This report provides a comprehensive overview of the trends and developments in telecommunications market in Indonesia and Timor Leste. Subjects covered include:

Key Statistics;
Market and Industry Overviews;
Regulatory Environment;
Major Players (fixed and mobile);
Infrastructure;
Mobile Voice and Data Markets;
Internet, VoIP;
Broadband;
Digital Media.
(Approx number of pages 111)
Researcher - Peter Evans
Current publication date: August 2007 (13th Edition)

Despite the occasional setback, Indonesia, a country of more than 245 million people, continues to see its telecom sector grow. The country has some particularly big challenges to confront in building the necessary telecommunications infrastructure to cover its uniquely complex geography. It must also deal with a range of social, political and economic issues. Having rebounded reasonably well from the Asian economic crisis of the late 1990s, the government has been gradually reshaping the telecom industry. The country is now experiencing healthier growth in both subscriber numbers and in revenues. While Indonesia’s fixed-line teledensity has remained disconcertingly low (less than 7% in early 2007), the recent increase in roll-out of WLL services by PT Telkom and others has boosted the growth rate and provided much-needed service to previously unserved communities. By end-2006, WLL services made up 35% of the total fixed-line subscriber base.

Indonesia’s mobile market has continued to expand at around 50% per annum. By March 2007, the total mobile subscriber base had passed 65 million, up from 12 million subscribers just five years earlier. While the country’s mobile penetration had quickly moved to almost 30%, there was still considerable potential remaining for further growth in this market. Of particular interest coming into 2007, five mobile operators were offering 3G services, having launched networks in 2006. Telkomsel was making a strong impression on the market (2 million 3G subscribers by March 2007), but the other operators had generally got off to a slow start.

The number of Internet users in Indonesia by May 2007 was estimated at 20 million. This represented a low 8% penetration. Broadband Internet access, although certainly on the increase, was still in the very early stages of development, with only one broadband service per 1000 population by end-2006. The government continues to promote wider use of online services, but there is much work to be done in this regard.

In June 2007, a government report indicated that there had been a further sharp rise in foreign investment; the country’s Investment Coordinating Board (BKPM) said foreign direct investment had risen 17% in the first half of 2007. However, the report triggered renewed concerns about the country’s investor-friendliness as it contained a revised list of foreign ownership limits. Although the government claimed that the new set of rules aimed to provide greater clarity regarding the permitted levels of foreign participation in different sectors, the reforms sent a mixed signal to investors regarding the future direction of investment policy. The telecom sector, in particular saw tighter restrictions introduced. Under the new regulations, foreign investors could own up to 65% of mobile (compared with a previous limit of 95%) and 49% of fixed-line operators, also down from 95%. There had been fears of even tighter restrictions, largely as a result of growing nationalist concern at increased Singaporean interests in the local telecoms industry. For the country overview, see chapter 1, page 1.

Timor Leste
In Timor Leste (previously known as East Timor), the political instability and outbreaks of civil unrest that had erupted in 2006, continued into the first half of 2007. Despite the election of a new government led by Nobel Peace Laureate Jose Ramos Horta, opposition to the administration caused further outbreaks of violence and looting. To the outside observer, the country appeared to have got off to a solid start in rebuilding its entire infrastructure following the turbulence that ensued after the referendum of 1999. However, the events of 2006/07 having caused major concerns about the direction of the country; it remained difficult to assess the long term impact of these events on such things as infrastructure building.

In the meantime, one bright spot was that the country’s mobile sector experienced strong growth of over 50% in 2006, with mobile penetration reaching the low, but nonetheless significant, 5% milestone. Fixed-line network expansion was generally languishing coming into 2007, with fixed teledensity still well below 1% for the time being. Although it was difficult to get accurate figures on the Internet market, it was evident that growth in this sector remained constricted.

It is noted that Timor Leste is yet to be listed as a member of the ITU. It has continued to be a difficult task to obtain official statistics for the country’s telecom sector. Where official Statistics are not available, BuddeComm will normally provide an estimate. For the country overview, see chapter 2, page 85.

Key highlights
Indonesia’s mobile market had passed the 65 million subscriber mark by March 2007 and was about to break through the 30% penetration barrier.
After more than six straight years of strong growth, the annual increase in Indonesia’s mobile subscriber numbers was still running at over 50%.
With competition hotting up as foreign players increased their participation, the country’s mobile market saw the launch of 3G services in 2006.
Mobile market leader Telkomsel was making an initial strong impression on the 3G market (2 million subscribers by March 2007); the other operators were off to a relatively slow start.
Internet penetration remained low (8% user penetration by end-2006).
Broadband Internet services were finally starting to pick up, subscriber numbers doubling in 2006; but broadband penetration remained low (0.1% penetration).
The Indonesian Government had once more tightened up on foreign investment in the telecom sector in 2007, a move partly in response to the recent influx of Singaporean capital.
The year 2006 proved very positive for the mobile market in Timor Leste, with growth surging in relative terms by over 50%; penetration gad reached 5% by early 2007.
On the broader scene, however, the ongoing political and civil unrest in the country during the 2006/07 period has been a major distraction for government, resulting in serious disruptions to development programs and infrastructure building.
Mobile, fixed-line, Internet penetration and population in Indonesia and Timor Leste – 2006

Country Mobile penetration Fixed-line penetration Internet* penetration Population (million)
Indonesia 29% 6.4% 0.8% 245
Timor Leste 5% 0.2% 0.1% 1

(Source: BuddeComm) Note: *subscriber penetration.

