XL's prepares cell phone changes

XL's prepares cell phone changes

By Taufik

Up to November 1999, Indonesia has still not fully recovered
from the economic crisis. Nonetheless, many are seeing a ray of
light at the end of the tunnel. With sociopolitical advancements,
this has encouraged optimism on Indonesia's economic future. This
is why many commitments for mid-term to long-term investments are
being made, either by local or foreign investors.

On the other hand, there are companies which are not only
committing to invest but have invested, although not in a very
large sense. This is what Indonesian cellular telecommunications
companies are doing, since they have gone through a bumpy path.

After a drastic decrease in 1998, cellular telecommunications
companies experienced a large rise in subscribers/users from mid-
1999. This was due to high demands for prepaid cards, approaching
network capacity limits of Indonesian cellular providers.

In a normal situation, this would be very pleasing. With the
market expanding even more rapidly than expected, companies then
had to respond by expanding their networks. Instead, the rise of
cell phone subscribers has created problems for cellular
providers in Indonesia because it happened during the crisis.

This is because local companies do not yet control the
telecommunications infrastructure. In order to expand networks,
cellular providers must purchase from abroad. This is obviously
difficult in the midst of a weak currency and unstable
sociopolitical conditions. Meantime, telecom providers still have
large debts in foreign currency. Thus, it is understandable that
Indonesia's cellular providers opt not to respond immediately to
the rise of subscribers in 1999.

With improving sociopolitical conditions and the risk of
investing in Indonesia decreasing, a wait and see attitude is not
suitable. Even though Indonesia's currency is not yet strong, a
number of Indonesian companies have begun to invest. Although it
is not yet significantly large, it is being done selectively. An
example is the expansion of network capacity by Excelcomindo
Pratama (XL). As the third GSM provider in Indonesia, it has not
only chosen locations that are high in traffic, but also where
the subscribers are willing to pay more. In other places,
although high in traffic, GSM providers like XL choose to improve
the managing of their network capacity.

Another option is to increase high quality subscribers of cell
phones. This is quite acceptable since the rapid increase of
Indonesia's cell phone users is actually triggered by the usage
of prepaid GSM cards. The problem is, prepaid GSM users need more
costly telecom infrastructure preparations than postpaid
subscribers, yet most of the prepaid subscribers are light users.
What complicates it more is that GSM providers are unable to take
advantage of the rise of prepaid card demands, due to the selling
system of these prepaid cards.

That is why cellular providers are halting sales of prepaid
GSM cards. Meanwhile, they are trying to promote subscribers of
postpaid cards by giving several incentives. Nevertheless, up
until now, these efforts do not seem to have been effective; even
though prepaid card starter kits have become expensive, due to
the lack of supply, demand is still high.

Why is this happening? Because even though the rate per second
of prepaid GSM cards is actually higher than postpaid cards, plus
the continuing price increase of starter kits, the demand is
still high, since there is already a strong notion that prepaid
cards have high value. Furthermore, Indonesian cell phone users
are mostly light user customers. The economic crisis has driven
more people to become light users. Frankly, the increase in
subscribers was not followed by an increase of customer quality.

This is not good news for cellular providers. The high
influence of rapid technology development has effected the
telecommunication business' short life cycle. That is why the
telecom business needs a strong financial structure. The
important thing is to maintain a good cash flow, which may be
reached if cell phone users comprise more of heavy users.

It has to be acknowledged that although several incentives are
given, it is difficult to drive cell phone subscribers to become
heavy users. Especially when most people strongly believe that
Indonesia's economical situation is still dim.

The betterment of Indonesia's economy is why optimism is
emerging among cellular providers in Indonesia, not only
investing to improve their network capacity, but also to promote
postpaid GSM users and also increase heavy user customers.

Pushing for more heavy user customers, besides supporting the
financial structure of the cell phone provider, can also be done
by changing the way cell phones are used. As what has happened to
fixed-line telephones, the usage pattern for cell phones will
also shift in the future. If now most cell phones are used to
receive calls and contact others, in the future they will be used
for data communications or faxing. The steps toward this shift
can already be seen. Among them is the availability of cell
phones that can be utilized for Internet browsing or for e-mail.
However, users of this kind of cell phone are still very limited.

In other words, if the number of heavy users does not improve
soon, the transformation of cell phone usage will be slow. This
will probably not affect cellular providers too much, since they
can feel comfortable with their investment in expanding network
capacity. But for subscribers and cell phone businesses this is
definitely a loss. In addition, it seems, cellular providers like
XL prefer to have the transformation of cell phone users to
proceed more quickly. This can be seen from its steps to continue
enlarging its network capacity and improving the number of heavy
user customers.