PT Excelcomindo Pratama said on Wednesday that it would be unable to comply with a new regulation requiring mobile providers to use more locally made network equipment. The company said the domestic firms did not yet have the capacity to meet demand.
On Oct. 16, the Ministry for Communications and Information Technology implemented a ministerial regulation requiring all telecom companies to spend 35 percent of their capital expenditure on local equipment. The rule also requires that at least 40 percent of the gear must be locally sourced, rising to 50 percent within five years.
The regulation, however, was not made public until Wednesday.
Companies will be required to regularly report their use of local components to the ministry. Those failing to comply will face sanctions, including the withdrawal of operators’ permits.
Hasnul Suhaimi, the president director of Excelcomindo (XL), Indonesia’s third-largest mobile provider, said the industry supported the intention of the regulation, which was to develop the local components industry. “But I don’t think the domestic industry is ready to supply our requirements,” he said.
According to Hasnul, it would be very difficult to operate his company under the new requirements. Most of the cellphone towers that the company had built and used consisted mostly of imported parts, he said.
“We use local resources for the installation of towers, training and maintenance,” he said, citing locally produced steel and domestic labor. “But besides that, most of the components are imported,” Hasnul said, declining to comment on the percentage of local components used.
XL operates 18,128 base transceiver stations nationwide, and said this month that it planned to sell 7,000 towers to other providers to comply with government regulations that towers must be used by multiple operators.
Hasnul said the domestic manufacturing industry still had a limited ability to supply components for next generation network technology, or Worldwide Interoperability for Microwave Access (Wimax), and that the regulation could slow down adoption of communications advances.
“I think Indonesia needs new advanced technology like Wimax, but we can’t build such towers with high levels of local components because currently the local manufacturers don’t produce Wimax components,” Hasnul said.
Gatot Dewa Broto, head of public relations at the ministry, declined to comment.
However, Maswidyantoro, an analyst from consumer organization Masyarakat Telematika Indonesia, said that local manufacturers could supply the required Wimax and other components because of loose regulations on local assembly.
These regulations deemed locally assembled products with foreign components of less than 50 percent to be made in Indonesia, he said.
“We could not produce mostly advanced components of Wimax, but we can assemble the devices in Indonesia,” Maswidyantoro said.