More Products:
Indonesia - Market Intelligence Report
|
Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. Telecommunications services in Indonesia are primarily provided by PT Telkom (domestic services, and increasingly international) and PT Indosat (international services, and increasingly long-distance and local) and their associated companies. International services were additionally provided by PT Satelindo, though this company is now a wholly-owned subsidiary of Indosat. Satelindo had always been obligated to provide its services in co-operation with Indosat. A small number of independent companies provide limited competition in the cellular market, and these are increasingly the subject of acquisition by foreign investors/operators. Under previous telecommunications legislation, drawn up in 1989, Telkom and Indosat were designated as "organising bodies" for telecommunications, which enabled private companies to co-operate with them in the provision of infrastructure/services. This co-operation initially took the form of Pola Bagi Hasil (PBH) projects from 1990, under which private companies installed and operated fixed lines on behalf of Telkom on a revenue-sharing basis. Most of the revenue-sharing agreements have now been transformed into joint-venture companies. Currently, the largest co-operation between Telkom and the private sector is the Joint Operating Scheme (JOS) or Kerja Sama Operasi (KSO), under which Telkom transferred to the private sector, for the 15 years to 2010, responsibility for the management and operation of five of its seven operating regions. Telkom retained the two most profitable regions (Jakarta and East Java). The KSO operators and Telkom collectively agreed to install one million lines a year in the five years to March 31, 1999. However, the economic crisis in the region led to some renegotiation of the KSO agreements to provide short-term relief to the KSO investors and ensure the long-term viability of the programme. In 1999, the original target for new lines to be installed was reduced from two million to 1.268 million. Continuing financial difficulties within the KSO operators and arguments between the operators and Telkom, led the incumbent to begin a process of acquiring control of the KSO operators. By the end of 2005, Telkom had acquired four of the five KSO operators, and in July 2006 began the process of acquiring the remaining operator. A new telecommunications law, approved in September 1999, substantially revised the existing 1989 telecommunications law (Law 3/1989) and became effective in September 2000. This revised legislation continues to promote competition, private participation, and effective regulation, and advocate gradual liberalisation, initially upholding the exclusivity rights of Telkom and Indosat. However, the legislation only provides key guidelines for industry reforms, including industry liberalisation, facilitation of new entrants and changes to the industry's competitive structure. Implementation guidelines have been and will be further made by government. The Telecom Law eliminated the concept of state-owned companies as Organising Bodies, thus ending the status of Telkom and Indosat as the Organising Bodies for the industry. Subsequent legislation in August 2001 removed their exclusivity rights, allowing any state-owned company, private company, or co-operatives to provide telecommunications networks and services. The new law also envisaged the creation of an independent regulatory authority, although this authority did not materialise until early-2004 and was still not fully operational at the time of writing. The introduction of fixed wireless services may impact on the growth of the cellular market, though there are no signs yet that this is the case. Telkom applies PSTN telephone tariffs for its fixed wireless service, which are substantially lower than those applied to cellular services, and pays lower regulatory fees than those applied to cellular services. Fixed wireless services using CDMA 2000 1X technology possess mobility and features similar to those offered by cellular providers, and fixed wireless service quality may exceed GSM cellular service quality due to more efficient spectrum usage. Following re-structuring of the industry from 2001 onwards, including the sale by PT Telkom of its interests in all Indonesian cellular operators with the exception Telkomsel, Indonesia's cellular operators saw themselves becoming acquisition targets for regional competitors towards the end of 2004 and into 2005. In December 2004, Telekom Malaysia announced it would acquire a 27.3% initial stake and management control of Excelcomindo, Indonesia's third largest cellular operator, followed, in January 2005, by Maxis Communications - also of Malaysia - agreeing to acquire 51% of Natrindo Telepon Seluler, which has received government approval to convert its regional licences into a national licence. Perhaps more significantly, Natrindo had also received, in September 2004, a licence to offer 3G/UMTS services on a national basis. In October 2005, Telekom Malaysia exercised its call option to purchase an additional equity interest in Excelcom from PT Telekomindo Primabhakti, taking its stake to 56.9%. In March 2005, Hutchison Telecommunications International Ltd (HTIL), of Hong Kong, announced plans to acquire a 60% equity stake in PT Cyber Access Communications (CAC), an affiliate of Thailand's Charoen Pokphand Group that had been awarded the country's first 3G/UMTS licence in October 2003. HTIL acquired its 60% stake for a cash consideration of US$120 million. After completion of the acquisition, HTIL has management control of Cyber Access, with Charoen Pokphand Group Indonesia (CP Group Indonesia) retaining a 40% stake. In June 2005, the government said it would sell-off the country's remaining available 3G spectrum in July and would use the proceeds from the spectrum sale to install fixed telephone lines down to the village level in several parts of the country that still have no access to telephones. The government said that there was 45MHz of 3G frequency available, and that operators would be allocated blocks of between 5MHz and 10MHz. The sale was due to be held in July 2005. Apparently, following the award of the two initial licences, the country's authorities had "become frustrated at the lack of progress by the two companies in making use of the licences". It was not until January 2006, however, that the bidding process got underway. In February 2006, the Ministry of Communications and Information awarded 3G licences to Telkomsel, Excelcomindo, and Indosat. The companies paid Rp218 billion, Rp188 billion, and Rp160 billion for the 10-year licences, respectively. The following month, the Indonesian government halved the 3G spectrum allocated to Hutchison Telecom Indonesia and Natrindo Telepon Seluler from 10MHz to 5MHz. The new awards in January 2006 were for 1x5MHz block of frequency each. Hutchison Telecom Indonesia and Natrindo were given the option to purchase their additional frequency blocks, but they had objected to paying the upfront fee and commission that had been levied on Telkomsel, Indosat, and Excelcom for using the frequencies. The three new licensees had 30 days to pay the upfront fee, which was set at double their final bids, and have to pay commission of usage rights, calculated on a figure of Rp160 billion (approx. US$17.2 million) - the lowest winning bid in the auction.
This Market Intelligence Report was produced as part of
|
Order the 
Download the