Newcomer Sinar Mas eyes Indonesian mobile launch by year-end

22 Aug 2007

PT Sinar Mas Telecommunications (Sinar Mas), backed by the billionaire Eka Tjipta Widjaja, has announced plans to enter the Indonesian mobile market by the end of this year, making it the tenth wireless player in the country and sparking concerns over a price war. According to Bloomberg the company, which is a unit of the nation’s leading palm oil producer, plans to build out a network with capacity of 1.4 million lines before the end of 2007. In an interview, Sinar Mas director Ubaidillah Fatah said the start-up hoped to attract 700,000 users this year; it plans to launch commercial services next month. However, the imminent arrival of the Jakarta-based operation has sparked fresh concerns about a price war which could undermine operators’ profits. Hutchison Telecommunications International Ltd, controlled by Hong Kong billionaire Li Ka-shing, launched its service in March – via PT Hutchison CP Telecommunications – and has already slashed prices in a bid to entice customers in a country where mobile take-up is expected to surge 25% to 100 million by 2009. In June, market leader PT Telekomunikasi Selular (Telkomsel) moaned that intense competition was already impinging on its bottom line.

Sinar Mas remains undaunted. It plans to start its service using code division multiple access (CDMA) technology supplied by Qualcomm and is targeting initial coverage of four cities including Surabaya in East Java and Bandung in West Java. Mr Fatah says the company has invested USD318 million to roll out 300 base transceiver stations (BTSs) and plans to add a similar number before the end of this year. The newcomer is championing a business model which it claims will offer ‘a very competitive tariff and a different service,’ but local industry watchers warn it could struggle to amass its ambitious target of 700,000 new users. They note that other smaller players such as Bakrie Telecom and Mobile-8 Telecom only managed to sign up 446,000 and 230,000 new customers respectively in Q2 2007, making Sinar Mas’ goal a difficult one.