The battle continues

By Henri Setiawan

BANDUNG (JP): I was talking with my friend in the office this morning as he has changed -- yet again -- his mobile phone, and it made me think how influential wireless technology was today, especially mobile technology, which has created more than 100 different wireless gadgets available on the market today, ranging from mobile phones through to palm-sized portable computers, wireless web connections, wireless organizers etc. My friend has changed his mobile phone virtually every three months, and the rapid development of such types of technology is just amazing.

In Indonesia, the crisis that began in 1997 has surprisingly not had a big effect on the fast-growing world of telecommunications. With several innovations and developments soon to be introduced in Indonesia, including the expansion of network coverage, it has been predicted that mobile services will gain major increases in revenue during 2001. Such a prediction will present enormous opportunities for investment, both nationally and internationally. Why? Because the penetration of mobile phones in Indonesia is still very low compared to the country's population and market potential.

New Mobile Operators

Several new operators have received licenses as mobile operators. They will operate in regional and/or national areas. The table below shows the list of operators that will fight to acquire a portion of the mobile competition.

(No, Operator, Technology, Coverage): 1, Telkomobile (PT Telkom), DCS/GSM 1800, National; 2, Indosat Multi Media (IM3), DCS/GSM 1800, National; 3, Astratel, DCS/GSM 1800, Sumatra; 4, Indosel, DCS/GSM 1800, Jakarta; 5, Aria West, DCS/GSM 1800, West Java; 6, Mitra Perdana, DCS/GSM 1800, Central Java; 7, Natrindo, DCS/GSM 1800, East Java; 8, Primarindo Sistel, DCS/GSM 1800, Kalimantan; 9, Kodel Margahayu, DCS/GSM 1800, East Indonesia; 10, Jaya Telesarana, PHS, Sumatra; 11, Telkom Personal, PHS, Jakarta; 12 Patria Caraka, PHS, West Java; 13 Bima Investa, PHS, Central Java; 14 Primasel, PHS, East Java.

In East Java, Natrindo will cooperate with Hutchison Whampoa, Hong Kong, which is already well-known for its expertise as a mobile operator in several countries, including Hong Kong, the UK and Australia.

In Sumatra, Bertrange, Luxembourg-based Millicom International Cellular S.A. (http://www.millicom.com), a provider of mobile phone services in Asia, Latin America, Russia and Africa, will launch GSM1800 mobile telephony, the company has announced. Millicom plans initially to deploy a network in Medan, the capital of North Sumatra, and Pekanbaru. The license covers the entire island of Sumatra, which has a population of 43 million. The company will launch services under its worldwide brand name, Tango.

Regional operators will each have a bandwidth of 20 MHz. With such a huge bandwidth it will enable the development of a lot more besides basic voice services. As a comparison, 3G technology only needs 15 MHz for voice services. But on the other hand, their licenses are restricted to regional areas and they have additionally experienced problems with connections to other networks. It will undoubtedly result in tough competition among operators that have national licenses, such as Telkomsel, Satelindo, Excelcomindo.

Indonesia's mobile growth

Below is a projection of Indonesia's mobile growth forecast:

Growth of Mobile Customers (in thousands)

(Operator, 1996, 1997, 1998, 1999, 2000*): Telkomsel, 189, 373, 425, 1.025, 1.450; Satelindo, 207, 401, 347, 716, 954; Exelcomindo, 19, 134, 170, 385, 645; Komselindo, 101, 65, 77, 37, 72; Metrosel, 20, 42, 30, 42, 56; Mobisel, 24, 31, 12, 13, 14; Telesera, 7, 7, 7, 7, 7; Total, 567, 1.053, 1.068, 2.225, 3.198.

*Until third quarter 2000

Source: From several references

Forecasting mobile customer growth 2001

(Operator, 2001): Telkomsel, 2.7 million; Satelindo, 1.6 million; Excelcomindo, 1.2 million; Indosat, 0.3 million; Telkom, 0.2 million.

Source: From several references

Preparation for the real battle

With 1.5 million new customers forecasted, the battle is just beginning this year. Such a large number of new customers will increase the number of mobile customers to 3.5 million (end of 2000). This will lead to great deals and amazing revenue opportunities. And it make sense if Telkomsel, Satelindo and Excelcomindo, as well as regional operators like Komselindo and Mobisel, compete aggressively to secure, upgrade and expand their coverage area and add new services. This would involve expanding Telkomsel's existing coverage network and capacity, and delivering value-added services like Satelindo SMS (Mentari).

On the other hand, the battle will be greater with new operators like Telkomobile, which is supported by PT Telkom Indonesia, and IM3, which is supported by PT Indosat, a well- known operator here. With new "weapons", the new technology of Digital Cellular Service (DCS) 1800, will provide a more ferocious battleground for the three GSM 900 operators that already exist nationwide. From reliability and services, DCS 1800 promises lots of features, like high-speed access for data, rather than GSM 900. It will be quite an interesting competition when you consider Indonesia's current political condition.

