Minister threatens to swing axe at Indonesia’s underperforming carriers

20 Jan 2016

Indonesia’s telecommunications minister Rudiantara has reportedly threatened to rescind the operating concessions of ‘most’ of the country’s ten mobile phone licensees, warning them either to merge or build out their networks to provide mobile internet services. With the domestic mobile market dominated by just three carriers – Telekomunikasi Selular (Telkomsel), Indosat Ooredoo and XL Axiata – Bloomberg quotes the Minister of Communications and Information Technology as warning: ‘Each permit has requirements for the operator to invest and to build, so if they don’t build anything, I can revoke their permit.’ The minister, who has a background in the private sector, having worked at two of Indonesia’s biggest telcos before taking a role in government, added that given his background he is ‘pragmatic’, and ‘will suggest they consolidate to have the capability to invest and retain their permits’. By the end of his term in office, Rudiantara believes that the Indonesian mobile landscape should have consolidated to a maximum four mobile network operators (MNOs), illustrating the government’s frustration at its inability to shake up a market in which the ‘big three’ collectively control around four-fifths of all mobile users, while the seven minnows tussle over the remaining slice of the pie.

The minister points to the fact that a number of underperforming MNOs are failing to satisfy the terms of their licence agreements, despite having previously been hit with fines. ‘So far we’ve handed them fines and penalties, but my job isn’t to accumulate funds for the government,’ he is quoted as saying. ‘I only need to enforce the permits and I’m prepared to do that, but I’d rather take the business-friendly and practical approach and suggest they merge to keep operating.’

In semi-related news, two of the three dominant MNOs, Indosat Ooredoo and XL Axiata, have announced a tie-up to offer 4G LTE network sharing – a first for Indonesia – as part of efforts to expand their reach across the country. The partnership involves the agreement of both parties to share an LTE multi operator radio access network, allowing them to access network equipment, but keep separate distinct infrastructure. The partnership comes after two years of discussions, and involves areas such as Banyumas, Central Java; Surakarta, Central Java; Batam; and Banjarmasin, South Kalimantan, according to a statement published by Indosat Ooredoo. ‘This partnership will expand 4G LTE for both of our customers and it will also support the government’s programme to build Indonesia’s digital economy,’ said Indosat president and CEO Alexander Rusli.