- 41 - The Competition Law is implemented by various regulations, including Government Regulation No.572010 dated July 20, 2010
A. Fixed Line, Fixed Wireless and DLD
Our exclusive right to provide domestic fixed line telecommunications services in Indonesia ended following the Telecommunications Law’s implementation in 2000. The MoC issued licenses to Indosat for domestic fixed line services in
August 2002 and for DLD telephone services in May 2004. We entered into an interconnection agreement with Indosat dated September 23, 2005 to allow interconnection between our local fixed line services in Jakarta, Surabaya, Batam, Medan,
Balikpapan, Denpasar and certain other areas. By 2006, Indosat was able to provide nationwide DLD services through its CDMA- based fixed wireless network, its fixed line network and these interconnection arrangements with us.
In an attempt to liberalize DLD services, the Government required each DLD provider to implement a three-digit access code to be dialed by customers making DLD calls. These regulations were first implemented in Balikpapan in 2008, with Balikpapan
residents given the option to make a normal DLD call or to select a three-digit code assigned to Indosat or to us. Under current regulations, this system is to be applied nationally beginning September 27, 2011. See “Legal Basis and Regulation – Introduction
of Competition in the Indonesian Telecommunications Industry”.
Indosat remains our largest competitor with respect to fixed line and DLD services and we also compete against other fixed line service providers such as PT Bakrie Telecom Tbk. formerly Ratelindo and PT Batam Bintan Telecom. However, traditional
fixed line services have faced and will continue to increasingly face competition from cellular services, particularly as cellular tariffs decrease, and from other alternate services such as fixed wireless, SMS, VoIP and e-mail services.
Telkom Flexi, our fixed wireless network is the largest in Indonesia with coverage of 370 cities offering limited mobility and charging customers based on PSTN tariff that is principally lower than GSM. For comparison, Indosat in 2004 launched its
CDMA-based fixed wireless phone service under the brand name “StarOne” in Jakarta and Surabaya. Bakrie Telecom offers fixed wireless services in more than 30 cities and Mobile-8 was granted a nationwide fixed wireless access license in 2009. In general,
the technologies employed by CDMA and fixed wireless access operators are less capital-intensive, previously allowing these operators to offer more competitive prices than GSM operators. Furthermore, licensing fees for radio stations of fixed wireless
mobile phone connections is lower than cellular.
B. Cellular
We operate our cellular service business through our majority-owned subsidiary, Telkomsel. As of December 31, 2013, Indonesia’s cellular market is dominated by Telkomsel, Indosat and XL Axiata, which collectively account for 80.4 of the full-
mobility cellular market. Other providers include Hutchison, Natrindo, Smart Telecom and Bakrie Telecom.
There were approximately 310 million full-mobility cellular subscribers in Indonesia as of December 31, 2013, a 12.3 increase from approximately 276 million as of December 31, 2012.
We believe that Telkomsel competes effectively in the Indonesian cellular market on the basis of price, coverage, service quality and value added services. As of December 31, 2013, Telkomsel remained the largest national licensed provider of cellular
services in Indonesia, with approximately 131.5 million cellular subscribers and a market share of 42.4 of the full-mobility cellular market. The second and the third largest providers were Indosat and XL Axiata, which have a market share of 19.2 and
18.7 respectively, based on the estimated number of subscribers as of December 31, 2013. In addition to the nationwide GSM operators, a number of smaller regional GSM, analog and CDMA fixed wireless providers operate in Indonesia.
The following table sets out information as of December 31, 2013 for each of the three leading cellular providers with national coverage:
Operator Telkomsel
Indosat XL Axiata
Launch date May-1995
Nov-1994
2
Oct-1996 2G Licensed frequency bandwidth GSM 900 1800
30 MHz 30 MHz
30 MHz 3G Licensed frequency bandwidth 2.1 GHz
15 MHz 10 MHz
15 MHz Market share
1
42.4 19.2
18.7 Subscribers
1
131.5 million 59.6 million
58.1 million 1 Internal estimate, dated December 31, 2013 based on various statistics compiled by us.
2 In November 2003, Indosat and Satelindo merged and Indosat took over Satelindo’s cellular operations.
- 42 - Hutchison and Natrindo also provide cellular services in Indonesia and in 2012 were each awarded an additional 10 MHz of
spectrum on the 3G license frequency bandwidth 2.1 GHz. This additional spectrum increased their respective total allocated frequency spectrum to 20 MHz and 25 MHz each. In accordance with the announcement of MoCI No.19PIHKOMINFO22013
dated February 25, 2013, Telkomsel has been selected as one of the companies to be granted an additional 3G license with radio frequency in the 2.1 GHz bandwidth.
C. IDD
