Competition among mobile operators is intensifying. A number of new entrants to the sector have been jostling for greater market share against the larger established mobile operators, through aggressive advertising campaigns detailing competitive advantages of lowest market prices, best call quality and cheapest deals. The number of mobile subscribers has certainly grown, reaching an estimated 97.4mn at the end of 2007 and above BMI’s original estimate. Despite the intense competition, however, Indonesia’s mobile market appears to have stopped short of entering a price war with Bakrie Telecom stating that operators were ‘still learning how to fight (a price war).’ In the last year, the major three operators – Telkomsel, Indosat and Excelcomindo – have reduced their prices in an effort to win new subscribers.

Certainly it would seem they are winning the fight for net additional market share, with Telkomsel accounting for 38.3% of the FY07 total, followed by Indosat and Excelcomindo on 24.4% and 18.5%, respectively. However, since introducing a reduction to prices, tariffs have risen once again, on account of the existing pricing model, which requires charging more for the first couple of minutes and then reducing the cost of calls for subsequent minutes. That said services are becoming increasingly affordable with the cost of handsets falling, while the regulatory authority has reduced interconnection charges between mobile operators, which should lead to reduced prices for end users. Further cost savings have been met with operators encouraged to share their networks, enabling greater network expansion.

All this has caused LippoTel to re-examine its existing status in the mobile market. The operator, despite retaining a longer operational history in the Indonesian mobile market than operators such as Hutchison Telecom and Smart Communications, has been overtaken in terms of subscriber numbers. On the basis that there are significant growth opportunities, LippoTel’s owner Natrindo Telepon Seluler (NTS) announced it would re-launch the operator under the brand name of Axis. By the end of 2008, some US$1bn will be committed to expanding the operator’s network with a total of 3,700 base stations covering Banten, North Sumatra, Central Java, Bali and Lombok. NTS’ major shareholders are Saudi Telecom and Malaysia’s Maxis Communications, and it could be due to the promising nature of the Indonesian mobile market that they have invested into the sector. Indeed, the UAE’s Etisalat acquired a 15.97% stake at a cost of US$438mn in Excelcomindo, reflecting the attractiveness of the market.