Byravee Iyer
Jul 15, 2014

Updated: Controversy surrounds Telkomsel’s media pitch

JAKARTA - Two months after calling a media agency review, Indonesia’s leading telco Telkomsel has awarded the US$40 million business to OMD, but not before at least one agency involved in the pitch expressed its displeasure over the 'e-auction' process employed in the final stages of the pitch.

Telkomsel's account is worth US$40 million
Telkomsel's account is worth US$40 million

Other agencies involved in the pitch include Carat, UM and MediaCom. Telkomsel engaged R3, an independent consultancy, to assist in the review and selection. None of the agencies responded to Campaign Asia-Pacific’s email enquiries. R3 said it was involved in the early part of the pitch.

Agencies would have to pay a $50,000 penalty if they pulled out of the pitch, according to a source close to the proceedings. It is also believed that the winning agency will be penalised to the tune of $100,000 if it chooses to resign the account. Timelines for agencies presenting were also considerably short. Campaign Asia-Pacific’s multiple emails to OMD and Telkomsel went unanswered.

“I think it has hit a new low for pitch conduct and sends a bad message to people in the industry,” the same source said.

Typically, e-auctions generate short-term cost savings for the procurement department and are often held toward the end of the pitch process, said another source who did not wish to be named. In Indonesia, the situation is further exacerbated by the lack of transparency in the market.

“Telkomsel is a significant client in Indonesia,” said the second source. “So media agencies are willing to under bid their fees because it reinforces their position in the market.”

Industry executives warned that recruiting talent is a challenge and treating resources like commodities isn’t doing the industry any favours. Not being able to service the business properly due to inadequate funds is the other, more obvious risk of underbidding.

The tender was conducted in two phases. The first phase called for agencies to submit agency credentials including their profile, past work and track record. This was followed by agencies showcasing their thought leadership through case studies on effective media planning. Shortlisted agencies proceeded to a "chemistry session" and then to the RFP phase.

“Telkomsel has come a long way towards building more strategic partnership with all our agencies," Alistair Johnston, director of marketing said when announcing the review in May. "With a clear focus on media planning scope, we want to build the same level of strategic engagement with our media agency, in an increasingly fragmented media landscape, where we have to work harder at driving effectiveness.” 

In 2011, Telkmosel handed media duties to M2M Interface, a partnership between Omnicom and Nava+, which split late last year.

Nava+ was formed after Daya Maha Berkarya (DMB), Advis, Brainstorm, and M2M Interface formed a partnership under the Nava+ Group of Brands in 2011. DMB had previously split from DDB Worldwide in Indonesia after a nine-year partnership. In December 2012, Nava + announced a media tie-up with IPG Mediabrands agency BPN and Interface (formerly M2M Interface) as part of the Nava+ integrated communications group.

Last year, the firm consolidated its digital business with local shop Narrada.

Update, 15 July, 4:30 pm: Rizky Muhammad, Telkomsel’s GM media channel management emailed Campaign-Asia Pacific about the appointment. Muhammad said the review was a “rigorous process managed by R3”, which includes: indentifying agencies; credential gathering (RFI); shortlisting; chemistry meetings; request for proposal; pitch brief sessions; and the final shortlist, e-auction and appointment.  “The final shortlisted agencies were identified based on technical scoring, followed by commercial evaluation and e-auction process that happens at the end of the pitch process,” said Muhammad adding that “technical” contributed more than “commercial” in determining who the business went to. 

“The agency with lowest commercial proposal did not necessarily win out as the overall scoring was determined and contributed more by their Technical fluency.” 

Muhammad said OMD has a solid understanding of Telkomsel’s brand, market, competition and strong strategic planning capabilities that goes well beyond media. 
 

 

 

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