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Fixed line telecommunications industry in Indonesia.

Current Issue

From 1961 until several years ago, operation of telecommunication service in Indonesia was monopolized by state companies because of its strategic role in controlling flows of information and communications.

However, with the changing condition in the country especially in economy and fast growing information industry in the world, demand for telecommunication service is stronger that the state companies alone could not keep pace with the demand.

In 1989, when a new law on telecommunications No. 3/1989 was made effective replacing the Law No. 5/1964, the condition was wide open for the private sector to play important role in the telecommunication service.

Currently telecommunication industry in Indonesia has become part of global industry as the service is not only controlled by the Indonesian private sector but also foreign investors. In fact foreign investors have almost dominated telecommunication industry in Indonesia. Some have even seen that monopoly has been in the hand of foreign investors.

Foreign control of the majority stake in major telecommunications companies in the country especially in mobile telecommunication service has triggered pros and cons because of the strategic role of the industry in controlling flows of information. Many fear that country could not safely guarantee its sovereignty if it does not fully control the flow of information.

Meanwhile the expansion of fixed wire line telephone networks has been sluggish with the declining demand for that service. The sluggish growth has drawn criticism from the House of Representatives against PT Telkom. The legislators have questioned the seriousness of state company in expanding the networks of fixed wire line, which is still dominated by the country's largest telecommunications company.

A higher level of technology to increase the capacity of fixed wire line will be needed as it has been far left behind by fixed wireless telephone. The facility of fixed wireless telephone is easily available. The procedure is much simpler than the procedure to secure fixed cable telephone facility. Fixed wire line, however, is still vital for the business and household sectors.

Characteristics of telecommunication industry

Telecommunications industry is very global in nature both geographically, and in products and uses that development of the industry in any part of the world will have its effect on global economic development Expansion of telecommunication industry is not restricted by any borders between countries as it requires international integration.

In Indonesia, telecommunication is also a vital industry in boosting economic development, not only because of the material value of the industry but more by the service value or its role in facilitating development of other industrial sectors. The Indonesian government has continued to update its regulation on telecommunication industry to adjust to the conditions of the fast growing industry.

Infrastructure

With the fast expansion of telecommunication service both fixed and cellular services large capacity and integrated backbone networks become vital to guarantee high quality, safe and economical communications. In addition, development of main networks/backbone could support the program to create equitable distribution of economic development in areas so far left behind such as eastern part of the country.

Currently, the main telecommunication networks in Indonesia consist of transmission system of terrestrial micro waves, optic cable, submarine cables and satellite transmission connecting trunk call centrals, which constitute secondary and tertiary telephone centrals in Indonesia. See the following table.

Structure of telecommunications service

The structure of telecommunication service in Indonesia is formed by development of products and demand for telecommunication service to follow development of technology in the world.

Cellular telecommunications are needed more than fixed telephone service because of the high mobility. In addition, telecommunication equipment is used not only for voice communications but also visual communications.

Telecommunication service of fixed telephone

Fixed telecommunication services in Indonesia include fixed wire line telephone and fixed wireless telephone.

Telkom is the largest operator of cable fixed telephones. Other operator PT Batam Bintan Telecom provides only limited telecommunication service for the islands of Batam and Bintan in the special economic zone.

After the implementation of the telecommunication law on Sept. 8, 2000 abolishing monopoly in the telecommunication industry in Indonesia, liberalization began in local fixed telephone marked with granting of fixed wireless telephone license to a number of operators including Indosat in 2002 and Bakrie Telecom in 2004.

Products of fixed wireless telephone include Flexi of Telkom, Esia of Bakrie Telecom and Star One of Indosat.

Capacity of telecommunication service industry

The capacity of telecommunication service is reflected in a number of factors which show the expansion of the industry as such as:

1. Installed line

2. line in services

3. Subscribers

Installed lines

Installed line is complete line fully built to the distribution point and ready to be connected with subscribers.

Installed lines in Indonesia began to grow significantly in 2004 when the lines rose in number to 11,912,708 units from 9,558,752 units in 2003. In the following years the increase was sharp marked with the expansion of fixed wireless telephone service in Indonesia.

Line in services

Line in service is a line that already turns out earning connected with subscribers not including cellular phone subscribers.

Line in service has continued to grow sharply in number from year to year. In 2002, the number of lines in service totaled 8,400,662 units, up again to 9,558,752 units in 2003 and to 15,717,300 units in 2006.

Number of fixed line subscribers

The number of fixed lines in Indonesia is still dominated by fixed wire line telephone although fixed wireless telephone is growing faster.

