3G shortfalls slow Indonesia's mobile growth

Caroline Gabriel/Wireless Watch
25 Sep 2012

However, the country has been very slow to enable mobile broadband, and now its auction to open up more 3G spectrum has been delayed for the fourth time in the wake of the bankruptcy of lead telco Telkomsel.

Existing 2G and 3G networks are coming under rising strain as Indonesian consumers start to adopt smartphones and data services, so new capacity is urgently needed. As for 4G, the country made a commitment to Wimax, but restricted it to the old fixed standard for many years, and LTE is unlikely to start its roll-out until 2014 because the potential bands are all occupied by broadcasters, government agencies or legacy wireless, forcing complex refarming programs.

As for 3G, the third phase auction, in 1.9GHz, originally scheduled for June 2012, has been postponed for the fourth time, this time indefinitely. The immediate reason is that the country‟s largest operator, Telkomsel, a 65:35 joint venture between state operator Telkom and SingTel, has been declared bankrupt.

The bankruptcy itself is controversial – it was ordered by the courts after the carrier's prepaid voucher distributor, PT Prima Jaya, said it was owed $557,000, a claim Telkomsel disputes. The firm is appealing the decision and SingTel said the unit was a “financially strong company” with net assets of $3.8 billion.

However, a bankrupt firm cannot bid for spectrum under Indonesian rules, but excluding Telkomsel would affect its future competitiveness – many expect it to win its appeal in a few months' time – and unbalance the whole auction, hence the postponement. But it leaves the 3G industry in limbo once again. Nonot Harsono, a member of the country‟s Telecommunications Regulation Committee (BRTI), told Investor Daily: “The bankruptcy is a big deal. It's not just about Telkomsel unable to participate in the 3G tender, but also about the economy of a country.”

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