News » Infrastructure » Indonesia’sWireless Network – Mobile Phones Have Never Mattered More

Indonesia’sWireless Network – Mobile Phones Have Never Mattered More

For Indonesia, wireless internet is not a convenience; it’s an essential means to staying digitally connected to the rest of the world.
Published: 2013


While businesses in most parts of the developed world are scrambling to catch up with the rapid shift to mobile internet use, Indonesia has for quite some time relied heavily on its mobile phone coverage to provide access to the Web. Rolling out broad- band on an archipelago replete with dense woodland and rugged terrain is a challenge and, in fact, any kind of wired internet is still an extravagance for the vast majority of Indonesian’s families. Mo- bile internet may be considered a luxury for many countries but in Indonesia it is far and away the most viable means of staying connected.

4G Imminent
In 2012 the number of mobile phone subscriptions in Indonesia exceeded the number of residents. Although this statistic is slightly misleading as many mobile users have more than one subscrip- tion it is still indicative of the importance of wireless services and explains why the fiercest competition among telecoms providers is to be found in this area rather than fixed-line provision. Around 40% of mobile phone customers use mobile data services for email access and Web browsing but, as 3G transfer rates are limited, 4G integration is keenly anticipated. Download speeds will subsequently increase to as much as 100 mbps but is unlikely to be widely available until 2014. The Ministry of Communication and Information Technology are considering which 4G frequency to implement, only too aware of the importance of this network to Indonesia’s ability to connect to the rest of the online world.

Maintaining Profitability
Although, at least initially, only a small proportion of mobile us- ers will be able to afford the additional cost of 4G, in one of the most populous countries in the world with a higher than typical mobile phone-using demographic, this small segment of users still offers tremendous profit potential for the country’s mobile service providers. Even the largest operators in the country have seen a drop in the average revenue per user but internet use offers profit margins so much greater that it is able to offset recent deficits. Consequently, the focus in the market is to encourage more users to invest in smartphones and increase their data usage. The vast majority of Facebook users in Indonesia, for example, access the social networking site through their mobile phone and it is this kind of social and recreational use that is still driving profitability. Couple this with the introduction of low-end–and consequently budget- friendly –smartphones, and there is every reason to believe that there is still plenty of market share to fight for, even before 4G is rolled out.

And it’s not just good news for the operators. The fight to attract virgin users has become a tussle to encourage customers to switch providers, effectively forcing the operators to abandon a destructive “race to the bottom” and instead focus on providing a greater quality of service.

Maturing Market
The paramount importance of offering a superior service has trigged a significant transition in the telecoms sector. Investment in infrastructure is increasing and leading to greater collaboration and possible consolidation among the providers. For instance, while competitors may be reluctant to share tower space, once a network reaches a certain standard and the playing field is levelled, the need to guard real-estate becomes redundant. The market has reached the point where it is more cost-effective for the providers to sell the towers to specialist firms and lease the space back, even if that means rubbing shoulders with the competition. The Indonesian government, in recognition of this development, is urging this process forward by forcing the sale of tower space to any willing investor.

The Palapa Ring project will bring broadband access to all of Indonesia’s major cities as early as 2015.

Sleeping Giant
Mobile internet access may be the way forward but that doesn’t mean that fixed-line services have been forgotten. The Palapa Ring project is a network of over 35,000km of underwater fibre- optics and over 20,000km of underground cables that will bring broadband access to all of Indonesia’s major cities as early as 2015.

The cost of PC equipment may still put broadband access out of reach of much of Indonesia’s population but as affluence grows and wired internet availability increases, this future market is the very definition of a sleeping giant.

In the past, investors have been hesitant about the Indonesian telecoms market, primarily because of the high level of competition. With 11 companies, Indonesia has the same number of network providers as India and Australia combined, and there are question marks over whether the market can continue to support this many players.

Opinion, however, is shifting. The percentage of the population with disposable income is growing and, combined with the im- minent introduction of 4G and broadband access, as well as the prospect that the government may step in to force at some level of consolidation, leads to the conclusion that expansion is still likely and explosive growth a very real possibility.

Facebook Twitter Google+

Leave a Comment