Media mogul takes big bite into energy sector
Albertus Weldison Nonto | February 28, 2011

Hary Tanoesoedibjo is far from content on being the top dog in the media world. His MNC Group is the country’s undisputed leader among a clutch of media companies, which gives the 46-yeal old tycoon enormous power to influence public perception. He is, however, now setting his sights on becoming an energy mogul as well, reports Albertus Weldison Nonto.

Tough, ambitious and shrewd. These are the words often used to describe Hary Tanoesoedibjo, the 46-year old owner of MNC Group, Indonesia’s largest media company. The Surabaya-born businessman is unafraid of taking on formidable adversaries, such as Siti Hardiyanti Rukmana, or Tutut as former president Suharto’s daughter is more widely known as, over control of  television station TPI.

The battle has been raging in the courts since July last year and indicates Hary’s toughness as a businessman. The media mogul is regarded as one of the best negotiators around and his success in building MNC into a formidable media company speaks volumes of his management ability.

In the short span of 12 years, Hary has emerged from relative obscurity to become one of the fastest rising tycoons in the country. He was ranked number 20 on the Globe Asia list of the 150 Richest Indonesians in 2010 with a networth of $640 million. If his energy bets payoff, he will definetly rise on this prestigious list.

Not content with running the largest media business in the country, Hary is now an expansion path that, if successful, could propel him to the upper echleons of the country’s business elite. His next phase of expansion, he tells Globe Asia, will be focused on natural resources and property, two sectors that offer huge upside.

His debut in the resources business was marked by a typically bold step: acquiring more than nine mining concessions in South Sumatra and Kalimantan through his Bhakti Coal Resources. At the same time, he is starting out in the oil and gas business through PT Suma Sarana. In property, he is planning new office buildings and a theme park.

Not surprisingly, Hary remains coy on the details of the new business units, not least the financing. Darma Putra, a director of holding company Bhakti Investama, says the group acquired eight of its coal concessions from Titan Mining. That provides control of 92,000 hectares of land with estimated reserves of around 1 billion metric tons of coal in Musi Banyuasin, South Sumatra.  Further surveys are currently underway to gauge the exact amount of reserves and the quality of the coal.

At the same time last year the group also acquired PT Putra Muba Coal in the same region, which this year begins producing 3 to 4 million tons of coal a year. Another concession in Kalimantan is already in production with a similar output. In total, the group expects to produce more than 6 million tons of coal this year, with output to be boosted in years to come once exploration is complete at the other concessions.

As always, Hary is eminently pragmatic in making his new business moves. Indonesia's strength as a major market creates opportunities in financial services, energy, consumer goods, property and even infrastructure and media, providing openings for new entrepreneurs or for expansion by existing groups, he argues.

“I decided to go into these business areas because they have shown good steady growth for the past five years, so surely someone can rely on good performance in the sectors for at least the next five year,” he states frankly.

Like many other businessmen, Hary says it’s hardly necessary to provide reasons for going into the resources business. With steady economic growth and the increasing number of middle-class Indonesians, the need for housing, energy and education forms the base of the pyramid of what the economy requires.

Hary warns, though, that as well as having to have a sound financial structure to benefit, it’s also essential to have the time to devote to a new project and qualified people to run and oversee the entire business process from day one. 

Living up to his principle that time means money, Hary spurns the golf course and prefers to spend his time working in his business. He sees his new ventures as the way to develop his existing business rather than to create entirely new enterprises. “Our group can only expand if we believe our existing business is showing steady growth and is run by good solid management,” he muses.

Dharma Putra told the media last month that financing for the expansion program will likely come from a variety of sources. There will be a rights issue of 10% of new shares in the holding company to a strategic investor, the sale of some assets and some bank loans.

Harry sees borrowing as a normal means of financing expansion, in addition to using existing equity. “The mistake in the past was to over-leverage and debt mismatch. So in our group, debt management has to be adjusted to capital equity and cash flow. Secondly, the tenor of funding should also match the investment plan,” he says.

He adds that in the past most Indonesian companies did not put these principles into practice in their debt management. “Some companies in the past financed their investments with three- to six-month commercial paper, so when the financial crisis occurred, they all collapsed, became insolvent and couldn't pay their debts.”  Hary adopts a more cautious approach, keeping his debts in line with the fundamentals of his operations.

Market analysts and investment bankers give Hary the thumbs up and a number of large banks have been more than willing to finance his expansion. “Hary is tough businessman who does not give upeasliy,” notes one investment banker. “His media empire is financially sound and he is very ambitious.”

He added, however, that the media tycoon will have to consolidate first if he wants to expand big into energy and property. “He must establish a core management team to help him evaluate the new business ventures as he cannot be a one man show.”

Media backbone
Independent business analyst Teguh Hidayat says Hary's media business will remain the backbone of his operations as he expands. Last year’s revenues stood at around Rp6.5 trillion ($720 million) and that figure is expected to expand to around Rp8 trillion this year, with a solid footing in the industry. While his financial services business contributes less than this, it is also a mature business.
His nationwide TV stations RCTI, MNC TV and Global TV control around 40% of audience ratings, putting Chairul Tanjung's Trans Group into second place. That puts the media business in a strong position to pull a solid share of the national media advertising spend, which last year stood at Rp35 trillion.

Hary firmly believes that television remains the right media for further development in Indonesia: Its growth is steady and geographical factors create the right conditions for continuing expansion. That’s the reason he is currently working to boost standards at 12 regional TV stations across the country to be part of the SUNTV Network, in readiness for rules demanding greater regional flavor.

He has strong confidence in the development of regional economies in today’s Indonesia. With national economic growth likely to hit 6.5% this year, he believes some regions with strong local economies will out-perform the national growth level and become excellent markets for his local TV business.

