Indonesia’s big 3 telcos look to win big from data

  • In 1H15 the big 3 collectively had 284 million subscribers
  • Telcos steadily navigating the shift from voice & SMS to data
Indonesia’s big 3 telcos look to win big from data

 

INDONESIA’S big three telecommunications providers, Telkom Indonesia, Indosat Ooredoo, and XL Axiata, will focus on improving network quality and offering attractive data plans for mobile-first customers. This strategic move comes in response to the changing mobile business landscape in the country.

The three telcos have been used to receiving billions of dollars from fixed line, voice and short messaging services (SMS). They are now steadily navigating their way towards winning market share via data.

Here are the main indicators from each telco’s financial performance in the first half of the year:

Overall subscribers
In the first half ended July 2016 (1H16), Indonesia’s top three mobile operators collectively had 284 million subscribers, a 10.6% increase compared with 1H15. There was a 0.6% increase compared to 282.3 million subscribers in calendar year 2015.
 

  1H 2016 1H2015 Growth
Telkom 157.4 million 144.1 million + 9.2%
Indosat Ooredoo 80.5 million 68.5 million + 17.5%
XL Axiata 44 million 46 million - 4.5%
Total 283.9 million 256.6 million + 10.6%

Indosat Ooredoo gained the most subscribers in 1H16, thanks to the company’s special Ramadhan internet and data promotions as well as a special prepaid programme for users outside of Java.

XL Axiata’s total subscribers decreased 4.5%, a trend that began last year as a result of the telco’s “value over volume” strategy, in which it seeks to attract more postpaid customers along with those who are willing to spend more.

Prepaid and postpaid subscribers
Despite the fact that the majority of Indonesian mobile customers are prepaid users, telco operators have started to shift their focus towards attracting more postpaid customers as part of their mid-term strategy.
 

  1H 2016 1H 2015 Growth
Prepad Postpaid Prepaid Postpaid Prepaid Postpaid
Telkom 153.5 million 3.9 million 141 million 3.1 million 8.8% 28.5%
Indosat Ooredoo 79.7 million 782,400 67.7 million 800,000 17.7% -2.2%
XL Axiata 43.5 million 490,000 45.6 million 428,000 -4.6% 14.5%

XL Axiata has succeeded in increasing postpaid subscribers by 14.5%. Late last year, the telco announced its new and improved postpaid service called XL Prioritas.

Indosat Ooredoo on the other hand is looking at acquiring more prepaid customers and has seen a slight decrease in postpaid subscribers.

Telkom with its mobile operator brand Telkomsel remains the largest player in both segments and has seen a significant increase in postpaid subscribers. Telkom’s 1H16 financial report highlighted that revenue from the postpaid segment contributed 7.8% to revenue.

Overall revenues
The big three telcos generated Rp81.3 trillion (US$6.25 billion) in revenue for the industry in 1H16, up 12% from Rp72.6 trillion (US$5.58 billion) in 1H15.
 

 

1H 2016 (Rupiah)

1H 2015 (Rupiah)

Growth
Telkom 56.5 trillion 48.9 trillion +15.6%
Indosat Ooredoo 12.9 trillion 12.6 trillion +10.5%
XL Axiata 10.9 trillion 11.3 trillion -3.5%
Total 81.3 trillion 72.6 trillion +12%

Telkom Indonesia posted a 15.6% increase in revenue, thanks to its rising digital business segment which is driven by data revenues.

“Telkom Indonesia’s expansion in fibre optics and base transceiver station (BTS) 3G/4G infrastructure has become the backbone of the company’s efforts to become a full-fledged digital company. Its value is reflected in the revenue figures. We will push the digital business segment to become the future growth engine for Telkom Indonesia,” the telco’s financial director, Harry M. Zen said in a statement.

For Indosat Ooredoo, an aggressive customer acquisition campaign and improved network quality are the ingredients behind their 10.5% increase in revenue in 1H15.
“The investments in improving our network and data services continue to provide good operating trends in our business. Customers are coming to us because they are attracted to our digital offers,” said Indosat Ooredoo president director Alexander Rusli in the company’s official report.

Meanwhile, the shift from legacy business, namely voice and SMS, to data business has caused XL Axiata’s revenue to shrink 3.5% from the same period last year.
The company’s report highlighted the financial challenges they faced in the first half of the year, coupled with a decrease in interconnect or international roaming revenue due to lower off-network traffic.

Capital expenditure
Telkom Indonesia as a group still led in terms of capital expenditure (capex). It spent the majority of its capex, which stood at Rp13.7 trillion (US$1.05 billion), to develop access and backbone infrastructure to support its fixed and mobile broadband business. Its mobile operator Telkomsel’s capex was mainly utilised for BTS development.

Telkom is targeting to spend Rp28 trillion (US$2.2 billion) this year.
 

  1H 2016 (Rupiah) 1H 2015 (Rupiah)
Telkom 13.7 trillion 11.9 trillion
Indosat Ooredoo 3.8 trillion 2.8 trillion
XL Axiata 2.8 trillion 1.7 trillion
Total 20.3 trillion 16.4 trillion

Indosat Ooredoo has set its capex target for this year at around Rp7 trillion (US$537.5 million). The telco has used Rp3.8 trillion (US$291.8 million) in 1H15. The bulk of the funds over the rest of the year will be spent on increasing its 4G network and supporting the roll out of its fibre-optic services.

“We are spending more on Indonesia because of the size of the country. If things get better, then hopefully we can spend more on increasing our network’s capacity and speed. These are the streams that we want to improve, focusing on strengthening our data services,” said Ooredoo Group’s deputy chief executive officer Waleed Mohamed Al-Sayed in the group’s annual report.

XL Axiata, with a capex target of Rp7 trillion (US$537.5 million) for 2016, has spent Rp2.8 trillion (US$215 million) in the first half to expand and improve its 4G network which is now available in 58 cities and areas across Indonesia.

With the capex target, XL Axiata aims to acquire six million more 4G LTE customers by end 2016 and expand its 4G network service to 27 more cities and areas in Indonesia.

Related Stories:

Telkom Indonesia Q1 2016 results: Data the main revenue driver

XL Axiata and Blackberry launch multi-number mobility service in Indonesia

Slugfest: How Malaysia’s Big 3 performed in 2015

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