Experts see room for cheaper cell phone calls

Tony Hotland, The Jakarta Post/Jakarta

Good news for cellular phone consumers: while current calling charges are already low by international standards, they are likely to continue to drop in the future, experts say.

And the ongoing price war being waged by cell phone operators that has resulted in the lower charges, is making the industry one of the most competitive in the country, experts say.

"There's still excess profit out there and a huge room for more decline (in charges). Of course this is good for consumers as long as the decline doesn't sacrifice the quality of the service," Hery Nugroho, a member of the Indonesian Telecommunications Regulatory Body (BRTI), told The Jakarta Post during the weekend.

Hery said the country's biggest cellular operator, PT Telkomsel, currently had an average EBITDA margin of around 65 percent.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization.

"It can be said that such a high EBITDA margin shows that Telkomsel still has excess profits. Compare this to operators in European or American countries, whose EBITDA margins are between 25 percent or 35 percent," Hery said.

The difference, he said, was probably because fixed-line phones in developed countries were well-established and affected the penetration of cellular services.

"However, even if (Indonesia) increases its penetration rate of fixed-line (competing services), I'm certain we will see further declines in cellular charges," Hery said.

"Lower calling charges are possible as long as there's no market distortions -- operators colluding to set minimum tariffs," he said.

Only about 9 million out of 220 million Indonesians currently have access to fixed-line telephones, while at least 23 million people already own cellular phones.

Hery could not predict when the charges would reach their lowest level at which point providers could not afford further price cuts.

Indonesian Association of Cellular Telephone (ATSI) secretary general Rudiantara said the decline in rates would continue as the price issue remained the biggest concern for the public.

"In addition to that, cellular operators are spending much less money per subscriber. This allows them to lower the tariffs," he told the Post.

The price war began when cell phone service providers began targeting people from lower income brackets. Telkomsel was the first operator to chop call rates by launching the cheap Kartu As SIM (subscriber identification module) card in May.

The move was later followed by rival PT Indosat, which lowered its IM3 tariffs. Last week, PT Excelcomindo launched two new brands, Kartu Jempol and Kartu Bebas that also offer lower charges.

Table:

Cellular tariffs for a 30-second long call

Brand to fixed-line Same service Other service

Kartu As (Telkomsel) Rp 495 Rp 1,000 Rp 1,900

IM3 (Indosat) Rp 900 Rp 1,000 Rp 1,550

Kartu Bebas (Excel) Rp 875 Rp 800 Rp 1,750

Market sources