Syahrial Ali's Blog

According to Indonesian Stock Exchange, on September 19th and September 22th 2008, PT Global Mediacom Tbk owned by Hary Tanoesoedibjo has released 22,79% of his share in PT Mobile-8 Telecom Tbk. Currently, the share of the company remained at 28.21% (previously 66,8%). Mobile-8 is one of CDMA operator in Indonesia.

Meanwhile, a couple of days ago, Bisnis Indonesia daily reported that three investors from Middle East indicating interest in the shares of Bakrie Telecom including QTel, which recently acquired 40.8 per cent stake in the country’s second largest telecommunication company PT Indosat.

Moreover, both Telkom Flexi and Startone Indosat have slowdown their expansion.

So, what’s really happened?

There are three possible causes, namely internal financial situation, tariff war effects or other technical flexibility.

In Bakrie case, earlier, the Bakrie Group said it will sell shares of a number of its subsidiaries including Bakrie Telecom to raise fund to repay a debt of US$1.2 billion maturing in April next year. So, internal financial condition which lead them to this action.

How about other cases?

Does the tariff war has result in casualties or does the economic crisis has affected this business?

Mobile-8 has announced to quit from tariff war by replacing it with value added services. How about other operators? We still have to wait.

All people in Indonesia know that mobile telecommunication tariff now is already cheap. So, the network qualities will play an important role. If the quality of your network was ugly, the customer will run and move to other operator.

It seems that only CDMA operators were hurt. GSM based technology operator such Telkomsel, Indosat or XL and also new operators such Axis and Three are still making expansion. They keep growing.

One main point should be keep in mind that the low tariff has eroded the income of the operator.

Or does limited spectrum has affected their flexibility. As writen in CDMA-GSM-Competition-in-Indonesia, all CDMA operators just have a small spectrum frequency (5MHz bandwidth), so they have small flexibility in making network design which result ini a higher budget for network expansion. The same problem does not exist in GSM based operator as they have at least 10MHz bandwidth.

So, what is the reason behind of this situation? We don’t know so far. The solution? I believe that transfer of ownership will not resolve the problem. I think, operator merger shall be considered.

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