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Telcom companies may see brighter skies this year
Telecommunication operators may enjoy better performances this year as data pricing will possibly increase and the number of subscribers could grow
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elecommunication operators may enjoy better performances this year as data pricing will possibly increase and the number of subscribers could grow.
Last year was a hard time for the industry because of pressure from low data pricing.
The better data pricing expected this year would be a result of mergers and acquisitions among the existing telecommunications operators where a smaller number of competitors would bring about higher pricing.
'The end of the CDMA [code division multiple access] era and more consolidation in the GSM market should mean more rational pricing conditions in the [telecommunications] sector,' Bahana Securities analyst Leonardo Henry Gavaza said.
Currently, there are six operators competing in the country's telecommunications industry and most offer GSM services. They are state-owned PT Telekomunikasi Indonesia (Telkom), which encompasses its cellular business PT Telekomunikasi Selular (Telkomsel), PT Indosat, PT XL Axiata, PT Hutchison 3 Indonesia, PT Smartfren Telecom and PT Bakrie Telecom. Smartfren and Bakrie have signed a deal for network sharing.
Communications and Information Minister Rudiantara said his ministry would encourage operators to merge with or acquire their competitors so that there would be three or four operators left, which would provide a far better competition landscape.
'For this year alone, I predict that the industry will grow between 7 and 10 percent, better than last year'when most operators kept bleeding because of low revenues and increasing costs,' he said.
Meanwhile, MNC Securities analyst Victoria Veny estimated more moderate growth of around 7 to 8 percent this year.
She said that besides more stable competition, data subscriber growth of between 20 and 25 percent,-supported by a fast 4G-Internet service, would spur the growth.
'While SIM card subscriptions have already surpassed the country's total population, operators still had ample room to increase the number of their data subscribers to boost revenues,' Victoria said.
The country's mobile subscriptions hit 330 million in 2013, outnumbering the country's population of 250 million people, according to an Ericsson Mobility Report.
Smartphone penetration, which partly indicates the number of data subscribers, stands at around 23 percent of total phone users in the country, according to a report by the Nielsen market research firm.
Telkom CEO Alex J. Sinaga said his company, which had 138 million subscribers as of September last year, would work to increase its subscriber base only by around 3 percent this year, but would try to boost the number of its data users, which currently stands at around 40 percent of its subscribers.
Voicing a similar view, XL deputy CEO Dian Siswarini said that besides slashing its operational costs, her company would increase its data users. Currently, XL data users represent 51 percent of the company's 62.9 million subscribers.
XL suffered Rp 901.2 billion (US$71.6 million) in net losses during the period of January to September last year, although its revenues grew by 10.8 percent to Rp 17.5 trillion from Rp 15.8 trillion year-on-year.
Nitin Mahajan, an analyst with Singapore-based Roland Berger Strategy Consultants, said mobile data monetization would still become a challenge for Indonesia's telecommunications operators this year, with cost efficiency remaining important.
'They [the operators] also must be more creative in spending their capital expenditures [capex],' he said.
Operators should spend their capex based on their segments, given that most operators' profits came from their top 20 percent of customers, he said.
Moreover, Minister Rudiantara said that telecommunications operators in the country would make a combined investment of $4 billion this year, with around 45 percent coming from Telkom.
Telkom and XL have stated that their capex this year would be around the same as those of last year: around Rp 23 trillion and Rp 7.5 trillion, respectively.
Indosat CEO Alexander Rusli meanwhile said that his company would spend less in capex and focus more on growth, saying that Indosat had been carrying out network modernization for the last two years.
Indosat, which is majority-owned by the Qatar-based Ooredoo Group, saw a slight decline in its revenues and Rp 1.32 trillion in net losses during the January to September period last year.
'For this year, we target a revenue growth of between 4 and 5 percent with total subscribers of around 60 million,' Alexander said, adding that he estimated less than 1 percent growth last year.
In another development, Rudiantara said that he would urge messaging service providers to help operators bear certain operational costs.
Messaging applications such as WhatsApp and LINE currently operate in the country through operators' networks, but offer their services for free, leaving operators with no additional income from providing their services to customers.
