Fitch Ratings tipped Indonesia’s mobile operators to enjoy a modest recovery in revenue in 2019, but warned the pace of the turnaround will depend on their success in generating growth from data.
The agency noted competition remains intense as operators plan to increase capex to improve network capacity, especially outside the economic centre of Java.
It believes a price war is unlikely in the near term due to current low data yields, with a shift in the top three players’ focus towards profitable growth expected to result in rational pricing.
Market leader Telekomsel’s mobile revenue showed signs of levelling out in Q4, down a marginal 0.6 per cent year-on-year compared with a 5.8 per cent decline in the first nine months of 2018.
XL Axiata outperformed the market in 2018 by mobile revenue, with a 3 per cent rise in Q4 seeing it close the full year with flat revenue and unseating rival Indosat Ooredoo to become the country’s second-largest mobile operator by this metric.
By subscribers, XL remains in third place despite increasing its market share 4 percentage points in 2018 to 16 per cent. Fitch Ratings expects continued subscriber gains this year.
It said Indosat Ooredoo’s net subscriber additions and ARPU need to improve considerably to meaningfully turn around a 44 per cent EBITDA decline in 2018.
The operator was hit hardest by the government’s SIM registration push started in May 2018, with its mobile connections dropping from nearly 110 million in Q4 2017 to 57.5 million in the last quarter of 2018, data from GSMA Intelligence showed. Its market share dropped from 23 per cent to 17 per cent.
Operators’ aggressive capex expansion underscores the need for continuous investment to maintain modest growth, Fitch Ratings said.
Indosat plans to increase its annual capex from IDR6 trillion in 2018 to IDR10 trillion ($700 million) for the next three years, to catch-up with the competition after years of under-investment.
XL’s budget is set to increase to IDR7.5 trillion this year from IDR7 trillion in 2018.
Despite the planned increases, Fitch Ratings believes it will be a challenge for the two opeators to match Telkomsel’s mobile network footprint without a network or spectrum-sharing policy in place, in light of their weaker market presence and smaller scale.Subscribe to our daily newsletter Back