All down the line: An internet-literate populace provides solid foundations for IT growth

While much IT-related activity in Indonesia is very basic, it is on a large scale and is growing rapidly. A density of use is being attained that is driving profitable advances. Significant development is also being seen at the business and enterprise level, suggesting that technology is starting to take root in the economy. Questions remain about infrastructure, inclusiveness and local development, but a foundation has been put in place on which a thriving sector can be built.

The retail side of IT has long been strong and is getting stronger. As of May 2013, Indonesia had the world’s fastest-growing rate of Twitter use (up 44% since the second quarter of 2012), and it is number four for Facebook use after the US, India and Brazil. As of 2012, 88% of internet users were active in social networking. In total, the country has more than 72m internet users.

Strong Base

A Time Mobility Poll, conducted in 2012 with Qualcomm, demonstrates a very active online culture and supports the thesis that where there is internet in Indonesia, it is used at least as much as in other countries. Of the Indonesians surveyed, 83% browsed the internet at least a few times a week, compared with an average of 66% among the surveyed countries (the US, Brazil, China, India, Indonesia, South Korea, South Africa and the UK). In the US the figure was 46%, and in the UK it was 47%. Only China was higher than Indonesia, with 86%. The poll also indicates a very engaged market: 74% of Indonesians said they conducted business regularly using their wireless mobile devices, the highest ratio (the average figure was 47%). Only 2% said they could go a week without their handheld device. Indonesians were performing 12 web searches with their devices a day, the second-highest in the survey. Indonesian Internet Service Providers Association (APJII) data also indicates that users are engaged with the internet: according to a 2012 APJII survey conducted in 42 cities, 68% of smartphone users were accessing the internet from their devices.

The APJII forecasts that the number of internet users in the country will grow to 139m by 2015. Smartphone use grew by over 100% in 2011 and 2012, and by 58% in 2013. While growth will slow in the coming years, it is expected that the number of smartphone users will double by 2016, and that almost half of all mobile users will have smartphones by 2017, according to data from The 2013 smartphone-owning population was 36m, the ninth-largest in the world, according to Kleiner Perkins Caufield & Byers. Indonesia already has more smartphone users than France, Germany, Russia and Mexico. Internet commerce is also growing rapidly, doubling between 2012 and 2013, and it is expected to more than double again by 2015.

Big Picture

The broader picture is even more impressive and demonstrates that the activity of consumers, much of which is sourced and hosted abroad, is beginning to generate substantial business activity on the ground. According to International Data Corporation (IDC), overall IT spending is set to rise to $16.4bn in 2014, up 12.5% from 2013 despite the weakening rupiah. The cloud, meanwhile, grew by 43% in 2012.

The growth in broadband take-up and quality has been impressive. According to Akamai, the broadband adoption rate was up 292% between the second quarter of 2012 and the second quarter of 2013, while the country’s average peak connection speed rose 35% in that time to 11.5 Mbps, ahead of India and just behind China. In the World Economic Forum’s E-Networked Readiness Index 2013, the country went from 80th to 76th, ahead of the Philippines and Vietnam, and just two points behind Thailand. The Economic Forum notes that the country did particularly well in two respects.

In affordability it is 39th, ahead of Vietnam, Thailand, the Philippines and Malaysia. In business usage it is 40th, ahead of all three developing economies in the region.

Mobile broadband penetration is high, at 31.9 per 100 inhabitants, and ranked 54th in the world in a September 2013 International Telecommunication Union report. That compares very favourably with the rest of the world and the region. The global average is 22.1.

Thailand comes in at 0.1 per 100, Malaysia at 13.5, Vietnam at 19.0 and China at 17.2. Growth appears strong: in early 2013 IDC forecast that the overall broadband market in Indonesia, including both fixed and mobile, would double in 2013, from $650m to $1.16bn.

IDC noted some trends that suggest a healthy sector. It said that the growth did not come so much from the increase in subscriber numbers but from higher usage, an indication that demand was increasing for those people who were connected. IDC said that it expects the broadband market to continue growing at a 55% annual rate through 2016. A number of factors are driving growth, including improved coverage by the operators and lower costs for users.

Last Mile

The country has made broadband a priority, despite the geographical challenges and low average incomes in some areas. The National Broadband Plan has some bold targets. By 2018 fixed broadband coverage should be 40-70% of the population at 2 Mbps, and 50-80% of buildings should be connected at 1 Gbps. It also calls for 75% of Indonesians to have mobile broadband at 1 Mbps and envisions 100% of the country covered by the internet backbone.

