PT Indosat, the second largest telecoms operator by subscribers in Indonesia, has reported a higher-than-expected 13% fall in net profits in 2006, as the group’s mobile arm Satelindo failed to keep pace in a buoyant telecoms sector. Local industry watchers note that Indosat has been hit harder than its competitors by the effects of rising competition, experiencing higher churn rates than its rivals or seeing more users throwing away pre-paid cards when they run out, rather than recharging them – the so-called ‘calling card phenomenon’.
Indosat has faced fierce competition both from the other mobile network operators and from no-frills WiLL operators such as Bakrie Telekom which are making inroads in the market. Satelindo’s mobile subscriber base grew by just 15% to 16.7 million users in 2006, compared with a mean growth of 40% for the industry overall. The impact of competition resulted in net profit falling to IDR1.41 trillion (USD154 million) last year from IDR1.62 trillion in 2005, although company officials are confident of posting strong growth in fiscal 2007 as the mobile market continues to expand. Wong Heang Tuck, finance director of Indosat, told reporters the company expected revenue to grow 20% in 2007, up from IDR12.24 trillion in 2006. Wong went on to say that Indosat might look to raise upwards of IDR500 billion from the market this year to fund its expansion plans. The company aims to add between five to six million new mobile phone users this year.