Expert case by Raj

LightFast - Launching high-speed broadband in Indonesia

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Problem Definition

Your client is the CSO of LightFast, a Middle-Eastern telecoms and media player. They are a national incumbent player who expanded operations into South-East Asia and North Africa in late 2010s. Their operations in Indonesia include pay-TV and fibre-optic broadband. However, the broadband business has flat-lined since launch.

LightFast is now looking to reset its Indonesian subsidiary and has asked you to advise them on whether they should re-launch or close operations.

They would like you to advice on the size of the opportunity if they were to re-launch in Y1, estimate the expected payback period and then highlight key considerations to make a go/no-go decision.


This is a candidate-led case based on a real-life engagement. It is a typical case for Strategy& unstructured cases but can be applied to McKinsey interviewee-led too.

There are three parts to the case

  1. Estimate the market size for broadband in Indonesia
  2. Determine the payback period to launching service
  3. Discuss the key factors to inform a go/no-go decision

Short Solution


Paragraphs highlighted in green indicate diagrams or tables that shall be shared in the “Case exhibits” section.

Paragraphs highlighted in blue shall be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you on how to guide the interviewee through the case.

At case commencement:

Share Diagram 1 with the candidate.

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

Background Information

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​

I. Calculating Market Size

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

The candidate should explicitly state that they will use market size as a proxy for the size of the opportunity.

a) Structure market sizing calculation

Market Size = (Price) * (Volume)

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

b) Identify data / make assumptions to calculate

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

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

  1. Price = $500 / year
    A strong candidate will point out that this will segment by income level of customer and likely skew market size but that $500 is a fair assumption.
  2. Addressable HHs
    1. Population = 100M
      Candidate should make a reasonable guess between 80-100M. Interviewer to prompt the candidate to assume 100M if their guess is within that range.
    2. Persons per HH = ~3
      Candidate to make a reasonable assumption given a young, emerging market infers larger households, and globally HHs around 2.
      Total HHs = 33M (candidate may round down to 30M for ease of calculation)
    3. Penetration rate = 5% of HHs

      HHs with fibre broadband = 1.65M (assume 1.5M for ease of calculation)

    4. HHs that will be out of contract each year = 50% (as 2-year contract)
      Given the case asks to estimate the market opportunity in Y1, the candidate should be able to correctly recognise that if the average contract length is 2 years, that in order to estimate potential customers in Y1 (i.e. those eligible to switch by being out of contract), this will be 50% of the total customer base (half of the two-year average term).
    5. Fibre HHs that are addressable = 750,000

So, total market opportunity = 750,000 HHs * $500/yr = $375M / yr

II. Payback Period

After completing market sizing, share this information with the candidate:

"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?"

Share Table 1 with the candidate.

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

  1. Total Investment = CAPEX to roll-out fibre + connection cost per household that signs up

    HHs in District A = 250 (inferred from table)

    HHs connected = 50% * 250 = 125 (given uptake of 50%)

    CAPEX to roll-out fibre = $1,000 per km * (250 HHs * 0.5km per HH) = $125,000

    Connection cost = $100 * 125 (HHs connected) = $12,500

    Total Investment = $125,000 + $12,500 = $137,500

  2. Operating profit = # of HHs connected * Avg. operating profit per HH

    125 HHs * $150 per HH per year = $18,750

    Total Operating Profit in Y1 = $18,750

    A strong candidate would point out that they will assume this profit stays constant each year to calculate the payback period as given the uptake if 50% averaged over 5 years. But he or she will also point out that it is likely that the HHs connected will ramp up in reality and so profit will ramp up, too.

Payback period = $137,500 / $18,750 = 7.3 years

III. Discussion of key factors to determine go/no-go decision

Interviewer to read out: 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

Difficult Questions

An excellent candidate would use Diagram 1 (map of Indonesia), to identify a fourth factor being

  • Geography – impact of disparate islands on cost of deploying cables and suitability of fibre vs 4G?


Diagram 1

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Diagram 1