Syahrial Ali's Blog

As written since 2 years ago in several postings, such as in  “Indonesia cellular, too many carriers?” and CDMA Operator for Sale I have indicated that CDMA operators will merge to face the highest competition in cellular business in Indonesia. Currently, only 3 of 6 CDMA operators are keen to build their networks, they are Telkom Flexi, Bakrie Telecom Esia and Smart Telecom. The other three, Indosat Starone, Mobile-8 and Sampoerna Telekom were not excited in the their business development. There is a tend that the active operators will buy the non active ones.

On the last November 2009, Indonesia’s Sinar Mas Group (through its subsidiary, PT Gerbangmas Tunggal Sejahtera) has reportedly acquired a 19% stake in Indonesia’s PT Mobile-8 Telecom for IDR211.4 billion (USD22.5 million). PT Tunggal Sejahtera Gerbangmas bought the shares of PT Global Mediacom Tbk (BMTR) in PT Mobile-8 Telecom Tbk (FREN). Previously, the share of the BMTR was 28.21%.  So, PT Global Mediacom Tbk (owned by Hary Tanoesoedibjo) will become the minority share holder in Mobile-8. PT Global Mediacom Tbk was previously the majority share holder with 66,8% and they have sold some of them on September 2008.

Along with the purchase of these shares, the Sinar Mas group has placed its representative Mr. Henry Cratein Suryanaga as chief commissioner of PT Mobile-8. Meanwhile Sarwono Kusumaatmadja and Reynold M Batubara have been appointed and vice commissioner and independent commissioner respectively. The share holder meeting on last November also named the board of director of Mobile-8 i.e: Merza Fachys as CEO and other directors are:  Anthony C Kartawiria, Beydra Yendi, Agus Heryanto Lukas and Yopie Widjaya.

So, Smart Telecom and Mobile-8, both CDMA operators in Indonesia are in the same business group now, namely PT Sinar Mas.

When you travel abroad, you will receive a welcoming message in the destination port from another operator. This message will tell you that you can use your mobile phone in this country as if you are in your own country. You are currently in other country and the operator you use has a cooperation agreement with the local operator in the destination country. You are in international roaming condition.

The same principal can also be applied within the same country. Some operators have better coverage than some others, or some operators have coverage in one or more areas, while some others have coverage in that region but they don’t have in another region. To cover all regions, an operator shall need to make a domestic roaming agreement with other operators.

Up until October 2009, almost 15 years since GSM technology was launched in Indonesia, no cellular operator was interested in domestic roaming. Big operators seem reluctant to provide domestic roaming to its competitor. This is one reason why new entry in cellular industry get difficulties to attract more customer in Indonesia. New entry operators must built their own network to serve customers.

However on Nov 16th 2009, there is a breakthrough in cellular communication in Indonesia when XL agreed to provide national roaming for Axis. Hence Axis’s customer can make a communication in all over Indonesia even though Axis doe have network in that area.

Domestic roaming is beneficial for both parties. The main benefit goes to tenant (Axis), however XL also receives additional revenue from this service. Domestic roaming is enable new entry to attract many customers as it can serve wider coverage.

Special respect shall be given to XL management who opens up an healthy competition with their competitors. Congratulation.

Deregulation in telecommunication sector tends to encourage competition in multi-operator environment. The same phenomenon also happen in Indonesia. Currently there are 10 cellular operator with 12 types of services, namely 6 cellular services and 6 fixed wireless access services.

Indonesian big market has attracted many investors in telecommunication industry. According to the data from Directorate General of Post and Telecommunication, till the end of 2008, Indonesian mobile subscribers has reached 150 million. This is one of the magnet why the investors come to Indonesia.

The competition among mobile telecommunication operators have increased sharply which are supported by two main things namely the need for communication itself and the affordable tariff. In terms of communication need, mobile phone has become life style not only for high and medium class society but also for low class society. With regards to tariff, the tariff war among cellular operators has brought the tariff down to the lowest level. Moreover, currently there are many low cost handsets available in the market. With these things, the number of subscribers has sky rocketed.

Responding to the high competition, a control mechanism is released by telecommunication authority. To ensure that the competition is healthy and to protect the customers’ right, every telecommunication providers are obliged to provide a service within the standard quality of service. This rules is based on Minister Information and Communication decree no 12 in the year of 2008.

There are 4 main items in the Cellular Quality of Service Rule namely: Service Performance, Network Performance, Reporting, and Assessment, Reward & Punishment.

The service performance consists of billing complaint, other complaint, activation and customer care response. The billing complaint shall be less than 5% of the total complaint, and all complaint shall be resolved in 15 days. 98% of activation both for post and prepaid shall be finished in 24 hours. 85% of Customer complaints shall be finished in a year (this is to anticipate if most complaint happen at the end of the year). With regards to customer care, 75% of all calls to service center shall be picked up by operator in 30 seconds. The time is calculated after the caller presses a special digit which mean he/she wants to speak to operator.

