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.