Cell phones ring up profits in crisis<\/p>\n
By Yudha Kartohadiprodjo<\/p>\n
Many residents of major cities cling to their cellular phones
\nas a necessity. The Jakarta Post looks at the business and the
\nthriving black market for the sought-after products.<\/p>\n
JAKARTA (JP): Walking through the corridors of Roxy Mas Mall,
\nWest Jakarta, one could be forgiven for mistaking the outlet of a
\ncellular phone vendor for a candy store. Attractively placed
\nbehind glass cases, cellular phone sets in various colors, models
\nand brands are displayed to catch the eye of passersby.<\/p>\n
Feeling blue or green today? Nusaphone, a small vendor in a
\ncorner of the mall, carries Nokia 5110 phones in eight gradations
\nof blue. Into the high-tech look? The Samsung phone set that
\nNusaphone sells comes in two metallic colors.<\/p>\n
Sometimes, however, the pretty packaging is deceiving.<\/p>\n
Windi, a photographer, bought his cellular phone a month ago
\nin Roxy Mas. The phone worked fine for the first five days. His
\njob requires him to be reachable at any hour and he rarely turned
\nthe phone off.<\/p>\n
One day, however, the message \"SIM card not recognized\"
\nsuddenly flashed on the phone's display screen.<\/p>\n
\"I took the phone back to the store. They acknowledged the
\nproblem and explained that the phone was made for the German
\nmarket, but they refused to take back the phone.\"<\/p>\n
Unwittingly, Windi bought a black market phone set, known as
\nBM or Nonguaranteed (Non-G) goods among cellular phone vendors.<\/p>\n
High demand from consumers and the exceptionally competitive
\nmarket are driving the black market. Of course, no taxes are paid
\nwhen the goods are smuggled into the country and the purchaser
\ndoes not receive a warranty.<\/p>\n
The price difference between a phone bought from a certified
\nvendor and one from the black market is about Rp 200,000.<\/p>\n
A cell phone distributor, \"Boy\", said the items were smuggled
\ninto the country through forwarder companies who \"take care\" of
\nthe delivery and customs.<\/p>\n
Most of them arrive at major gateways of Batam, Jakarta and
\nSurabaya as hand-carried cargo goods.<\/p>\n
\"Want to order 100 sets of phones? Just call a distributor in
\nSingapore or Hong Kong. If the price is right, they would then
\ncontact a forwarder who would offer their services for a mere Rp
\n60,000 per piece. Tax free and right to your door,\" Boy said.<\/p>\n
Services are abruptly halted when the customs agency declares
\n\"red light\" operations, a code that means it is tightening its
\ninspections.<\/p>\n
Tax free? Seems like an offer no profit-minded businessperson
\ncould refuse.<\/p>\n
Yet the government is losing a lot of money but doing nothing,
\ndespite the ailing economy, to stop the inflow of smuggled
\nphones.<\/p>\n
Currently, 50,000 phone sets are sold in Indonesia every month
\nand luxury taxes and customs duties are not paid on about 50
\npercent of the sales. With the average price of a cellular phone
\ncosting about Rp 1.5 million (about US$200) each, the state's
\nmonthly loss is estimated at Rp 8 billion. The number accounts
\nfor nearly one third of the state's total tax losses for all
\nelectronic goods combined.<\/p>\n
Customs officials appear to have turned a blind eye to the
\nproblem.<\/p>\n
\"Well, yeah, sometimes there is hand-carried (cargo) but the
\namount usually is not enough for trading. If we caught a
\nshipment, we would impose the usual custom duty,\" said Tony
\nSoesanto, head of the customs service office at Soekarno-Hatta
\nInternational Airport.<\/p>\n
Tony also denied knowing of the terms \"red light\" or \"green
\nlight\".<\/p>\n
Still, he cannot deny the fact that many cellular phone
\nvendors are more than happy to sell warranty-less phones.<\/p>\n
\"The market is so competitive nowadays and our customers
\nalways want to have the lowest price,\" said Boy. He added that
\nthe net profit for vendors is low; for each phone set sold, the
\nmargin for vendors usually does not exceed Rp 75,000.<\/p>\n
