Mobile Sector Gears Up

Indonesia

Economic News

22 Jul 2010
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With all eyes on the still untapped potential of the Indonesian cellular market, industry players have announced large-scale investments for 2008.



Malaysia's main telecommunications company Telekom Malaysia plans to invest around half of its $1.4bn overseas spending in Indonesia, where it is a 59.63% stakeholder in Indonesia's PT Excelcomindo Pratama.



The operator, which has stakes in nine Asian companies, reported that profit growth for 2006 more than doubled year-on-year and said its international operations contributed significantly to this growth.



Indonesia remains one of three key countries (with China and India) in the Asia Pacific region that is fuelling high growth for the sector.



Statistics from the Asia Pacific Research Group (APRG) indicate Indonesia has a mobile subscriber penetration rate of just under 25%, or 60m out of a population of 230m. The APRG predicts this number to rise to more than 90m over the next two to three years.



Indonesia's second largest telecoms firm, PT Indosat, recently reported a decline in net profits in 2006 for the second year in a row. However, its revenue grew in the third quarter growth by 11% and by 10% in the fourth quarter.



The company announced plans to invest a minimum of $1bn in 2007 to encourage growth in what has become an increasingly competitive market. The investment, which is expected to be partly raised through loans, will be used to expand the company's network and to add five to six million new customers to its existing 16.7m customer base.



Indonesia's next wave of mobile customers is expected to come from lower income brackets. This means industry players will have to focus on minimising costs and offer competitively-priced services.



In 2006, messaging services in Indonesia generated $1.1bn, 22% of total revenues, according to Wireless World Forum's Indonesia Mobile Market.



Telkomsel, the cellular market leader with over 35m users, recently allocated $900,000 to a project that includes an upgrade of its network, to allow efficient management of peak SMS traffic as well as to accommodate growth in SMS traffic, thus helping Telkomsel to achieve increased revenues without additional operational costs.



Sybase 365, a subsidiary of American software company Sybase, is also targeting market growth opportunities. This month, it announced the opening of an office in the capital's business district. "With the penetration rate expected to hit 42% by 2009, there are a lot of opportunities in the market for local as well as international players in the wireless content space," Ty Tan, Sybase 365's Indonesian country manager told OBG.



The company has secured premium SMS connections with Indonesia's top three mobile operators - Telkomsel, Indosat and Excelcom - giving it access to 97% of the Indonesian mobile market, or more than 58.2m mobile subscribers.



"Our strategy is to position ourselves as aContent Provider (CP) partner of operators, working together with them to grow substantially their mobile value-added service revenues without a proportionate increase in customer care issues. We are working to
be the aggregator of choice for all international CPs looking to expand into the dynamic and growing Indonesian market," said Tan.



Another area for growth is 3G, although demand for services is expected to gather at a quiet pace over the coming years, due to the higher cost of 3G handsets. Besides, 3G services are still considered a niche product beyond the needs of the majority of users who are well served by voice and SMS.



At the end of this month, PT Hutchison CP Telecommunications, part of Hutchison Telecommunications International, will launch its 2G and 3G services in Indonesia. The group has identified Indonesia as one of the key growth markets in Asia and is attracted by the country's large population and below-average penetration levels. Hutchison Telecommunications International announced record profits of HK$1,576m ($201m) for 2006 and reported they will invest up to $513m in Indonesia in 2007.

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