This report provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in Indonesia. Subjects covered include:
BuddeComm’s Annual Publication, Indonesia - Telecoms, Mobile, Broadband and Forecasts provides a comprehensive overview of the trends and developments in the telecommunications and converging media markets in Indonesia.
Indonesia has built a substantial telecom sector, providing a solid platform for further growth despite the occasional serious setback. This country of around 250 million people presents a huge potential market; however, it faces some particularly big challenges that need to be confronted if it is to successfully continue the building of the telecommunications infrastructure needed to support what is a uniquely complex geography. At the same time, there is no avoiding the fact that Indonesia must also deal with a range of social, political and economic issues that have been proving problematic.
The Asian economic crisis of the late 1990s saw the government’s efforts to reshape the telecom industry take on a new impetus. Prior to this the government had certainly been addressing the issues and working towards a more competitive market, but progress had been slow. In the last decade or so the reform process has accelerated; over the same period Indonesia has been experiencing healthy sustained growth in subscriber numbers and revenues.
While fixed-line teledensity remained disconcertingly low for a number of years, a recent upturn has delivered much better outcomes (over 12% fixed-line penetration by early 2009), thanks largely to the advent of fixed wireless services. These services have boosted the growth rate in the last few years and provided much-needed basic telephone services to previously unserved communities. The roll-out of fixed wireless infrastructure has been given good support by the operators with Bakrie Telecom and PT Telkom leading the way. Although the published statistics have been somewhat imprecise, by end-2008 fixed wireless services made up about two thirds of the total fixed-line subscriber base.
Meanwhile, Indonesia’s mobile market continues to grow, expanding at an annual rate of close to 50% into 2009. The total mobile subscriber base had passed 130 million by January 2009, up from 12 million just six years earlier. With the country’s mobile penetration suddenly approaching 55%, the industry view is that there remains considerable potential for further growth and the operators have been scrambling to meet the anticipated demand.
Furthermore, market interest has started to focus on the 3G services already being offered by five operators. While 3G subscribers comprised only around 7% of the national subscriber base by early 2009, the potential of 3G to boost ARPU was not lost on the operators and competition was starting to heat up on the 3G front. Telkomsel is indeed making its presence felt in this market segment, claiming about 72% of the nine million 3G subscribers at end-2008.
The number of Internet users in Indonesia was estimated at just over 30 million by early 2009, representing a relatively low overall penetration of 12%; at the same time, the Internet subscription market was generally depressed with less than 5 million subscribers. Broadband Internet access was virtually non-existent, with broadband subscriptions running at around 15% of the total Internet subscriber base. While the government continues to promote greater use of online services, these efforts appear to be having only limited impact on the take up rate of the various Internet services on offer.
In a move that some observers feel could have a negative impact on investment in the country’s telecom sector, Indonesia’s competition watchdog, the KPPU, announced in 2007 that there was evidence of cross-ownership of Indosat and Telkomsel that was violating the country’s anti-monopoly laws. The KPPU alleged that the cross-ownership by Singapore’s state-owned holding company Temasek in two of Indonesia’s mobile operators violated the 1999 anti-monopoly law.
At the time, Temasek owned a 56% stake in Singapore Telecom, which had a 35% stake in PT Telkomsel. Temasek’s wholly-owned Singapore Technologies Telemedia controlled 75% of Asia Mobile Holdings, a company that owned 40% of PT Indosat. Together, PT Telkomsel and PT Indosat controlled more than 80% of the domestic mobile market. The issue subsequently underwent a process of resolution by the courts. In June 2008, the parties were waiting on a decision by the Supreme Court, after Temasek appealed a lower court’s adverse ruling. The Indonesian Supreme Court threw out the appeal in September 2008.
The following notes provide some background to our scenario forecasting methodology:
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