Indosat CEO: Indonesian Telecommunication Market Saturation

Indosat CEO, Harry Sasongko, elaborated a realistic statement that the telecommunication business in Indonesia starts saturating. On the interview with WSJ, Sasongko (who has been working as Indosat’s CEO since 2009) stated that the growth of revenue on telecommunication industry that previously reached 15%, now decreased to 10%.

With the number of users reached for almost 200 million (while Indonesian citizen number is 240 million people), the revenue growth peaks several months ago with 20%. This trend becomes a common thing since it happens to almost all Asian market except India and Vietnam. By now, the growing market that still has chance for mobile penetration is Africa.

By now, ARPU (Average Revenue Per User) in Indonesia is less than $5 for each month. Three years ago, some operator could get $7 / month for their ARPU. Last month, Indosat announced that its revenue for the last nine months up to September 2011 only raising 4% on $1.7 million. For additional information, in Indonesia, Indosat is the second biggest operator (based on their userbase) after reaching milestone 50 million users  early November.

By the decreasing number of phone and SMS usage, operators is dependent to their revenue from Internet data package. Recently, Internet data package is dominating telco’s revenue stream after Apple and Google, as biggest smartphone platform owners, do bypass.

For Indosat (and seems to happen to all GSM operators), the revenue from data is increasing extremely about 50% compared to last year. However, the revenue from data is only contributed 10% from total revenue. In the next few years, it is predicted that data package sharing for operator revenue can reach 15-20%.

With little smartphone penetration, operators try hard to put on their thinking cap to get revenue from users that mostly spend only less than $10 per month for telecommunication cost. The ways that have been done by operator to deal with the condition are increasing the number of inexpensive smartphone users—to get more users who use the data package, and offering flexible data package even up to only 50 cent per day.

Innovation becomes the key to face the tight competition in telecommunication business. I think that the competition style on data package selling in Indonesia supposed not to sell in cheapest price but to offer the fastest, stable, and reliable connection. For example, the wide 3G coverage with 90% service level is quite enough. It is not the era of cutting the price down anymore – do you still remember the era of pricing war?—while the needs of internet data package seems to be people’s primary needs.

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