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ublicly listed cell phone distributor and retailer PT Erajaya Swasembada (ERAA) says a possible surge in sales of mid-range phones is expected to help maintain its profitability amid pressure from rupiah depreciation and lower selling price.

The weak rupiah has resulted in higher imported phone prices, thereby hurting purchasing power, while at the same time the presence of good quality phones sold at lower prices in the market has challenged phone retailers in the country.

But Erajaya expects to counter those challenges and maintain net profit on the back of an increase in the country'€™s middle class, according to marketing and communications director Djatmiko Wardoyo.

'€œToday'€™s trend is that sales of middle-range phones start taking up and will likely surpass that of low-cost phones,'€ he said on Tuesday.

The availability of mid-range phones priced at around Rp 1 (US$77.09) to 2 million with varied features had attracted new customers and those with low-cost handsets to upgrade their handsets, Djatmiko went on.

The trend shift would help Erajaya compensate for its lower average selling price, which is expected to hit Rp 1.05 million this year, down from Rp 1.15 million last year, Djatmiko said.

PT Hartono Istana Teknologi, which manufactures cell phones under the Polytron brand, previously launched its 4G-ready smartphone dubbed ZAP, which is priced at Rp 1.09 million.

Chinese brand Xiaomi has also entered the country'€™s market with budget smartphones that have features similar to those of global brand smartphones.

Erajaya, which also runs phone retailers Erafone and iBox, has also been affected by rupiah depreciation.

'€œAround 60 percent of our products are imported while the remaining 40 percent are sourced locally,'€ Djatmiko said.

Erajaya distributes phone brands iPhone, Samsung, BlackBerry, Sony and Nokia.

Djatmiko said increased expenses due to higher interest rates last year had also put pressure on the firm'€™s revenue, with interest-bearing finance cost surging by 93.4 percent to Rp 182.4 billion last year.

Bank Indonesia raised interest rates by 175 basis points in 2013 to 7.5 percent, with a delayed effect of banks raising lending rates last year, adding to financial burdens for companies with debts.

The ballooning expenses squeezed Erajaya'€™s revenues, resulting in a 39.3 percent decrease in its net profit to Rp 211.52 billion in 2014 from Rp 348.65 billion in the previous year.

Lackluster financial performance was also experienced by publicly listed phone distributors PT Trikomsel Oke (TRIO) and PT Tiphone Mobile Indonesia (TELE), last year.

TRIO'€™s net profit declined by 34.3 percent to Rp 314.4 billion last year, while TELE pocketed an increase of only 3.4 percent in net profit to Rp 304.8 billion in 2014.

Erajaya was aiming to increase its sales value to around Rp 16 trillion this year from Rp 14.45 trillion in the previous year, Djatmiko said.

In terms of sales volume, Erajaya foresees that it will remain stagnant to reach 60 million units this year or increase to up to 65 million units.

Indonesia'€™s phone market has seen an increasing number of smartphones over the last six years, with demand increasing from only 500,000 units in 2008 to around 22.1 million units in 2013, according to Erajaya'€™s internal data.

'€œWe are upbeat that the number will surge significantly in the future,'€ he said.

Shares in Erajaya traded at Rp 895 at Wednesday'€™s close, down 1.1 percent from the previous day. The stocks have plummeted almost 18 percent so far this year, underperforming the broader benchmark Jakarta Composite Index'€™s (JCI) nearly 5 percent advance.