SINGAPORE-Lost accounts, lost jobs, lost profits, lost confidence: These words have been used to describe Indonesia’s wireless industry, but they may not necessarily be true.
Although it is undeniable that wireless telecommunications operators, such as Telkomsel and Satelindo, have been slapped with problems, including falling revenues, squeezed margins, poor investor sentiment, and even fraud, many believe the worst is over and the country’s most resilient sector will bounce back soon enough.
This, despite the fact that Satelindo Chief Operating Officer Ron Chesterton estimates that subscriber growth fell as much as 15 percent in August last year, when the rupiah first came under attack, following the devaluation of the Thai baht. One Singapore-based research house, Pyramid Research, even estimates that the monthly usage per subscriber in Indonesia fell from US$50 to slightly more than US$15 between June 1997 and January 1998, based on the exchange rates prevalent during those months.
But the outlook remains bright, say analysts, in light of last year’s licensing of three personal communications services and two cordless access services licenses.
“While delays may occur in network buildout as investors revisit their business plans and devise new strategies, much of this re-evaluation should only delay potential projects and not halt them,” said Pyramid Research in a recent report on the Asian telecommunications industry.
The research firm believes the delays will manifest themselves in the first half of this year, but that increased activity will be seen in the latter half, assuming the economy stabilizes by then.
In fact, there is a feeling amongst industry watchers and players alike that Indonesia’s wireless market may not be as badly hit as its landline market because of the fewer investment dollars the wireless industry requires to effectively roll out services. Also, fewer people are likely to be retrenched in this sector since it is, by nature, the less labor intensive of the two.
But it has not always been smooth sailing for wireless telecommunications operators. Analysts estimate that Indonesian cellular operators lost more than US$3 million last year because of fraud-a situation that was exacerbated by the currency crisis.
PT Satelindo, one of the fastest-growing mobile phone companies in Indonesia, had to de-register some 100,000 accounts last year because of fraud and dead-beat customers. At least 50,000 more write-offs are expected this year as the company battles the effects of the currency crisis.
But operators like Satelindo have begun the battle against fraud, and initial results show they are succeeding. For a start, Satelindo has implemented vigorous background credit checks for new customers and has also tried inducing subscribers to pay with credit or debit cards. Under the debit/prepaid system, subscribers use their handsets as they would public card-operated phones-pumping in more money once their card value falls to zero.
The introduction has helped Indonesian operators stem the incidence of bad debt, while at the same time, boost revenues.
“Operators are happy because airtime rates for prepaid card users are higher than normal contract users, so the money is better. On the other hand, customers are also happy because prepaid cards allow them to keep track of their spending patterns. They no longer have to wait till the end of the month to know what the bill is. It’s a win-win situation,” said Alan Wee, senior research associate at Pyramid Research.
