Syahrial Ali's Blog

What’s your comment about current telecommunication tariff in Indonesia? Please pay attention for the 3 biggest operators’ ads nowadays. XL claim that customers can talk for 17 hours for only Rp 1,000 (almost US$1), while Indosat informs that customers can make a voice communication with just Rp 1,000 for whole day. The biggest cellular operator, Telkomsel asks for Rp 2,000 for entire day communication.

What are thay looking for exactly? If we inspect the terms and condition, it is mentioned that the tariff is for On-net communication only, for the same network. If you are an Indosat subscribers, the tariff applies for calling to Indosat network. The same is true for XL and Telkomsel.

Yes, the operator can only play with on-net tariff. They don’t touch the off-net tariff. Why? Because the off-net tariff comprise of two parties originating and terminating network and the tariff is already agreed between them.

According to the information from each operator last year, the average revenue per user is around Rp 50,000 – Rp 60,000. By applying the daily tariff as mention above, each operator target of ARPU is still the same. 30 days mean Rp 30,000 and plus the cost of interoperator call then the average ARPU will be around Rp 50,000. So, it means that there are many ways to maintain the revenue by bundling it with variety of tariffing scheme.

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…)

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.

According to the data from DG Postel (released on Oct 9th, 2008), the total number of Indonesian telecommunication subscribers were more than 134 millions subscribers which consist of 8.7 millions fixed, 12.7 millions FWA and 113 millions of cellular subscribers. Like other developing countries, the prepaid and postpaid compositions of FWA and cellular subscribers are 96% (more than 121m) are prepaid subscribers with only less than 4 % are post paid. This was different very much with developed countries where this composition was overturn, namely the number of customers postpaid far exceeded the number of customers prepaid. Their classic reason is they do not want to pay everything that was not yet utilised.

By the way, have you ever compared the tariff scheme for both types of payment (prepaid and postpaid) in Indonesian cellular telecommunication?  Let’s take Telkomsel as an example. If we look at the basic price then the postpaid tariff is lower than other prepaid tariff (Halo Rp 600/min, Simpati Rp 1500/min & Kartu As Rp 900/min) for on-net local, off-net (Halo Rp750/min, Simpati Rp 1600/min; Kartu As Rp 900/min). Only SMS is higher than prepaid (Halo Rp 150, Simpati Rp 125, Kartu As Rp 88). However, if we investigate the promo tariff, then the prepaid tariff is far lower than the postpaid tariff. The tariff for prepaid is only Rp 0.5/second or Rp 30/min, far below the tariff for postpaid Rp 600/min).

The similar thing will be found with other cellular operator such as Indosat and XL. XL for instance just ask prepaid subscribers to pay Rp 1,000 for 60 minutes, while postpaid subscriber has to pay Rp 9/second.  Indosat place a Rp 15/second to all operators for postpaid subscribers and Rp 1,000/day for prepaid subscriber .

I think, this tariff scheme is an anomaly if we calculate the cost of prepaid system.

Prepaid call need more resources. For instance, before connected, the system shall perform a balance checking, whether it still has credit to make a call. This check perform continuously during the conversation. After the call release, the system shall report the charge of the call to subtract the credit. So, it need a realtime system. This requirement is different with post paid system. All checkings can be postpone to the end of the month when you need to send the billing.

In the security view, the postpaid users have a clear identities because of initial checking on registration. Meanwhile the prepaid user who register online can input invalid data.

So, why the operators do not offer good incentives for postpaid subscribers? Shall we jump to conclusion that operators are more beneficial by getting money earlier before their network is used? And the amount is bigger than the cost of prepaid systems?