Syahrial Ali's Blog

There was a big news this week when the biggest CDMA operator Telkom Flexi intended to merge with Bakrietel Esia. The CEO of PT Telkom, Rinaldi Firmansyah has sent the letter to Ministry of State Own Enterprise, Mr. Mustafa Abubakar concerning this. The minister has given the green light, so Telkom can proceed with their plan.

The negotiation shall be started to reach the win-win solution. As we know, Telkom Flexi is the biggest CDMA operator in Indonesia with currently 15 million subscribers, while Bakrietel Esia is the second with just below 10 million subscribers. When the merger happened, the CDMA market will be monopolized by these operators.

There were different views about this merger. Some argue that this merger will make unhealthy competition in CDMA business. They will dictate the market as they have 80% of the market share. Some others see there are several advantages of this merger for both companies. Telkom and Bakrie can deliver better services to all subscribers since they have adequate bandwidth to play with. They will have more efficient cost both in operational and expenditure.

Above all, we as the customer, not only want better services but also affordable tariff.

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.

On previous posting, it has been written the first reason why incumbents operator have several advantages in cellular businesses in Indonesia. The second reason is the entry time of the new comers. All new comers were started their business when the incumbents have a established network. So, they were too late.

The impact of the late entry time are:

1. New users will be protested about coverage limitation. This leads to unhappy users and back to incumbent operators.

2. Most new users who join the new comers are in low economic level who just have very low budget for their communication need. Middle or high economic level who spend high communication cost already have their mobile number. They already received good communication services from incumbent operators so they will keep their mobile number. (more…)

As written long time ago in several postings, Indonesia currently has 11 cellular operators, 5 of them using GSM and 3G technology and the rest (6) using CDMA technology. Only 3 out of 11 operators are considered in a good business condition. All of them are GSM and 3G operators, namely Telkomsel with almost 60m subscribers, Indosat with almost 40m subsribers and Excelcomindo Pratama (XL) with almost 30m subscribers. (more…)

The rumor that Sinar Mas wants to buy Bakrietel share  was heard for a long time. However, both parties have been denied it frequently. Kontan Daily reported today that Sinar Mas has bought Bakrietel for 6.2% of share or equal to 1.76 billion of share. According to BEI data, Sinar Mas has done it last month.

If calculated according to the Bakrietel price during last November, then Sinar Mas has been invested around IDR 100 billion. After entering Bakrietel, then share composition of Bakrietel are Bakrie & Brother: 22.43%; Credit Suisse Singapore Branch: 8.08%; Sinar Mas: 6.2%; and the rest owned by public.

For your information, Bakrietel is a company which has a CDMA lisence under the product name: ESIA. Last year Bakrietel just won International Call Service Provider, and Bakrietel is about to win National Long Distance Call Service Provider.

According to the latest data from DG Postel, the number of mobile prepaid subscribers in Indonesia have reached 117m on last July. If we calculate mobile phone density, then Indonesia with 240m populations has almost 50%  mobile phone density, a quite higher in number. However, the Sharing Vision surveys say that more and more people tend to have more than one mobile phone.

Actually there are at least 2 main reasons why people tend to have more than one mobile phone. The first reason is the tariff. Both GSM and CDMA have quite different tariffing scheme. People still feel that the GSM tariff is more expensive than CDMA tariff. Hence, everyone will have at least 1 GSM mobile and 1 CDMA mobile . GSM phone is used to receive a call and to maintain contact with other people. For your information, GSM technology is implemented earlier than CDMA in Indonesia, so that more people have GSM mobiles than CDMA mobiles. Meanwhile, CDMA is used to make a call because the tariff is so cheap. (more…)