At a time when Indonesia’s major operators are racing to roll out their 4G networks and making regular claims about having the fastest network, the widest coverage or the most 4G users, the country’s fifth largest player Smartfren Telecom is quietly gearing up to compete with the likes of Telkomsel, Indosat and XL Axiata on 4G data.
The operator, backed by the Sinar Mas Group, one of the country’s largest conglomerates, with interests in pulp and paper, agribusiness and mining, aims to be a leader in 4G data and has “very aggressive” plans for customer acquisition next year, CEO Paul Hodges (pictured) told Mobile World Live.
Its owners brought in a new management team at the beginning of the year to expand its market share and shake up the company’s culture and structure. Compared with rivals, Smartfren is tiny, with 12.3 million customers and less than a 4 per cent market share in Q3, which has been fairly stable for the past four years. Telkomsel leads the market with 148 million total connections.
Hodges joined in March with former CSL colleague Christian Daigneault as CTO and a number of senior executives from Celcom and Maxis in Malaysia and XL.
Taking a page out of CSL’s 4G blueprint in hyper-competitive Hong Kong, Hodges is adamant Smartfren can make a difference in the market with its network quality and coverage.
While the top three 4G players currently offer 4G only in selected cities, he said, Smartfren aims to take LTE-Advanced (LTE-A) nationwide, with support from the country’s large tower companies and a strategic partnership with fibre company Moratel. “We plan to enable HD video viewing with no buffering, which isn’t possible now in the country,” he said.
Smartfren rolled out a TDD-FDD LTE-A network in 11 cities in western Indonesia in September and in August upgraded its 4G network in Jakarta to LTE-A with two-band carrier aggregation.
It has 30MHz of TDD 2.3GHz spectrum and 20MHz of 800MHz FDD airwaves, and aims to deploy 11,000 4G base stations nationwide next year. This will make its 4G footprint larger than its legacy network, he said. “We are picking up our investment next year, for both coverage in outer-lying areas and increased density in Java. The 800MHz band is for coverage, while 2.3GHz is for capacity for in-fill.”
Hodges noted that it is not in the market to undercut on prices but to provide a better data experience. “We certainly won’t be destructive in the market. We’re in a very good position. We’re small enough to be nimble in developing products and services — speed to market is key for us. LTE is the tech of the future, and currently we have the best network, which puts us in a good position to take market share from some of the bigger players.”
Moving on from CDMA
The operator emerged in 2012 after the merger of CDMA operators Mobile-8 and Smart Telecom. It has partnerships with a number of Chinese vendors to produce smartphones under the Smartfren Andromax brand. These phones operate on CDMA 2000 1xEVDO Rev A technology.
He said its longer-term plan is to transition from low ARPU to higher ARPU as it reduces its reliance on low-end handsets. Part of its strategy is deploying voice-over-LTE (VoLTE), which it plans to introduce this quarter. It is pushing into digital services as well as the enterprise market, which are areas it hasn’t had good traction in the past with CDMA. It also plans to leverage its parent company’s bank ownership as it moves into e-commerce.
Hodges said he’s spent the last six months going through a major corporate restructuring. “It’s been no small task, because it’s required a complete organisational transformation in everything we do. This has given us the ability to go into the above areas [digital services, e-commerce…], which previously we weren’t structured to capture.”
It has also expanded its international roaming agreements worldwide after hiring the head of roaming at CSL.
Two-vendor approach
Given the scale of the Indonesian market, with 254 million people and more than 18,000 islands, Smartfren engaged two network equipment vendors for its 4G rollout.
“It’s unrealistic to expect one vendor to be able to manage such a large territory. We made the decision to give the east to ZTE and the west to Nokia,” he said.
Looking at the quick rise of upstart Bolt Super 4G, Hodges said its rival has taken advantage of a market looking for faster data connectivity, but it is geographically restricted and a pure data play. “It’s a very different market today. They have a dongle proposition, and I think their time has gone now.”
Bolt launched 4G in the greater Jakarta area in early 2014. It has 1.9 million 4G users, giving it a 40 per cent share of the country’s 4G market, which is down from 82 per cent in Q1.
Asked why he’s uprooted from Hong Kong, where he’s spent most of his career, Hodges said: “It’s the perfect opportunity to take a small player with tremendous potential and a supportive board that understands what it takes to be successful. We’re in the perfect position in the market with a new network and a lean and nimble organisation.”
He certainly will have his hands full next year. Telkomsel said last month it is expanding 4G coverage from 10 to 14 cities by the end of the year and claimed the widest network coverage, while second ranked Indosat is targeting 20 cities by year-end. Number 3 XL is planning 4G service in 36 cities by the end of the year and said it has the country’s fastest 4G speeds. In addition to rising competition, Smarfren reported its net loss for the first nine months of the year increased 42 per cent to IDR1.34 trillion ($96.2 million).
But Hodges is undaunted. “The company is totally restructured with a new team, a new vision and a new network, so it’s a matter of focusing on the right growth areas and launching the right services and devices,” he said. “We absolutely have to be taken seriously by all the big players because we’re in such an advantageous position with our network.”
It’s already seen ARPU more than double for LTE customers compared with CDMA users.
He drew a parallel between Smartfren and LG Uplus in South Korea, which shifted straight from CDMA to blanket LTE coverage quickly and grew market share. “We are on a similar path.”
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