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Jakarta Post

Bleak future ahead for CDMA cell phone operators

  • Mariel Grazella

    The Jakarta Post

Jakarta   /   Mon, July 1, 2013   /  09:50 am

Already burdened by heavy losses, cell phone operators providing Code Division Multiple Access (CDMA) services face harsher headwinds ahead, further threatening their survival amid the market'€™s dwindling support for the technology.

PT Erajaya Swasembada (ERAA) is among those cell phone distributors who no longer channel CDMA handsets to the dying market.

'€œOur portfolio is entirely made up of GSM [global system for mobile communications] handsets to keep up with market trends,'€ spokesman Djatmiko Wardoyo said.

Like device distributors, major network equipment vendors have also shifted their focus to GSM-based equipment.

'€œCDMA and GSM are entirely different technologies, and we choose to pour our resources, such as time and money, into building our competencies in GSM,'€ said Hardyana Syintawat, spokesperson for Ericsson Indonesia, which used to supply CDMA base transceiver stations (BTS).

She added demand for CDMA transceivers was far from '€œsignificant'€.

State-owned telecommunications operator PT Telekomunikasi Indonesia finance director Honesti Basyir pointed out that CDMA was losing because it had entered the market '€œafter GSM had dominated it'€.

He added the price war among GSM operators, which slashed tariffs as low as that of CDMA, was the final nail in the coffin.

Acknowledging the dog-eat-dog nature of the telecommunications business, the publicly-listed company has decided to stay away from the CDMA market, '€œand we will withdraw this service in two-three years,'€ he said, adding that CDMA subscribers would be transferred to GSM.

However, independent CDMA operator PT Bakrie Telecom (BTEL) chose to go against the grain.

'€œAt one point in time, there are a total of 45-50 million CDMA subscriptions. It would be interesting to recoup these numbers,'€ BTEL president commissioner Anindya Bakrie said during a previous shareholders'€™ meeting, while adding the business was '€œboth a challenge and opportunity'€.

BTEL ended 2012 with 11.6 million subscriptions, 20.3 percent less year-on-year.

BTEL and another independent CDMA operator, PT Smartfren Telecom (SMRT), have extended their net losses to this year'€™s first quarter, each recording net losses of Rp 97.4 billion (US$9.81 million) and Rp 355.6 billion, respectively.

While booking a net loss, SMRT saw a 44 percent annual rise in subscription numbers to 11 million as of 2012.

Smartfren deputy CEO Djoko Tata Ibrahim said the company bundled its services with an array of devices, like Windows 8 and Android smartphones, to maintain customer loyalty.

'€œWe'€™ve done this because the number of CDMA devices available in the market is limited, considering that the CDMA community is not as vast as GSM'€™s,'€ he said.

PT Telekomunikasi Selular (Telkomsel), the leading GSM operator, has 120.6 million subscriptions alone in the first quarter of 2013.

Alex J. Sinaga, chairman of the Indonesian Telecommunication Operators Association (ATSI), said the attenuating market left CDMA operators with only two options.

'€œThe first option is to die off naturally and the second option is to hit a turning point through consolidation,'€ he told The Jakarta Post, adding the government must provide incentives for consolidation to take place.

Bakrie Telecom and CDMA operator PT Sampoerna Telekomunikasi Indonesia (STI) entered a share-swap deal last year.

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