Indonesia Telecommunications Report Q1 2012

We have extended to 2016 its forecasts for Indonesia's fixed-line, mobile and broadband internet markets. These are based on new data for H111 from the key telecommunications operators and wider market data from Indonesia's regulatory authorities. For all that, the new 2010 and H111 results were broadly within expectations and we have not needed to radically alter our forecasts, other than to take into account new economic data that may affect consumer spending and new mobile and broadband ARPU figures, which show declining spending by customers in spite of continued subscriber addition rates. This is down to increased price-based competition as the battle between mobile and fixed services intensified. Competition prompted Smart Telecom and Mobile-8 to merge in March 2011 and we expect furthermore consolidation over time.We welcome recent initiatives, just as the licensing of VoIP (Voice over Internet Protocol) and IPTV services and the announcement of a new accelerated economic development plan as overdue recognition of the ICT sector's relevance to ensuring growth in a host of industry verticals that are themselves driving economic expansion. Operator-motivated moves to stay ahead of the curve by developing cloud computing services should as well stand the market in good stead and improve its position as an ICT hub in the region.On the other hand, there are mixed messages coming from the government regarding the licensing of 4G mobile services based on 4G research. In August, it seemed that LTE licensing would be delayed by several years in order to protect investments in the rival WiMAX research. However, in late October 2011, the government permitted Indosat to trial an LTE solution from Nokia Siemens Networks.The MP3EI reflects the considerable work done by incumbents Indosat and Telkom in augmenting and expanding their core networks. Telkom, in particular, is making rapid progress in deploying an all-new all-IP straightway generation network, with cloud computing, mobile broadband and IPTV services representing three key growth pillars for the company's long-term future. Cloud and IPTV services were both launched in the first half of 2011.Mobile operator XL Axiata was granted additional spectrum in early 2011; this will give it the possibility to compete on a level playing field with Telkomsel and Indosat. In spite of everything, there is no beating Telkomsel in the mobile market, even when adding Bakrie Telecom's limited mobility services to the analysis. Bakrie has as well just acquired 3.3GHz spectrum that it claims will help it launch 4G mobile broadband services. And with Telkomsel and Indosat reporting very strong take-up rates for BlackBerry smartphones and related services, it is clearer than ever that it is broadband in other words now the real growth engine in Indonesia's rapidly maturing market. Indonesia reaffirmed its position as one of the more attractive emerging telecoms markets in Asia Pacific afterwards the country overtook India in this quarter's business environment ratings update. Indonesia is off to a flying start, registering real GDP growth of 6.5% y-o-y in Q111, driven by private consumption and investment. We continue to hold a sanguine view on the economy and caution upside risks to our 5.9% and 5.8% real GDP forecast in 2011 and 2012.Notwithstanding, though Indonesia has returned to relative orderliness since the post-Suharto chaos of the late 1990s and early 2000s, the country faces multiple challenges and threats to its stability that could flare up again if President Yudhoyono or his successor proves incompetent or if improved governance fails to take hold. Investors will continue to view Indonesia as one of Asia's riskier destinations.

enquiries@companiesandmarkets.com www.companiesandmarkets.com/Market/Telecommunications/Market-Innovation/Indonesia-Telecommunications-Report-Q1-2012/RPT1028794?aCode=e7702a5b-ad88-47dd-bb7a-a58072d4bda2