Regional areas should create a great deal of competition between the four operators -- Komselindo, Metrosel, Mobisel and Telesera -- that already operate their analog mobile phone system (AMPS) alongside the new players and their DCS 1800 technology: PT Astratel Nusantara, Sumatra, PT Natrindo, East Java, Primarindo Sistel, Kalimantan, Mitra Perdana, Central Java, and DI Yogyakarta, also known as Kodel Margahayu, East Indonesia.

There will be 14 mobile operators in the first quarter of 2001 to fight over almost two million customers. For the five national licensed operators it will be advantageous as they will acquire opportunities for roaming, have a wider area of coverage which will, of course, affect prices for subscribers.

Telkomsel, Satelindo and Excelcomindo will have tough competition this year and next if IM3-Indosat and Telkomobile-PT Telkom networks are deployed and their services made available on the market. This is because the names, experiences, network coverage and budgets from both operators are already well known.

It is also supported with lots of lower priced mobile devices that have capability for dual band 900 and 1800 in the market already owned by customers. In Indonesia, where people love new technology and services that provide new experiences and set trends, 1800 technology will present a number of advantages such as the capability to transfer, send and receive high speed data.

Some people predict that Indosat and Telkom will win in terms of coverage, quality of service and features. With pricing, Telkom is also predicted to provide better bargains to customers since it already owns the national network and has no problem with interconnections. But don't forget, better customer services also attracts more customers, especially in low demand areas.

Others predict that it will be a very hard time for new operators to compete as customers are not well known for purchasing value-added mobile services like multimedia, high speed sending and receiving of data and Internet services. Wireless application protocol (WAP) for instance, is still only in its infancy. And users with "special" numbers, or "fortune" numbers, are really quite difficult to change. But these are just small issues. The real competition will begin if existing operators are also given licenses as 1800 MHz operators.

So, in which geographic area will the most keenly fought and strategic battle be fought? Greater Jakarta (Jakarta, Bogor, Tangerang and Bekasi) is still the most strategic, although one survey states that a 12 percent penetration for 12 million citizens in Greater Jakarta will not grow much further. But this market is still promising, as from the 3.4 million mobile customers nationally, almost 60 percent are from Grater Jakarta and 40 percent are from Surabaya, Semarang, Medan, Batam and other places.

Operator Preparation

With the battle beginning this year, operators are preparing for the next competition. Excelcomindo for example, will be targeting more than 1.2 million customers by the end of 2001, much more than last year's 700,000 customers. And the investment that will be made for this project is US$170 million. Much of this investment will be used to build new networks to expand coverage areas, like building more base transceiver stations (BTS) and microcells in Sumatra, Kalimantan and Sulawesi.

Indosat is planning to acquire 300,000 new customers in the first quarter of 2001 with operations in Jakarta, Surabaya, Bali and Batam by building more than 420 BTS. This company will invest more than Rp 1 billion. The total investment that has already been prepared by Indosat for mobile services this year is Rp 4.8 billion. The technology will be supported by Ericsson, a well- known vendor for mobile technology.

Telkom is also preparing for the battle by targeting 200,000 new customers in Jakarta, Bandung and Lampung for its first stage of operations. To support this penetration, Telkom will invest $60 million with 450 BTS. Siemens, a big vendor from Germany, will provide the tender in supplying the system for Telkom.

An Excelcomindo survey shows that total revenue for national mobile operators this year will be more than Rp 10 billion or a growth of more than 45 percent, compared with revenue from 2000, which was only Rp 7 billion. Total investment for building and operating coverage areas for 2000 was $900 million.

Telkomsel, on the other hand, as one of the leaders of the mobile market today, is also optimistic that it will still be the best. As the biggest operator in terms of customers and coverage, Telkomsel is targeting around 700,000 new customers this year and will have 2.7 million customers by the end of 2001. To fulfill this ambition, Telkomsel will add another 500 BTS throughout Indonesia worth billions of rupiah in investment. Money is no problem for this company as it has $500 million to play around with.

Satelindo is targeting more than 600,000 new customers, giving it a total customer base of 1.6 million, or more than 60 percent compared to last year. Satelindo will invest Rp 1.3 billion to add another 450 BTS. Rumor has it that PT AriaWest International, known as KSO Divre III-West Java, will receive a share from Telkom in this company. PT AriaWest International already has its DCS 1800 license for West Java.

From various data available on the Internet, the current tight competition among mobile companies is very beneficial for the customer. The question today is how will customers and consumers acquire more benefits with such low prices, advanced features and ease of connection between one operator and another? The important point is that we hope Indonesia will benefit from the telecommunications sector and transparency will be more prevalent as the ease of communications increases and the glory of Indonesia will return for good.

The writer is a staffer of PT Telkom Indonesia.