Telecom network operators — Axiata, Telkomsel, Indosat Ooredoo and Hutchison 3G 3 – in Indonesia are in the process of making investments to tap the huge demand for mobile Internet.

Indonesia, the fourth largest population in the world, is seeing an upsurge in economy in 2016. The competition demanding affordable connectivity, adoption of smartphones and 3G data service and the launch of 4G LTE services will prompt telecoms to make more investment in data networks.

Smartphones will represent around 40 percent of all handsets in Indonesia this year, as per the forecast from tech investment advisory firm Redwing Asia.

4G troubles

It should be noted that at the end of the first quarter (Q1) of 2016, Indonesia witnessed 20 million 4G subscribers. Telecoms revealed that though 4G service adoption has been moderate, it is still ahead when measured up to the adoption of 3G services when they were initially rolled out. After the commercial launch of 4G LTE services, Indonesia’s operators XL Axiata, Telkomsel, Indosat Ooredoo and Hutchison Tri have conveyed that the revenue from the service is still lagging behind.

Indonesian telecoms have their 4G strategy focus on making the service reach to not only a section, but to the complete population in general. The Indonesian government has introduced a national broadband plan recently in order to boost the low internet use and broadband penetration due to the slow development of the country’s telecom industry. The government also revealed plans to auction orders for 15-year contracts to build Internet infrastructure in the Riau and Maluku islands to expand high-speed Internet access in the country.

The IoT sector has better prospects with the Jakarta administration launching various applications like Waze, CROP, Smart Lighting initiative etc. which will aid the government functioning while working on the IoT technology.

In optical fiber network sector, the Indonesia’s Ministry of Communications and Information Technology intends to develop 15 smart districts and cities across the country as pilot projects that will be supported by a broadband service infrastructure. As a trigger to it, the Indonesian government has launched the Palapa Western Ring Package optic fiber network service project for a budget of Rp1.28 trillion.

Also, with more than 2,000 new customers reportedly joining the state owned Telkom Indonesia’s IndiHome service, that features fiber-optic connectivity for high-speed internet, cable television, and home phone service it has been revealed that on an average, a user has to bear a cost of $300 in to install a new fiber optic network, which can be reduced with a joint effort from all developers, telecoms and the government.

Performance of telecoms

Axiata

Axiata Group (Axiata) has announced the unaudited report for the first quarter of 2016 with a 5.4 percent growth in total revenue, with a majority of its operating companies posting an improved year-on-year revenue growth.

The company with headquarters in Kuala Lumpur revealed its EBITDA increased by 7.7 percent to RM1.9 billion, owing to the easing of expenses. EBITDA margin at 37.4 percent was its highest in the previous seven quarters contributed mainly by XL, Dialog and Smart for the regional mobile telecommunications group, in the quarter ended on March 31, 2015.

Axiata saw mixed performance for the quarter, amidst heightened competitive market pressures. Despite Celcom5 having a challenging first quarter, Dialog and Smart performed exceptionally well with XL showing continued stronger growth as a result of its transformation agenda.

Celcom faced obstacles in the first quarter of 2016, as a result of the new regulation on value added services (VAS) where almost all VAS had to be temporarily halted due to customer complaints. Celcom’s revenue was affected by the drop in VAS by 19.8percent, with voice falling down by 16.4 percent.

Celcom’s first quarter revenue, normalised EBITDA and normalised PATAMI fell 13.4percent, 12.3 percent and 22.3 percent respectively whilst normalised EBITDA margin improved by 0.5percent points to 40.7 percent on the back of lower direct expenses.

Postpaid segment witnessed positive movement with the launch of First Gold 80 in February, adding 37,000 new subscribers by end of the quarter, while mobile data revenue and mobile Internet revenue came up by 14.8 percent and 35.4 percent respectively. Stabilization of Celcom’s IT system has been a key factor in the growth.

Axis brand displayed success with its first quarter revenue, EBITDA and profit after tax (PAT) increased by 2.5 percent, 16.7 percent and over 100 percent, respectively. EBITDA margin came up by 38.9 percent and has been following a constant growth rate for the fourth consecutive quarter. Net subscriber additions increased by approximately 600,000 within the quarter, with Average Revenue Per User (ARPU) increasing by 39.3 percent to IDR 39,000.

Indosat Ooredoo

Indosat Ooredoo has announced Q1 results with a net profit of Rp217.2 billion ($16.3 million) in comparison to a loss of Rp455.6 billion ($34.2 million) in 2015.

Qatar-based Ooredoo, the parent company of Indosat, accredited the positive results to strong growth in its data services, with the data traffic on its network rising by 52.5 percent.

