LightFast - Launching high-speed broadband in Indonesia

The following structure provides an overview of the case and structure to apply:

Provide the following information to help the candidate with making assumptions for market sizing:

Average broadband contract length – 2 years

Average fibre-optic broadband service price – $500/year

Fibre Optic penetration rate – 5% of households​

Ask clarifying questions to get information you need in order to solve the case.

Provide the following background information ONLY when asked by the candidate:

• LightFast broadband segment is B2C only
• Indonesia population – no information
• Indonesia avg. persons per household (HH) – no information

With the information above and the candidate's assumptions, we can go ahead and calculate the market size.

Market Size = (Price) * (Volume)

B2C spend in fibre broadband = (Avg. price) * (# of addressable HHs in Y1)

B2C spend in fibre broadband = (Avg. price) * (# of addressable HHs in Y1)

"The CEO agreed with your market sizing and has decided to take your recommendation. LightFast now plans to roll-out in one city district in Jakarta (called District A) to prove the business case. But the CEO would like to understand how long the payback period would be if he were to go ahead. How would you think about that?"

Provide the following background information ONLY when prompted by the candidate for "investment costs, CAPEX, uptake, OPEX, profit, or expected costs":

• Typical uptake of broadband per district (avg. over 5 years) = 50% of HHs subscribe
• Typical length of cable needed = 0.5km per HH in a district
• Connection cost = $100 per HH connected (one-off charge)
• Infrastructure cost = $1,000 per km of cable (one-off cost)
• Typical operating profit margin = $150 per HH per year

a) Structure payback period calculation

Payback Period (years) = Total Investment / Annual Operating Profit

The CSO of LightFast has seen the payback period and market size and overall is happy with the decision to go ahead and re-launch service in Indonesia starting with District A. He is pleased with your work helping this decision!

What other factors would you advise the CSO to assess beyond the market size and payback period?

Candidate to apply a market entry framework mentioning factors:

• Level of competition – aggregated or disaggregated
• Local regulation – difficulty in getting licensed to launch
• Other technologies – lower-cost alternatives to deploy