In 2004, the number of new fixed wire line telephone was 345,022 line units or an increase of 4.2% from the previous year.

In 2005 and 2006, the number of new fixed lines declined. In 2005, there were only 126,781 new lines or an increase of only 1.5% and in 2006, the number of new lines was 23,080 units or an increase of only 0.3%.

The sluggish growth of new fixed wire lines came with fast growing interest in fixed wireless telephones. The number of fixed wireless telephones grew fast since 2004 with the operation of Telkom's Flexi, Indosat's StarOne and Bakrier's Esia based on CDMA.

Value of the sales of fixed line services

The value of fixed lines services has continued to increase despite a decline in the sales value of fixed cable telephone service. The increase is attributable to fast growth of demand for fixed wireless telephone services.

In 2004, sales of fixed wireless telephone services were valued at Rp 385.029 billion but the value leapfrogged in the following years to reach Rp 949.255 billion in 2005 and to Rp 2.037 trillion in 2006.

Meanwhile sales of fixed cable telephone service fell from year to year as shown in the following table.

Operators and owners

Telkom is a publicly listed company with investing public holding part of its shares. However, the majority or 51.19% of its shares are still controlled by the government.

Indosat, which was formerly partly owned by Telkom is now the biggest rival of the state-owned company. Telkom quit as shareholder of Indosat in compliance with the government regulation banning monopoly. Currently the government owns 14.38% of Indosat and Singapore Technologies Telemedia owns 41.60% and the public 44.56%.

Bakrie Telecom is another competitor in fixed wireless telephone business. It is the only one without government stake as it was established when the liberalization policy has come into effect.

PT Bakrie & Brothers Tbk is the majority shareholder of Bakrie Telecom, holding 50.25% its shares with CMA Fund Management Ltd having 15.08%, PT Bakrie Communications 3.17 % and Richweb Investments Ltd 2.08% and the public 29.42%.

Fixed wire line service industry

Demand for fixed cable telephone has declined partly because it is easier to secure the facility for fixed wireless telephone. In addition the pulse tariff is the same between fixed wire line and fixed wireless telephones.

Also, Telkom as the largest operator of fixed telecommunication service now focuses more on promoting the use of its fixed wireless telephone products as investment in fixed wire line is still more expensive--around US$ 600-US$ 700 per line unit as against US$ 150-US$ 200 per line unit of fixed wireless telephone. In addition the time needed to install fixed wireless telephone infrastructure is much shorter.

Operation of Telecommunication Service through joint operation (KSO) scheme

When PT Telkom still held the monopoly in fixed telecommunication service, it offered joint operation (KSO) scheme to attract investors. KSO was at that time the only way for the private sector getting involved in fixed telecommunication service industry in Indonesia.

When the monetary crisis jolted the country in 1997/1998, many KSO projects were shelved or suspended. When the deregulation was launched on telecommunication service sector, the system was no longer used but projects already started were continued.

Among the KSO scheme still effective is held by PT Bukaka Sing Tel International to build fixed lines in eastern part of the country. A number of other KSO projects have been taken over by Telkom because of dispute in the implementation with the contractors.

On Oct. 19, 2006, Telkom revised the agreement with Bukaka Singtel International (BSI), on the KSO contract to build fixed lines in Regional VII. Under the new KSO agreement, Telkom make decision on finance and business and has the right based on policy and cost to build new telecommunication facility in that region.

Fixed wireless telephone service industry

Operators of fixed wireless telephone services

The country has three operators of fixed wireless telephone service--Telkom, Indosat and Bakrie Telecom. The three operators use Code Division Multiple Access (CDMA) 2000 1x technology for fixed wireless telephone service.

CDMA 2000 1x is a technology of broadband wide spectrum networks using compression technique and data package technology which is more efficient than GSM technology.

The advantage allows the operators using CDMA technology to keep lower operating costs.

Telecommunications networks of fixed wireless telephone

Fixed wireless telephone uses integrated telecommunication networks allowing connection with other communication sets.

First connection with signals sent by telephone is received by BTS which has transmitter and receiver. The signal is received and then transmitted to mobile switching centre (MSC) to be sent to the base station controller (BSC) and then to telephone central.

The number of BTS units and other telecommunication equipment will determine the coverage of the telecommunication system.

Telkom has the largest telecommunication networks compared to those of Indosat and Bakrie.

