Operators in Indonesia could see their revenue increase in 2019 if they are able to expand their data offerings to drive usage, according to Fitch Ratings.
Indeed, the growth opportunities from data are such that most Indonesian operators are set to crank up their capex in order to boost network capacity. With telecom providers keen to seize the opportunity, competition is set to intensify.
However, Fitch notes that the current low return on data means that the top three operators are likely to play it safe in terms of pricing as they pursue more profitable growth. The country’s largest operator Telkomsel saw a fractional (0.6%) year-on-year drop in revenue in Q4, having experienced a 5.8% decline across the first three quarters of 2018.
XL Axiata meanwhile became the country’s second-largest operator in terms of revenue after seeing a 3% increase in the quarter, overtaking Indosat Ooredoo. While XL Axiata made gains in terms of its market share, it retains its position as the third-largest operator on this basis – although Fitch anticipates that it will add more subscribers this year.
The agency was less optimistic about Indosat Ooredoo’s prospects, noting that the operator had undergone a 44% fall in EBITDA across 2018 which would require a substantial increase in subscriber gains and ARPU to offset. Local publication The Insider Stories noted that the operator’s revenue had fallen by 23% year-on-year and its subscriber base had plummeted from 110 million to 58 million (47%) as a result of the government implementing requirements for SIM registration in May 2018.
Indosat has stated that it expects its annual capex to be IDR10 trillion ($700 million) for the next three years, compared to IDR6 trillion for 2018. After years of insufficient investment, the group is hoping that increased spending will help reverse its fortunes and fight back against its competitors. XL is also set to raise its capex from IDR7 trillion in 2018 to IDR7.5 trillion this year.
While Fitch notes that achieving even slight growth will require further investment from operators, this may not be enough for the second and third placed operators to compete against Telkomsel. The ratings agency believes that Indosat and XL Axiata may need to form a network or spectrum-sharing agreement to stand up to the market leader.