“We have a young population with 80% of our people under 50 years of age, so this is a huge market,” he notes. “Compared to other ASEAN countries, for example, the TV media will be the right choice, different to Malaysia and Singapore where print media is dominant. Indonesia is in a similar situation to Thailand,” he foresees.

Nor does he deny that his TV business has helped to shape national consumer behaviour. Advertising on his TV stations and in his print media features products such as banking services, snack foods, cosmetics and much more, creating desires that influence the marketplace.

His Indovision pay TV business controls around 55% of that niche market, with around 800,000 subscribers. With market penetration of only 3% of the more than 50 million families in Indonesia, he is optimistic about the future of the business. “Let’s say we target around 40% of families to have pay TV. That means we will have around 20 million families, a huge market given that now we have only 1.5 million subscribers nationwide,” he reasons.

Teguh Hidayat is not convinced that Hary’s figures are correct. Given the high level of competition in the industry at the moment, with operators including First Media and PT Telkom's Yes TV, he believes Indovision needs to revise its claim of market dominance.

Nevertheless, Teguh believes that  Hary's plan to sell 30% of MNC Sky Vision — the holding company for the pay TV business — to the public this year will open the way for strong business expansion and strengthen his position in the pay TV business.  For Hary, it could be argued, the sky’s still the limit.  GA

Power Player

Hary Tanoesoedibjo remains at the center of the national spotlight due to his strategic position in the media business. With the democratic system still in its infancy in Indonesia, the power of the media to create or break an individual’s image is a critical factor, reports Albertus Weldison Nonto.

Veteran journalists reporting on Indonesia's stock market still remember the time when Hary Tanoesoedibjo emerged from obscurity some 12 years ago to look for opportunities to buy heavily indebted companies struck down by the economic crisis.
Backed only by a small family-owned securities company, Bhakti Securities, he was a regular visitor to the media center at the exchange, happy to discuss pretty well anything in those turbulent times as he shared his vision for Indonesia's new business landscape with reporters.
Out of thousands of topics they discussed, one theme was paramount: that the crisis had made it possible for anyone to become a business champion. “I saw that everybody was on the same level playing field at that time, and business was open to everyone. There was no more exclusivity or protection,” he recalls.
With a strong base in financial services, Hary moved from the securities business into investment banking, investment management, insurance and consumer finance. He saw it was the right time for new players to venture into the unknown by buying out companies on the verge of collapse.
He saw the media business as one with enormous potential. “This was fundamental. While our financial services business had been our backbone from the beginning up until this time, it was logical to look toward a different industry to search for opportunity.”
He aggressively acquired Bimantara Citra Group, the flagship of Suharto second son Bambang Trihatmojo, proving his point that there were no longer any privileged players. The next decade or two would also demonstrate that there was room for many new business faces in the world of business.
While he had no experience of the media, he found it took only a short time to learn the nature of the business and carve a niche as an important player in the sector. “In fact, the nature of business management is similar, so we can learn as quickly as possible what we need to know about each sector we go into,” he says.
At the time, there were many who didn’t believe this was a straight-forward business play. Hary, after all, was an upstart whose financial strength was in doubt. Some believed he had made a “back door” agreement with Bambang to safeguard the Suharto family interests during those turbid political times.
Over time, the criticism died as Hary's ability to manage the company through hard times became clear, until it emerged as the important force it now is. 

Political ties
Hary doesn't deny that his business maneuvers over the past decade have taken him close to powerful interests, including the country’s presidents.  “I am close to them all, the late former President Abdurahman Wahid, former President Megawati Sukarnoputri, because of my position in the media,” he states, though downplaying the significance by saying anyone can be close to a president. 
Now, he says, times have changed, since a relationship to the country’s political leadership is no longer the determining factor in business success, as it used to be.  “In the past good relations and networks with government could be the main factor in determining your achievement, while capability, ability could be the least important. Nowadays, capability and ability are number one while a good and wide-ranging network is only a supporting factor,” he explains.

Hary obviously now feels secure enough that he has no qualms about taking on the Suharto children in a more frontal way. He has been fighting with Bambang Trihatmojo’s elder sister, ‘Tutut’ Suharto or Siti Hadyanti Rukmana, over ownership of the former TPI television station. His name has also been mentioned in the case of the web site built for the Department of Justice and Human Rights, where his brother’s PT Sarana Reka Dinamika is accused of taking funds that should have gone to the state.
Hary says he and his team try to see the cases in terms of the wider picture, not merely from a business perspective.  He believes the cases have been politicized by certain parties for personal and group interest, particularly the PT Sarana case.

“We are in a defensive position to face these challenges. Most of them are politically driven, a move to attack someone's reputation. I would say that we haven’t created the problem, because I don't have a problem with these people personally. I see some freeloaders in this case,” he muses, adding that anything could happen in the future.

Independent analyst Teguh Hidayat sees that Hary is in a strong position to survive the onslaught. “There is plenty of proof that Hary is strongly placed politically even though he is not in politics. He can manage relationships with power holders, even with an opposition leader such as Megawati. Meanwhile the TPI case paints a clear picture of Tutut's diminishing power,” he says.
Outside his big business ambitions, with ventures in the energy business, property – he has interests in the Grand Hyatt, the Westin Hotel and some office buildings in Jakarta — Hary saves some of his energy to think of ways to improve the lives of Indonesians living in remote areas of the country.

He is currently preparing to establish schools to train people in remote areas on how to work with government. So far he has set up institutions that can help 40 students at a time in two-month courses.
“In five years time we plan to have set up 10,000 schools across the country using our funds,” he says, adding that another aim is to boost the provision of free medical services to the poor.

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