Cellular phone growth to slow down
By I. Christianto
JAKARTA (JP): The currency crisis, which has seen the value of the rupiah drop almost 60 percent against the U.S. dollar since July, will affect the growth of the mobile phone industry in Indonesia.
The rupiah's sharp depreciation will not only limit new subscribers but also make cellular expansion more expensive.
Cellular service providers, like most other companies, are facing difficulties in paying back their offshore loans.
The director of Telkomsel, Ardin Ichwan, said the government had urged service providers to put the brakes on expansion.
"We were told to improve capacity, coverage and service but not to expand our infrastructure as it will require much more investment," he said.
There are seven cellular telecommunications suppliers in Indonesia, offering three different systems -- Advanced Mobile Phone System (AMPS), Nordic Mobile Telecommunications (NMT) and Global System for Mobile Communications (GSM).
At the end of September there were 1.04 million cellular phone users in Indonesia. They subscribe to GSM, which is run by Satelindo, Telkomsel or GSM-XL; AMPS by Komselindo, Metrosel or Telesera; and NMT by Mobisel.
The government has forecast there will be two million users of mobile phone services by March 1999, the end of the Sixth Five- Year Development Plan.
New providers
To support its plan, the government has granted licenses to five more companies to develop two new cellular technologies: the Digital Cordless System (DCS-1800) and Personal Mobile Phone Service (PHS).
The five companies comprise PT Selnas and PT Indophone which will operate DCS-1800 nationwide; PT Primasel which is to operate PHS in East Java; PT Indosel which will operate DCS-1800 in Greater Jakarta; and a consortium of state-owned PT Telkom, PT Indosat and PT Inti, which will operate PHS in Greater Jakarta.
Selnas is 10 percent owned by Telkom and 90 percent owned by PT Cellnet Nusantara, a private firm controlled by businessman Sudwikatmono, one of President Soeharto's close relatives, and Siti Hutami Endang Adiningsih, the President's youngest daughter.
Telkom has a 35 percent stake in Indophone which is 65 percent controlled by PT Nusantara Ampera Bakti (Nusamba). Nusamba's shareholders include timber tycoon Bob Hasan, who is also the company's chief commissioner; businessman Sigit Hardjojudanto, Soeharto's eldest son; and the Supersemar, Dakap and Dharmais foundations, all chaired by Soeharto.
Indosat controls 65 percent of the shares in Indosel, while Telkom and Inti control 5 percent and 14 percent respectively. Other shareholders include PT Bangun Nusantara Persada and Kopindosat.
However, the five new cellular companies, which are scheduled to start trial operations mid next year, will likely face difficulties due to the economic turmoil.
Investments in the cellular sector are not cheap. The new cellular suppliers, though they are ready to invest in infrastructure and offer reasonable packages to the public, will be hard pushed to attract new customers because people will think twice about using their services when the economy is unstable.
Delay
The currency crisis has forced the government to delay the appointment of 11 new cellular providers to supply DCS-1800 and PHS regionally in six areas of the country.
Minister of Tourism, Post and Telecommunications Joop Ave said the government decided, after a series of assessments, to postpone the announcement of the winners, which was scheduled for September.
The rupiah turmoil has affected a wide range of businesses including the prospective suppliers of mobile phone services, Joop said.
"Even if we announced the winners, they (the new cellular suppliers) would not have money to start the projects."
The 11 licenses include six regional licenses for DCS-1800 operations in Sumatra, West Java, Central Java, East Java, Kalimantan and eastern provinces and five regional licenses for PHS in Sumatra, West Java, Central Java, Kalimantan and the eastern islands.
The country was to have a total of 23 service providers by next year, offering six different systems and with Greater Jakarta and East Java as the key markets.
Ardin said the target for cellular users must be reviewed as the five new service providers would not start on schedule and the granting of 11 additional licenses had been delayed indefinitely.
The government also needs to consider a possible weakening in the public's purchasing power.
Cellular users will probably grow at slower rate compared to previous years.
Under the government's plan to license more service providers, coupled with the decreases in handset prices, the high growth of cellular telecommunications services until 2000 is to be maintained.
Telecommunications analysts previously believed that cellular services were likely to grow in the coming years at rates higher than those projected by Merrill Lynch of the United States.
Cellular telecommunication services here grew 41 percent in 1993, 80 percent in 1994, 127 percent in 1995 and 90 percent last year.
The company predicted, however, that growth might decline to 76 percent this year, 38 percent next year, 37 percent in 1999 and 31 percent in 2000.
But the predicted slowdown was not because of economic woes as the report was issued long before the crisis began.
It simply showed that the rate of market penetration of cellular services in Indonesia would remain the lowest in the region -- which is estimated at 0.2 percent in 2000 -- compared to 38.1 percent in Hong Kong, 27 percent in Singapore, 18.2 percent in South Korea and 11.3 percent in Malaysia.
Table: Number of cellular users
Operator System Sep 30, 1996 Sep 30, 1997
--------------------------------------------------
Excelcomindo GSM -- 111,989
Komselindo AMPS 90,958 114,000
Metrosel AMPS 22,102 37,178
Mobisel NMT 22,907 30,847
Satelindo GSM 190,000 368,113
Telesera AMPS 6,158 6,642
Telkomsel GSM 130,682 372,698
--------------------------------------------------
Total 462,807 1,041,467