Cellular operators vie for a niche

Cellular operators vie for a niche

JAKARTA (JP): A cellular phone for everyone: This may be at
the heart of the campaign for cellular operators in Indonesia,
particularly in Jakarta, the country's most promising cellular
phone market, within the next few years.

Yes, there will be more operators competing in the market
place for a share of this wireless sphere.

By next year, the greater Jakarta area (including Jakarta,
Bogor, Tangerang and Bekasi, also known as Jabotabek), will have
at least eight mobile cellular phone operators. There will be the
five existing operators, including three Global System for Mobile
Communications (GSM 900) operators of Excelcomindo, Satelindo and
Telkomsel, Komselindo and Mobisel. There is also PT ACeS which
operates satellite-based cellular phone system Byru.

The government recently granted state-owned PT Indosat and PT
Telkom the right to operate a Digital Cellular Service (DCS)
1800, or GSM 1800, nationwide. Both companies plan to launch the
service in Jakarta next year.

State-owned telecommunications maker PT Inti is also allowed
to operate GSM 1800 in the Jakarta area after the company had to
cancel its project for the Personal Handy Phone (PHS, a cellular
system originating from Japan) as it was not feasible and did not
have a promising future.

In the meantime, the government has also licensed six new
companies to run cellular phone services to operate the GSM 1800
regionally, beyond Jabotabek. They include PT Aria West
International (to operate in West Java), PT Astratel Nusantara
(Sumatra), PT Mitra Perdana (Central Java), PT Natrindo Global
(East Java), PT Primarindo Sistel (Kalimantan) and PT Kodel
Margahayu (eastern Indonesia).

The new regional operators will compete with Komselindo (West
Java), PT Metrosel (Central and East Java) and PT Telesera
(Bali).

Immature

The cellular phone industry has been developing well in
Indonesia considering that the market is immature compared to
other Asian nations such as Hong Kong and Singapore.

Data from the Asia Pacific Telecoms Analyst (June 2000) shows
that penetration of fixed-line services in Indonesia has been
growing slowly in a monopolistic environment, as real
liberalization has yet to start even though a new regulation was
implemented last September.

Meanwhile, penetration of cellular services is growing
significantly with real competition, but the growth rate of 1.5
percent is much lower compared to Hong Kong, Singapore, Taiwan
and South Korea which have surpassed 50 percent.

The overall number of cellular phone users in Indonesia surged
by 75.6 percent to be 3.2 million users in the first nine months
of this year when compared to the same period in 1999.

The figure is estimated to reach 3.4 million by the end of
this year.

The cellular market is now controlled by GSM operators. Of the
estimated figure, Telkomsel has some 1.7 million users, Satelindo
over 1 million and Excelcomindo about 670,000.

GSM is the definitive worldwide standard for wireless
communications. The technological development of the cellular
system now approaches the mobile broadband multimedia (3G) level
which will operate on a higher frequency (1.8 gigahertz). GSM
1800 is a must for Indonesia if the nation does not want to lag
behind other nations in the cellular system.

The three new GSM 1800 operators will make competition in
Jakarta much fiercer. Indosat and Telkom have allocated huge
amounts for investment in the business.

Indosat's director for business development Budi Prasetyo said
that the company invested $300 million to develop Indosat Multi
Media Mobile (IM3) which will include the GSM 1800.

He said that the service, supplied by Ericsson, would be
launched in mid-2001.

IM3, which will offer GPRS (General Package Radio Service),
will have 470 Base Transceiver Stations (BTS) with a capacity of
420,000 service lines in nine locations of Bandung, Batam,
Denpasar, Jakarta, Medan, Semarang, Surakarta, Surabaya and
Yogyakarta.

Telkom said it allocated an investment of Rp 90.5 billion
to build the cellular service. They are hopeful that the
operation will be active by the last quarter of 2001 in Jakarta,
Bandung and Bandarlampung and to grab 495,000 users.

Rivalry

In all probability there will be stiff competition between
Indosat and Telkom.

The cellular service will be one of the four major lines of
businesses run by Indosat after the government permitted the
company to become a full network service provider.

Budi said Indosat now possessed the "4-in-1" strategy,
meaning that the company would run services of mobile and
wireless; Internet and multimedia; backbone; and fixed line.

He said Indosat plans to develop at least 1.6 million cellular
service units and operate 3G by 2005.

The Internet service is estimated to operate in 305 cities
while services of cable TV, interactive TV and on-demand service
is estimated to operate in five cities by 2005.

Indosat also plans to build a backbone covering Sumatra, Java-
Bali and Kalimantan-Sulawesi by 2005 and install at least 1.9
million fixed lines.

Budi said that Indosat would need some Rp 15 trillion to
implement the "4-in-1" strategy. The funds will be generated by
budget allocation, subsidiary sales, partnership, bonds issuance
or with commercial loans.

Telkom's vice president for communications Doddy Amerudien
said the company aimed to focus on information and communications
services.

He quoted a report from the Boston Consulting Group last year
that Indonesia had a promising future in the telecommunications
sector, particularly in mobile and Internet services.

Telkom will provide more innovative services like the existing
services of Telkom-Phone(P)net, Telkom-Mobile(M)Net, Telkom-
View(V)Net, Telkom-Internet(I)Net and Telkom-Service(S)Net, he
added. (icn)