Indonesia cellular telco business overview

I plan to write a series of articles focusing on Indonesia cellular telecommunications industry. Before I go into the specifics of the industry, I want to provide a perspective on Indonesia as a country.  Indonesia is the 4th most populous country in the world and represents a large consumer market with 200m+ population.  Indonesian consumer spending power is roughly 15x lower than US.  Fixed broadband penetration rate is extremely low where majority of the people know internet for the first time from mobile phones as opposed to from a computer email client/web browser.

Indonesia United States
Population 240m 310m
GDP $700B $14.5T
GDP growth rate 6.10% 2.80%
GDP per capita $2,900.00 $47,000.00
Mobile phone subscription 220m 280m
Fixed Broadband (adsl/cable) subscription 3m 81m

Now that we have a bit of perspective on the country and population, here is an overview of the Indonesia cellular telecommunication market size and notable players. Cumulative gross revenue in the cellular and fixed wireless (limited mobility) industry is $10B+ USD with over 220 million subscribers.  As a comparison, AT&T by itself generates $125B of revenue.


Telkomsel is the dominant service provider with 94m+ subscriptions at end of 2010 where most of the subscriptions are prepaid.  Postpaid services are typically more expensive and targets the affluent/business people.  Postpaid subscribers represents 2-3 % of all subscribers for all service providers.


Overall, the government handed out licenses to 8 different operators to stimulate competition.  Price wars between the operators have been going on for a number of years.  2 smaller CDMA operators just recently merged and there is public rumor about the merger of Telkom-Flexi and Bakrie Telecom to save on operational cost and network capacity investments.  Here is the Average Revenue Per Subscriber (ARPU) of Telkomsel that tells the story.


Here is an overview of the 2010 gross revenue distribution Telkomsel.  Operation and maintenance of the cellular network represents 21% of operating revenue which includes item such as Radio Frequency usage tax that is ~5% of revenue.  Another 20% is spent on depreciation and amortization which is mainly driven by Base Transceiver Stations (BTS) purchases and network equipment expansions.


Construction of each BTS unit is extremely cost intensive which requires the installation of high tower to mount the antennas, power generation for the BTS, and rack mounted networking equipment manufactured by Huawei and ZTE to enable the mobile phone service.  At the end of 2010, 80,000+ BTS units have been installed by the industry.  Each BTS costs USD $80k-$100k to install and represents roughly $6.4B of capital expenditures over the life of the industry.   This is one of the most capital intensive industry.


Following the trend in developed countries, mobile service providers in Indonesia will rely on the demand for mobile data service for revenue growth in the near future and get more out of their existing subscribers.

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