Frustrated Indonesian telecom giants seek mergers
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As a plan looms for publicly-listed telecom operator PT XL Axiata to acquire smaller rival PT Axis Telekom Indonesia, the mobile-phone industry is bracing for more mergers as the limited frequency spectrum impedes the sector from expanding.
The frequency limitation has seen five operators unable to improve slow mobile Internet and disrupted calls, amid a high demand for access.
Muhammad Budi Setiawan, the Communications and Information Ministry’s postal and information infrastructure chief, said there would be no quick fix other than to have mobile operators merge soa as to get a greater share of the frequency spectrum.
“Regulators and industry players in GSM [global system for mobile communications] and CDMA [code division multiple access] have always looked for consolidation due to limited frequency,” said Budi.
“It’s only sufficient for the market to have four operators – three GSM and one CDMA,” he said.
Indonesia’s five GSM operators are PT Telkomsel, a subsidiary of state-run PT Telkom; PT Indosat, controlled by Qatar Telecom Pte Ltd; XL Axiata, controlled by Malaysia’s Axiata Group; Axis, controlled by Saudi Telecom Company (STC); and PT Hutchison 3 Indonesia, controlled by Hong Kong-based Hutchison Whampoa Ltd.
The CDMA includes all locally owned companies – PT Bakrie Telecom, PT Telkomflexi and PT Sampoerna Telecommunication Indonesia.
Amid the frequency shortages, industry players have often pointed out that the market, compared to other countries, has suffered from a glut of operators serving 240 million people, in which more than half already subscribe to mobile devices.
This has incited cut-throat competition, both for subscribers and for frequencies.
The government has only allocated a small spectrum for mobile operators while the largest chunk is for radio and television networks.
Earlier this year, the government auctioned additional blocks for third-generation (3G) mobile networks.
Around five operators joined the bidding, but only Telkomsel and XL Axiata managed to secure the blocks.
However, XL Axiata president commissioner Tan Sri Dato Muhammad Radzi bin Haji Mansor said the additional frequency his firm had obtained was “insufficient”.
“If you are going to expand your business, you need more spectrum,” he said, adding that the lingering question was access.
XL Axiata, the country’s third-biggest operator with five frequency blocks, is looking to acquire Axis, which is the fourth biggest with two blocks.
Should the acquisition materialise, XL Axiata will become the second-biggest operator after Telkomsel.
“We are still studying whether the consolidation has the potential to bring about a monopoly of frequency,” said Ministry spokesman Gatot S Dewa Broto, adding that operators were barred from handing over their licences to another operator.
While the regulator is calling for the consolidation, Telkomsel president director Alex Sinaga said his company would only venture into acquisitions or mergers if the potential partner had “equal network coverage and capacity”.
“This is to ensure fairness for both sides,” he said.
