BLOOMBERG/Bakerie Plans Wireless Foray to Connect With Rising Youth Demand for Internet
By Achmad Sukarsono
PT Bakrie Telecom plans to enter the wireless broadband business in the third quarter amid growing demand from young consumers. It will use proceeds from an April bond sale to fund the expansion.
“Indonesia is a young country with 50 percent of the population below 35, said Amit Bose, the telecom’s head of strategic initiatives.
Young people were hungry for information and entertainment and sought them on the Internet, he said. But the nation’s infrastructure and Internet service quality left something to be desired.
The growth of the Internet helped the country’s largest phone company, PT Telekomunikasi Indonesia (Telkom) record a 6.7 percent rise in net profit last year, while its traditional phone business dropped. Users of Speedy, Telkom’s broadband services, grew 77.5 percent in 2009 to 1.1 million from 645,000, while its mobile phone customer base was 81.6 million in the end of 2009.
Boosting the new business would provide a strong foundation for when demand for voice services lessened, Telkom president director Rinaldi Firmansyah said last month. There were only 30 million users in September, according to an industry association.
Bakrie Telecom, known as BTel, issued $250 million of bonds on April 30, with coupons priced to yield 11.5 percent. Bose declined to comment on results of the sale.
BTel, which had a mobile phone customer base of 10.5 million in 2009, sees the broadband wireless Internet market as “an open playing field” and the company is “very focused” on taking the opportunity.
While Telkom previously had a “time advantage” in voice services, that edge no longer existed as everyone was entering the wireless broadband market at the same time, Bose said. With the ease of getting capital and technology at the moment, “there was no reason why anyone could automatically dominate.”
Internet penetration in Indonesia does not reach beyond big cities, and this suits BTel’s business profile, according to Chandra Pasaribu, an analyst at PT Danareksa Securities. Telkom and PT Indosat, the existing players in Indonesia’s wireless broadband business, have nationwide coverage, while BTel’s strategy focuses on 79 cities.
“The deciding factor will be the packaging of the service that they will offer, whether all you can eat or price per kilobytes,” Pasaribu said. “The market is definitely there, so the competition will be on pricing and quality.”
Bose denied speculation that BTel has plans to merge with Telkom or any other mobile-phone operator in Indonesia.
Sarwoto Atmosutarno, president director of Telkom’s mobile-phone unit Telkomsel, has said there could be a merger this year because having 11 players in the cellular phone service business was too many for Indonesia.
“It’s hardly likely” parent Bakrie group will give up the telecommunications business, Bose said. “Rumors will continue. People call us up and ask are you going to be part of Telkom tomorrow. We have never thought about it.”