Churn rate is defined as the number of participants who discontinue their use of a service divided by the average number of total participants for any given period of time. So, even though the customer change their number in the same operator, they are still included in the churn rate.

The churn rate in Indonesia is caused by at least by 2 main reasons. First, the cheaper price of starter pack compared to top-up. For your information, mostly prepaid customer who moves from one operator to another or who frequently changes their mobile number from the same operator. The starter pack can be bought for about 60 cent only. This includes 50 cents basic pulse and another 50 cent for bonus pulse. So, you get US$1 credit for just 50 cent. Meanwhile, if you want to top-up for US$1 pulse, you have to pay US$1. An easy choice for customers.

The second reason is the lack of numbering cost. Every operator can easily release a cellular number without any cost from the regulator. Actually numbering is one of scarce resources in telecommunication world. People are reluctant to memorize long number.  Without any regulation, the numbering becomes wild. To reduce churn rate, regulator shall charges every number used by operator. With this regulation, automatically the cost of starter pack will be higher. People will choose to maintain their phone number instead of using another starter pack.  Actually the starter pack costs much for operator as they need to pay for SIM (subscriber identification module) as well the licenses for the number of customers in their billing system.

I believe there are so many ways to reduce the churn rate in cellular industry in Indonesia. However, the charge for numbering is the most effective ways.

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Telkom the biggest telecommunication operator will spend about IDR 2oT (more than  US$2b) for its capex, 65% 0f them (around US$ 1.3b) will be used by Telkomsel (the largest cellular operator). This figure is just below 2009 figure (US$1.5b). Telkomsel will focus on its  mobile broadband services. This service skyrocketed last year from 200,000 subscriber in 2008 to more than 1.6m in 2009. It increased for about 700%, fantastic.

Indosat, the second one will spend IDR 4,5T  (around US$470m) 2010, it also below the figure of 2009 (US$600m). This fund will be used mostly for 3G Based Transceiver Station expansion. Currently Indosat serves around 28.7m subscribers down around 19% from last year figures. For your information, besides cellular services Indosat also provides data services and fixed line services as well as international gateway service. The biggest contribution is still from cellular services (75%), followed by data services (15%) and fixed and international gateway (10%).

XL, the 3rd largest cellular operator will spend around US$450m for its capex in 2010. This figure is far below 2009 figure (US$ 600m). However, according to the CEO, Hasnul Suhaimi, the company financial is getting better. So with a company profits during 2009, XL plans to propose dividend at annual general share holder meeting.

Bakrie telecom, the 2nd largest CDMA opeartor in Indonesia plan a US$200m for its capex in 2009. This figures is equal to the 2008 and 2009 figures. Bakrie has planned US$600m expenditure for 2008-2010 or equal to US$200m per year.

No information was received from Axis and HCPT concerning thier capex for 2010. For your information Axis capex for 2009 was around US$500m.

From the figues above, we can see that almost all operators decreased their expenditures in 2010. Still in crisis? (data taken from various sources)

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This is the second time of high level management reshuffled since Indosat bought by Qatar Telecom (QTel) on June 2008.  The first reshuffled was made on June 2009.

Below are the complete list Indosat board of directors up to 2012:

- Harry Sasongko Tirtotjondro, President Director and Chief Executive Officer (since August 11th, 2009)
- Peter Wladyslaw Kuncewicz, Director & Chief Finance Officer (since September 1st, 2009)
- Laszlo Imre Barta, Director and Chief Commercial Officer (effective April 30th, 2010)
- Stephen Edward Hobbs, Director and  Chief Technology Officer (since June 11th, 2009)
- Fadzri Sentosa, Director and  Chief Wholesale and Infrastructur Officer (since June 11th, 2009)
- Guntur S. Siboro, Chief Marketing Officer
- Syakieb A. Sungkar, Chief Sales Officer

And the board of commissioner up to  2012:
- H.E Sheikh Abdullah Mohammded S.A Al-Thani, Chief Commissioner
- Nasser Mohd. A. Marafih, Commissioner
- Richard Fansworth, Commissioner
- Rachmad Gobel, Commissioner
- Rionald Silaban, Commissioner
- Jarman,Commissioner
- Alexander Rusli, Independent Commissioner
- Soeprapto, Independent Commissioner
- Thia Peng Heok George, Independent Commissioner
- Chris Kanter, Independent Commissioner

Till the end of 2009, Indosat serves around 33.1 million subscribers and it is facing a tight competition from XL who try to be the second largest cellular operator in Indonesia.