What the vendors lose in profit they make up for in volume. On
\naverage, a small vendor in Roxy Mas easily sells 100 phone sets
\nper month.<\/p>\n
The demand for cellular phone sets, assisted by the
\nintroduction of the prepaid GSM card, is exceeding what suppliers
\ncan handle. Prior to the economic crisis, there were 1.2 million
\ncellular service subscribers. The number tailed off to 800,00
\nwhen the economy stumbled.<\/p>\n
Industry experts predicted the number would not recover until
\nthe end of this year. But reports reveal that the number of
\nsubscribers exceeded 1.6 million by the middle of the year.<\/p>\n
Cellular phones have only recently come into their own as a
\nmass consumer product.<\/p>\n
Many remember that the only thing close to a cell phone in the
\n1980s was a dull, heavy black box connected to a long antenna.<\/p>\n
The phone, either produced by PT INTI, Dancall or Ericsson,
\nwas only practical for use as a car phone.<\/p>\n
Costing from Rp 14 million to Rp 18 million apiece when the
\nrupiah still traded at about 1,200 to the U.S., its price kept it
\nout of the hands of all but the wealthiest of consumers.<\/p>\n
It is only in the past three years, riding the wave of the
\ndecade's boom times, that ownership of a cellular phone developed
\ninto a trend.<\/p>\n
The strengthening of the rupiah in recent months before last
\nweek's plunge also increased the sales of cellular phones in
\nJakarta. The Ericsson GF788, which cost Rp 2.2 million last year,
\nnow is offered at Rp 1.35 million. Some models even sell for less
\nthan Rp 1 million.<\/p>\n
\"We usually keep our price close to the phone's real value in
\ndollars. As the average price decreases by Rp 600,000, demand
\nstarts to hike up,\" said Adi Saputra, director of PT Sarindon
\nNusapersada, a distributor of Samsung cellular phones.<\/p>\n
Adi said consumers increasingly sought sophisticated phones as
\nstatus symbols. \"It's the prestige over price and functionality.\"<\/p>\n
Dual-band<\/p>\n
Dual-band phones, which can receive signals on both the GSM
\n900 and GSM 1800 frequencies, are the sought-after choice at the
\nmoment.<\/p>\n
Indonesian operators can only support the GSM 900 frequency
\ncurrently and the prohibitive cost of the dual band makes the
\nprospect of an upgrade unlikely at any time soon.<\/p>\n
\"Although nobody could fully use the feature unless they go
\nabroad, it seems that dual-band is the trend for now,\" said Adi.<\/p>\n
The same trend is also noticed by Susanto Susilo, a director
\nof PT Ericsson Indonesia.<\/p>\n
Susanto said the company did not lose money to the black
\nmarket. \"It just adds an extra job for us, since we receive more
\ncomplaints. But as long as consumers still buy Ericsson, it's
\nfine with us.\"<\/p>\n
To educate its consumers, Ericsson places advertisements in
\nthe media and has set up a consumer hot line.<\/p>\n
Consumer ignorance about the advantages of purchasing a model
\ninclusive of a warranty appears to fan the growth of the black
\nmarket.<\/p>\n
The Indonesian Consumers Foundation (YLKI) says that
\nconsumers' lack of trust in the warranty system reflects their
\npreference for choosing black market goods.<\/p>\n
\"In their mind, consumers are asking for thorough coverage
\nfrom the warranty. In reality, most warranties only cover the
\nservice charge, which is actually not expensive,\" said YLKI's
\nTini Hadad.<\/p>\n
Most of the complaints to the agency concerning electronic
\ngoods involved poor after-sales service.<\/p>\n
YLKI said companies should provide complete warranty terms and
\nalso assure that they cover not only services but spare parts.<\/p>\n
Consumers also are advised to shun the black market because it
\nthey could end up with a dud.<\/p>\n
\"Buying a black market phone means that the service terms for
\nthe set are uncertain and there is a chance that no compatible
\nspare parts are available in Indonesia,\" Tini added.<\/p>",
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