Hutch enters crowded Indonesian mobile market

30 Mar 2007

Hutchison Telecommunications International Limited (HTIL) yesterday announced the launch of its Indonesian mobile operation Hutchison CP Telecom (HCPT), marking the latest arrival in an already crowded cellular marketplace. HCPT, HTIL’s 60:40 joint venture with Thai-based agro-industry group Charoen Pokphand Indonesia, will initially offer GSM services under the 3 brand providing 2G network coverage in 67 cities on Indonesia’s most-populated island of Java, before expanding it to Bali in June, Sumatra by the end of the year, and Kalimantan and Sulawesi in 2008. 3G network services are also available in Jakarta in the launch phase. The newcomer will kick off its operations by offering pre-paid cards only, before venturing into offering contract plans. However, it faces an uphill task in a market dominated by established GSM operators Telkomsel, Satelindo, and Excelcomindo, and CDMA-based rivals Mobile-8, Bakrie Telecom and Telkom – all of which are embroiled in a price war.

HCPT plans to invest USD600 million between now and 2008 to develop its cellular services, on top of the USD400 million already spent to get the company off the ground. HTIL’s chief executive Dennis Lui says the new venture expects to sign up ‘as many as one million new subscribers as soon as possible’ and is confident of turning its first net profit within two years of launch. Lui stopped short of setting a target for market share in its first year, but HCPT president Rajiv Sawhney confirmed the country’s potential for growth in mobile communications had encouraged the start-up to invest heavily in the project. ‘Analysts have mentioned growth of some 30 million new subscribers in Indonesia in the coming years. We believe we can attain a fair share of that market,’ Sawney said. ‘The challenge is how to provide network coverage, sufficient low-cost handhelds and affordable tariff schemes, as well as the usefulness of mobile services.’

Dennis Lui believes cellular penetration in Indonesia will increase to between 50% and 60% in the medium-term, up from 27.9% at the end of 2006. Telkomsel was the market leader at that date, says TeleGeography’s GlobalComms database, with 35.59 million subscribers, followed by Indosat with 16.7 million and Excelcomindo with 9.5 million. The remainder is held by city operators like Bakrie Telecom, Mobile-8 Telecom and Lippo Telecom.