Number of fixed wireless telephone subscribers

Then number of fixed wireless telephone subscribers grew fast from 1,673,781 in 2004 to 4,819,762 in 2005. Pre-paid Telkom Flexi contributed 3,241,000 subscribers to the total number in 2005, up from 745,000 in the previous year. In 2006, the number of Telkom Flexi subscribers grew further but not as fast as in 2005, but in the same year, pre-paid Esia subscribers increased considerably to 1,414,920 from 351,826 in 2005.

Bakrie Telecom seeks to attract attention of subscribers to the length of time of conversation as the yardstick for saving pulse where it has an advantage over its rivals.

Bakrie Telecom has an opportunity to attract more subscribers in the coming years as by December, 2006 it received the license to expand its coverage nationwide. Previously it had coverage limited only to Jakarta, West Java and Banten.

Telecommunications Regulations

The government regulates and control the operation of telecommunication service industry. The legal basis for the regulation and control include the telecommunication law, government regulation and ministerial decisions issued from time to time.

Telecommunications Law

The Telecommunications Law No. 36 in 1999 is the main guideline in the reformation of telecommunication service industry in Indonesia, on which government regulations, ministerial decisions and decisions of the post and telecommunication director general on telecommunication service industry are based.

The Telecommunications Law annulled the concept of executive body ending the monopoly in the operation of long distance call service (SLJJ) held by PT Telkom and International direct dial (SLI) service held by Indosat.

The abolition of the executive body, the telecommunications law divides telecommunication service providers into three categories:

1. Telecommunications network providers

2. Telecommunication service providers

3. Special telecommunications providers

Providers of telecommunications networks are licensed to own and or operate telecommunications networks.

Providers of telecommunications service are licensed to provider service by leasing network capacity from networks providers.

Providers of special telecommunications service are licensed to provide private telecommunication service for purpose related to broadcasting and national security interest.

Telecommunication Regulatory Body (BRTI)

Based on a decision of the communication and information minister No. 25/2005, BRTI is the executive agency for the telecommunication law having the authority to monitor and control the operation of the telecommunication sector. BRTI is made up of officials of the directorate general of post and telecommunications and the Telecommunication Regulatory Committee.

Universal Service Obligation (USO)

Base don the Telecommunications Law, all operators of telecommunications networks and service providers are bound by USO requiring them to contribute to providing universal telecommunications facility and infrastructure or other forms of compensation.

On September 3, 2003, the post and telecommunication director general issued a statement that telecommunications operators in Indonesia are required to contribute 0.75% of their gross income to development of USO.

On March 11, 2004, the communications minister issued a decision No.34/2004 saying USO facility must meet the minimum requirements that:

1. Facility must meet the basic telephone standards including facsimile and internet services.

2. Facility must provide public basic telephony services with access to domestic long distance, international and mobile telephone services.

3. Facility must provide telecommunications services that could transmit and receive data.

4. Facility must be able to be accessed for emergency services.

5. Facility must use equipment certified by the post and telecommunication directorate general.

On September 30, 2005, the communications and information minister issued a regulation No. 15/2005 determining the USO contribution at 0.75% of gross income to be paid quarterly or twice a year or annually not later than March 31 in the following year.

In September, 2007, it was planned to start construction of USO facility in 11 blocks in 18,000 villages throughout Indonesia with 27,713 line units.

Based on the plan of the post and telecommunications directorate general development of telecommunications in rural areas with the USO program USO will be expanded every year.

Marketing aspect

Tariff competition

Tariff of fixed cable telephone line unit

The tariffs imposed on fixed cable telephone subscribers include monthly subscription fee and usage cost.

Telkom sets the same tariff for local telephone, both for a distance of 0-20 km and for a distance of more than 20 km, but the tariffs are different by the pulse duration. For a distance of 0-20 km during non busy hours the pulse duration is 3 minutes and in busy hours the pulse duration is 2 minutes.

Similarly the pulse duration is 2 minutes for longer distance during non busy hour but only 1.5 minutes during busy hours.

Paid up Tariff of fixed wireless telephone

The number of fixed wireless telephone subscribers has continued to increase in the past several years encouraging operators to improve their competitiveness to take advantage of the growing marketing. New consumers tend to choose wireless than cable fixed telephones as one can secure wireless facility in a much simpler way while the pulse cost and features are almost the same. Both can be used for facsimile and internet services, etc.

The post paid tariffs of fixed wireless telephone are tightly competitive at present. The lowest tariff for local service is Rp 19 per minute by Star One.

The tariff for domestic long distance calls among flexi users is much higher than rival brands namely Rp 900 per minute as against Star One's Rp16 per minute and Esia's Rp 50 per minutes for among the brand users respectively.

