Alex Sinaga, President-Director, Telekomunikasi Indonesia: Interview

Interview: Alex Sinaga

How is infrastructure deployment for 4G advancing, and what are the prevailing obstacles?

ALEX SINAGA: The main challenges in the mobile broadband ecosystem in terms of rolling out 4G are related to the adoption of the correct spectrum for this technology. While spectrum in Indonesia is still dominated by 2G and 3G, allocation for 4G is being planned with consideration being given to all mobile players.

For better implementation of 4G, mobile operators need support from fixed broadband infrastructure based on fibre optics, either for backbone, backhaul or fronthaul networks. In order to support an increase in mobile network capacity, current efforts are focused on submarine fibre-optic deployment in eastern Indonesia, where backbone infrastructure is still lacking. Additionally, an unstable electricity supply in some regions is a limiting factor for proper 4G deployment.

What are the growth prospects for Indonesia’s telecoms sector in light of ASEAN integration?

SINAGA: According to data from AT Kearney, Indonesia’s telecoms sector is projected to expand by 8% per annum to reach Rp230trn ($19bn) by 2020. Growth will largely be driven by mobile data and fixed broadband. Consumer data accounted for 88% of mobile and fixed data in 2014 and is set to reach 93% by 2019.

While the voice market will remain saturated and flat, or even see a decline in the years ahead, mobile data is on the rise. In light of this trend, we expect data prices to continue declining over the next few years. The consumer segment is expected to drive most of the data market growth, with a compound annual growth rate (CAGR) of 60%, followed by the enterprise segment, with a CAGR of 45%.

As Indonesia joins the ASEAN Economic Community (AEC), competition in the telecoms sector will be tighter. With the ASEAN free trade rules, certain state protections against the entry of foreign operators will no longer exist. As the country with the largest population and a 64th-place ranking of the 148 economies surveyed for the World Economic Forum’s Network Readiness Index, Indonesia will be a big target for ASEAN ICT companies. As a result, we expect ICT penetration levels to increase and broadband quality to improve. The AEC will bring the country’s ICT sector to a new level.

How can telecoms firms cooperate with public authorities to bridge the digital gap in rural areas?

SINAGA: There are several factors behind the digital divide between rural and urban areas, including infrastructure gaps, the ability and skills of the people to use such infrastructure, and the level of local content available in rural areas. To reduce the digital gap, public authorities must first work to provide the right set of policies for infrastructure development, such as tax incentives and business protection. Furthermore, private companies in the sector must also support the government’s efforts to provide training for people in rural areas, which will allow them to take advantage of the opportunities provided by digital knowledge. Last but not least, ICT companies must work to provide local content that caters to the needs of rural communities.

How would you describe the level of IT implementation across different sectors of the economy?

SINAGA: Total IT spending by Indonesian companies is projected to reach $1.68bn in 2015, with a CAGR of 16% expected until 2018. However, there are some industries in Indonesia that do not fit global IT spending patterns, and this is being driven by different maturity levels of IT implementation.

The most advanced industries in Indonesia in terms of IT implementation are banking and financial services, followed by the energy sector, retail and wholesale, industrial manufacturing, electronics, media and entertainment, and telecommunications. On the other hand, the sectors that are considered less mature in their IT implementation – and therefore in need more rapid development – are the government, the education sector, construction, health care and transportation.