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On the last November 2009, Indonesia’s Sinar Mas Group (through its subsidiary, PT Gerbangmas Tunggal Sejahtera) has reportedly acquired a 19% stake in Indonesia’s PT Mobile-8 Telecom for IDR211.4 billion (USD22.5 million). PT Tunggal Sejahtera Gerbangmas bought the shares of PT Global Mediacom Tbk (BMTR) in PT Mobile-8 Telecom Tbk (FREN). Previously, the share of the BMTR was 28.21%.  So, PT Global Mediacom Tbk (owned by Hary Tanoesoedibjo) will become the minority share holder in Mobile-8. PT Global Mediacom Tbk was previously the majority share holder with 66,8% and they have sold some of them on September 2008.

Along with the purchase of these shares, the Sinar Mas group has placed its representative Mr. Henry Cratein Suryanaga as chief commissioner of PT Mobile-8. Meanwhile Sarwono Kusumaatmadja and Reynold M Batubara have been appointed and vice commissioner and independent commissioner respectively. The share holder meeting on last November also named the board of director of Mobile-8 i.e: Merza Fachys as CEO and other directors are:  Anthony C Kartawiria, Beydra Yendi, Agus Heryanto Lukas and Yopie Widjaya.

So, Smart Telecom and Mobile-8, both CDMA operators in Indonesia are in the same business group now, namely PT Sinar Mas.

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As written in the previous post Indonesian Cellular QoS Rule, the measurement items are:   Call Center Service Level, Endpoint Service Availability which include call success rate, drop call and block call, and SMS service level.

Starting from 2010, Indonesian telecommunication regulator will fine operators which do not pass the standard quality of service.

Below are the measurement result.

Source: DG Postel
CSR: Call Success Rate
FWA: Fixed Wireless Access.

According to the data, Mobile-8, a CDMA operator, was the most performed network, both for Fren (cellular) and Hepi (FWA). Its total subscriber was only around 3m by the end of 2008.  Meanwhile, HCPT with its product call “3″, was the less perfromed network followed by Smart Telecom. HCPT is GSM/3G operator, while Smart Telecom is a CDMA operator.

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This announcement came the day after the communication and information technology minister disclosed that Amdocs was being excluded from a local tender because the controlling shareholders are Israeli.

The Jakarta Globe reported that on Monday Communications and Information Technology Minister Tifatul Sembiring said that Amdocs should not be included in the billing tender of Indonesian cellular service provider Telkom PT because Amdocs has Israeli shareholders. A spokesman said the ministry will investigate Israeli-affiliated telecommunications companies and sanction those found to be in violation of the regulation.

Sembiring is a member of PKS, the conservative Islamic Prosperous Justice Party, and said excluding Amdocs from the tender was justified because Israel has no diplomatic relations with Indonesia.

The newspaper also noted the criticism from a local consumer organization, whose analyst called Sembiring’s action “irrelevant” and unwise. The analyst said that Israeli technology was commonly used in the information-technology sector because Israel is a major producer of high-tech components, and Indonesia imports 90% of the telecommunication parts used in the country.

“Many of these could be from Israeli manufacturers or come from companies with Israeli shareholders,” he said. “How about products from Taiwan? Many of our telecommunications products are from Taiwan – another country that does not have diplomatic relations with Indonesia.”  (taken from: Haaretz.com)

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However, exceptions apply to administrative sanctions from the telecommunications operation, because Article 14 mentions in full, that the imposition of tariffs on the types of non-tax state revenue derived from the Organization of Post and Telecommunications such as: a. administrative sanctions in the form of fines for violations of the permit obligation telecommunications network administration and / or basic telephony services; and b. administrative sanctions in the form of fines for breach of obligation of the organization permit value-added telephony services and multimedia services, entered into force 1 (one) year after this Government Regulation set. Hence the imposition of sanctions fines began an effective force on the date of January 16, 2010.

Although previously announced as in press releases dated February 3, 2009, and yet through this press release, the regulator wants to remind the Regulation No. 7 year 2009 to the telecommunications providers so they can prepare themselves better before the enactment of the provisions of the fine sanctions. The consequences of the implementation of such regulation can significantly impact for the telecommunications rules violator.

Below are several important things on Regulation no 7 of year 2009.
1. Administrative sanctions for non-achievable development:
- less than 40% from commitment: IDR 600m
- between 41% to 70% from commitment: IDR 400m
- between 91% to 90% from commitment: IDR 200m
2. Sanction in the form of fine for not meeting service quality standards are set according to prevailing regulation, IDR 200m / item.
3. Sanctions in the form of fines for violations due to the absence of compliance with the provision of interconnection schedule (schedule process of the answer, schedule negotiation process, the process of providing access to schedules, etc.) as stipulated in the regulations, IDR 600m / item.
4. Sanctions in the form of fines for violation of price discrimination and interconnection access, IDR 10b.
5. Sanctions in the form of fines for violations of use of domestic products due to capital expenditures that do not meet the applicable provisions, 15% x (Cons Obligations)% x Capital Expenditures / year.
6. Sanctions in the form of fines for violations of the use of domestic production due to operational expenditures that do not meet the applicable provisions, 15% x (Cons Obligations)% x Operational Expenditures / year.
7. Does not meet the minimum services which must be provided, IDR 10m / service.

