SOFYAN A. DJALIL Minister of State-Owned Enterprises

‘Potential for business huge’
Government backs national IT development strategy

An archipelagic nation of 17,508 islands that are home to the fourth-largest population in the world, Indonesia currently has a cellular penetration of around 25 per cent and fixed line accessibility of less than 10 per cent. The country’s mobile sector runs mostly on GSM, and although CDMA (code division multiple access) is also present, it is mostly employed in the fixed wireless segment.

This is set to change, though, as more mobile companies embrace the potential of CDMA to raise average revenue per user. Overseas investors such as Hong Kong’s Hutchinson Telecom are beginning to realise the potential of this facet, which contributed to strong sectorial growth in the first half of 2007. Although internet penetration remains low at around 10 per cent, a government strategy for national IT development aims to increase the number of commercial and private users. The Palapa Ring Project was given the green light in March this year and is scheduled for completion in 2011, providing 33 provinces and 440 cities in Indonesia with high-speed internet access via a fibre-optic national backbone. Plans are also in place to establish broadband wireless networks in the larger cities, with Java being proposed as the future site of the Bandung High Technology Valley.

“The potential for business here is huge, but we feel that maybe not enough people realise this,” says Sofyan A. Djalil, Minister of State-Owned Enterprises. “We have been inviting foreign investors to come to Indonesia for a long time, and they now dominate our telecommunications sector. Forty per cent of the market is now shared by smaller companies, who are starting to challenge the larger companies and are making the market more competitive.”

Deregulation is playing a leading role in Indonesia’s drive towards an e-savvy populace. Instigated in 2001, the phasing out of the duopoly of Telkom Indonesia (TI) and Indosat has heightened competitiveness and opened the door to investors. TI’s subsidiary Telkomsel, which entered the market in 1995 and currently has a customer base of 32.5 million people, is 35 per cent controlled by SingTel.

Telkomsel has attracted 1.5 million customers to its 3G service, which covers 25 Indonesian cities. Last year, the company attained a number of awards, including Best GSM Operator of the Year, Best Innovative Product and Best Multimedia Services. Its strong growth in 2006 has given Telkomsel the impetus to unroll an extensive $1.5 billion network expansion this year.