Cellular industry picking up again

Cellular industry picking up again

After being dragged down by the economic crisis, the cellular
phone industry in Indonesia is showing signs of a recovery and
the number of subscribers is once again on the up.

The total number of cellular phone users in the country is now
1,065,820. Subscribers have a choice of three different systems
run by seven operators.

Cellular phone subscriptions have grown sharply in Indonesia
in recent years. Data from the state telecommunications company
PT Telkom shows that by the end of 1996, 562,514 people used
cellular phones. By the end of 1997, this figure had almost
doubled to 1,067,782.

However, the economic crisis forced many people to abandon
their subscriptions and in the first quarter of 1998, the number
of users was running at 815,577. The drop did not take long to
bottom out, and by the third quarter of last year, subscriptions
were up to 942,602.

PT Telkom data shows that 88 percent of mobile phone users
subscribe to the Global System for Mobile Communications (GSM).
The largest company offering this service is Telkomsel, which
serves 424,525 customers. It is followed by Satelindo, which has
346,926 subscribers and Excelcomindo, which has 169,857. The
remaining users are served by Advanced Mobile Phone System (AMPS)
technology offered by Komselindo, who have 77,030 subscribers,
Metrosel, who have 29,060 subscribers and Telesera, who have
5,549 subscribers. A further 11,873 users are served by the
Nordic Mobile Telephone (NMT) system offered by Mobisel.

Telkomsel director Hasnul Suhaimi said the telecommunications
industry was one of the few sectors of the economy tipped to make
a quick recovery from the crisis.

"Sales of the latest handsets have been very encouraging. That
is only a simple indicator, but another reason for the recovery
is the introduction of prepaid GSM cards." he said, pointing out
that users favored the new card because it allowed them to keep
close control of their bills.

Cellular phone sales slumped after the crisis first broke and
people readjusted to changes in their purchasing power.

"Consumers sought out second-hand phones because the retail
prices of new cellular phones more than doubled from pre-crisis
levels. However, when the rupiah stabilized, cellular phones fell
in price and people came out in search of the latest models.
That's the way Indonesians are, they always want the latest
models," Hasnul said.

Rudiantara from Excelcomindo warned that although the number
of cellular phone users had increased, network technology used
here was fast becoming outdated.

"Since the introduction of prepaid GSM cards, the number of
users has increased steadily. Out of all GSM users, 55 percent
are post-paid users and 45 percent prepaid users. Next year,
post-paid users will probably fall to around 35 percent," he
said.

Despite the encouraging signs, he warned that the economic
crisis would continue to hamper growth in the cellular phone
industry here.

"While other countries are preparing third generation cellular
phone technology, operators in Indonesia are struggling to stay
afloat," he said.

Komselindo, an AMPS operator which plans to upgrade its
technology to Code Division Multiple Access (CDMA), will face
much resistance to this proposed change because existing AMPS
users will have to change their handsets.

The company may be ready to take on the new technology, but it
is completely unable to subsidize the change of handsets and
users themselves will be reluctant or unable to put themselves
out of pocket for an untried system.

In the spirit of combating crony capitalism, the government
has canceled the licenses of three cellular providers: PT
Indocomm, which offers CDMA technology, PT Selnas, which offers
the Digital Cordless System (DCS-1800), and PT Indophone (DCS-
1800).

In addition to the canceled licenses, nine companies recently
awarded licenses to operate DCS-1800 and Personal Handy-Phone
Services (PHS) are likely to find it hard to start operating due
to weak demand.

So, the dream of partaking of third generation cellular phone
technology in Indonesia is still a long way off.

Rudi predicted that demand for third generation technology
would remain low for the foreseeable future.

"The third generation is designed for multimedia services and
we must stick to the main question: how big is the market in
Indonesia? There has been no significant growth in the number of
data application users or Internet and mobile phone subscribers."

Data compiled by the International Telecommunications Union
(ITU) in 1997 showed that Indonesia had the lowest level of
multimedia access in Southeast Asia. According to the union's
data, Indonesia's telephone main line density in 1996 was 2:1,
the density of television sets in 1995 was 18:3 in 1995 and in
1996, the density of Internet hosts was 0:005.