Indonesia's telecoms market presents good growth opportunities due to its large and youthful population and extremely low broadband penetration rate. While the mobile industry generates low ARPUs in light of consumers' preference for prepaid subscriptions, and strong competition among operators and from alternatives such as fixed-wireless technologies, the long-term outlook is positive as operators are stepping up efforts to grow the nascent 3G market. Developments in the mobile data sector will also help to offset disappointing growth in the fixed broadband industry.
- Indonesia's top three mobile operators - Telekomunikasi Selular (Telkomsel), Indosat and XL Axiata - ended 2012 strongly. Consequently, we have upgraded our mobile subscriber estimate and forecasts. We envisage 361mn subscribers by end-2017, up from 303mn at end-2013.
- The heavy reliance on prepaid subscriptions is reflected two of the top three mobile operators reporting yo- y decline in their blended ARPU. However, the increasing adoption of 3G services poses an upside risk to our ARPU forecasts.
- The fixed-line and fixed broadband sectors continue to be outshined by their mobile counterparts, and we do not foresee a reversal in the trend given that consumers and businesses are clearly favouring the convenience of mobile solutions and the greater technological advancements.
Key Trends And Developments
Telkomsel and XL Axiata secured the last two blocks of 2.1GHz spectrum in March 2013. Badan Regulasi Telekomunikasi Indonesia stated that Telkomsel has been awarded frequencies in the 1970-1975MHz range, paired with spectrum in the 2160-2165MHz band. Meanwhile, XL Axiata has been awarded 1975-1980MHz spectrum, paired with frequencies in the 2165-2170MHz band.
In the same month, content delivery networks provider EdgeCast Networks collaborated with Telekomunikasi Indonesia International (TELIN) to power a TELIN-operated Indonesian CDN. According to the deal, TELIN will offer CDN services to its enterprise customers. The agreement expands the coverage and capacity of EdgeCast's global network. TELIN will a well-distributed CDN inside Indonesia using EdgeCast technology. TELIN also plans to team up with EdgeCast for incorporating other services, including IPTV and cloud hosting, into its CDN offerings.
Indonesia remained in ninth position in BMI's Asia Pacific Telecom Risk/Reward Ratings with a telecoms rating score of 53.5. Indonesia's growth boom is built on solid foundations and we expect it to continue over the coming years. That said, risks are growing, the most pressing of which is a deterioration in global credit markets that could force up local borrowing costs. As such, we forecast real GDP growth of 6.1% this year, versus an estimated 6.2% in 2012 and consensus expectations of 6.3% growth.