JAKARTA (TheInsiderStories) – The financial performance of Indonesian telecommunications (telco) operator continues to degenerated lately amid the tight competition among the players. The contribution of the telco sector for economic growth also continued to decline.
As an example throughout 2018, net income of state-owned telecommunication operator, PT Telekomunikasi Indonesia Tbk (IDX: TLKM) plunged 18.57 percent to Rp18.03 trillion (US$1.26 billion) from previous year Rp22.14 trillion.
Looking at the telco companies’ current financial performance, Minister for Information, Communication and Technology (ICT) Rudiantara rated that the telecommunication sector is not healthy and need a consolidation.
In 2015-2016 period, the contribution of the media and telecommunications sector to Indonesian GDP two digits. Now the contributions only seven percent.
Rudiantara rated, there are two things that telco actors must be carried out like price, volume, and cost control. According to him, cost of Indonesian telco companies more expensive than other countries in Asia. While infrastructure loses from Singapore, Malaysia and even Vietnam.
In term of cost, he said, Indonesian telco operators could arrange together with USO universal service obligation (Rp3 trillion) and Rp6 trillion in charity funds.
Rudiantara reported, EBITDA of the telco industry currently has an average of 40 percent or losses of Rp8 trillion from previous year 45 percent.
Currently, Indonesia has five cellular operators namely PT Hutchison 3 Indonesia (Tri), PT XL Axiata (XL), PT Indosat (Indosat), PT Telekomunikasi Selular (Telkomsel), and PT Smartfren Telecom Tbk (IDX: FREN). Of the five operators, only Telkomsel has an EBITDA 50 percent. While, Indosat, XL Axiata and Smartfren suffered losses.
Furthermore, the negative growth of the telco industry was more due to the decline in legacy services which were replaced by new services from the over the top providers and SIM card registration policies and tariff wars between operators in data services.
Therefore, Rudiantara suggested that the number of ideal cellular operators in a country should be two to threeoperators to avoid cartel practices or business monopolies.
He added, the government had hoped that telco operators would consolidate to make the industry healthy.
Vice President of Qualcomm and President Qualcomm for Southeast Asia-Pacific John Stefanac once said that the number of cellular operators certainly benefits the community because they can choose which operators are relevant, so that price competition between operators becomes more competitive.
But on the other hand, the large number of telco service providers can also cause low quality networks from each operator, where the network spectrum becomes smaller because they have to share with other operators.
As happened in Australia and the United States, the ideal number of telecommunications operators in a country is between three and four operators. With that, the spectrum of the network becomes firmer.
He added, Indonesia also had not maximized the 3G network. One way to optimize it is to build more 3G-based Base Transceiver Station (BTS) in various regions.
In addition, the use of wireless networks, which account for more than 95 percent of the 60 million internet users in Indonesia, can trigger a slow internet connection. Ideally, the number of wireless users should be 60 percent, while the rest access the internet through a fix line or cable.
Furthermore, Rudiantara revealed that the government is pushing to continue to encourage consolidation between cellular operators, both in the form of mergers or acquisitions into a telco holding company, and not the integration of networks or sharing of infrastructure.
Because, he said, the telco industry is an industry that is capital intensive, technology intensive and intensive labor. To run and develop business, companies must be willing to spend large amounts of money and capital.
Besides, President Director of Telkomsel Ririek Ardiansyah said the government must also provide certainty to industry players, including the fate of the post-merger spectrum or acquisition, because it is regulated in the current Act.
The Law No. 36 of 1999 mandates that frequencies belong to the state. Thus, if one operator stops for example due to an acquisition, the current frequency is returned to the government. That is why mergers or acquisitions cannot be done because the buyer must annex the operator company without the frequency.
In detail, the financial performance scale of four Indonesian telco companies can be described in the following table:
|No.||Operator Company||Number of Customer
(per April 2018)
|2018 Financial Performance (in trillion Rupiah)|
|2.||XL Axiata||45 million||22.94||4.40||25.72||3.30|
|3.||Indosat Oeredoo||34 million||23.13||2.66||23.60||2.40|
Written by Daniel Deha, Email: firstname.lastname@example.org