Illustrating Indonesia’s telecommunications ambitions, ICT Minister Rudiantara told local media in November 2017 that the government program to provide full internet access to the entire archipelago would be achievable by […]
Illustrating Indonesia’s telecommunications ambitions, ICT Minister Rudiantara told local media in November 2017 that the government program to provide full internet access to the entire archipelago would be achievable by 2024. The flagship project contributing to the effort is the Palapa Ring Satellite, which is set to be completed by the end of 2018 or early 2019. An additional high-speed internet satellite will be launched into orbit by 2022.
A key part of the Indonesia Broadband Plan (IBP), the Palapa Ring itself is a fiber-optic network over undersea cables extending 35,000km across the country. Designed to improve broadband connection speeds, the ring will offer download speeds of 20Mbps in urban areas and 1Mbps in rural districts. Currently, internet speeds in the country average 7Mbps. Over a period of five years, the Indonesian government has committed to investing approximately USD23.2 billion in internet connectivity improvement, with 10% of the funding sourced from the government’s budget. The year 2017 saw USD1.5 billion injected into rural areas that were being linked to broadband services for the first time. In tandem with government initiatives to improve interconnectivity around the country, the number of active internet users has increased steadily over time. January 2017 marked YoY growth of 51%, pushing overall penetration rates to over 50%. However, mobile is king, with a penetration rate as high as 65%. According to external sources, Indonesians spend just under four hours a day on average accessing the internet via mobile phone. Accordingly, a 40% jump in social media users was recorded in 2017, with 106 million people subscribed to an average of eight social media apps per person. Economic forecasts indicate that Indonesia’s ICT spending could increase by 16% to USD29.5 billion through to 2020, up from an estimated USD25.4 billion projected for 2017. Considering IT expenditure alone, Indonesia is expected to see sales increase to USD11.9 billion, a 24.2% increase compared to the previous three-year period. DIGITAL WALLETS At the forefront of the digital transformation in Indonesia is using technology to reach the 80% of the country that remains unbanked. “Around 6% of Indonesians have a formal bank account, but for companies like GoPay and other digital wallets, a phone is enough,“ Zee Fakier, Managing Director of DuitPintar, told TBY, adding “90% of internet traffic is on mobile phones, so that is where the future is.“ There are approximately 300 digital wallet companies and applications waiting for government approval. However, with regulations still lagging behind, there remains space for international companies to enter the market. In 2018, a more sophisticated credit rating system may come into play as activity in the fintech sector accelerates. Credit card usage also remains low in Indonesia, which has given rise to a variety of alternative electronic payment systems. However, Teddy Setiawan Tee, President Director of PT Cashlez Worldwide Indonesia, noted in an interview with TBY that adoption may take time due to the complexity of creating new payment ecosystems. “That is why there is no prominent player in the market yet, despite the huge size of the market,“ he explained. Regardless, PT Cashlez Worldwide Indonesia has signed on with three major banks working with us: Bank Negara Indonesia (BNI), Bank Mandiri, and Maybank. BTBP, Sinar Mas, Bank Permata, and Bank Rakyat Indonesia (BRI) are also on the company’s radar. Other companies in the e-wallet space are Kudo, an online-to-offline that aids underserved customers in making transactions online, and Payfazz, a platform for making money transfers easier for those without bank accounts. FIRST MOVERS Success stories in the IT sector going into 2018 have taken advantage of first mover strategies to get ahead of the curve, whether through capitalizing on the mobile-driven internet usage market or offering convenient services that suit the geography of the country. With seven mobile services providers in the country, XL Axiata saw potential in switching to data-focused services rather than traditional minutes and SMS packages. “Since 2015, our focus has been on building a 4G network. The take-up rate for 4G has actually been much faster than what we predicted,“ Dian Siswarini, President Director and CEO of the company, told TBY. “Our 4G subscribers make up more than 40% of our users, and it only was released in early 2016.“ Data comprises more than 70% of its total revenue, the highest in the local industry. œ–