Indonesia telecoms market

Indonesia telecoms market

Over the last decade, Indonesia’s telecoms market appears to have successfully navigated the country’s economic and social difficulties and is now on track for sustained growth.


Comprising over 17,000 islands between Asia and Australia, Indonesia presents a unique geographical challenge for telecoms operators but, with a population of around 250 million, it also holds vast opportunity for domestic and international operators alike.


Incumbents PT Telkom and PT Indosat originally dominated the telecoms sector until the government began a restructuring programme in 1994. Privatisation of Indonesia’s telecoms sector commenced with a dual listing of 35% of PT Indosat on the Jakarta and New York stock exchanges. This sale raised $1.4 billion and was to be the first of several stakes sold in both companies.

Today, Indosat is 65% owned by Qtel Asia, with the government maintaining a 14.29% stake, while PT Telkom is 53.24% owned by the government and 46.76% publically owned. Signalling its ambition, the latter filed a bid to acquire Asian submarine cable operator Pacnet earlier this year. However, in June it was reported that the $1 billion bid had been withdrawn, with Telkom CEO, Arif Yahya, reportedly stating that acquiring Pacnet would not bring “added value” to the company.

Indonesia’s mobile market is growing rapidly, having expanded at an annual rate of approximately 20%. Mobile broadband growth appears even more promising increasing at around 25% annually and is expected to be a major focus in the coming years.

After waning in the late 1990s as a result of the regional economic crisis, the mobile market gained traction again in 2000 with subscribers rising from a low of 800,000 to three million by the end of the year. Since then subscriber numbers have grown substantially each year, with 254 million mobile subscribers estimated in March.

In 2007, two new players entered the mobile sector, Hutchison CP Telecommunications (HCPT) and Smart Telecom, which briefly increased the number of active mobile operators in the country to eight. This number later reduced to seven with the 2011 merger of Smart Telecom and Mobile-8, but this has still not been enough to calm fears that the mobile market is becoming oversaturated.

Peter Evans, senior analyst for South East Asia at BuddeComm, however, notes that even the country’s two smallest players are managing healthy growth, suggesting an overall competitive market: “If Indonesia follows the pattern observed in similar developing markets in the region, a growth similar to that of the last three or four years is likely to continue, moving the penetration considerably higher. If this occurs we would probably not see saturation for another five to seven years,” he says.

On the subsea cable front, Indonesia’s international connectivity was improved this year with the completion of the 400km Batam-Dumai-Melaka (BDM) cable system, linking the country and Malaysia. The cable has two routes – Melaka-Batam and Melaka-Dumai – and provides 1.28Tbps of capacity. It will also interconnect with other major cable systems connecting to Europe, the US, Africa and other parts of Asia.

While Indonesia’s underdeveloped telecoms market and large population are an attractive proposition to foreign investors, the instability of the country’s business environment is often not. Corruption and government bureaucracy continue to be factors that deter potential investors, with the risk of political instability also looming in the background.

Global network exchange provider Epsilon operates via two nodes in the country and announced plans to build a data centre with a partner in Jakarta in 2011. The project, however, was subsequently abandoned due to concerns about the quality of the facility. “For all the positives in this growing market opportunity, there are a few challenges to overcome,” says Andreas Hipp, CEO at Epsilon.

“Shareholding restrictions for foreign investors when it comes to the IT sector are one concern, and recruiting the right level of highly skilled and experienced staff another. Licensing can also be a challenge; we’ve also found that it is almost impossible to obtain an international licence, and approval times for simple business licences can take a long time, unless you to go down the route of paying ‘expedite fees’ which is an issue for us,” he continues.

This hasn’t, however, prevented interest in the country. US giant AT&T secured a multimedia service operators licence in Indonesia in 2011 and announced plans to enhance its service portfolio with managed LAN, IP and application services for multinational customers in the country.

This was made possible through an Indonesian government policy, allowing foreign operators to own up to 95% of communications service companies. AT&T owns 95% of a JV with PT Pradipta Danadvaska.

Tier 1 carrier NTT Communications also established a local subsidiary, PT Terasasih Sejahtera, in order to obtain a licence for the building of a fibre-optic network earlier this year. The service allows multinational customers to use high capacity fibre-optic access lines to connect to global offices or global cloud platforms via the company’s nearest PoP.

country information


  Population (July 2012 est.)


  Urban population (of total population, 2010) 

  1,811,569 km2 

  Land area  

  $845.7 billion  

  GDP (2011 est.)



  Indonesian Rupiah


market data