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Telcos to benefit long term from COVID-19 crisis as users shift online
With people and businesses, even governments, turning increasingly to the internet for day-to-day interactions and activities, the telecommunications industry is one of the few looking to come out on top from the health crisis.
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Stock image illustrating working from home (Shutterstock/Nattakorn_Maneerat)
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span style="background-color:#FFFFFF;">Indonesian telecommunications firms are expected to reap long-term benefits from the coronavirus health crisis due to increasing demand for mobile data and internet connectivity, say analysts.
The demand for internet services has surged as people shifted their interactions and daily activities online amid COVID-19 physical restrictions, Reliance Sekuritas analyst Anissa Septiwijaya said on Nov. 13.
Anissa said this shift could create a lasting impact for the country’s telcos, as indicated in their financial performances in the first nine months of the year.
“Telcos’ financial performances have remained stable amid the pandemic, compared to companies in other sectors that experienced significant [financial] decline,” she told The Jakarta Post by text message.
In September, publicly listed PT XL Axiata recorded a 5.1 percent increase in annual revenue to Rp 19.66 trillion (US$1.4 billion), while its profit skyrocketed 316.3 percent year-on-year (yoy) to Rp 2.08 trillion following the sales of 2,782 telecommunications towers earlier this year.
XL Axiata chief financial officer Budi Pramantika earlier attributed its top-line and bottom-line growths to a 12 percent yoy rise in data revenue to Rp 16.7 trillion.
“Most of our customers were working and studying [from home] during the pandemic in accordance with the government advisory,” he said during a media briefing on Oct. 6.
According to the e-Conomy SEA 2020 report by Google, Singaporean state-owned investor Temasek Holdings and global consultancy Bain & Co., Indonesians spent 4.7 hours per day on the internet during the height of lockdowns, up from 3.6 hours before the outbreak. The figure now stands at 4.3 hours per day.
The report also noted that eight out of 10 internet users in Southeast Asia viewed technology as “very helpful” during the COVID-19 outbreak, and that it has become an “indispensable part of people’s daily lives”.
Meanwhile, publicly listed state-owned telecommunication company PT Telekomunikasi Indonesia (Telkom) booked Rp 16.68 trillion in profit as of September, up 1.33 percent yoy compared to September 2019. But it recorded a slight dip in revenue of 2.62 percent yoy to Rp 99.94 trillion in the first nine months of the year.
Telkom booked a 3.46 percent yoy increase to Rp 56.45 trillion in total revenue from mobile data, internet and IT services, and a 17.07 percent yoy increase to Rp 16.1 trillion in revenue from its broadband internet and interactive television services, Indihome.
Publicly listed telecommunications company PT Indosat, which owns the brand Indosat Ooredoo, also enjoyed an increase in its September revenue of 12.9 percent yoy from its cellular service.
Overall, the company saw a 9.2 percent yoy jump in overall revenue to Rp 20.59 trillion in the first nine months of the year.
The company, however, failed to reduce its losses in September, which worsened 60.8 percent yoy to Rp 457.5 billion, from Rp 284.6 billion last year. The higher loss was attributed to increased employee expenses following organizational restructuring earlier this year.
XL Axiata president director Dian Siswarini said she expected telcos to face potentially tighter price competition amid the ever-increasing need for connectivity during the health crisis.
“Almost every operator has rolled out unlimited data plans that could lead to yet another price war, and it could get even tighter if the COVID-19 outbreak worsens,” she said.
Anissa of Reliance Sekuritas, however, said she was not too concerned about this possibility, as the recently enacted Omnibus Law on Job Creation would prevent a price war.
The law stipulates that the government set the price floor and ceiling for network service providers in the public interest and to promote healthy business competition.
In the case of a price war, said analyst Maximilanus Nico Demus of Pilarmas Investindo Sekuritas, each telco would still retain its customers regardless of the pricing scheme.
“As long as they continue to improve the quality and services of their [mobile] data connectivity, each provider will maintain its market share,” said Maximilanus. He added that telcos were likely to continue to benefit even post-coronavirus, as the health crisis had turned mobile data into a primary need for many people.
“People will still continue to buy mobile data despite the fact that the pandemic has weakened their buying power, and this will continue even in the post-pandemic world,” he said.
