Cellular business shows unstoppable growth

Tony Hotland, Jakarta

Boosted by declining phone rates and the entry of more sophisticated handset technology, the number of cellular subscribers rose by 5.1 million, or 28 percent, to 23.4 million in the first half of the year, from 18.3 million last year.

Market leader PT Telekomunikasi Seluler (Telkomsel) booked around 2.9 million new subscribers in the period and is looking increasingly able to accomplish its target of five million new subscribers by the end of the year.

Telkomsel now has some 12.5 million people subscribing to its Simpati, Halo and As cards.

"Telkomsel's half-year net profit is 37 percent higher than for the same period last year and is 102 percent higher than we targeted earlier this year," Telkomsel president Bajoe Narbito said.

Telkomsel's first semester net profit in 2003 was Rp 1.94 trillion (US$225 million), 54 percent higher than for the same period in 2002.

Rival PT Indosat drew 1.4 million new subscribers, bringing total subscribers to its Mentari, IM3, and Matrix cards to 7.34 million. It expects to draw up to 3 million subscribers this year.

Third-largest cellular provider, PT Excelcomindo Pratama, also increased it cellular subscribers to 3.6 million people from about 2.5 million.

Company president Gerald F. Rossi said that the company was aiming for 4.2 million subscribers and planned investment amounting to as much as $200 million this year to reach its target.

While cellular service providers are gaining greater revenue from growth, the public has also taken benefit from various facilities offered by the providers, especially lower rates and even free starter packs.

Telkomsel, for example, sells its Kartu As starter card at a price equal to the value of the call units contained in the card. Telkomsel even offers additional call units worth Rp 15,000, 10 days after activation. In the past, buyers usually bought a starter card at a price higher than the value of the card's call units.

Recently, Indosat cut its IM3 card rates significantly to counter Telkomsel's move. It cut local call rates by 67 percent and long distance call rates by some 75 percent. Indosat claims the new rates are 32 percent lower than for Kartu As.

In view of the strong growth in the first semester of the year, Association of Indonesian Cellular Operators (ATSI) chairman Rudiantara has projected there will be around 28 million subscribers by the end of the year.

"I'm even optimistic that 2007 will see 65 million cellular subscribers, as all providers are aggressively enhancing their capacity and expanding their coverage areas," he said, adding that at least $3 billion would be invested by cellular operators to expand and upgrade their infrastructure this year.

Rudiantara said the projected figures covered only the subscribers of Global Service for Mobile Communications (GSM)- based cellular services.

The figures could be greater if the number of subscribers of Code Division Multiple Access (CDMA)-based, fixed-wireless service is taken into account.

Since Telkom launched its CDMA-based service, Flexi, last year, the sector has been moving at full throttle. Aside from Flexi, the current players in the CDMA sector are Esia, Mobile 8 and StarOne. Esia is owned by the Bakrie group, Mobile 8 by Bimantara group and StarOne by Indosat.

Rudiantara said CDMA service providers were expected to book up to 1.5 million subscribers this year and the number was projected to grow to 10 million by 2007.