Consolidated revenue in Q1 2016 saw a 11.8 percent increase from the Rp 6.8 trillion or $519 million.

Mobile revenue increased 15.8 percent, primarily due to increased revenue from data, SMS, voice, and value-added services, which was offset by a decrease in interconnection revenue, according to Indosat Ooredoo.

As of March 31, 2016, the company has a subscriber base of 69.8 million, with an ARPU of Rp 26,400 or $2 a month. The customer base rose by 5 percent, while the 2015 figure was 66.5 million, owing the credits to network modernization and product innovation. The company plans to acquire new customers by offering more products and services, instead of putting efforts to convert its prepaid subscribers to postpaid.

The company owns 52,326 BTS, with 3,544 of them 4G-ready, compared with a total of 40,756 BTSes and only 75 4G-capable stations, it owned in 2015.

On the underside, Indosat Ooredoo’s corporate debt increased by 4.8 percent in 2015 to Rp23.6 trillion or $180.1 million.

Indosat Ooredoo’s 4G network is now available in over 20 cities, covering a population of more than 40 million.

TelkomseI

Telekomunikasi Indonesia (Telkomsel), which is Indonesia largest telecom service provider, recorded Q1 of 2016 with a 16.6 percent increase in revenue to Rp 27.54 trillion or $2.1 billion against Rp23.62 trillion or $1.8 billion in the same period last year.

The growth is said to be driven by the rise in its data and Internet business with rise in smartphone adoption in Indonesia, resulting in Telkom giving out a 45.1 percent increase in data, Internet, and IT service (excluding SMS) revenue summing to Rp10.3 trillion or $780 million versus Rp7.1 trillion or $540 million in the first quarter of 2015. SMS services revenue grew 15.4 percent to Rp3.95 trillion or $300 million, bringing total data revenue to Rp14.26 trillion or $1.1 billion.

The state owned group’s EBITDA increased 18.8 percent to Rp 14.66 trillion or $1.1 billion, while net profit went up by 20.26 percent to Rp 4.59 trillion or $350 million.

Telkomsel’s investment made in broadband infrastructure resulted in its expansion Telkomsel’s 4G LTE network.

Telkomsel had its data revenue (excluding SMS) lagging back previously but it rose in comparison to the cellular and fixed-line revenue, which grew by only 3.34 percent to Rp10.87 trillion or $830 million from Rp10.52 trillion or $800 million.

Q1 2016 saw cellular voice revenue growth of 5.04 percent to Rp8.92 trillion versus Rp8.5 trillion in Q1 2015, meanwhile fixed voice revenue crashed down by 3.8 percent to Rp1.94 trillion this quarter versus Rp2.02 trillion in Q1 2015.

Telkomsel totals a 43.8 million subscribers for its Telkomsel Flash mobile broadband service, and 4.2 million subscribers for its IndiHome Fiber fixed broadband service as of Q1 2016.

Telkomsel intends to lead to a 15 percent increase in full year revenue to Rp 115 trillion or $8.7 billion versus the Rp 102.5 trillion in 2015. With the strategy to become a digital company, PT Telekomunikasi Indonesia posted a 45.1 percent upsurge in data, Internet, and IT services revenue amounting to Rp10.3 trillion or $780 million in Q1 2016.

Telkomsel aims to spend 80 percent of its capital expenditure (Capex) which amounts to approx. Rp22.4 trillion or $1.72 billion of the total capex of Rp28 trillion or $2.1 billion in order to strengthen its digital infrastructure, by expanding its 3G, 4G, and fiber optic networks.

Telkomsel spent 26 percent or Rp 5.72 trillion or $440 million of its Capex total of Rp22 trillion or $1.69 billion to develop its data services and digital infrastructure, in 2015.

In the beginning of 2016, Telkomsel had 152.6 million customers, with revenue growing 14.8 percent and net profit up 15.4 percent in Q1 2016 over Q1 2015.

Telkomsel plans to internationalize itself this year, either through joint ventures or acquisitions, with plans already up for Guam’s GTA Teleguam, with proposed acquisition on hold owing to regulatory hurdles.

H3I

H3I, which is an emerging telecoms of Indonesia has reported that its data traffic is doubling approximately every nine months and has entered in to a deal with Nokia will supply H3I with packet core technology in some of important cities, which are considered the most densely populated cities.

Indonesia is becoming a major destination for telecom network vendors such as Nokia, Ericsson, Huawei, Cisco, HPE, Juniper Networks, Brocade, ZTE, among others thanks to the potential to make investment in mobile Internet networks.

Vina Krishnan
[email protected]