Much has already been accomplished. The Palapa Ring, which was 80% complete by the end of 2013, will connect the entire archipelago by high-speed fibre optic cable. The project was started in 2001 and will total 28,704 km when completed (with more than 35,000 km of undersea cable and almost 22,000 km of inland cable). In May 2013 a groundbreaking ceremony was held for the final leg of the project, running 5300 km from Sulawesi to Papua. The project in its entirety is scheduled to be finished by 2015.

Indonesia is intently focused on the last mile. To an extent, it is a digital divide issue. Those on low incomes are unable to afford the technology, and both the government and the private sector are working to bridge that gap. Telkom Indonesia in cooperation with Intel has established mobile Broadband Learning Centres, minibuses which take high-speed internet and other technology resources to remote areas. Telkom also sponsored the Ministry of Education’s SabakMoE programme, which aims to get tablet computers into the classroom. A major element of the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development is improvement of connectivity throughout the archipelago, and while that includes transport, it also has a major communications component.

The issues are also technical. The last mile for fixed broadband often involves digging up roads and wiring buildings. Fortunately, technology has overtaken the problem and allowed connectivity to be achieved when it is too difficult to cable. The growth of wireless internet has acted as a workaround and enabled people to connect before trench digging is finished. The combination in the end might be the ideal mix, with the long distances being covered by installed optic fibre and the rest through high-speed wireless.


The trend toward high-speed wireless broadband started years ago. By 2008, just a year after introduction of wireless broadband technology, HSPA connections (at 315,000) outnumbered fixed-line connections (300,000). Since then, the market has grown rapidly as new technologies have been introduced and as consumers have become more adept at utilising them. Informa put 3G subscriptions in June 2013 at 45.5m, or 18.4% of the population.

Yet the real impetus behind the growth has been a rise in smartphone ownership. According to Roy Morgan Research, ownership doubled from 12% in March 2012 to 24% in March 2013, with overall mobile ownership up by 10% to 84% of the population. According to eMarketer, total smartphone ownership was 16.6% in 2013, up from 10.6% in 2012. Nielsen puts smartphone penetration at 23%, with Indonesia ahead of both India (18%) and the Philippines (15%). In 2011 only 4.8% of the population owned a smartphone.

A report by Canalys in January 2013 anticipated 52% smartphone growth in 2013, and a study by Yahoo! and Mindshare sees ownership rising by some 151% to over 100m by 2017. The figures suggest that the market is undergoing a major transition. While consumers had previously been satisfied with voice, text and basic messaging, they are starting to adopt data services.


The handset market is also developing quickly, driving broadband use. While the market is dominated by Samsung, with 80% of the Android smartphone share in early 2013, competition is fierce. Android overtook BlackBerry as the preferred smartphone operating system in 2012, with BlackBerry’s share falling from 39% in the second quarter of 2012 to 21% a year later. But in the Android space, competition is breaking out that has boosted the overall market.

Chinese manufacturer Oppo has taken aim at Indonesia. It opened in the country in early 2013 and by October it had 1000 employees, 18 branches in Jakarta and was selling 16,000 phones a month. The company said that if it hit 50,000 a month, it would start to manufacture locally. Ninetology, a Malaysian smartphone firm formed in 2012 and claiming a 12% market share in Malaysia in 2013, is also targeting Indonesia. Monica Agnes, a local star and its largest shareholder, is the face of the company, which is expected to help sales.

Smartfren is producing its own brand of smartphones in cooperation with Chinese manufacturers, and they are selling for under $200. In the third quarter of 2013 its Andromax model was the second-best seller after Samsung, according to IDC. Considered the largest local maker, Evercross was also in the top 10 with its mass market phones. Mito, another local brand in the top 10, also operates at the low end.


The competition has had an effect on prices. At the end of 2013, a dual core Andromax phone was retailing for Rp950,000 ($95). Ninetology is in the market with a Rp1m model ($100). As is the case globally, the flood of cheaper models has had an impact on the brand names, which are bringing out their own low-end models to compete. In Indonesia, for example, a Samsung Galaxy Star Pro – an Android phone with dual SIM cards, WiFi, GPRS and EDGE – retails for $130.

The tablet business is also booming. According to Nielsen, tablet penetration hit 5% in 2013, up from 1% in 2012. According to market research firm GfK, tablet sales in Indonesia totalled 1.3m units between June 2012 and May 2013, up 141% year-on-year (y-o-y). A 2013 Mindshare/Yahoo! study saw the number of tablets owners hitting 16.2m in four years. Research also suggests that an increasing number of people have multiple terminals, resulting in consistent usage throughout the day. PC sales were also up, rising 17% y-o-y. IDC says that the PC remains strong outside of urban and relatively wealthy areas. In the first quarter of 2013, sales of PCs in Jakarta and Bali were down 6.2% y-o-y; everywhere else, sales were up 8.4% y-o-y.