In the tariff for connection to Public switch telephone network (PTSN) or other operators, Flexi is the lowest at Rp 150 per minute as against Star One's Rp 260 and Esia's Rp 250 per minute. Each operator sets relatively the same tariff for connection to cellular phones. See the following table.

Pre-paid tariff of fixed wireless telephone

The pre-paid tariff and the post tariff of fixed wireless telephone are almost the same. Difference is only found in certain services.

Esia sets different tariffs for post and pre paid service among its subscribers for local calls. The post-paid tariff set by Esia for long distance call is around Rp50 per minute and the prepaid tariff is around Rp250-Rp1,000 per minute. However, in general the pre-paid tariff of Esia is the same as its post paid tariff.

Similarly, Star One sets almost the same tariff for both pre-paid and post paid services.

Flexi sets almost the same tariff as set by Asia such as for local calls and long distance calls, local service to PTSN and local cellular service.

Tariff SLI (international call)

After receiving commercial license to provide SLI service on May 13, 2004, Telkom began to provide SLI service on June 7, 2004. The SLI tariff is set by the provider on maximum limit set by the government.

Telkom divides operation areas in the world into six as reference in setting SLI tariff namely Africa, American and Caribbean countries, Asia and Oceania, Europe and Middle East.

Meanwhile, Indosat puts certain countries into seven groups with different SLI tariffs including Austria, Belgium, China, Denmark, France, Germane, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland as group with the highest SLI tariff of Rp12,840 per minutes.

Brunei and Macao belong to group set by Indosat with the lowest SLI tariff of Rp 5,880 per minutes.

Bakrie Telecom with its Esia began to introduce SLI service in February, 2005 with low introductory tariff of Rp888 per minute, for certain countries in Europe, Asia and America.

Early March, 2005, a program of very low tariff of SLI 1188, was offered with a tariff of Rp 1,188 per minute effective from March to December, 2005.

Currently the Esia's SLI tariff is Rp 1,500 per minute for almost all countries of destination in the country.

Features Competition

Feature technology in fixed wireless telephone has grown fast. The latest feature introduced by producers of fixed wireless telephones is internet connection facility that has succeeded in attracting subscribers making mobile fixed wireless telephone service gain in competition facing fixed cable telephone service.

Income from fixed wireless telephone service increasing

A strong growth has been recorded from year to year for fixed wireless telephone both in the number of subscribers and income.

Income from fixed wireless telephone service industry in 2005 shot up 146.5% from Rp 385.029 billion in 2004 to Rp 949.255 billion. In 2006, the income surged again by 109% to Rp 2.037.661 billion.

Flexi of PT Telkom contributed the largest portion to the total income from fixed wireless telephone services. Flex contributed Rp 1,058.4 billion in 2006. Esia of the Bakrie Telecom grew fast. Esia with 1,547,557 subscribers contributed Rp829.361 billion in the same year.

Star One of Indosat also showed significant increase in the number of its subscribers and contribution to the total income from fixed wireless telephone services.

Average Revenue Per User (ARPU)

ARPU, which is the average revenue from each users of telephone in certain period, serves as indicator in evaluating development of productivity of the users of telecommunications service.

ARPU from fixed wireless telephone service is calculated by dividing total income from the subscribers in certain period by the average number of subscribers in the same period not including income from cellular phone service, income in connection fee and interconnection fee and from international roaming.

In 2006, ARPU of large operator Flexi rose from Rp 123,000 in 2005 to Rp 135,000 in 2006 for post paid service. Pre paid ARPU grew but not as fast as post paid service as many pre paid subscriber of Flexi use their telephone only for co-subscribers of Flexi and for SMS service.

The increase in ARPU income is faster than the increase in the number of ARPU subscribers that the ratio of income to number of subscribers increased resulting in an increase in ARPU.

On the contrary, Esia's ARPU has declined with the fast growth of the number of its subscribers and an increase in calla among its subscribers.

Expansion and new investment

Operators of fixed line services have increased investment to expand their capacity.

Telkom made new investment in December, 2006 to increase its backbone capacity in several areas, expand its optic fiber networks and internet protocol (IP) based networks, etc.

Indosat carried out expansion of Star One networks in 18 cities in Indonesia in 2007 such as in Lhokseumawe, Gorontalo, Brastagi, Manado, Salatiga, Tegal, Kudus, Boyolali Klaten and Bandung.

