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The Jakarta Post ,  Jakarta   |  Tue, 08/19/2008 10:47 AM  |  Business

The government is not concerned over the fierce tariff war in the crowded Indonesian mobile phone industry, as it has yet to lead to a compromise in service standards, officials say.

Information and Communications Minister Muhammad Nuh said over the weekend that the intense competition had been relatively “healthy” and that his ministry would not interfere in such matters.

“We will not impose regulations to try to change things. It’s actually the customers who have benefited the most,” he said.

Over the past several years, operators have aggressively cut their tariffs to lure more customers amid a rapidly growing telecommunications sector.

Critics have argued that the sharp reductions, which mean less revenue for operators, coupled with a massive budget for advertising to promote their discounted rates, have eroded operator’s spending on maintenance and network expansion, thus compromising their services to the public.

An ACNielsen survey shows that phone operators spent big on advertising to promote their reduced tariffs and new products.

In the first semester for instance, the survey found that PT Exelcomino Pratama (XL), the third largest operator, led the pack after spending Rp 139 billion on ads — approximately 219 percent higher than in the same period in 2007.

Bakrie Telecom, with its Esia brand, came in second with Rp 131 billion — a 57 percent increase from a year earlier. Then in third came IM3 owned by PT Indosat (the nation’s second largest telecom firm) spending Rp 119 billion, representing a 209 percent increase from the January-June period last year.

Nuh, however, insisted the tariffs were outside the government’s domain and that it was unlikely to interfere.

Gatot S. Dewa Broto, a spokesman for the post and telecommunications ministries, said the ministry could only monitor the situation and intervene if the tariff war showed signs of hurting the industry or customers.

Several operators have vowed that the low tariffs they were offering would not lead to a reduction in the quality of customer service.

Eddy Kurnia, public communications vice president of PT Telekomunikasi Indonesia (Telkom), the nation’s biggest telecommunications firm, said the tariff war was to be expected as the country’s mobile sector had now become highly competitive, with 10 operators in the same industry.

“Unfortunately, companies sometimes forget how to improve the quality of the services they offer.

“It is a real challenge to improve services without imposing extra costs on customers,” he said.

Telkom owns a 65 percent stake in PT Telekomunikasi Selular (Telkom), which controls around a 50 percent market share of the mobile telecommunication industry.

XL president director Hasnul Suhaimi said the tariff competition had not led his company to compromise its services.

In fact, he said, the company was rapidly expanding its network, having spent up to US$1.25 billion on network infrastructure this year alone.

A good network was needed, Hasnul said, for the company to manage the already hectic state of subscriber’ cellular traffic.

“As of the first half of this year, we have 23 million subscribers, more than double the 10.2 million subscribers we had in the same period last year,” he said.

Hasnul attributed the growth not only to the low tariffs but also to the network the company had built.

Mobile-8 corporate communication manager Yolanda Nainggolan said cellular companies would have brighter prospects if they spent less time trying to lure customers based on cheaper rates alone.

“Our company has been working to expand its network capacity to allow our 3.5 million subscribers to communicate seamlessly throughout the nation,” she said. (ewd)

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