Electronic Commerce: Financing Aspects Ernst & Young: the e-Firm Jos Luhukay March 2000 ®

Agenda Stages in eCommerce Business Development Financing Possibilities General Outlook for Indonesia

Explosive Growth Projections for eCommerce Worldwide Acceptance Grows beyond US u Worldwide eCommerce expected to grow from $170 billion in 1999 to over $3 trillion in 2003; growth rates exceed 100% / year u US represents nearly 3/4 of the world market in 1999; by 2003, US represents less than 1/2 the world market. Worldwide eCommerce Projections ($ trillions ) US Early Adapters Rapid Assimilation Worldwide Penetration Source: Forrester for growth numbers; IDC acceptance rates Rest of World e-Firm

Embedded devices open up opportunities to reshape the Financial Services Industry eCommerce Is More than Just a PC Paradigm Computing to Connection Embedded chips 6 billion + Computers ~600 million Source: Kevin Kelly, New Rules for the New Economy, 1998 Source: “IDC Predicts,” IDC, 1999 v Embedded Vehicles Cons Elec IAs PCs 6,000M 600M 300M 2,000M 150M The Devices Connected WW, Installed, 2003 Embedded devices change traditional models and present opportunities to automate functions. Third generation mobile phones, expected here in September, have greatly increased functionality allowing possibility of ec transations. Ownership of Palm Pilots or other hand held devices continue to grow, increasing the range of devices that can be used to ‘transact’ with customers or suppliers. e-Firm

Types of eCommerce u Mutual interest u Contiguous systems u Efficiency- and effectiveness-driven  Value-chain enablement  Extranet integration  Collaborative forecasting u Ad hoc, self-service u Growth- and efficiency-driven u Low volume, large mass  Customer care  Web storefront and catalog  Online trading Business-to-Consumer Business-to-Partner u External teaming u Mutual targeting u Joint rewards u Growth-driven  Marketplaces  Portals u Ad hoc or periodic u Self-service u Efficiency- and effectiveness- driven  Knowledge management  Employee self-service Business-to-Employees Business-to-Business e-Firm

e-Firm Four Phases in eCommerce Business Development Definition of Business Strategy Implementation –ePresence creation –Traffic generation Valuation Financing

Phase #1: Business Strategy Initially for internal purposes only Includes market analysis, development of a business model, definition of technology alternatives, financing schemes, and a projection of revenue and expense over a certain period of time e-Firm

Phase #2: Implementation Quite technical, almost entirely a graphics design & programming “domain” Centers on the development of a presence on the internet and the generation of usage (often measured in “clicks”, subscription, members, etc) e-Firm

Phase #3: Valuation Perhaps most complicated phase More an “art” than a structured process Comprises: –Website metrics for the measurement –The measurement itself –Estimation of the value of the business e-Firm

Phase #4: Financing May involve private placement(s) and/or initial public offering (IPO) IPOs for the time being not possible in Indonesia May include business strategy & plan rewrite Almost entirely a corporate finance area e-Firm

Financing Possibilities Shareholders usually not ready to take on the “bleeding” stage, which coul take 1-2 years Private placement often a problem, investors still wary about Indonesia’s corporationg Using capital market is a bigger possibility e-Firm

General Outlook for Indonesia Quite positive, although developing slowly Indonesia’s capital markets seen as not ready for eCommerce, hopefully things will get better this year A number of private placements will happen in 2000, more next years IPOs perhaps through “backdoor” or done overseas e-Firm

Summary The time for eCommerce in Indonesia has arrived We need to continue the process, and even make it happen faster, if possible more “internet time” e-Firm