With the completion of the process of migration of the frequency of Star One from 1.900 Nhz to 800 Mhz in mid 2007 and addition of service access and the settlement of problem in interconnections with Telkom, Indosat targets to chalk up an increase of 600,000 in the number of its subscribers this year.

Meanwhile, Bakrie Telecom carried out expansion of its Esia networks in 17 cities in Indonesia with a target to have 3.6 million subscribers in 2007. Bakrie Telecom used a five-year loan of US$ 145 million from a foreign syndicate of financers.

Migration of frequency of fixed wireless telephones to be effective as from Dec. 31, 2007

Based on a regulation of the minister of communications and information No. 01/PER/M.Kominfo/1/2006 on January 13, 2006, all fixed wireless telephone service providers are operated only to use the frequency of 800 Mhz, as the frequency of 1.900 Mhz, which was previously used by all providers of fixed wireless telephone services will be used for 3G networks.

Migration of frequency was ruled by the government to meet the international standard of he industry and in line with a recommendation of the International Telecommunications Union-Radio Communication Sector(ITU-R).

As a result of the migration, all operators of fixed wireless telephone service have to make adjustments and expand networks and make registration of subscribers and some of their subscribers use single frequency handsets.

Telkom is now preparing development of new networks and replacement of around 400,000 Flexi handsets for subscribers in Jakarta, Banten and West Java which use handsets with frequency of 1.900 Mhz, as on Dec. 31, 2007 there will be cut off in Flexi service in 1.900 Mhz.

Meanwhile, Indosat is still studying option for the migration of the frequency by using BTS CDMA networks of other operators or by replacing radio frequency in existing Base Transceiver Station (BTS).

Prospects and Conclusion

* Infrastructure networks constitute important factor determining the smoothness of development of installed line units, paid connection and increase in the number of subscribers.

* The number of fixed wire line telephone subscribers has tended to remain stagnant because of tight competition especially facing fixed wireless telephone, which has growing capacity in voice and data and internet communications. In addition, it is much easier to secure the facility of fixed wireless telephone not to mention in mobility, which fixed cable telephone could not match.

* The prospects of expanding telecommunications industry in Indonesia have attracted foreign investors. Apart from the fact that the market potential is still widely open or the largest in this region, the characteristics of consumers in Indonesia, which tend to follow new technology, has become a major factor for foreign investors to do business in this sector in Indonesia.

* The fact that foreign investors have gained domination of business in telecommunications service in the country also indicate the industry has great attraction.

* Liberalization by the Indonesian government ending monopoly of the industry by the government has accelerated development of fixed wireless telephone service industry because of the need for cheap and mobile with complete features that could be met by fixed wireless telephone.

* The prospects of fixed wireless telephone service are still encouraging as the number of its subscribers is still much smaller than the subscribers of cellular phone service. Fixed wireless telephone service is expected to gain in competition facing cellular phone service in the future.
Table-1

Telecommunication infrastructure in Indonesia

Infrastructure Description

Main transmission Constitutes networks providing connection
networks (backbone) between one long distance telephone
 central (secondary and tertiary centrals)
 and another through:

 --Terrestrial microwave transmission

 --Optic fiber cable transmission

 --Submarine cable transmission

 --Satellite transmission

Networks of fixe wire line Networks of subscriber's equipment to
telephone local telephone central through
 connecting equipment (outside plant)

Networks of fixed Networks, which provide connection between
wireless telephone subscribers' equipment and local telephone
 central through Base transceiver
 station(BTS), and then through Mobile
 switching centre (MSC) connected to Base
 station sub system(BSS), and finally to
 telephone central.

Networks Networks, which provide connection between
telephone mobile handset and telephone central using
 integrated dual band (single integrated
 dual band network), which consists of

 --Base transceiver station (BTS)

 --Digital switch centre (DSC)

 --Transmission connecting DSC with base
 station controller and telephone central

Networks Networks which transports data for use in
Internet internet dial up service, broad tape,
Source: VoIP and Virtual private network (VPN)

Source: Telkom/Indosat

Table-2

Structure of telecommunication service in Indonesia

Types of Types of service/
Telecommu- telecommunications
nications technology Operator

Fixed line Fixed wire line (local) Telkom
telephone Batam Bintan
 Telecom

 Fixed wireless (local) Telkom
 Indosat
 Bakrie Telecom

 SLJJ (Long distance call) Telkom
 Indosat

 SLI (International call) Telkom
 Indosat

 VoIP Telkom

 Indosat
 Excelcomindo,
 Atlasat, Gaharu,
 Satria wijaya prima

Cellular GSM Telkomsel
telephone
 Indosat
 Excelcomindo

 Natrindo
 Hutchison

 CDMA Mobile 8
 Indoprima
 Sampoerna Telkom.

