Jenkins Gauge

Indonesia’s Tough 2014

Jakarta– Indonesia is known as one of the leading countries in the world with the mostmobile users. However though, in 2014, the country’s Telkom industry ended on alow note, after most mobile operators suffered financial losses during the yearamid cutthroatcompetition.

Inthe first nine months of 2014, cell operators PT XL Axiata (EXCL) and PTSmartfren Telecom (FREN) kept bleeding, with total net losses of Rp 901.2billion (S$95 million) and Rp 939.9 billion, although the two recorded 10.8 and22.2 per cent in revenue growth, respectively.

Pricesfor internet data package in the country are the lowest in the region butoperators are keeping their data prices low to attract customers adding on thefactors of the tough challenge to maintain the companies’ ROI. The rupiah'sdepreciation is also a challenge, especially for operators, who have a largeamount of foreign debt. Continuous spread of fraudulent acts also poses as abig threat to legitimate operators aided by the archipelagic stature of the country,making it harder to travel from one island to another to catch these scammers.

Whilethe year may not have been a favourable time for growth in the telcomsindustry, a number of major events in the industry brought changes in theindustry's competition landscape that may have a positive effect in the future.

OnApril 8, PTAxis Capital Group Telekom Indonesia officially merged with XL, making theindustry home to six players: Telkom (including its cellular business PTTelkomsel), XL, Indosat, Smartfren, Tri and Bakrie Telecom (BTEL) from 11operators a few years back.