Telecommunication Company Success Story in Indonesia

by | Sep 30, 2021 | Study Insight, Uncategorized | 0 comments

Source: Rites

Since digitization is changing customer behavior in Indonesia, the telecom industry must adapt to stay competitive. With the shift to digital, customer behavior altered, as did the telecom landscape. Data usage began to overtake traditional phone and messaging services all of a sudden. According to Boston Consulting Group, the contribution of these services to worldwide revenue fell from 70% in 2015 to 50% in 2018. 

From the Statista.com survey entitled “Market size of information and telecommunications technology industry in Indonesia from 2017 to 2019 with a forecast for 2020”, the value of the information and telecommunications technology industry in Indonesia was USD 6.5 billion in 2019. It was projected that the value would reach USD 7.1 billion by 2020. With the rising demand for better Infocom services among the general population, this industry must grow and support the country’s connectivity. 

In Indonesia itself, Currently Indonesia has 7 mobile operators namely Hutchison 3 Indonesia (Tri), XL Axiata (XL), Indosat, Sampoerna Telekomunikasi Indonesia (Ceria), Telekomunikasi Seluler (Telkomsel), Smartfren and Bakrie Telecom. Two of them are telecommunications companies from abroad, namely XL Axiata and Hutchison 3 Indonesia. Both companies have long entered the market in Indonesia and can survive in the middle of the Indonesian market. Here is their success story in and survived in the Indonesian market:

Axiata Group Bhd. in Indonesia

Axiata Group Berhad, or Axiata, is a Malaysian multinational telecommunications company with large interests in Asia. It was originally known as TM International Berhad. It is one of the country’s largest wireless carriers. In Malaysia, Nepal, Indonesia, Sri Lanka, Bangladesh, and Cambodia, Axiata owns controlling interests in mobile providers. Having major strategic ties to India and Singapore. Non-mobile telecommunication operations in Thailand and Pakistan are also owned by the Group.

In 2019, Axiata Group Bhd., founded in Malaysia and managed by the country’s sovereign wealth fund Khazanah Nasional Bhd., attempted but failed to merge its Asian operations with Telenor ASA of Norway. Then, in May of this year, Axiata CEO Jamaludin Ibrahim told Reuters that he was in talks with all Indonesian players except the biggest. But if Hutchison and Indosat consummate a deal, then the Malaysian telco’s options for doing an Indonesia-specific transaction are going to be rather limited. That will once again mean looking for a regional partner. That’s easier said than done when all global networks are looking to serve their own core customers’ heightened hunger for data in the post-pandemic world.

The gross income of telecommunications operator Axiata was estimated to be around IDR 26.02 trillion in 2020, reflecting a minor but steady increase since 2016. Axiata is a major player in the Indonesian telecommunications sector, and it is one of the primary beneficiaries of Telkomsel’s market loss. During the COVID-19 epidemic, the increased demand for an internet connection to assist work and study activities resulted in an increase in revenue. Data traffic soared, particularly around the start of the pandemic. Then it began to decline as people’s purchasing power diminished as economic conditions deteriorated as a result of the pandemic’s impact.

Hutchison 3 Indonesia

3 (three) is a brand used for nine mobile telecommunications networks in Europe, Asia, and Australia owned by Hong Kong-based CK Hutchison Holdings. The entire Tri-branded network provides 2G, 3G/WCDMA, and 4G LTE GSM technology. In addition to Indonesia, the network is also present in Australia, Austria, the United Kingdom, Denmark, Hong Kong, Ireland, Italy, and Sweden. In Asia, Tri Indonesia is part of Hutchison Asia Telecom (HAT). 

In Indonesia, this telecommunications company is called tri Indonesia. 3 first time to expand their market in Indonesia in 2000 and received a 3G license in 2004. It began its operations on 29 March 2007, initially in the Jakarta area only. Only after 9 months of operations, 3 acquired about 2.2 million GSM customers. 3 achieved high customer mindshare maintaining at about 90% of awareness level as of April 2009. As of April 2009, 3 Indonesia had about 4.5 million customers on its GSM network. Currently, 3 Indonesia is in the fourth position as the largest operator in Indonesia based on the number of customers. As of January 2021, 3 already have 39.8 million subscribers. As of early 2021 Tri already has 44,000 4G base stations.

In 2018, Hutchison Tri reported that it received revenues of more than USD 1 billion in 2018. As of the end of 2019, Tri has reached network coverage for a population of 170 million. The network includes in Kalimantan, Sulawesi, Sumatra, Bali, and Lombok. Last year, tri reported that traffic increased by 20%. This is a moment that Tri’s revenue always increases every year because tri network users also increase. This year, Tri merged with one of Indonesia’s telecommunications companies, Indosat Ooredoo. These mergers are useful for improving services and strengthening their business network. The combined entity of the two companies will be named Indosat Ooredoo Hutchison. The company is claimed to be the second-largest telecommunications company in Indonesia with an estimated annual revenue of USD 3 billion.

Telecommunications business opportunities in Indonesia

The internet penetration rate in Indonesia was forecasted to reach approximately 90% by 2025. In the bigger metropolitan areas, there is an abundance of WiFi hotspots and good cellular signals. However, rural areas with less infrastructure might not have such luxuries. Even so, the recent internet usage among the rural population has been increasing with the rising affordability of mobile devices such as smartphones. Smartphones are the preferred device to connect to the online world by many Indonesians as the number of households that own a desktop computer is considerably low.

By 2025, the forecasted number of Indonesians who accessed the internet through their phones would amount to around 250 million. Identifying this as a market opportunity, the Indonesian mobile network providers have been competing to deliver better mobile internet services to their customers. Currently, the Indonesian mobile network providers are optimizing their services through the 4G technology that is available for every internet user, including those living in the outlying parts of the country.

With a large number of internet and mobile phone users, Indonesia certainly has a large market against telecommunication companies. This provides an opportunity for telecommunications companies abroad to expand their market to Indonesia. Because the growth of the number of internet users in Indonesia will certainly rise every year and it takes telecommunications companies to meet these needs. 

Enter Indonesia’s Franchise Business With Bright Indonesia

Telecommunications is one of Indonesia’s fastest-growing industries. In comparison to the circumstances of fixed wire and special telecommunications connections, cellular connections are of reasonably high quality across the country. According to the most recent figures, the number of cellular accounts in Indonesia exceeds the country’s total population, indicating that the country’s cellular connections are of high quality. As a result, cellular networks are an important part of Indonesia’s telecommunications business.

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*This article is written by, @Candy Bestari, @Sintya Nur Muftiana

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