Indonesia- telecom sector trends and opportunities

In our fourth series of blog posts, we are introducing telecom sector trends and opportunities, starting with Indonesia.

Growing telecom market in Indonesia offers interesting opportunities for investors.

The market is dominated by 3 players, Telekomunikasi Indonesia (Telkom), XL Aviata and Indosat, which control around 85% of the mobile phone market according to Indonesia Investments.  Telkomsel, which is a subsidiary of previously state monopoly Telkom had a market share of around 42% at the end of 2013, Indosat c. 19% and XL Aviata a bit less than 19% according to Global Business Guide (GBG) Indonesia.

There are over 308 million mobile phones used in Indonesia (with a population of 255 million), which means many might have 2-3 phones, but smart phone penetration only stood at around 23% in urban areas at the end of 2013 with 38% of total population with internet access as of June 2016 according to Indonesia Investments.

The government is keen to improve Indonesia’s broadband network with the so-called Indonesia Broadband Plan targeted to provide broadband to 30% of the population by 2019 with 100% mobile broadband penetration, as Indonesians prefer handheld devices to access internet, also connecting their laptops from their phones making the fixed broadband largely unnecessary according to GBG Indonesia.  Therefore, telecom providers are focusing on data services including 4G.

Government mission is to become a digital nation with growing E-Commerce, IT based education and online start ups. Government has re-launched the Palapa Ring Project with an investment of $207 million dollars. The project is scheduled to be ready with its undersea fiber-optic cable network of 13,000 kilometres and onshore network of 22,000 kilometres by 2018. According to Indonesian Ambassador to Finland Wiwiek Setyawati Firman, Indonesia is one of the biggest online markets in the world with over 93 million internet users , Facebook being the most popular social media with 14% of the population using it daily.

E-Commerce is indeed a great opportunity thanks to a recent boom of online start ups. Foreign investors, according to GBG, can also collaborate with local wireless operators to make it easier to enter the telecom market to provide services or install network infrastructure.

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