 3 G Telkomsel
 Indosat
 Excelcomindo
 Natrindo
 Hutchison

Data and Domestic & international leased circuit
Internet Domestic & International frame relay (ATM)
 VSAT
 Whole sale internet access
 IP-VPN
 Dial up Internet
 WI-fi & hot spot

Network & Leasing of transponder
Interconnect Satellite Broadcast
ions Satellite based leased line
 Terminal based leased line

Types of Types of service/
Telecommu- telecommunications
nications technology Product

Fixed line Fixed wire line (local) Local telephone
telephone Local telephone

 Fixed wireless (local) Telkom Flexi
 Star One
 Esia

 SLJJ (Long distance call)

 SLI (International call) TIC 007
 SLI 001,SLI 008

 VoIP Telkom Global 017,
 Telkom Save
 Global Save

Cellular GSM Simpati, Hallo,
telephone kartu As
 Matrix, Mentari, IM3
 XL Bebas, Jempol,
 Xplore

 Solusi (local)
 3 (Three)

 CDMA Fren
 Primasel
 Ceria, Neon

 3 G

Data and Domestic & international Operator: Telkom,
Internet leased circuit Indosat
 Domestic & International
 frame relay (ATM)
 VSAT
 Whole sale internet
 access
 IP-VPN
 Dial up Internet
 WI-fi & hot spot

Network & Leasing of transponder Operator: Telkom,
Interconnect Satellite Broadcast Indosat
ions Satellite based leased
 line
 Terminal based leased
 line

Source: Telkom, Indosat

Table-3

Types of service and operators of fixed telecommunication service

Types of services Operator

Fixed wire line Telkom
 Batam Bintan Telecom

Fixed wireless Telkom
 Indosat
 Bakrie Telecom

Source: Data Consult

Table-4

Development of installed capacity and line in services
of fixed lines in Indonesia, 2002-2006
(line unit)

Year Installed capacity

2002 8,400,662
2003 9,558,752
2004 11,912,708
2005 13,927,369
2006 15,717,300

Source: Telkom/Indosat/Data Consult

Table-5

Number of lines in service, 2002-2006

(line units)

Year Lines in service

2002 7,750,035
2003 8,479,115
2004 10,233,464
2005 13,505,760
2006 14,703,621

Source: Telkom, Indosat, Bakrie

Table-6

Number of subscribers of fixed telephones, 2003-2006

(Line units)

Year 2003 2004 2005 2006

Fixed wire line 8,214,328 8,559,350 8,686,131 8,709,211
telephone
(line units)

Growth (%) -- 4.2% 1.5% 0.3%

Fixed wireless 0,264,787 1,673,781 4,819,762 6,082,537
telephone

Growth (%) -- 532% 315% 9.5%

Total fixed 8,479,115 10,233,131 13,505,893 14,791,748
telephone

Growth (%) -- 20.7% 31.9% 9.5%

Source: Telkom

Table-7

Sales of fixed line services, 2004-2006

(Rp million)

Revenues 2004 2005 2006

Fixed wire line telephone 10,546,400 10,271,300 9,920,600
Fixed wireless telephone 0,385,029 0,949,255 2,037,661
Total 10,931,429 11,220,555 11,958,261

Source: Telkom, Indosat, Bakrie Telecom

Table-7

Operators of fixed telephone and shareholders

Operator Shareholders Shares

Telkom Indonesian government 51.19%
 Investing public 48.81%
 Foreign; PMCB US
 Resident
 8.71%
 The Bank Of New York 7.83%
 Other 29.45%
 Indonesian 3.27%

Indosat Indonesian government 14.38%
 Singapore Technologies 41.60%
 Telemedia
 Public 44.56%

Bakrie PT Bakrie & Brother 50.25%
 CMA Fund Management Ltd 15.08%
 PT Bakrie Communications 3.17%
 Richweb Investment Ltd 2.08%
 Public 29.42%

Source: Telkom/Indosat

Table-8

KSO projects in several regional areas

Regional Operator/ Status
division Operational coverage KSO partners KSO

I Aceh, North Sumatra, PT Pramindo Ikat Taken
 West Sumatra, Riau, Nusantara over in
 Jambi, South Sumatra, Consortium 2001
 Bengkulu, Lampung

