BMI View: The launch of 4G in the refarmed 1,800MHz spectrum has stimulated 4G network expansion in Indonesia, with at least six operators announcing ambitious expansion plans. However, strong take-up is not expected in the near term, due to the high prices of smartphones and limited spending power. Furthermore, minimum local content requirements could have the effect of increasing production cost s and , subsequently, the prices of smartphones. On the other hand, Indonesia's fibre broadband sector presents a positive outlook for growth. With the entrance of 'disruptive' ISP MyRepublic into the fibre broadband market, coupled with heavy investment from both the private and public sector, better connectivity and lower prices can be expected.
Increasing saturation of the mobile market and declining voice revenues will force Indonesia's largest telecoms operators to focus on the development of next-generation fixed and mobile data networks. The country's mobile operators are accelerating their tower outsourcing and managed services strategies in order to reduce operating costs. This is a sensible move considering their weak bottom line performances.
The mobile sector grew by 6.3% y-o-y in 2014, bringing the penetration rate to 127.7%.
Mobile ARPUs continued their downwards trend in 2014, with market weighted average blended ARPU falling by 9.8% for the year.
Indonesian wireless broadband operator Internux, which operates under the 'Bolt! Super 4G' brand, has added 750,000 subscribers following commercial launch in Q413. In August 2014, the operator launched the country's first two 4G LTE smartphones on an active commercial network. The company claims that more than 90% of the operator's broadband subscribers are using Mi-Fi personal hotspot devices.
Key Trends And Developments
All large operators are making efforts to expand their Long-Term Evolution (LTE) networks. Telkomsel plans to invest IDR12.9trn (USD993.3mn) in 2015 to expand its LTE network coverage. The operator aims to control a 50% share of the LTE market, and will deploy new base transceiver stations across Indonesia to achieve this. PT Indosat plans to invest up to IDR7.5trn (USD581.25mn) in capital expenditure (capex) projects in 2015. Up to 80% of 2015's total capex will be earmarked for network improvement and constructing additional base transceiver stations (BTS). The operator is working towards completing a two-year network modernisation plan, which involves upgrading BTS with 4G LTE capability.
XL Axiata also has big ambitions when it comes to LTE. XL Axiata expects to sign up 25% of all its data users to 4G LTE services by 2017, assuming availability of affordable smartphones increases in the market. The limited availability of low-cost devices is expected to peg LTE growth to less than 10% of XL's total number of data subscribers in 2015, according to the company. The operator, which now has a total of 30,000 4G subscribers, seeks to net a total of 3mn 4G subscribers by the end of 2015.
Meanwhile, the Indonesian government is also keen to see 4G and fibre services grow as it seeks to implement a programme to expand fibre-optic network coverage and set up smart cities in the country by investing more than USD24bn in infrastructure projects in the next five years. The government has allocated a significant portion to the telecoms sector to boost fibre and 4G coverage across the country.
Under the 2014-19 Indonesia Broadband Plan, up to IDR278trn (USD23.2bn) is to be invested in extending wireline broadband services to 30% of the urban population and 6% of the rural population, while mobile broadband services are to be rolled out to 52% of rural consumers. The aim is to facilitate increased productivity by allowing more businesses and workers to utilise online tools and resources via connected devices such as smartphones and mobile computers.