Note: Coverage provided of Timor Leste’s telecoms market is relatively limited due to its early development stage.

Data in this report is the latest available at the time of preparation and may not be for the current year.

1. INDONESIA
1.1 Key statistics
1.2 Telecommunications market
1.2.1 Overview of Indonesia’s telecom market
1.3 Regulatory environment
1.3.1 Telecommunications Law 2000
1.3.2 Telecommunications Law 1989
1.3.3 Tariffs
1.3.4 Privatisation process
1.4 Fixed network operators in Indonesia
1.4.1 Major players
1.5 Telecommunications infrastructure
1.5.1 National infrastructure
1.5.2 International infrastructure
1.6 Broadband and Internet market
1.6.1 Overview
1.6.2 ISP market
1.6.3 Broadband market
1.6.4 Content and e-services
1.7 Mobile communications
1.7.1 Overview of Indonesia’s mobile market
1.7.2 Mobile technologies
1.7.3 Major mobile operators
1.7.4 Mobile voice services
1.7.5 Mobile data services
1.8 Broadcasting market
1.8.1 Overview
1.8.2 Regulatory environment
1.8.3 Free-to-Air (FTA) TV
1.8.4 Cable and pay TV
1.8.5 Satellite TV
1.9 Forecasts
1.9.1 Notes on scenario forecasts
1.9.2 Forecasts – fixed-line services
1.9.3 Forecasts – Internet services
1.9.4 Forecasts – mobile market
2. TIMOR LESTE
2.1 Key statistics
2.2 Telecommunications market
2.2.1 Overview of Timor Leste’s telecom market
2.3 Regulatory environment
2.3.1 United Nations Transitional Administration in East Timor (UNTAET)
2.3.2 National telecommunications policy
2.3.3 Autoridade Reguladora das Comunicaçóes (ARCOM)
2.4 Fixed network operators in Timor Leste
2.4.1 Telstra
2.4.2 Timor Telecom
2.5 Fixed network voice services
2.5.1 International calls
2.6 Data and Internet market
2.6.1 Overview
2.7 Mobile communications
2.7.1 Overview of Timor Leste’s mobile market
2.8 Broadcasting market
2.8.1 Overview
3. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – Original consortia operating in each geographical zone
Exhibit 2 – Indonesian satellites – 2007
Exhibit 3 – Major FTA television broadcasters, ownership, launch date and coverage




Table 1 – Country statistics Indonesia – 2006
Table 2 – Telecom revenue and investment statistics – 2005
Table 3 – Telephone network statistics – 2006
Table 4 – Internet user statistics – May 2007
Table 5 – Broadband statistics – 2006
Table 6 – Mobile statistics – March 2007
Table 7 – National telecommunications authorities
Table 8 – National network statistics and annual growth – 2005 - 2006
Table 9 – Fixed lines in service and teledensity – 1995 - 2006
Table 10 – Fixed lines subscribers and annual change by operator – 2006
Table 11 – PT Telkom fixed lines in service – 2005 - 2007
Table 12 – Five-year USO plan for villages – 2006 - 2010
Table 13 – Fixed wireless (WLL) subscribers by operator – September 2006
Table 14 – Internet users – 1998 - 2007
Table 15 – Internet subscribers – 1998 - 2006
Table 16 – Registered domain names – January 2005
Table 17 – Number of IPv4 and IPv6 addresses allocated in Indonesia – 1999 - 2006
Table 18 – Broadband subscribers and households - 2006
Table 19 – DSL subscriber growth – 2001 - 2006
Table 20 – Mobile subscribers – 1995 - 2007
Table 21 – Mobile operators, technology, subscribers and annual growth – March 2007
Table 22 – Subscribers and market share by operator – March 2007
Table 23 – Telkomsel subscribers – postpaid, prepaid and market share – 1999 - 2007
Table 24 – Telkomsel postpaid & prepaid ARPU, annual change, subscribers and annual growth – March 2007
Table 25 – Telkomsel subscribers – postpaid and prepaid – 2001 - 2007
Table 26 – Telkom and Indosat prepaid subscribers – 2006
Table 27 – Telkomsel SMS services and annual growth – September 2005
Table 28 – Key broadcasting statistics - 2006
Table 29 – TV households and home satellite antennas – 1997 - 2006
Table 30 – Pay TV subscribers – cable and satellite – 2001 - 2006
Table 31 – Forecast fixed-line growth and penetration – lower forecast – 2006; 2010; 2015
Table 32 – Forecast fixed-line growth and penetration – upper forecast – 2006; 2010; 2015
Table 33 – Forecast Internet subscriber growth and penetration – lower forecast – 2006; 2010; 2015
Table 34 – Forecast Internet subscriber growth and penetration – upper forecast – 2006; 2010; 2015
Table 35 – Forecast mobile growth and penetration – lower forecast – 2006; 2010; 2015
Table 36 – Forecast mobile growth and penetration – upper forecast – 2006; 2010; 2015
Table 37 – Country statistics Timor Leste – 2006
Table 38 – Telephone network statistics – 2006
Table 39 – Internet provider statistics – 2006
Table 40 – Internet user statistics – 2006
Table 41 – Mobile statistics – March 2007
Table 42 – National telecommunications authorities
Table 43 – Fixed lines in service – 1995; 1998 - 2000; 2003 - 2006
Table 44 – Mobile subscribers – 1999 - 2007