II Jakarta, Bogor, Tangerang, Telkom --
 Bekasi, Serang, Purwakarta

III West Java, Banten PT Aria West Taken over
 International in 2003

IV Central Java, PT Mitra Taken over
 DI. Yogyakarta Globaltele- by Telkom
 communications

V East Java Telkom --

VI West Kalimantan, Central PT Daya Taken over
 Kalimantan, East Mitratele- in 2002
 Kalimantan, South communications
 Kalimantan

VII North Sulawesi, Central PT Bukaka Singtel Revision of
 Sulawesi, South Sulawesi, agreement
 Southeast Sulawesi, Bali, in 2006
 West Nusa Tenggara, East
 Nusa Tenggara Maluku,
 Papua

Source: Telkom

Table-9

Operators of fixed wireless telephone services

Operators Systems License Products

Telkom CDMA 2000 1x Local /limited Flexi
Indosat CDMA 2000 1x Local /limited Star One
Bakrie Telecom CDMA 2000 1x Local /limited Esia

Source: Telkom/Indosat/Bakrie

Table-10

Telecommunication networks of fixed wireless
telephone operators, 2006
 (units)
 Bakrie
Telecommunications networks Telkom Indosat Telecom

Base Transceiver Stations (BTS) 1,531 1,018 408
Base Station Controllers(BSC) 38 26 10
Mobile Switching Centre (MSC) 19 8 6

Source: Telkom/Indosat/Bakrie

Table-11

Number of fixed wireless telephone subscribers, 2004-2006

(units)

Users/subscribers 2004 2005 2006

Telkom-Flexi
Classy Post-paid 654,000 727,000 698,000
Trendy Pre-paid 745,000 3,241,000 3,382,000
Flexi Home Post-paid 30,000 94,000 96,000
 Subtotal 1,429,000 4,062,000 4,176,000
Bakrie-Esia Post-paid 9,350 20,303 64,278
 Pre-paid 61,689 351,826 1,414,920

Bakrie-Ratelindo Regular and 120,990 114,475 68,359
 telecom. service
 outlet

Indosat-Star One Subtotal 192,029 486,604 1,547,557
 Post-paid 11,898 19,708 20,545
 Pre-paid 40,854 251,450 338,435
 Subtotal 52,752 271,158 358,980
 TOTAL 1,673,781 4,819,762 6,082,537

Source: Telkom/Indosat/Bakrie Telecom

Table-12

Plan for development of rural telephone with USO facility

 Number of
Year villages Number of line units

2007 18,000 27,713
2008 10,100 27,515
2009 11,583 28,998
2010 2,235 2,235
Total 44,809 114,766

Source: Post and Telecommunications Directorate general

Table-13

Fixed cable telephone tariffs effective since April 1, 2004

 Cost of installation and monthly bill

Access cost Business (Rp) Household (Rp Social (Rp)

Installation 175,000-450,000 75,000-295,000 50,000-205,000
Monthly 38,400-57,600 20,600-32,600 12,500-18,500
subscribers

 Price per
 Usage cost pulse (Rp) Pulse duration

 Up to 20km 250 3 minutes(non
 (local) busy hours) and
 2 minutes (during
 busy hours)

More than 20km 250 2 minutes (non
 busy hours) and
 1.5 minutes (in
 busy hours)

Domestic long Price per Rounding of time
distance minute (Rp) of block duration

0-20 km 83-122 1 minute
20-30 km 122-163 1 minute
30-200 km 325-1,290 6 seconds
200-500 km 460-1,815 6 seconds
More than 500 km 570-2,270 6 seconds

Source: Telkom

Table-14

Post paid tariff of fixed wireless telephone effective since 2004

Types of telephone
services Tariff per 60 second (Rp)

 Flexi Star One Esia

Connections to
subscribers of the
same brand

Local 49 19 50
Domestic long distance
0-200 km 900 Within island16.65 50
200-500 km 900 Inter island 33.32 50

PTSN/FWA

Local 150 260 250
Domestic long distance
0-200 km 900 1,000-1,500 636-1,000
200-500 km 1,500 1,300-2,100 1,091-2,091

Connection to
cellular phone

Local 550 398-750 6.36
Domestic long distance
0-200 km 800-1,600 1,500-1,600 1,182-1,727
200-500 km 1,250-2,500 1,500-2,500 1,818-2,545

Source: Telkom, Indosat, Bakrie Telecom

Note: PSTN: Public switch telephone network

FWA: Fixed wireless access

Table-15

Tariffs of pre-paid fixed wireless telephone

Type of telephone
services Tariff per 60 second (Rp)

