Indonesian telecoms operators are increasingly turning their attention to mergers in a bid to sidestep a lack of allocated spectrum resource in the country that currently threatens to hamper further rapid development in the sector. The Jakarta Post quotes Ministry of Communication and Information Technology (MoCI) postal and information infrastructure chief Muhammad Budi Setiawan as saying that a number of telcos are becoming increasingly frustrated by the lack of bandwidth capacity which has resulted in end users experiencing slow mobile internet speeds as more and more users clamour for broadband access. The MoCI official sees no ‘quick fix’ other than for telcos to merge in order to secure a greater share of the spectrum frequencies that have been assigned to date. In his opinion, industry players in other 2G markets (both GSM and CDMA) have seen consolidation as a simple answer to addressing limited frequency constraints.
Turning to Indonesia’s crowded mobile market, Budi said that: ‘It’s only sufficient for the market to have four operators – three GSM and one CDMA’. However, the domestic mobile landscape is pock-marked by a plethora of GSM and CDMA service providers, each of which is clamouring for their share of precious spectrum. GSM operators include Telkomsel, Indosat, XL Axiata, Axis Indonesia and 3 Indonesia, while CDMA operations are also offered by locally owned firms Bakrie Telecom, TelkomFlexi and Sampoerna Telecommunication Indonesia.
Local industry watchers suggest that as a consequence of frequency shortages in Indonesia, the market – when compared to other countries – has suffered from their being too many small players which has resulted in cut-throat competition, both for customers and for mobile frequencies.
In March 2013 the MoCI awarded additional blocks of 3G mobile spectrum, but only Telkomsel and XL Axiata were successful, leaving the three other applicants empty handed. The process was run as a ‘beauty contest’ and saw Telkomsel, which is 65% owned by Telkom Indonesia, winning spectrum at 1970MHz-1975MHz, while XL Axiata was the runner up with spectrum at 1975MHz-1980MHz. However, since then XL Axiata has said its 3G allocation is ‘insufficient’, prompting it to consider a bid to take control of Axis Indonesia – the fourth biggest player with two blocks of spectrum. If successful in its takeover bid, XL Axiata would leapfrog Indosat to become Indonesia’s second-biggest cellco after Telkomsel.