Indonesia expanding 4G LTE services

Indonesia is slated to see its already sizeable base of mobile broadband subscribers expand in the coming years, with the recent rollout of 4G/long-term evolution (LTE) services by the country’s big three operators. That said, operators are facing challenges such as insufficient infrastructure, high capital expenditure requirements and limited available spectrum. The government’s recent move to base its telecoms licensing criteria on service provision, rather than the number of towers and base transceiver stations (BTS) a company owns, could also have a negative impact on revenues, at least in the early rollout of 4G LTE services. It could also prompt a wave of consolidation, ensuring long-term growth in a high-potential market.

3G Growth

3G service expansion began in 2006, when the government awarded 3G licences to Indosat; Excelcomindo, which eventually became XL Axiata; and state-owned Telekomunikasi Indonesia’s (Telkom) mobile unit, Telekomunikasi Selular (Telkomsel). Authorities had already issued 3G concessions to Natrindo Telepon Selular (which later changed its name to Axis Telekom), of which Malaysia’s Maxis Communications owns a 51% stake, as well as Cyber Access (CAC), a 60%-owned subsidiary of Hutchison Telecommunications International. Natrindo was awarded its concession in 2003, and CAC in 2004, although neither had launched UMTS services due to the absence of necessary infrastructure. Telkomsel was the first to launch 3G services, in August 2006, followed by Excelcomindo, Indosat, Natrindo Telepon Seluler and Hutchison.

Since its launch in 2006, capital expenditure on new 3G infrastructure has soared, while mobile broadband usage expanded rapidly, with telecoms research consultancy Redwing reporting that out of 320m mobile subscribers in Indonesia at the end of 2013, some 130m were mobile-enabled data subscribers – a 20% increase over 2012. According to Redwing, the nation’s big three operators – Telkomsel, Indosat and XL Axiata – reported a nearly four-fold increase in total mobile data traffic on their networks between 2011 and 2013, with data traffic rising from 48 petabytes (PB) in 2011, to 188 PB in 2013. Telkomsel, which had 140.6m subscribers as of the end of 2014, cited 143% growth in data services in its 2014 annual report.

4G Development

The development of 4G began in 2010, when Indosat, the country’s second-largest mobile provider, announced plans to upgrade its network in a bid to ease the transition to 4G LTE technology. The following year, Indosat partnered with ZTE to begin testing 4G services, commissioning a purpose-built Indosat Innovation Lab at the Bandung Institute of Technology, with early tests reaching speeds of up to 107 Mbps.

The government’s Indonesia Broadband Plan (IBP) envisions 100% mobile broadband coverage in urban areas by 2019. In 2012 the Ministry of Communications and IT (MCIT) undertook studies on frequency allocations in other markets before committing to its own tendering process, with some politicians suggesting that the authorities should re-farm the 1800-MHz spectrum for 4G LTE services. Commercial 4G services were launched in November 2013, when internet service provider Bolt launched a 4G fixed service. Mobile broadband hit the market in December 2014, when Telkomsel launched its Super 4G-LTE service on the 900-MHz frequency. (Klonopin) Indosat and XL Axiata both rolled out 4G LTE networks later in the same month.

Network Coverage

With approximately 750,000 4G subscribers in Jakarta, Bogor, Depok, Tangerang and Bekasi, Bolt is the largest 4G LTE service provider in Indonesia, although telecoms operators have aggressively expanded their 4G offerings in just a few months. XL Axiata’s services are concentrated in Bogor, Medan and Yogyakarta, with the company holding 4G trials in Jakarta in February 2015, and announcing plans to roll out 4G trials in Surabaya, East Java, in the same month. Indosat’s coverage is limited to a few districts in Jakarta, while Telkomsel offers services in Jakarta and Bali.

With speeds of up to 100 Mbps, XL Axiata’s 4G LTE network is the fastest on offer in the archipelago, followed by Bolt’s 72 Mbps, and Telkomsel and Indosat, which both offer speeds of up to 36 Mbps. Ongoing infrastructure challenges and limited network reliability, however, mean that these speeds are the maximum consumers can expect to experience and do not necessarily reflect the actual average speed. Operators can expect to be held to higher standards in the coming years, with the MCIT announcing in February that it plans to restructure the criteria for telecoms licensure, emphasising service quality, including data speeds, over the number of BTS each company holds.


Operators are already benefitting from the telecoms market’s shift from voice and SMS revenues to data revenues, which are increasingly critical as operators compensate for stagnant returns from legacy voice and SMS services. XL Axiata reported that while turnover from the core voice and SMS services grew by a modest 3% in 2014, internet data and value-added services climbed 42% and 50%, respectively. Indosat aims to expand data services to comprise 60% of total revenues by 2018, while Telekom reported that revenue from its data, internet, and IT segment expanded by 15.7% between 2012 and 2014, compared to 6.7% growth in mobile voice services.

Although Redwing forecasts the mobile data subscriber base will reach 170m users by the end of 2015, this will require subscribers to upgrade their devices to 4G-ready smartphones. As a result of the uptake in new data services, smartphones are forecast to comprise over 50% of the overall device base by 2017.


4G faces challenges to further expansion, including limited available spectrum and high capital expenditure requirements for network construction (see overview). To meet rising demand for data, operators will also need to avoid the price wars that have whittled down voice revenues in the mobile market.

In February 2015 the MCIT announced government plans to offer incentives to telecoms operators involved in rolling out the expansive IBP, including broadband infrastructure, which will reduce the impact of rising capital expenditures on companies’ bottom lines.

Spectrum Allocation

The government plans to roll out 4G services on the 900-MHz spectrum, with services later expanding to the 1800-MHz spectrum. At present, only 2G networks use the 1800-MHz band, although stakeholders including Adita Irawati, the vice-president of corporate communications at Telkomsel, have previously called for integrating these spectrums, enabling new products for 2G and 4G LTE to be rolled out simultaneously. The 1800-MHz frequency is at present inhabited by four operators using up to 75 MHz of bandwidth, including 22.5 MHz for Telkomsel, 20 MHz for Indosat, 22.5 MHz for XL Axiata and 10 MHz for Hutchison 3 Indonesia. The 4G spectrum allocation agenda advanced in February 2015, when the MCI announced plans to form a taskforce to oversee an 1800-MHz frequency allocation restructuring process. The process is expected to be completed in 2015, underpinning the expansion of 4G LTE services throughout the entire year.