Tuesday, October 16, 2007

Cell phone war rages on


"To lie is a sin! You can have three times as many cell phone message units." This is the tagline intensively advertised by Hutchison, a newcomer cellular operator known as 3 (read: Three). This operator, the full name of which is Hutchison Charoen Pokphand Telecommunication Indonesia and whose shares are controlled by Hutchison Telecommunications International Ltd (60 percent) and Charoen Pokphand Group (40 percent), officially entered the cellular telecommunications market in Indonesia in late March.

With Hutchison Charoen Pokphand Telecommunication being a newcomer, its president director, Rajib Shawney, said 3 was ready to engage in a rate war with established operators. 3, he said, offers a package containing talk time that is 50 percent longer than that nominally found in starter packs. For a recharge package of Rp 30,000 and over, 3 will triple the value of the voucher. For calls to other 3 users, the cost is Rp 150, for both local and long distance calls. As for calls made to subscribers of other operators, the rate is Rp 1,000 (local) and Rp 2,000 (long distance).

Initially, Hutchison will have a presence in 67 cities in Java, and then expand to Bali in June, Sumatra in August and to Sulawesi and Kalimantan at the end of 2008. Offering competitive rates, 3, which is initially designed for pre-paid service, expects to attract one million subscribers by the end of 2007. "Indeed, it will take a long time to win over the market. However, we are convinced that our business will develop," said Rajiv during the launch of 3 at Dharmawangsa Hotel, South Jakarta.

The presence of 3 has led to fiercer competition in the cellular business and has spurred other operators to do their utmost to maintain their market share. Currently, there are a number of cellular-based telecommunications operators in Indonesia. In the Global System for Mobile Communication (GSM) sector, there are Telkomsel, Indosat, XL, Lippo Telecom and, of course, 3. Meanwhile in the Code Division Multiple Access (CDMA) technology sector, players are Mobile-8 and Neon, Bakrie Telecom (Esia), Telkom (Flexy) and Indosat (Star One). In addition, there are also CAC and NTX, both of whom are licensed 3G operators based on Wideband Code Division Multiple Access (WCDMA).

There are an estimated 30 million numbers in circulation, which illustrates just how great the market potential is in Indonesia. Unlike fixed line telephones, of which households usually have just one connection, cellular phones allow every family member to have their own number. Some people even have two or more cell phone numbers. As a result, it was only a matter of time before a rate war broke out.

PT Excelcomindo Pratama Tbk, for example, has introduced a special rate for XL Bebas (Free XL) prepaid card, namely Rp 25/second. This rate applies for telephone calls made to any service (fellow XL number, PSTN or other operators) regardless of zone or time. "We want to make the Bebas card a simple and easy product in terms of accessibility and rates," said Riza Rachmadsyah, senior brand manager of Bebas.

This program is just one of several choices, as for its post-paid service XL has its Xplore Family Plus program, which allows a family (comprising five to 10 people), to communicate with one another at a lower price. Indeed, XL has introduced various offers to respond to the increasingly critical market demand, maintain consumer loyalty and attract new consumers.

Fierce competition involves not only GSM but also CDMA technologies. Although the growth of Flexi wireless telephone subscribers has been hampered by users switching providers, PT Telkom claims that it booked gross revenue of Rp 750 billion in the first quarter of 2007.

Up to the end of the first quarter, the number of Flexi subscribers nationwide was recorded at 4.6 million, with average revenue per user (ARPU) being about Rp 60,000. Aside from the innovation called FlexiCombo, which allows users to go on a calling spree all over Indonesia where there is a Flexi frequency, another thing that has jacked up the revenue is the rate that Flexi offers. "The rate of Rp 49/minute that Flexi offers is the lowest and the most competitive for operators based on CDMA technology," said Eddy Kurnia, Telkom's vice president of public and marketing communication.

The rate with a CDMA cellular phone is indeed lower in cost than that of GSM. That's why Esia has become popular among cellular phone users, especially because the Esia GoGo service, which offers a call forwarding feature that can cover a vast area, allows communication in many cities without having to replace your card while the rate remains low.

This fixed wireless product of PT Bakrie Telecom should not be underestimated. Some of the innovations that Esia has introduced are indeed rare in the telecommunications industry. This does not relate to the development of the product, which is a serious undertaking, but rather to its marketing strategies, such as the Gile Beneer (Really Crazy) Package or the Hujan Duit (Raining Money) Package. These gimmicks are really crazy indeed.

In early March, Esia also launched its latest edition starter pack called Esia Paket Untung (Esia Profit Package). According to Erik Meijer, deputy president director of PT Bakrie Telecom Tbk, currently the number of Esia subscribers stands at over 1.5 million. The target set for this starter pack is that it will be used by 90 percent of 2.1 million new customers, which constitute the company's target for late 2007. As for the remaining 10 percent, they will be the targets for Wifone house phone products.

Erik is optimistic that this latest product will sell well even though a price war involving telecommunications rates is inevitable. Esia's rates are highly competitive. Esia Profit Package, for example, offers the longest talk time (Rp 50/minute and Rp 1,000/hour to fellow Esia users). "Esia users will enjoy the biggest rewards not only because the rate is the lowest but also because they can enjoy a great number of bonuses," Erik said, by way of promotion.

Calling sprees at low rates is what many cellular operators, including Fren, have been offering. Fren has been intensively promoting its one-rate scheme. As of May 1, PT Mobile-8 Telecom Tbk (Mobile-8) applies a rate of only Rp 10 per second for all calls, local or otherwise, after the sixth minute. In this way you can save money when phoning users of other providers or a PSTN or even making an International call (using FrenSLI 01068).

Rate war? Of course, this is the most effective means for operators to attract subscribers. These marketing gimmicks include lowering talk rates and reducing the price of starter packs. Of course, operators are being imaginative in their offers and are marketing products to suit the target.

The low-end market, for example, needs cheap communications means with sound and SMS. For this market, there are AS vouchers from Telkomsel, Jempol vouchers from XL and IM3 (with the M3 Shock package) from Indosat. They are involved in head-to-head competition and offer almost similar facilities and rates. Then in the mid range there are Simpati from Telkomsel, Bebas from XL and Mentari from Indosat as well as Fren from Mobile-8. In the high-end market, there are postpaid vouchers such as Halo from Telkomsel, XPlore from XL and Matrix from Indosat. What's obvious is that the rate war has yet to end. (Burhan Abe)

The Jakarta Post - May 16, 2007

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