Indonesia’s Tough 2014

Jakarta – Indonesia is known as one of the leading countries in the world with the most mobile users. However though, in 2014, the country’s Telkom industry ended on a low note, after most mobile operators suffered financial losses during the year amid cutthroat competition.

In the first nine months of 2014, cell operators PT XL Axiata (EXCL) and PT Smartfren Telecom (FREN) kept bleeding, with total net losses of Rp 901.2 billion (S$95 million) and Rp 939.9 billion, although the two recorded 10.8 and 22.2 per cent in revenue growth, respectively.

Prices for internet data package in the country are the lowest in the region but operators are keeping their data prices low to attract customers adding on the factors of the tough challenge to maintain the companies’ ROI. The rupiah's depreciation is also a challenge, especially for operators, who have a large amount of foreign debt. Continuous spread of fraudulent acts also poses as a big threat to legitimate operators aided by the archipelagic stature of the country, making it harder to travel from one island to another to catch these scammers.

While the year may not have been a favourable time for growth in the telcoms industry, a number of major events in the industry brought changes in the industry's competition landscape that may have a positive effect in the future.

On April 8, PT Axis Capital Group Telekom Indonesia officially merged with XL, making the industry home to six players: Telkom (including its cellular business PT Telkomsel), XL, Indosat, Smartfren, Tri and Bakrie Telecom (BTEL) from 11 operators a few years back.

In another development, code division multiple access (CDMA) services started to drop off.
In October, Telkom ended its CDMA service, Flexi, and migrated all service users to its global system for mobile communication (GSM)-based service provider PT Telekomunikasi Selular Indonesia (Telkomsel).

Another major industry trend where most operators released ownership of their telcoms towers to independent tower companies for efficiency.

On March 19, Indosat sold its shares in tower operator PT Tower Bersama Infrastructure (TBIG) to reap Rp 1.39 trillion to partially pay its debts, which are due this year. XL and Telkom signed tower deals with tower firms PT Solusi Tunas Pratama (SUPR) and TBIG, respectively, in October.

XL sold 3,500 of its towers to SUPR for Rp 5.6 trillion, which was used to pay its debts. Telkom, meanwhile, agreed with TBIG for a share swap deal, under which TBIG would wholly own a stake in Telkom's tower business - PT Dayamitra Telekomunikasi (Mitratel) - and Telkom would own around a 15 per cent stake in TBIG.

In terms of technology development, the year has become a starting point for Indonesia's drive to provide Internet access to most of its 250 million citizens under the Indonesia national broadband plan (RPI) when they released 4G network in December.