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.