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Indonesia 2011

Telkom: Indonesia’s complete TIME company

Jun 01, 2011

Until 1961, telecommunications was a state-run enterprise. As was the case in other developing countries, expansion and modernization of telecommunications infrastructure played an important role in the country’s general economic development. Also, Indonesia’s large population and rapid economic growth created a demand for expanded services.

Recent reforms have attempted to create a regulatory framework to promote competition and accelerate the development of telecommunications facilities and infrastructure. Further measures that came into effect in September 2000 were aimed at boosting competition by removing monopolistic controls, increasing the transparency of the regulatory framework, creating opportunities for strategic alliances with foreign partners, and facilitating the entry of new participants to the industry.

Telkom Indonesia President Director Rinaldi Firmansyah

Fixed-line penetration is low in Indonesia when measured against international standards. As of February 2011, Indonesia had an estimated fixed-line penetration (including fixed-wireless subscribers) of 16.8 percent and an estimated cellular penetration of more than 80 percent.

“There are a number of significant trends in the telecommunications industry in Indonesia and these include continued growth,” said Telkom Indonesia President Director Rinaldi Firmansyah, who added that the telecommunications industry in Indonesia will continue to grow parallel to the growth of the economy.

According to Firmansyah, Telkom Indonesia expects wireless services to become increasingly popular as a result of wider coverage areas, better wireless network quality, lower handset costs, and the proliferation of prepaid services. It also anticipates more competition in the industry as a result of the government’s regulatory reforms.

“The future of our industry is TIME,” emphasized Rinaldi.

Several years ago, Firmansyah realized that Telkom Indonesia would face more challenges to meet the expectations and aspirations of its shareholders, customers, and indeed, the nation if it remained solely a telecommunications operator.

As new and unprecedented modes and volumes of communication emerged, driven by cellular, satellite, digital, and broadband technologies, Telkom stakes its future in its capability to provide seamless access to a huge diversity of information, media, and edutainment across a wide range of platforms.

So, Telkom embarked on a far-reaching transformation that is still ongoing. While maintaining its legacy business of fixed-line and cellular voice services, it has strategically built a portfolio of new wave businesses, including broadband, IT and enterprise services, and content, with a view to sustaining competitive growth.

Firmansyah claimed that by the end of 2010, Telkom’s customer base had grown 21.2 percent, to 105.1 million customers. Telkom at the moment serves 8.4 million fixed-wireline telephone subscribers, 15.1 million fixed-wireless telephone subscribers, and 81.6 million mobile telephone subscribers.

As of December 2010, Telkom had about 94.01 million cellular customers, which represented a 15.1 percent growth from the previous year on the back of continuous product and service innovation, strong brand positioning, and an improved network. Its estimated market share as of that year stood at about 45.6 percent of the fullmobility market.

On the other hand, as of December 2010, there were 1.65 million subscribers for fixed-broadband services (Speedy), which represented growth of 44 percent from 1.15 million subscribers recorded in the same period last year. Speedy remains the market leader in the business with a total market share exceeding 80 percent.

At the end of 2010, Telkom’s mobile broadband user base grew by 128 percent from 1.67 million to 3.80 million in the same period. It has maintained its leadership position in the mobile broadband sector, with approximately a 60 percent market share.

“To support our mobile broadband service, some of our backbone infrastructures were utilized by Telkomsel (a Telkom subsidiary company) as a part of Telkom’s strategy to synergize operational resources,” Firmansyah said.

As of February 2011, the total number of fixed-wirelines in service remained essentially flat at approximately 8.3 million, which represented a decline of 1 percent from 8.37 million in the same period last year.

“Our 8.3 million subscribers represented a market share of some 99 percent. We remain the dominant player in the fixed-wireline market,” Firmansyah said.

Until today, the majority of Telkom’s common stock was owned by the Indonesian government, with the public taking a minority stake. “Our shares are traded on the IDX, the NYSE, the LSE, and are publicly offered without listing in Japan,” said Firmansyah, who is confident that Telkom will maintain its growth by regional expansion. It has established Telkom Indonesia International (TII) as its vehicle to expand overseas.

A fully owned subsidiary of Telkom, TII provides information communication and international networking services under three business portfolios: international telecommunication services, project management and consultancy, and investment and strategic partnerships.

As Telkom Group’s international arm, TII has regional representation and investments in Malaysia, Singapore and Hong Kong. Through TII, Telkom works towards its vision of becoming a leading telecommunication, information, media and edutainment (TIME) player in the region.

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Indonesia 2011 was prepared for and originally printed in Foreign Affairs magazine.

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