The market remains dominated by GSM players Telkomsel, Indosat and XL, which together account for 85 percent of total Indonesian mobile connections. All three grew their subscriber numbers by around 21 percent year-on-year and are seeing success in migrating customers to higher-speed WCDMA and HSPA networks (especially in the case of XL, which has already migrated a quarter of its customer base to the faster networks).
The first quarter also saw the completion of the merger between CDMA players Smart Telecom and Mobile-8 to create a new operator called Smartfren. The combined firm had a subscriber base of 6.8 million in Q1 (3.6 million via Smart and 3.2 million via Mobile-8) and is targeting 10 million by year-end. Smartfren has set a capex budget of US$450 million for the current year, which will mainly be used to expand its number of base stations from 1,500 at the end of 2010 to 4,500 by the end of this year. The operator claims it has upgraded the entire network to '3.5G' technology, which appears to refer to its roll-out of EV-DO Rev B technology. It claims the new network will support mobile data download speeds up to a theoretical peak of 50 Mb/s. The firm also claims that the cost of upgrading its CDMA-based network is cheaper than the investments required at its GSM-based rivals, which it says will allow it to offer cheaper tariffs.
The incumbent operators also face competition from three fixed-wireless players and several WiMAX operators. However, the planned merger between CDMA-based fixed-wireless operators TelkomFlexi and Bakrie Telecom appears to have stalled. At one stage the two firms were believed to have been seeking regulatory approval for a US$1 billion merger that would have created a new entity with around 25 million connections, which would have made it Indonesia's fourth-largest operator by subscribers. Although that deal has been shelved – at least temporarily - the regulator now appears to be mulling whether to grant the fixed-wireless operators full mobile licences in a bid to further stimulate competition in the sector. According to local press reports, Bakrie received a mobile licence in April this year.
Meanwhile, Telkomsel is focusing on upgrading its network. The market leader told local media recently that it is investing around US$1.1 billion in mobile broadband this year, and is planning to expand its HSPA-based network to 40 major cities. It already offers 21 Mb/s HSPA+ in Indonesia's main cities and has been trialing LTE since August last year with network vendor ZTE. Its LTE rollout is being planned in conjunction with shareholder SingTel (35 percent), which is working on a "regionally compatible LTE network" that will cover its Asia-Pacific footprint across Singapore, Indonesia, Australia (Optus) and the Philippines (Globe Telecom). Non-SMS data income accounted for 14 percent of Telkomsel's revenue in Q1, up from 7 percent a year earlier, as it continues to push new mobile data services.
According to a recent Wireless Intelligence study, Indonesia will account for over 10 percent of LTE connections in the Asia-Pacific region by 2015, behind only China and Japan. However, this is dependent on current regulatory problems around LTE spectrum allocation being resolved. All the country's airwaves are currently used by existing operators and broadcasters – with no spectrum band deemed to have sufficient free capacity to successfully support LTE rollout. The regulator has identified 1.8 GHz as the most likely band, though this will still require extensive spectrum refarming. Other possible bands – such as 2.6 GHz - run the risk of interfering with existing Pay-TV, satellite and broadcast services, while the broadcasters' move from analogue to digital TV – which would free up the 'digital dividend' spectrum – has yet to begin.
