There can be few areas within the emerging markets to which Paul Budde has not applied his highly respected powers of analysis. Even East Timor, not yet a member of the ITU, can not escape his attention. Here Paul Budde summarises the contents of his new report: 2006 Telecoms, Mobile and Broadband in Asia report - Indonesia and Timor Leste.
Unclear telecoms market for East Timor and Indonesia
This report is intended to provide a comprehensive overview of the trends and developments in the telecommunications, broadcasting and pay TV markets in Indonesia and Timor Leste. The tiny fledgling nation of East Timor experienced further political instability and outbreaks of violence in the first half of 2006.
To the observer, the country had appeared to have got off to a solid start in rebuilding its entire infrastructure following the turbulence that ensued after the referendum of 1999. However, it remains difficult to assess the long term impact of the events of 2006 on such things as infrastructure building.
Following the 1999 crisis, the United Nations Transitional Administration in East Timor (UNTAET) provided overall administrative and financial assistance during the period up until elections were held in April 2002. The United Nations finally completed its role in early 2005.
The new government was looking to gain ongoing assistance from the international community in putting strong systems in place. In fact, telecoms remains an important priority under a newly established Ministry of Transport, Communication & Public Works. Eventually, in July 2002 the East Timor government selected Portugal Telecom to be the lead partner in a consortium to operate Timor Telecom. The new operator replaced Telstra in March 2003 and set about expanding the country's telecom facilities.
It is noteworthy that East Timor (also known as Timor Leste) is yet to be listed as a member of the International Telecommunication Union (ITU). This makes it difficult to obtain official statistics on the country's telecoms sector. Where official statistics are not available, BuddeComm normally provides estimates.
Indonesia, a country of more than 220 million people, continues to see its telecom sector grow in a busy manner despite the occasional setback. The country has some particularly big challenges to confront in building the necessary telecommunications infrastructure to cover its uniquely complex geography. It must also deal with a range of social, political and economic issues.
Having rebounded reasonably well from the Asian economic crisis of the late 1990s, the government has been gradually reshaping the telecoms industry. The country is now seeing healthier growth in both subscriber numbers and in revenues. While Indonesia's fixed-line teledensity has remained disconcertingly low (less than 6%), a move by the incumbent, Telkom, to rapidly roll out Wireless Local Loop (WLL) services for unserved communities is looking promising and should boost teledensity.
...but mobiles show some growth
The country's mobile market has continued to expand and by early 2006 the mobile sector was growing at around 60%; the subscriber base had passed 45 million (penetration 19%), up from 3.6 million subscribers just five years earlier. While mobile penetration has quickly raced past 10%, there is enormous potential remaining for further growth in this market. The government has already chosen a company, Cyber Access Communications, to provide the country with its first 3G network. There is certain to be considerable interest in this project.
In a reminder of the events of the late 1990s, the rupiah slid to a more-than-four-year low against the US dollar in August 2005. This sort of event can be a problem for the operators, the bulk of whose revenue is in rupiahs, while investment costs are mostly in US dollars. A weaker rupiah could see operators suffering foreign exchange losses, depending on their gearing arrangements.
Indonesia has continued to struggle to attract foreign investment in recent years, with potential investors expressing concerns over the twin issues of corruption and government red tape. This naturally has had an impact on the telecom sector, which desperately needs foreign investment to help build infrastructure. Foreign direct investment into Indonesia fell 26% year on year in 2004 to US$10.3 billion.
Ironically, the weakening rupiah in 2005, together with evidence of a more stable government, increased the country's investment prospects and actually saw foreign investment jump 74% in the first half of the year.
The full eport include further detailed statistics, market and industry overviews, regulatory environment, major players (fixed and mobile), infrastructure, mobile voice and data markets, Internet/VoIP/IPTV, broadband (FttH, DSL, cable TV, wireless), and convergence and digital media.
* Paul Budde is the Managing Director of Paul Budde Communication (trading as BuddeComm), an independent global telecommunications research and consultancy company which includes 45 national and international researchers in 15 countries. The company operates from Bucketty, in the Lower Hunter Valley, Australia.