Indonesia Telecoms Industry Report 2022-2027

Executive Summary

Indonesia Telecoms Industry Report at a Glance
Globally, the telecommunications sector is proving to be a core and essential infrastructure service to national economies, with data infrastructure becoming critical in a connected world and will likely increasingly attract a new class of investors such as large infrastructure funds. The publisher expects the Indonesian telecommunications industry to remain steady thanks to the defensiveness nature of the industry, amid the political uncertainties and an uncertain economic outlook due to the COVID-19 pandemic.   The publisher forecasts 5G mobile subscribers will represent 43.5% of all subscriptions by 2027 in Indonesia. 4G will represent about 50.6% of all connections while 2G and 3G will represent about 2% if not shut down earlier. Indosat and Telkomsel launched 5G in 2021 and take-up will ramp to an estimated 9m by the end of 2022, while the publisher forecasts just under 183m 5G subscribers by 2027 for the Indonesian market.   The Indonesian telecommunications market is a thriving mobile market with four large network operators, an incumbent fixed-line provider with near-monopoly and the overall market underpinned by strong economic fundamentals. Indonesia is among the fastest developing telecommunications market in the world, driven by growth in both mobile and fixed broadband subscriptions. The publisher forecasts that mobile subscriptions will continue to grow strongly in the 2020-25 period after a slow down in 2018. Fixed broadband subscribers will also continue to grow and increase their household penetration.   Expanded coverage, greater affordability, service improvements, increased data usage and smartphone penetration are the main drivers of growth in the telecoms sector. The country continues to expand its fibre-optic network and 4G coverage, backed by strong investment in capital expenditure. Investment in the telecoms sector grew at a fast pace and momentum was maintained as expected in the 2020-25 period.   The publisher expects the overall telecoms market to grow strongly through to 2027 after a decline in 2018 due to the SIM registration regulation with overall market growth resuming through to 2027.

 

Capex Investments

The Capex to GDP ratio remained relatively stable between 2015 and 2021. The capital expenditure (Capex) from telecommunications operators is growing strongly as mobile operators build out their 4G coverage and increase capacity to fulfil strong data demand and increased smartphone take-up. The publisher expects Capex spending to grow between 2022 and 2027.  

Mobile Subscribers and Revenue

The mobile subscriber penetration rate fell in 2018 after the government implemented new requirements for SIM registration in May 2018. The publisher forecasts the growth to resume and accelerate again during the 2022-27 forecast period.   Mobile network operators are facing competitive pressure with the market shifting to unlimited voice and text and data allowance increasingly becoming the sole offering differentiator. The publisher benchmarked mobile data pricing across 8 countries in the Asia Pacific region and found that Indonesia is lagging behind in terms of data download but we expect the country to catch up as 4G coverage is accelerating and smartphone penetration is increasing especially in regional areas.   According to our benchmark study of mobile data pricing, India has the lowest rate per GB at just a few cents per GB, while Indonesian pricing is already fairly low when benchmarked against neighbouring countries.  

Broadband Subscribers - FTTH Push

The publisher estimates the broadband subscribers' growth will be sustained by household growth and a reduction of the number of underserved premises previously not able to connect now served by the Internet but now served by FTTH services. The Indonesian fixed broadband market is growing at a double rate year on year and will continue over the 2021-2026 period with a growing appetite for high-speed data among the expanding middle-income class in Indonesia driving fixed broadband take-up and household penetration  

Thematics - Telecoms Infrastructure / 5G / M&A / e-Commerce

 The long-envisioned Palapa Ring national broadband network is now completed and operational since the end of 2019. The US$1.3bn project incorporates eight different networks. The arrival of 4G moved the Internet off our desktops into our palms and pockets, 5G could transform the network from something we carry around to something taking us around either virtually (augmented reality or virtual reality) or in reality (autonomous vehicles), the 5G outcome and benefits beyond fast connectivity remain largely unknown in terms of business models, investments required and timeline.   Investment funds are assigning high valuation multiples to telecommunications infrastructure assets such as mobile towers, data centres, submarine cable and fibre infrastructure. This report outlines some real market examples of how investors view and value these investments with real industry examples and EV/EBITDA comparatives and benchmarks.   Most telecommunications operators are in the heavy investments phase both in fixed and mobile segments, spending heavily upgrading their 4G network infrastructure. The publisher expects a wave of consolidation in Indonesia not before 2022-2023, as margins get squeezed further and a new Capex cycle kicking with 5G.   The increase in smartphone penetration made possible by the availability of low-cost devices has triggered growth in e-commerce, tapping into the potential of Indonesia’s emerging middle class with relatively high disposable income. GoJek, Tokopedia, Grab and Bukalapak are leading the pack with e-commerce, ride-sharing and mobile payments.

Companies Mentioned

• BizNet
• Centratama
• DigitalBridge
• EdgePoint
• FiberStar
• Gihon
• GoJek
• IBS Towers
• Indosat
• Kabel MNC Play
• Link Net
• Mitratel
• MyRepublic
• Protelindo
• Smartfren
• Telkom
• Telkomsel
• Tokopedia
• Tower Bersama
• Tri Indonesia
• XL Axiata

Methodology

The publisher uses primary and secondary research as well as proprietary information sources to generate market analysis and forecasts for fixed and mobile services in terms of both subscribers and revenue. Interviews are conducted with key service providers in the region to determine current and potential market sizing as well as future service offerings. Information gathered through interviews is further cross-checked to validate the total market size.

The primary research is supplemented with a range of secondary source material, including related research, press releases, securities filings, media, Web-based materials, and trade publications.

Industry and population statistics are also leveraged for reference and to ensure consistency in the data collection. Extensive service provider primary and secondary research, together with the publisher's end-user research database, provides a strong basis for sizing and forecasting the market. The multiple reference points allow for validation of information provided by the service providers compared with that gathered from alternative sources.

Note: Forecasts are made in local currency, and no allowance is made for inflation. All numbers in this document may not be exact due to rounding.