In the network performance, the dropped call and blocked call rate shall be less than 10% from total calls. The test shall be done by drive test and static test with a minimum sample 260 and 200 calls respectively for each city/region. The call shall be 60 seconds holding time and 10 seconds pause time. In terms of short message service, 75% of the number of short message shall be sent at maximum 3 minutes. The total sample of SMS test is 100 messages with 160 characters long and the interval time to send the sms is 10 minutes.

The rule is also requested operators to report their quality of service performance, once a year. The report shall be submitted not late the second week of February. Besides that operator shall update and publish its quality of standard on quarterly bases in its own website.

To assess operators’ report, Indonesian Telecommunication Regulator performs quality of service measurement once a year. When the measurement result is not meet the rule criteria, a punishment such fine will be applied to the operator. The moral is the regulator wants to protect customers from bad service quality.

Welcome to Mr. Tifatul Sembiring, as a new Indonesian Minister of Information and Communication. Since October 21st 2009, Mr. Tifatul replaces Mr. Muhammad Nuh, who now appointed as Education Minister in the 2nd term of Mr. Yudhoyono as Indonesian President.

Tifatul, previously was a president of Partai Keadailan Sejahtera, a party which has supported Yudhoyono since his firm term in 2004. Below are bio data of the new Minister.

Name: Tifatul Sembiring, Ir.
Born: Bukittinggi, Sumbar, 28 September 1961
Education: Sekolah Tinggi Ilmu Manajemen Informatika dan Komputer, Jakarta, & International Politic Center for Asian Studies Strategic Islamabad, Pakistan.
Work experiences: PLN, 1982-1989 & Director of Asadudin Pres, Jakarta.

Tifatul Sembiring programed in 100 first days his work as Inforcom Minister, to implement 100 computer villages, a village with computer literacy. This program is part of grand design to implement 10.000 computer village in 2014.

Tifatul also determines the computerization system can enter all through the foundation of the community from the educational agency, the business, to the government officer in the lowest level. Computerize government will reduce the corrupted activities as officer will not receive any cash. They just receive the docket or payment receipt.

Congratulation Mr. Tifatul and we are waiting for your positive contributions for this department and for the country.

According to InMobi Network Research data, Indosat the second largest cellular operator in Indonesia leads the mobile internet service with the market share almost 75%. Indosat mobile data service serves almost 3 million subscribers. This figures is far higher than Telkomsel and XL.

From this 3 million subscribers, Indosat gets IDR 1.4trillion or equivalent to 15.6% of its total revenue in first semester 2009. This figures is slightly higher than the 2008 figures with just IDR 1.28 trillion.

InMobi also noted that the young people (18-27 years) are the highest (53%) customers of mobile internet and 82% of the users are men.

For your information, Indosat has served mobile data services since a few years ago ahead of its competitors.

BWA tender auction just finished a couple of months ago. The total license fee was about IDR 458,414b or equivalent to IDR 15.3 per MHz (total 15MHz TDD). Meanwhile, 3G tender in 2006 has resulted about IDR 800b (total 25MHz, FDD) for the Indonesian government, or IDR 32b per MHz. People may eager to know what is the Indonesian rule for the spectrum levy?

Actually Indonesia has a mixed treatment concerning spectrum frequency levy. For instance, both 3G and WiMAX licenses include the spectrum levy. So, the winners will just pay the license on yearly basis and they do not need to pay the spectrum levy. They can build their network freely and they still pay the same amount of money every year. On the other hand, the GSM & CDMA license holders will have to pay the spectrum levy according to apparatus used. They payment will increase every year as the network grows. The former is known as the spectrum license while the latter is known as the apparatus license.

Let’s compare this two type of spectrum levies. In terms of simplicity, everyone will agree that the spectrum license will be easier than the apparatus license. With regards to fund, which is more interesting for operator?

Old fashioned license scheme (apparatus license) do not oblige the license holder to pay any money to get the license. They only pay when they build their network. If they do not build any network for a limited time, the regular will take the license back. In this way, operator will have time to build the network and at the same time they just spend a small amount of money to pay the spectrum levy.

The spectrum license on the other hand requires operator to pay in advance before the build their network. This will create problem for some new entry operators.

Which one is cheaper?
As written above, at the beginning, the apparatus license only requires a small amount of money to pay the spectrum levy. However in the long run, this figure will increase significantly and at one time it will be more than the spectrum license. Take Telkomsel or Indosat for example. Both operators pay more than IDR 1 trillion a year for 30MHz spectrum in GSM and DCS spectrum, or it is more than IDR 32b per MHz, the value of 3G spectrum levy.

Many countries in the world have changed their licensing scheme. Most of them are moved to spectrum license. Indonesia is also moving toward this and in the near future will change their licensing scheme to spectrum license. Apparatus license on the other hand will still be used for instance for a microwave link .