Lessons from China and IM3

Jonminofri Nazir, Contributor, Jakarta

By numbers, Indonesia's huge population of 212 million should be a lucrative market for both types of telephones: fixed as well cellular.

Sadly to say, the country has only seven million fixed phone lines, while the number of cellular phones is more or less similar.

The good news then is that business opportunities for telephone operators is wide open and extremely promising, both for fixed phones (wireless or non-wireless) and for cellular phones that use GSM or any other system.

Need proof? Just look at the extremely rapid growth of cellular phone users. In just 10 years the number of mobile phones has equaled the number of lines provided by state-owned telecommunications company PT Telkom, which has been operating for decades.

Another indication is the 260,000 new subscribers acquired by the latest GSM operator, PT Indosat Multi Media Mobile (IM3), in just under 10 months. It is not surprising, therefore, that they are aiming to double that number by the end of the year.

"Our target is 450,000 subscribers by the end of the year," said Sumedi Kirono, the commercial director of IM3.

Fully aware of the opportunities in this sector, the government has deregulated the related policies. Being an operator is no longer the monopoly of certain companies.

For fixed phones, in line with the new policy, the government has actually given PT Indosat the necessary permit to market its local telephone products starting August 1, 2002 based on the agreement signed by PT Telkom and PT Indosat.

Strangely, until the first week of this month, the government is yet to fulfill its commitment. With a few weeks left it would be very difficult to set up a new business.

Based on conservative estimates, the number of cellular subscribers by 2004 will double to reach 14 million.

Will the local cellular industry be able to meet such a demand? Taking other countries' experiences as an example, this should not pose as a major problem.

China, for instance, increased the capacity of its GSM operators within no time. The world's most populated nation boasts an increase of five million new cellular phones every month, which means every month an operator five times the size of Indonesia's major operator comes into existence.

Of course China is different from Indonesia. The growth of subscribers here, due to various factors, will not be as fast as in China. But one important reason that might spur the growth is the inexpensive cellular phones currently available in the market. With only Rp 500,000 one can purchase a cellular phone with sufficient features.

To take advantage of business opportunities, every cellular operator has its eyes wide open for ways to increase subscriptions.

Two of the country's major operators, Satelindo and Telkomsel, keep on implementing strategies to find new subscribers in their own coverage areas, while at the same time they have been increasing the number of Base Transmitting Stations (BTS) to cover the blank spots.

Meanwhile, another operator, Excelcomindo, is opening new markets by expanding its coverage in Sumatra and other islands to make its services truly nationwide.

The way IM3 expands its market is also interesting to watch, though this newcomer operates in the same areas already occupied by other operators. That's why it has opted for product differentiation - especially in the technology aspects - to present to its subscribers entirely new features. This way it has succeeded in creating a totally new market.

The differentiation has made possible a wide range of applications. The use of the nationwide GSM 1800 frequency is one example.

Another is the Enhanced Full Rate (EFR) technology that makes the voice much clearer, as close as possible to the original voice quality. A SIM Tool Kit, which is a cellular card with a 64KB memory that makes browsing possible, is also provided.

Finally IM3 applies the GPRS technology for the benefit of its subscribers. Hence the subscriber can receive and transmit a huge amount of data at a high speed and have a mobile access to the Internet also at a greater speed compared with using a modem or a fixed phone.

The GPRS facilities have indeed created a new market for IM3. This niche consists of consumers who are used to information technology for their work or life style. By using GPRS features these subscribers can receive and transmit a wide range of information, e-mail as well as play games with distant users.

"The number of GPRS users is rising," Sumedi said. This service is currently given free of charge. The free charge strategy, according to Sumedi, is to educate the customers on the use of mobile Internet. In the future, when the market is more mature, IM3 will impose the appropriate charges.

However, it is irrefutable that these GPRS users were previously GSM subscribers of other operators, therefore, the IM3 is today their second card as they want to enjoy its GPRS facilities. Sumedi feels certain that once they try IM3 they will instantly feel the difference in the voice quality as well as its other superior features.

Another market segment targeted by IM3 is the consumers who are price conscious. IM3 caters to them by making available the most inexpensive prepaid card, which is sold at Rp 90,000. This strategy has worked successfully with the lower income bracket, because for these customers the most important thing is to receive an incoming call, thus they can economize on charges.

IM3 also offers another service called "IM3 Friend" with monthly rates half the prevailing price and air time discounts as well. This service is quite popular with the type of customers who often communicate within their own circles, such as their colleagues, friends or family members.

Though IM3 is reluctant to release actual figures, one can guesstimate from their advertising campaign that "IM3 Friend" has really penetrated the market better than its sophisticated feature, the GPRS technology. Obviously "IM3 Friend" has made communications on cellular phones truly affordable.

The huge number of lower income subscribers has remarkably expanded the cellular market. In fact they are the new market segment for GSM cellular phones in Indonesia.