Syahrial Ali's Blog

According to Gartner, Indian cellular  operators face the highest churn rates compared to their counterpart in Asia pacific Region (APAC). The monthly churn rate for India range from 3.5 per cent to 6 per cent. This followed by Malaysia with 2-2.5 per cent and Taiwan with 2-3.5 per cent. Meanwhile, Thailand and Japan have monthly churn rate 1.9-2.6 per cent and 1.5-2.6 per cent respectively. Gartner also reported that Indonesia monthly churn rate was only 1-2 per cent. It means that in Indonesia only 1-2% of customers change their cellular operator every month.

Churn rate is defined as the number of participants who discontinue their use of a service divided by the average number of total participants for any given period of time. So, even though the customer change their number in the same operator, they are still included in the churn rate.

The churn rate in Indonesia is caused by at least by 2 main reasons. First, the cheaper price of starter pack compared to top-up. For your information, mostly prepaid customer who moves from one operator to another or who frequently changes their mobile number from the same operator. The starter pack can be bought for about 60 cent only. This includes 50 cents basic pulse and another 50 cent for bonus pulse. So, you get US$1 credit for just 50 cent. Meanwhile, if you want to top-up for US$1 pulse, you have to pay US$1. An easy choice for customers.

The second reason is the lack of numbering cost. Every operator can easily release a cellular number without any cost from the regulator. Actually numbering is one of scarce resources in telecommunication world. People are reluctant to memorize long number.  Without any regulation, the numbering becomes wild. To reduce churn rate, regulator shall charges every number used by operator. With this regulation, automatically the cost of starter pack will be higher. People will choose to maintain their phone number instead of using another starter pack.  Actually the starter pack costs much for operator as they need to pay for SIM (subscriber identification module) as well the licenses for the number of customers in their billing system.

I believe there are so many ways to reduce the churn rate in cellular industry in Indonesia. However, the charge for numbering is the most effective ways.

When almost all operators decreased their capital expenditure in 2009, how about this year 2010? Here are the data.

Telkom the biggest telecommunication operator will spend about IDR 2oT (more than  US$2b) for its capex, 65% 0f them (around US$ 1.3b) will be used by Telkomsel (the largest cellular operator). This figure is just below 2009 figure (US$1.5b). Telkomsel will focus on its  mobile broadband services. This service skyrocketed last year from 200,000 subscriber in 2008 to more than 1.6m in 2009. It increased for about 700%, fantastic.

Indosat, the second one will spend IDR 4,5T  (around US$470m) 2010, it also below the figure of 2009 (US$600m). This fund will be used mostly for 3G Based Transceiver Station expansion. Currently Indosat serves around 28.7m subscribers down around 19% from last year figures. For your information, besides cellular services Indosat also provides data services and fixed line services as well as international gateway service. The biggest contribution is still from cellular services (75%), followed by data services (15%) and fixed and international gateway (10%).

XL, the 3rd largest cellular operator will spend around US$450m for its capex in 2010. This figure is far below 2009 figure (US$ 600m). However, according to the CEO, Hasnul Suhaimi, the company financial is getting better. So with a company profits during 2009, XL plans to propose dividend at annual general share holder meeting.

Bakrie telecom, the 2nd largest CDMA opeartor in Indonesia plan a US$200m for its capex in 2009. This figures is equal to the 2008 and 2009 figures. Bakrie has planned US$600m expenditure for 2008-2010 or equal to US$200m per year.

No information was received from Axis and HCPT concerning thier capex for 2010. For your information Axis capex for 2009 was around US$500m.

From the figues above, we can see that almost all operators decreased their expenditures in 2010. Still in crisis? (data taken from various sources)

Indosat, a second largest cellular operator in Indonesia just reshuffled its director and commissioners. Kaizad B Heerjee, a director from ST Telemedia was replaced by Laszlo Imre Barta. Kaizad will be officially inactive since May 2010. In board of commissioners, two of them were replaced. The independent commissioners, Setyanto P. Sentosa and Michael Latimer were replaced by Alexander Rusli and Chris Kanter respectively.

This is the second time of high level management reshuffled since Indosat bought by Qatar Telecom (QTel) on June 2008.  The first reshuffled was made on June 2009.

Below are the complete list Indosat board of directors up to 2012:

- Harry Sasongko Tirtotjondro, President Director and Chief Executive Officer (since August 11th, 2009)
- Peter Wladyslaw Kuncewicz, Director & Chief Finance Officer (since September 1st, 2009)
- Laszlo Imre Barta, Director and Chief Commercial Officer (effective April 30th, 2010)
- Stephen Edward Hobbs, Director and  Chief Technology Officer (since June 11th, 2009)
- Fadzri Sentosa, Director and  Chief Wholesale and Infrastructur Officer (since June 11th, 2009)
- Guntur S. Siboro, Chief Marketing Officer
- Syakieb A. Sungkar, Chief Sales Officer

And the board of commissioner up to  2012:
- H.E Sheikh Abdullah Mohammded S.A Al-Thani, Chief Commissioner
- Nasser Mohd. A. Marafih, Commissioner
- Richard Fansworth, Commissioner
- Rachmad Gobel, Commissioner
- Rionald Silaban, Commissioner
- Jarman,Commissioner
- Alexander Rusli, Independent Commissioner
- Soeprapto, Independent Commissioner
- Thia Peng Heok George, Independent Commissioner
- Chris Kanter, Independent Commissioner

Till the end of 2009, Indosat serves around 33.1 million subscribers and it is facing a tight competition from XL who try to be the second largest cellular operator in Indonesia.