Another driver of growth is increased competition from internet companies, with the Chinese particularly active in this space. China’s Tencent, the firm behind the QQ messenger, formed a joint venture with Indonesia’s MNC. The latter has been working to create a search engine to challenge the dominance of Yahoo! and Google. Another Chinese firm, Baidu, initiated an aggressive expansion plan in 2012, introducing an Indonesian version of its website, a portal. In 2013 the company launched 10 products in the country, five for mobile devices and five for PCs.


Helping to drive development of the internet, or in part driven by the internet’s development, is e-commerce. TokoBagus, the biggest site, had 1bn page views in July 2013, four times what it was getting in April 2013. Kaskus, a relatively new competitor, was reporting 600m pages view a month. Tokopedia is reporting a 10-20% rise in shipments. Some big players have become involved. A new e-commerce company – Lamido – was formed by Germany’s Rocket Internet in late 2013, and also in 2013 eBay entered the market in cooperation with Telkom Indonesia with a venture called In November 2013, XL joined up with Korea’s SK Planet to form e-commerce marketplace and escrow payments system Elevenia.

Estimates suggest Indonesia’s e-commerce market is growing rapidly. Vela Asia research put the segment’s value at $900m in 2011, $4bn in 2012 and $8bn in 2013. It forecasts the market hitting $12bn in 2014 and $18bn in 2015. A South-east Asia eCommerce Readiness Index, developed by Vela Asia, ranked Indonesia top in the region, though the score was skewed by market size. Singapore was number two, and Malaysia was last. Payment and escrow systems have been important. Indonesia has a range of services that can act as intermediaries in a transaction. Doku has been around since 2007, Ipay88 since 2006. IpayMu, Veritrans and Inapay also provide escrow or payment services.

The Cloud

The development of the cloud market is an indicator of the increasing commitment to IT. In a Frost & Sullivan (F&S) survey published in September 2013, 45% of the respondents (IT decision makers at Indonesian corporations) said that the cloud was their top priority in 2013, and 40% said that they were facing pressure from their management to implement cloud solutions. The larger players are actively developing the market. Telkom Indonesia has offered its EOffice solution for a number of years, while Indosat started offering its X-Cloud at the end of 2012.

F&S noted that the Indosat programme is innovative, as it involved cooperation between a telecoms firm and IT companies. In this case, Indosat partnered with Huawei, IBM, Fujitsu, Microsoft, Intratec and Mandawani. While local players are behind the international trend in terms of offering and service, brand recognition is high, which is helping keep the international giants from taking too much market share. Google has been able to develop a following in the Indonesian cloud due to its high profile globally, but Amazon has not as it is not well known in Indonesia.


While technology is rapidly advancing in Indonesia, problems remain. In e-commerce business is not always smooth. In September 2013 Japan’s Rakuten broke from MNC, its local partner, and made its Indonesian e-commerce operations a wholly owned subsidiary, and in May 2013 e-commerce store Multiply shut its doors. Operators have been caught flatfooted by demand, with rapid adoption of smartphones and tablets outstripping network capacity.

Indonesia for the most part either taps overseas services or clones products. IT is dominated by foreign players, even if local firms front the technology. The government is becoming increasingly protectionist to help remedy this imbalance, and companies are starting to see the benefits of hosting and developing domestically. “In the past Indonesia has relied on foreign firms for advanced technological products, but now it is making a push to grow this industry locally,”

Abraham Mose, the president director of government-owned technology and electronics firm Len, told OBG.

Indonesians need to start creating their own technology and services, otherwise the gains will flow overseas in the form of profits and royalties. “There are 200-300 IT firms in Indonesia, but the majority are involved in services such as system integration,” Indra Sosrodjojo, director at Andal Software, told OBG.


Indonesia’s technology market is on its way up. Twitter and Facebook are still important, but increasingly the cloud, e-commerce and wireless broadband lead. It seems that Indonesia has hit the take-off period, catching many by surprise in doing so. The next few years should bring rapid growth and intense competition. Companies from all over the world will be battling for market share, which should help keep prices down. Last mile and digital divide issues remain, but as they are solved the market will expand further.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

Cover of The Report: Indonesia 2014

The Report

This article is from the Telecoms & IT chapter of The Report: Indonesia 2014. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart