Indonesia Telecommunications Report Q4 2011

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Indonesia Telecommunications Report Q4 2011 Published on August 2011

Report Summary In this quarter's update, we have incorporated figures provided by the International Telecommunication Union and Indonesian mobile operators, and made several revisions to our forecast scenarios. While we have largely retained our expectations for the country's mobile, 3G, fixed-line and internet sectors, we have adjusted our outlook for the broadband industry and mobile operators' ARPU levels. Figures provided by companies such as Telkomsel, Indosat and XL Axiata showed that the decline in ARPU was worse than we had previously expected, which could be attributed to intense competition arising from price promotions to grab market share and rural expansions. Indosat has reportedly launched a sale of 4,000 telecoms towers to raise more than US$500mn. Indosat has been mulling the sale of its tower assets for more than a year, which would allow the company to boost cash reserves and concentrate on its core business of providing mobile services. We believe that the additional funds would help the operator to consolidate its position as the second largest mobile operator in Indonesia. In addition, Indosat's decision to sell its towers could be partially attributed to the government's bid to encourage tower sharing to reduce resource duplication and lower capital expenditure. Indonesia's Ministry of Communications and Information and Technology issued a regulation in March 2008 that gave local governments the ability to limit the number and placement of telecoms towers. Furthermore, telecoms operators that own towers are obligated to allow alternative operators to use their towers without discrimination. Consequently, there is less incentive for mobile operators to incur hefty costs to increase the number of base stations. Meanwhile, the planned merger of Telkom's Flexi brand and Bakrie Telecom's Esia has collapsed after one year of negotiation. Although the deal was potentially a good fit and both companies would have formed an entity that would have controlled more than 90% of Indonesia's CDMA market, there were also many challenges that hindered positive progress. Nevertheless, the agreement was looking increasingly precarious after Bakrie Telecom's parent company, Bakrie & Bros, said in March 2011 that it was frustrated by the lack of progress and could talk to alternative suitors. Besides concerns from Indonesia's business competition supervisory commission, Komisi Pengawas Persaingan Usaha (KPPU), about a possible monopoly and Telkom's labour union, Telkom said its shareholders did not approve of BTel's request to acquire a majority stake. Indonesia reaffirmed its position as one of the more attractive emerging telecoms markets in Asia Pacific after the country overtook India in this quarter's BMI business environment ratings update. Indonesia is off to a flying start, registering real GDP growth of 6.5% y-o-y in Q111, driven by private consumption and investment. We continue to hold a sanguine view on the economy and caution upside risks to our 5.9% and 5.8% real GDP forecast in 2011 and 2012 respectively. However, although Indonesia has returned to relative orderliness since the post-Suharto chaos of the late 1990s and early 2000s, the country faces multiple challenges and threats to its stability that could flare up again if President Yudhoyono or his successor proves incompetent or if improved governance fails to take hold. Investors will continue to view Indonesia as one of Asia's riskier destinations.

Table of Content Executive Summary 7 SWOT Analysis 9 Indonesia Wireline (Fixed-Line And Broadband) Business Environment SWOT ... 9 Indonesia Mobile Business Environment SWOT . 10 Indonesia Political SWOT ... 11

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>> Get this Report Now by email! Indonesia Economic SWOT 12 Indonesia Business Environment SWOT . 13 Business Environment Ratings 14 Asia Pacific . 14 Asia Pacific Business Environment Ratings, Q411 . 18 Indonesia 19 Industry Forecast Scenario ... 21 Mobile .. 21 Table: Mobile Historical Data And Forecasts 21 ARPU .. 23 Table: ARPU Historical Data And Forecasts (IDR) ... 23 Fixed Line 25 Table: Fixed-Line Historical Data And Forecasts . 25 Internet 27 Table: Telecoms Sector ' Internet ' Historical Data And Forecasts ... 27 Market Data Analysis 29 Mobile .. 29 Market Overview 29 Table: No. Of Mobile Subscribers (Q111) .. 30 Subscriber Divisions ... 32 Prepaid ... 32 Postpaid .. 33 ARPU .. 34 3G ... 35 Mobile Contract Wins . 38 Table: Mobile Contract Wins, 2008-2010 ... 38 Mobile Operator Data 39 Table: Indonesia Mobile Market Overview . 39 Table: Telkomsel . 40 Table: Indosat . 42 Table: XL Axiata . 44 Table: Bakrie Telecom 46 Mobile Content 48 Regional Outlook 48 Country Outlook .. 50 SMS . 50 Table: Telkomsel SMS Messages Sent (bn) Vs Revenues Per SMS (IDR) 50 Mobile Broadband .. 51 Mobile TV ... 52 Other Content . 53 Table: Selected VAS Services Launched, 2008-2009 .. 53 Fixed Line 56 Fixed Wireless 57 Table: Major Fixed-Wireless Operators ' Number Of Subscribers (mn). 58 Broadband ... 60 IPTV ... 62 Submarine Cable Deployments ... 63 WiMAX ... 64

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>> Get this Report Now by email! Wireline (Fixed-Line And Broadband) Developments 67 Table: Wireline Developments, 2008-2009 . 67 Regulatory Environment... 68 Indonesia: Regulatory Bodies And Their Responsibilities .. 68 Interconnection ... 69 Universal Service Obligation (USO) ... 69 Regulatory Development . 70 Industry Development . 70 Competitive Landscape 72 Key Players .. 72 Table: Indonesia Telecoms Sector Key Players .. 72 Table: Key Operators Financial Indicators, 2002-2009 . 73 Company Monitor .. 74 Huawei Technologies ... 74 Table: Vendors' Financial Performance (US$mn), 2009-2010 74 Table: Selected Huawei Contract Wins, 2010-2011 77 Operator Profiles ... 81 Telkom 81 Telkomsel 87 Indosat 91 XL Axiata (Formerly Excelcomindo Axiata) ... 96 Regional Telecommunications Penetration Overview . 100 Mobile 100 Table: Regional Mobile Penetration Overview ..100 Fixed-Line..101 Table: Regional Fixed-Line Penetration Overview 101 Broadband .102 Table: Regional Broadband Penetration Overview ...102 Glossary Of Terms .. 103 Table: Glossary Of Terms ..103 BMI Methodology 104 How We Generate Our Industry Forecasts .104 Table: Key Indicators For Telecommunications Industry Forecasts ...104 Telecoms Business Environment Ratings 106 Risk/Reward Ratings Methodology 106 Ratings System ...106 Indicators ...106 Table: Ratings Indicators ..107 Weighting ...108 Table: Weighting Of Indicators .108 Sources ..108

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