BMI View: The Indonesian market saw a major development in December 2014, with the deployment andlaunch of 4G LTE networks by the three largest mobile operators, Telkomsel, Indosat and XL Axiata.
Although the outlook for the technology will be limited by the low spending power of most Indonesians andthe high price of LTE tariffs and smartphones, it represents a step forward in the development of themarket. 3G will be the favoured form of mobile broadband throughout our forecast period, but will continueto make up a minority of mobile subscriptions while the number of competitors remains too high, leading toa significant prominence of low-value prepaid subscribers. Moves towards tower sharing will help reducethe burden of this hyper-competitive environment, and could potentially pave the way for furtherconsolidation. The wireline market is witnessing considerable investments in fibre-optic networkinfrastructure, a development that should drive the uptake of high-value converged services, includingIPTV. The government is looking to encourage the expansion of fixed broadband infrastructure withincentives, however, mobile broadband will continue to remain the dominant service for internet access.
Increasing saturation of the mobile market and declining voice revenues will force Indonesia's largesttelecoms operators to focus on the development of next-generation fixed and mobile data networks. Thecountry's mobile operators are accelerating their tower outsourcing and managed services strategies in orderto reduce operating costs. This is a sensible move considering their weak bottom line performances.