 Flexi Star One Esia

Connection to
subscribers of
the same brand

Local 49 16.65 50
Domestic long
distance
0-200 km 900 299 250
200-500 km 900 909-1,000

PTSN/FWA

Local 250 100 250
Domestic long
distance
0-200 km 1,400 500-750 909-1,000
200-500 km 2,400 650-1,050 1,364-2,273

Cellular telephone

Local 800 199 (Indosat), 800
 375 (other
 operators)
Domestic long
distance
0-200 km 1,200-1,900 749 (Indosat) 1,364-1,545
 550-800(other
 operators

200-500 km 2,200-3,300 750-1,250 (other 1,818-2,727
 operators)

Source: Telkom, Indosat, Bakrie

Note: PSTN = Public switch telephone network

FWA = Fixed wireless access

Table-16

SLI tariff of Telkom and Indosat

Operators Areas Tariff/minute (Rp)

Telkom Africa 5,090-6,440
 America and Caribbean countries 5,090-7,470
 Asia and Oceania 4,410-9,630
 Europe 5,090-9,630
 Middle East 5,090-8,460

Source: Telkom

Table-17

SLI tariff of Indosat by areas

 Tariff/minute
Operator Area (Rp)

Indosat Austria, Belgium, China, Denmark, France, 12,840
 Germany, The Netherlands, Norway, Spain,
 Sweden, Switzerland,

 India, Japan, Saudi Arabia, United Arab 11,280
 Emirates, Britain,

 Australia, Canada, Hong Kong, New Zealand, 9,960
 South Korea, Taiwan, America

 Finland, Ireland, 8,580

 Pakistan, The Philippines, Thailand 7,500

 Argentina, Egypt, Malaysia, Singapore, 6,780
 South Africa

 Brunei, Macao 5,880

Source: Indosat

Table-18

Features of fixed wireless telephone

Features Flexi Star One Esia

Call forwarding * * *
Calling line identification * * --
 presentation (CLIP)
Voice mail box * * *
Call waiting * * *
Do not disturb * * --
Call barring * * --
Call hold * -- --
Call transfer * * --
Three party * * --
Call conference * * --
Ring back tone * * *
WAP * * *

Source: Flexi, Star One, Esia

Table-19

Number of subscribers and fixed wireless telephone service income,
2004-2006

 Description 2004

Telkom Flexi Number of subscribers line unit) 1,429,000
 Amount of income (Rp million) 98.600

Indosat Number of subscribers (line unit) 52,752
Star One Amount of income (Rp million) 11.400

Bakrie Telecom Number of subscribers (line unit) 192,029
Esia Amount of income (Rp million) 275,029

Total Subscribers (line units) 1,673,781
 Income (Rp million) 385.029

 2005 2006

Telkom Flexi 4,062,000 4,176,000
 509.900 1.058.400

Indosat 271,158 358,980
Star One 70.300 149.900

Bakrie Telecom 486,604 1,547,557
Esia 369,055 829,361

Total 4,819,762 6,082,537
 949.255 2.037.661

Source Telkom, Indosat, Bakrie Telecom

Table-20

ARPU of operators of fixed wireless telephone in, 2005-2006

(Rp)

Operator 2005 2006

Flexi
Post paid 123,000 135,000
Pre paid 19,000 35,000

Esia
Post paid 158,530 145,489
Pre paid 71,399 57,405

Sumber: Telkom, Bakrie Telecom

Table-21

Expansion and new investment
by Telkom in December 2006

Telecommunications Implementation
services Expansion/Investment plans period

Fixed cable Expansion of Surabaya-Ujung December 2006
telephone Pandang--Banjarmasin submarine
 backbone infrastructure
 capacity.

 Expansion of Jember--Denpasar
 submarine backbone

 Expansion of Bandung-Cirebon
 optic fiber regional
 connections

 Expansion of local telephone
 central switch capacity

 Access networks in regional
 I-VI Divisions

 IP project to offer broad band
 access to all users in
 Indonesia

Fixed wireless Completing expansion of fixed 2006
telephone wireless telephone service in
 44 locations including 40 in
 Jakarta, 2 in Sumatra and 2
 in Sulawesi

 Procurement of set of CDMA 2000
 1x equipment in regional V
 Division

 Expansion of access of CDMA
 fixed wireless telephone in
 regional I-IV divisions

Source: Telkom
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Title Annotation:INDUSTRY PROFILE
Publication:Indonesian Commercial Newsletter
Date:Jun 1, 2007
Words:6001
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