Cellular business shows unstoppable growth

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.