NTS to Spend US$1 bil. on Network Expansion, Marketing in 2008

NTS, which began offering mobile services in February this year, plans to increase the number of its base stations to 3,700 by the end of the year from the current 1,500, Dow Jones reports, quoting the company's Chief Executive Director, Erik Aas. The company aims to achieve national coverage by the end of 2009. NTS will also launch a marketing campaign this week for its GSM-based mobile services (under the Axis brand) in the greater Jakarta area. The unlisted company, which aims to have two million subscribers by the end of 2008, will later this year extend the service to other parts of Java, northern Sumatra, Bali, and Lombok.

Outlook and Implications

• Aggressive Strategy under New Ownership: NTS, previously controlled by the Lippo Group, has been taken over by other investors in the past few years. STC now holds a 51% stake in NTS, while Maxis Communications holds a 44% stake in the Indonesian company. The remaining shares are held by a local investor. Although NTS has been present in Indonesia for many years, the operator had failed to develop its operation under the previous ownership. Now with the financial injection and management experience of the new owners, NTS is set to undertake an aggressive expansion. In addition to network roll-out and marketing campaigns, the operator also aims to attract customers with lower tariffs than those offered by its rivals.

• Increasing Competition to Boost Market Growth: Indonesia's mobile market is currently dominated by Telkomsel, Indosat, and Excelcom, with their market shares, in terms of subscribers, standing at about 53%, 28%, and 17%, respectively. However, the competition from the likes of Hutchison and NTS, as well as CDMA-based fixed wireless service providers, is on the rise. Indonesia, which has a population of around 230 million, had approximately 90 million mobile subscribers at the end of 2007, up 40% from a year earlier. High tariffs and handset prices have kept mobile phone penetration levels low (currently at 40%). There is still room for organic growth; facing intensifying competition, operators have started cutting tariffs and offering promotions. Such a trend will continue and stimulate further market growth.

• Foreign Investment in Indonesian Market: With significant growth potential, the Indonesian mobile market has continued to attract investment interest from foreign players. Singapore's state-owned investment company, Temasek, has been a major investor in the Indonesian mobile industry—indirectly holding stakes in both Telkomsel and Indosat, the country's two largest mobile operators. However, in November 2007, the Indonesia competition watchdog, the KPPU, ruled that Temasek's cross-shareholdings had breached the country's anti-monopoly and thus ordered Temasek to divest from one of the companies within two years. Temasek is in the process of appealing against the KPPU decision, but if it is eventually forced to divest, it could provide another opportunity for foreign players to invest in a major Indonesian mobile operator (see Asia-Pacific: 26 February 2008: No Let Up for Growth in South-East Asian Mobile Markets).

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