It turned out he was right, the phones were selling like hot cakes. He’s a visionary businessman who can foresee things.”
That may not always be the case. While it’s the nature of an entrepreneur to take risk, it must be a calculated risk to ensure sustainable business operation. Hengky agrees. He has hired Hermawan Kartajaya, one of the country’s top marketing gurus, to help bolster the capacity of Telesindo’s human resources. “I paid him billions of rupiah to train my staff how to smile,” he quips.
He acknowledges that he learned the importance of staff training from SingTel and Telkomsel, who both allocate significant funds to human resources development. Hengky treats his staff as ‘partners’, a concept popularized by global coffee shop operator Starbucks. He provides his entire staff with healthcare programs, some of his senior staff with apartments in Jakarta, and even makes sure small things such as a credit card are available to his marketing team.
Another important part of his strategy is to make Telesindo sub-dealers and resellers comfortable doing business by providing relatively soft payment terms. However, he also has a punishment system in place for those who fail to meet targets.
Rudy Atlantik, a sub-dealer in Serpong on Jakarta’s southwest fringe, says Hengky also helps sub-dealers make credit proposals to banks to help them finance expansion. “He will talk to the people at BCA to personally recommend his sub-dealers,” he says.
Aside from doubling the number of his own shops, Hengky also aims to increase the number of resellers from 70,000 to 100,000 this year in regional areas using IPO proceeds, as well as a franchise system to fund the project. He's also setting his sights on acquiring stakes in a Singapore-based firm which has a phone voucher retailing business operating in Malaysia, Thailand and Vietnam.
In a departure outside the cellular business, Hengky is also planning to use his extensive retail experience to grow his new Honda motorcycle business and already has distribution licenses for the Greater Jakarta area and both West and East Java. Next on his list are Central Java, Bali and Sumatra.
Hengky is optimistic about the new business, which will leverage on Honda's popularity in Indonesia. “I will beat all the traditional dealers. It’s my nature to compete,” he brags. GA