Indosat Loses Mobile-Phone Subscribers to Rivals

Indosat Loses Mobile-Phone Subscribers to Rivals

Soraya Permatasari Bloomberg/Jakarta

PT Indosat, Indonesia's second- biggest mobile-phone operator, lost 170,000 subscribers to other providers in the three months ended Sept. 30, which lowered its subscriber base to 12.7 million users.

Indosat had 12.87 million subscribers in June, the company said in August. A "higher churn rate," or the rate at which cellular customers change service providers as a percentage of subscribers, is the main reason for the drop, Strasfiatri Auliana, a spokeswoman for the company, said in a phone interview.

Jakarta-based Indosat competes with PT Telekomunikasi Selular, Indonesia's biggest cellular operator, in a nation where more than three-fourths of its 238 million people don't have phone access. It's also facing competition from overseas companies such as Telekom Malaysia Bhd. and Hutchison Telecommunications International Ltd. which have invested in smaller Indonesian phone companies.

Phone operators "are offering cheaper and cheaper stored- value cards each time, some as low as rP 10,000 (99 U.S.cents), making it easier for a customer to switch from one provider to another," said Ferry Yosia Hartoyo, an analyst at DBS Vickers Securities in Jakarta.

Still, Indosat, which controls about a third of the mobile market, will probably be able to achieve its target to have as many as 14 million subscribers by the end of this year, said Hartoyo, who has a "buy" on Indosat and PT Telekomunikasi Indonesia, which owns Telekomunikasi Selular.

"Indosat's subscriber growth in the second quarter was extraordinary," Hartoyo said. "A slowdown in the third quarter was expected."

The Muslim Eid al-Fitr holiday, Christmas and year-end festivities will boost demand for telecommunications in the fourth quarter, Hartoyo said. About 85 percent of Indonesia's population is Muslim.

Telekomunikasi Selular, or Telkomsel, had 22.5 million subscribers as of July. It aims to increase the number to 25 million by the end of the year, 53 percent higher than last year.

Indonesia's cell-phone users will increase to 45 million by the end of the year, according to an association of Indonesian cellular operators. That may rise to about 79 million users by 2007, according to Morgan Stanley, making Indonesia the fourth- largest mobile-phone market in Asia.