Competition in cell phone services becomes fiercer

Competition in cell phone services becomes fiercer

By Christiani Tumelap

JAKARTA (JP): Competition in the domestic mobile telephone
service business is expected to become more severe next year with
the expected entrance of Indosat and Telkom to challenge the
existing seven operators.

The government is expected to award the new license for the
GSM-1800 format for Indosat and Telkom in August as part of its
plan to transform the two firms into strong, full network and
service providers before it liberates the country's
telecommunications sector in 2002 or 2003.

Indosat said it would launch its new business from the most
lucrative market, Jakarta, where it plans to sign up at least
360,000 subscribers in the first year of operation alone.

Telkom has not made a prediction, but it is obviously
targeting Jakarta also as its first market base.

The two telecommunications giants will have to struggle to
compete with the seven existing operators to grab as many new
customers as possible from the one million new subscribers who
are predicted to sign up for mobile telephone service in 2001.

The existing seven operators -- Telkomsel, Excelcomindo and
Satelindo, which run the Global System for Mobile Communications
(GSM) on the 1800 format; Telesera, Metrosel and Komselindo,
which run the advanced mobile phone system (AMPS); and Mobisel,
which runs the Nordic mobile telephones (NMT) system -- currently
serve about 2.6 million subscribers.

Indosat recently said it was optimistic about the prospect of
its new business mainly because the mobile telephone market had
showed a constant high growth of at least 50 percent per year.

The number of mobile telephone subscribers has been growing
despite the crisis, which was believed to ruin customers'
purchasing power. The number is expected to climb from 2.05
million in 1999 to 3.2 million by the end of this year and 4.5
million next year.

However, Rudiantara, head of the policy division of the
Indonesian Cellular Telephone Association (ATSI), said new
players would not be able to beat existing operators, especially
the three GSM operators, because they were well-established.

"The competition will certainly become very tough. But it is
impossible for them to really compete against us in only one or
two years of operation as we already have a strong customer
base," he said on Saturday.

The three GSM operators control 96 percent of the country's
total mobile telephone market of about 2.6 million subscribers at
present.

They have also showed the highest growth compared to other
operators of AMPS and NMT.

According to data from Telkom, Telkomsel's subscribers grew by
98 percent to reach 1.12 million by the end of March this year
from 566,167 in the same period last year, while Satelindo's grew
by 43 percent to 703,783 from 491,964 and Excelcomindo's soared
by 121.7 percent to 468,400 from 211,200.

Metrosel recorded a positive growth of 58.9 percent, while
Mobisel and Telesera recorded a lesser growth of 29.9 percent and
1.7 percent respectively. Komselindo, on the other hand, saw its
number of subscribers shrink by 18.6 percent.

Telkomsel commercial director Hasnul Suhaimi also voiced
optimism, saying Telkomsel was undefeatable because it had
established a solid customer base, especially in all major cities
around the archipelago.

"I'm very optimistic. They may steal some of our customers,
but I believe Telkomsel will retain dominant control over the
market with at least 33 percent by then," he said, claiming that
Telkomsel now controls 46.5 percent of the domestic GSM market.

Hasnul acknowledged, however, that existing operators would
face a serious threat if the new players could provide a much
better service at a lower price.

Apart from Indosat, Telkom and the seven existing operators,
Indonesia has another 13 companies which have secured government
licenses to do business in this sector.

Five companies, including PT Selnet Nasional Indonesia and PT
Indonesia Telephone Cellular National, in which Telkom has a
stake, were granted licenses for the Digital Cordless System DCS-
1800 and Personal Mobile Phone Service (PHS) in 1997.

In November 1998, another nine companies, including Astratel
Nusantara Consortium and PT Ariawest International, both of which
are Telkom's partners in the Joint Operation Scheme (KSO), were
granted licenses to operate the DCS and PHS formats in six areas
of the country.

But due to a lengthy impact of the economic crisis, hardly any
of the 13 companies have started network construction, let alone
commencing operation.