(translated from www.postel.go.id)

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The same principal can also be applied within the same country. Some operators have better coverage than some others, or some operators have coverage in one or more areas, while some others have coverage in that region but they don’t have in another region. To cover all regions, an operator shall need to make a domestic roaming agreement with other operators.

Up until October 2009, almost 15 years since GSM technology was launched in Indonesia, no cellular operator was interested in domestic roaming. Big operators seem reluctant to provide domestic roaming to its competitor. This is one reason why new entry in cellular industry get difficulties to attract more customer in Indonesia. New entry operators must built their own network to serve customers.

However on Nov 16th 2009, there is a breakthrough in cellular communication in Indonesia when XL agreed to provide national roaming for Axis. Hence Axis’s customer can make a communication in all over Indonesia even though Axis doe have network in that area.

Domestic roaming is beneficial for both parties. The main benefit goes to tenant (Axis), however XL also receives additional revenue from this service. Domestic roaming is enable new entry to attract many customers as it can serve wider coverage.

Special respect shall be given to XL management who opens up an healthy competition with their competitors. Congratulation.

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Indonesian big market has attracted many investors in telecommunication industry. According to the data from Directorate General of Post and Telecommunication, till the end of 2008, Indonesian mobile subscribers has reached 150 million. This is one of the magnet why the investors come to Indonesia.

The competition among mobile telecommunication operators have increased sharply which are supported by two main things namely the need for communication itself and the affordable tariff. In terms of communication need, mobile phone has become life style not only for high and medium class society but also for low class society. With regards to tariff, the tariff war among cellular operators has brought the tariff down to the lowest level. Moreover, currently there are many low cost handsets available in the market. With these things, the number of subscribers has sky rocketed.

Responding to the high competition, a control mechanism is released by telecommunication authority. To ensure that the competition is healthy and to protect the customers’ right, every telecommunication providers are obliged to provide a service within the standard quality of service. This rules is based on Minister Information and Communication decree no 12 in the year of 2008.

There are 4 main items in the Cellular Quality of Service Rule namely: Service Performance, Network Performance, Reporting, and Assessment, Reward & Punishment.

The service performance consists of billing complaint, other complaint, activation and customer care response. The billing complaint shall be less than 5% of the total complaint, and all complaint shall be resolved in 15 days. 98% of activation both for post and prepaid shall be finished in 24 hours. 85% of Customer complaints shall be finished in a year (this is to anticipate if most complaint happen at the end of the year). With regards to customer care, 75% of all calls to service center shall be picked up by operator in 30 seconds. The time is calculated after the caller presses a special digit which mean he/she wants to speak to operator.

In the network performance, the dropped call and blocked call rate shall be less than 10% from total calls. The test shall be done by drive test and static test with a minimum sample 260 and 200 calls respectively for each city/region. The call shall be 60 seconds holding time and 10 seconds pause time. In terms of short message service, 75% of the number of short message shall be sent at maximum 3 minutes. The total sample of SMS test is 100 messages with 160 characters long and the interval time to send the sms is 10 minutes.

The rule is also requested operators to report their quality of service performance, once a year. The report shall be submitted not late the second week of February. Besides that operator shall update and publish its quality of standard on quarterly bases in its own website.

To assess operators’ report, Indonesian Telecommunication Regulator performs quality of service measurement once a year. When the measurement result is not meet the rule criteria, a punishment such fine will be applied to the operator. The moral is the regulator wants to protect customers from bad service quality.

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Tifatul, previously was a president of Partai Keadailan Sejahtera, a party which has supported Yudhoyono since his firm term in 2004. Below are bio data of the new Minister.

Name: Tifatul Sembiring, Ir.
Born: Bukittinggi, Sumbar, 28 September 1961
Education: Sekolah Tinggi Ilmu Manajemen Informatika dan Komputer, Jakarta, & International Politic Center for Asian Studies Strategic Islamabad, Pakistan.
Work experiences: PLN, 1982-1989 & Director of Asadudin Pres, Jakarta.

Tifatul Sembiring programed in 100 first days his work as Inforcom Minister, to implement 100 computer villages, a village with computer literacy. This program is part of grand design to implement 10.000 computer village in 2014.

Tifatul also determines the computerization system can enter all through the foundation of the community from the educational agency, the business, to the government officer in the lowest level. Computerize government will reduce the corrupted activities as officer will not receive any cash. They just receive the docket or payment receipt.

Congratulation Mr. Tifatul and we are waiting for your positive contributions for this department and for the country.

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