Cellular industry, promising with tight rivalry

Cellular industry, promising with tight rivalry

Debbie A. Lubis, The Jakarta Post, Jakarta

The cellular business in the country will continue to enjoy
rapid growth this year and in years to come but only strong
operators will survive the competition in the long run, analysts
say.

The number of cell phone users has been growing at double-
digit rates in the past few years, and is expected to continue to
do so in the short-term.

The number of cell phone users will easily surpass the number
of fixed-line customers.

The Association of Indonesian Cellular Operators (ATSI)
revealed that at the end of last year the industry served a total
of 6.57 million cell phone users, almost double the 3.67 million
users the previous year.

Just 567,000 people owned cell phones in 1996.

It is believed that cellular phone users will soon outnumber
fixed-line customers, who, according to domestic telephone
monopoly PT Telkom, totaled 7.2 million at the end of last year.

Besides rapid growth, the cellular industry also enjoys better
revenue per user than the fixed-line industry, Telkom said.

Telkom said that average revenue per user at its cellular
division (Telkomsel) last year was Rp 287,000 (around US$28) a
month, more than twice the Rp 141,000 a month average of Telkom's
fixed-line users.

With a total of 6.57 million subscribers last year, cellular
operators raked in a total revenue of Rp 10.5 trillion (about
$1.05 billion).

ATSI chairman Rudiantara predicted that total revenue in the
cellular business would reach Rp 15 trillion this year.

His figure was based on conservative predictions of the growth
of cell phone users this year.

He said that most new subscribers would come from the pre-paid
services, which should grow by between 75 and 80 percent this
year.

He also predicted that non-voice services, mainly Short
Messaging Service (SMS), would contribute 12 percent of the total
cellular business revenues this year, a slight increase from 8
percent last year.

Despite the rapid growth of demand for cell phone services,
Rudiantara predicted only three to four operators would survive
the competition in the next few years.

"In the next two or three years, the existing cellular
operators will be crystallized into three or four," Rudiantara
told The Jakarta Post.

Crystallization and consolidation of businesses would
eventually force uncompetitive operators out of the market, as
was happening in Malaysia and the Philippines.

Citing examples of consolidation, Rudiantara said that PT
Indosat Multimedia, that offers the Indosat MultiMedia Mobile
(IM3) services, was using the roaming facility belonging to its
sister company PT Satelindo.

Also, Telkom merged its Global System for Mobile
Communications (GSM-1800) operations with its cellular
subsidiary, Telkomsel, he said.

Small operators operating in a number of provinces using
outdated technology would be eventually forced out of the market,
Rudiantara said.

He predicted that only cellular operators with national
licenses and the latest GSM technology would survive.

They are companies like PT Telkomsel, PT Satelindo and PT
Excelcomindo Pratama (Excelcom). Together, the three operators
control 95 percent of the market.

As of the end of last year, Telkomsel had 3.25 million
subscribers, Satelindo 1.76 million and and Excelcom 1.22
million.

In addition to the three largest operators, Indosat also holds
a national license. However, Indosat, with its IM3 service, is a
relative new comer. It entered the market only last year and has
150,000 customers.

Indosat-M3 director Hasnul Suhaimi was confident that his
company would quickly catch up with the three biggest operators.
Indosat Multimedia aimed to grab 5 percent of market share this
year, with around 450,000 users.

Indosat has invested a total of Rp 7 trillion in its IM3
business.

In addition to the four operators, four other operators have
been around since the mid 1990s, but they failed to gain ground.
They are Komselindo, Metrosel, Telesera and Mobisel. Their
subscribers range from 10,000 to 70,000 users.

There are seven other companies licensed by the government to
operate at the provincial level. However, only one of them is in
operation: PT Natrindo, with its commercial name Lippo Telecom
operating in East Java.

The other six license holders are PT Astratel for Sumatra, PT
AW (Aria West) for West Java, PT Inti for Jakarta, PT Mitra for
Central Java, PT Primarindo for Kalimantan, and PT Kodel for Bali
and Sulawesi.