Smartfren’s CDMA to LTE migration proving costly, but 5.4m now on 4G

15 Jun 2017

Indonesian mobile operator Smartfren Telecom continues to forge ahead with its migration from CDMA to LTE, but the shift is proving both time consuming and costly, IndoTelko reports. TeleGeography notes that the struggling operator booked net losses of IDR1.974 trillion (USD148.6 million) in 2016, wider than the previous year’s negative bottom line of IDR1.565 trillion. In a filing to the Indonesia Stock Exchange (IDX), Smartfren reported revenue of IDR3.630 trillion last year, a significant 20% improvement when compared to IDR3.025 trillion in 2015. Operating (EBIT) losses, however, were also up at IDR1.980 trillion from IDR1.330 trillion as operating costs climbed to IDR5.600 trillion from IDR4.350 trillion. Smartfren attributed the rising losses in part to increased interest expenses of IDR562.23 billion. Moreover, the company’s bottom line continued to take a hit in 1Q17, with net losses spiralling to IDR754.3 billion from IDR265.9 billion in the year-earlier period – again impacted by its efforts to transition away from the older CDMA platform.

Smartfren President Merza Fachys acknowledged the disappointing results and clarified some of the ongoing ‘triggers’ impacting on the firm’s depressed profitability. Specifically, he noted that his firm is finding it heavy going to compete against three major mobile rivals, and pointed to a second factor: the sheer cost of moving so many customers from CDMA to 4G LTE, while trying to maintain an effective CDMA service at 850MHz that is still taken by several million customers and contributes around 35% of the telco’s total revenue. Smartfren closed out 2016 with a total of 11.1 million subscribers, he said, up a net 100,000 year-on-year, and ARPU improved from IDR21,700 in 2015 to IDR28,200 in 2016, fuelled by increased data consumption from LTE users, which accounted for 5.4 million users at end-2016 – a figure Smartfren hopes to boost to ten million by the end of this year.

Indonesia, PT Smart Telecom (Smartfren)