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So, what’s on the news? The first one is the launch of Axis product. Axis is the latest invention by new-but-old player in GSM industry, Natrindo Telepon Seluler (NTS). Why new-but-old? NTS is reformed from Lippo Telecom, which has given service for East Java province for about 8 years. Now, they try their luck by playing in national wide area. NTS share mostly is owned by Maxis Malaysia. Apparently Maxis’ majority stock is now owned by Saudi Telecom. Thus, this is the first operator in Indonesia indirectly owned by Middle East.
What’s so special about the product? The Axis price tag is quite making a controversy. They charge 60 Rupiah per SMS, 60 Rupiah per minute for intra call, and 600 Rupiah per minute for extra call to other operators. All prices have no other term and condition. See something odd? Yes, they sound 6 and 6 and another 6. Christian said it is the number of the devil. But, NTS reject it and told that it is only a coincidence. Whatever the motive behind, the tariff is quite cheap for Indonesian GSM services.
Currently, there are 5 players in GSM services in Indonesia. The majority market share is held by Telkomsel. Telkomsel is state-owned company, which 35% of its stakes is owned by Singapore giant, Singtel. According to the latest market share survey, Telkomsel holds about 50% of market share. Indosat (NYSE: IIT), owned by STT Telemedia, is in second place with about 20-30%. Both Singtel and STT Telemedia are Singaporean companies under Temasek management.
Together, the two companies control almost 80% of GSM market share respectively. Since having ownership in both companies, Temasek accused to have crossed ownership scheme, Indonesian commission for the Supervision of Business Competition condemned Temasek for monopolistic practice in telecommunication sector. The case is on trial in the Supreme Court.
Other player in GSM area is XL and Hutchinson/Three. Both are private companies. XL holds about 10% of market share and owned by Telekom Malaysia. Hutchinson, in the other hand, is a respected global player. In Indonesia, Three is still struggling finding their niche. Three entered Indonesian market by buying majority stake of new company formed by Thailand food maker, Charoen Phokpand. It is the first telecommunication company to be granted 3G frequency. But until now, I have never heard any 3G service offered by Three.
Something to be noticed, there is no GSM operator that doesn’t owned (fully or partially) by foreign funds. It is not a good news since actually there are many investment holdings in Indonesia that has lot of money. Telecommunication sector is a bright sector since the penetration has not reached 70% of total population.
The second news is in CDMA area. CDMA is quite new in Indonesia compared to GSM service. The first GSM service was launched in 1994, while the first CDMA service was unveiled by the late 2002. Although quite young technology, CDMA has gain much attention, due to their “cheap price” association. In 2007, the CDMA subscribers have reached 10 million in numbers.
Mobile-8, a cellular CDMA operator cannot stand a chance of compete with Fixed Wireless Access (FWA) operator. Cellular can be brought anywhere within national coverage, with compensation a quite higher tariff. In other hand, FWA is only for local area, but can be maximized to lower the cost. In our historical data, FWA operators won landslide victory against cellular operators, thanks to low tariff promotion.
To have better positioning, Mobile-8 launched their own FWA, called “Hepi”. Hepi is designed to provide low tariff service with the power of current cellular network. Their promotional tariff for intra call is quite astonishing. Only 1000 Rupiah for unlimited call per day! Of course intra call promotion is aimed to have more new customers.
CDMA players in Indonesia, compared to GSM players, are more varies. Telkom Flexi is the major player in FWA with about 50% of total market share. Thanks to the power of current established network, they are using the fixed network to expand the services. This service division (later to become own company) is fully owned by Telkom (NYSE: TLK), state-owned company that also own majority share in Telkomsel.
Another big player is Bakrie Telecom. Their product, Esia, is quite phenomenal. They were the first to introduce unbelievable tariff, 50 Rupiah per minute for intra call, that later triggered “price wars” among telecommunication operators, GSM and CDMA. Bakrie Telecom, as we suspect from the name, is owned by Bakrie Group, headed by notorious Aburizal Bakrie and his families. He is currently the wealthiest person in Indonesia; even in South East Asia, according to Globe Asia.
Other CDMA operators are Starone and Smart Telecom. Starone is Indosat’s product. It was once being abandoned since Indosat was trying to focus in GSM service. By early this year, Starone is revived with new theme and campaign. Smart is owned by Sinar Mas Group. It belongs to conglomerate Eka Tjipta Widjaja. Smart is another cellular CDMA operator, besides Mobile 8. The company is quite new but already has wide coverage in major cities in Indonesia.
