There has been considerable energy and turmoil in Indonesia’s telecom sector over the last decade or so. Growth, both in subscriber numbers and in revenues, has been strong and, more importantly, there are signs that the changes in the regulatory regime and operator restructuring are starting to have a positive effect on the industry. The mobile market has been especially positive. There was a good response to the launch of the more recent launch of 4G/LTE services.

Whilst broadband users have grown on back of a surge in mobile broadband subscriptions and smartphone sales, fixed internet connections remained relatively low, despite broadband development having accelerated. Fixed broadband penetration was still under 2% by 2016 and broadband household penetration was a low 5%.

CK Hutchison mobile subsidiary Hutchison 3 Indonesia (Tri) has launched its commercial 4G service in six cities in Sumatra, Kalimantan, Sulawesi, Java and Bali, and it hopes that what it calls the ‘millennial generation’ will be at the forefront of people signing up to its LTE tariff plans. The cellco confirmed the launch yesterday (30 March 2016), which saw the operator switching on its 4G network in the cities of Batam, Pontianak, Makassar, Jakarta, Bandung and Denpasar. It now has 55.5 million mobile customers which concluded that around 70% are aged 15 to 25 years. This is the next generation who will make the digital economy as one of the motors of growth of Indonesia’s development,’ he said.

4G smartphone take-up is on the increase. Around 7% of all Tri users currently own a suitable device, compared with 2% to 3% last year. As such, Tri is confident of signing up three million LTE subscribers in the short term. It has already deployed approximately 1,000 eNodeB (4G BTS) to support the new service, out of a total 39,054 BTS in service. The network is already modern; people can switch to 4G BTS-ready anywhere in a matter of hours. The six cities chosen were because the ecosystem is ripe there. If there is demand, the company will instantly turn on 4G service in new locations. The Tri Indonesia is rolling out 4G with a limited block of frequency at 1800MHz. The cellco holds 10MHz blocks in each of the 1800MHz and 2100MHz bands but says it is currently only using 5MHz for 4G due to the capacity it still needs to service voice/SMS services. Prediction is that with 5MHz, the company can still serve 4G for the next two years: It is hoped that the government will open up a tender for 3G frequencies, in which case capacity constraints will be neutralized immediately.

Continued progress in the development of the telecom sector will need further government action on restructuring the industry. A stumbling start to building the country’s fixed-line network was followed by a solid fresh start, aided by the embracing of fixed-wireless technology, which became the dominant component within that market segment. However, the fixed market is now a minor segment and in decline. This is even more the situation with internet which is still in a relatively early stage of development.

Invigorated by the highly successful mobile segment on the back of increased competition in the marketplace, the country’s telecom industry has found a new dynamic. The all-important national backbone network is taking shape and on the service side the rapid increase in mobile broadband subscriptions and smartphone take up has been remarkable. However, there had been some signs that the government was hesitating in its efforts to restructure the industry.

Key developments:

– Indonesia’s economy continued its run of strong positive growth, with GDP increasing by 4%-6% in 2015/16.
– The mobile market in Indonesia has been growing strongly, but at a more modest rate than previously (less than 10% annually).
– The fixed line market (wireless and wireline) continues to suffer setbacks with a rapidly declining subscriber base.
– Broadband services were finally starting to grow, boosted by surging mobile broadband.
– Construction of the US$1.5 billion Palapa Ring optical fibre cable project is continuing.
– Government initiative on national infrastructure to push fibre and 4G coverage nationwide.
– Market leader Telkomsel was continuing to dominate the mobile market, with its mobile subscriber base of around 45% market share.
– Having acquired rival operator Axis, by early 2015 Axiata had adopted a dual-brand strategy, promoting both XL and Axis equally.
– In December 2015 Singapore telecom companies announced plans to build fibre optic network in some Indonesia’s major cities.
– By 2016 Internet and multimedia services provider Biznet Networks had expanded the reach of its Indonesian fibre-optic stretching from Java to Bali and Sumatra.