Indonesian mobile sector faces overload

PUBLISHED : Tuesday, 23 June, 2009, 12:00am
UPDATED : Tuesday, 23 June, 2009, 12:00am

Heightened competition in Indonesia's mobile communications market, where a government spectrum auction is expected to increase the number of operators to 30 this year, could overload the country's infrastructure and ruin the quality of services, industry experts warn.

Indonesian media have reported that at least 73 companies will participate in the broadband wireless access (WiMax) tender for 2.3 gigahertz bandwidth spectrum, including three big operators - Telkom, Indosat and Bakrie Telecom.

The tender results will be announced next month.

Indonesia is one of the fastest-growing mobile markets. It had more than 140 million users at the end of last year, more than 40 per cent growth from the previous year. Cellphone penetration was 60 per cent.

However, with the strong growth in the past few years, industry players and analysts worried that the pro-competition regulatory framework in Indonesia implied limited access to scarce spectrum resources, which led to poor service quality once subscribers were increasing.

Indonesia is one of the most vibrant economies in Asia.

With a large population and an intensely competitive telecommunications environment, it is an exciting market in terms of wireless technology potential, according to Qualcomm's Southeast Asia and Pacific president John Stefanac.

'A rapidly expanding subscriber base served by 11 operators of all technological persuasions, each with limited access to spectrum, is beginning to overload current network capacities,' Mr Stefanac said.

'And, we are beginning to see signs of this - we are witnessing a steady decline in user experience.'

Indonesian market watchers believe that industry consolidation should occur in the near future so as to reduce the number of operators.

Hence, the operators that survive should have more spectrum to meet the increasing subscriber growth.

Market researcher Business Monitor International said the mobile sector believed that consolidation might not be far off as market watchers questioned whether the Indonesian market could support so many operators.

'Big operator would be able to find small prey in this uncertain economic climate,' it said.

But the plan to issue new spectrum for WiMax technology could increase the number of mobile operators to 30 even as existing operators try to win the spectrum.

'It's our belief that a streamlined number of wireless operators would benefit Indonesia as it provides more spectrum to operators, enabling them to deploy compelling and differentiated services and applications - ones that are relevant and interesting enough for consumers and businesses,' said Mr Stefanac.

'We believe additional spectrum should be offered to existing operators at affordable licence fees as this will allow greater cost saving for the operators while improving quality of service.'

Cull waiting

Player overcrowding has led to expectations of sector consolidation

The spectrum auction is expected to increase the number of operators to: 30