Indosat’s Strategy for Broadband Penetration in

IndonesiaCase Study of “Bridging The Digital Divide:

Indosat’s Drive for Broadband Penetration in Indonesia”

M.Ridwan - 29112555Machadi Dhana – 29112303

M. Khadafi – 29112324Pedro Putu Wirya – 29112565Seto Kusparyanti – 29112306

Yuliani Dewi – 29112321Rahdianto Maulana - 29112554

Syndicate 5

10 November 1967, Indosat established as subsidiary of US-based International Telephone and Telegraph Corp. (IT&T)

1991, there were PT Telekomunikasi Indonesia, PT Indosat and PT Satelindo as the state owned companies, with specific business segment specialization Telkom for local communication, Indosat for

international communication, and Satelindo for satellite communication

History of Indosat

8 September 2000, the Indonesian government issued Telecommunication Law, prohibiting activities that could result in monopolistic practices

Indosat lost it’s exclusivity to international telecommunication service

While it was also given the broader opportunity to play role in domestic telecommunication business

What’s Next for Indosat?

History of Indosat

Fixed Line Infrastructure Legacy network using telephone line and dial-up

method was the basic infrastructure for fixed line internet access – before 2004

ADSL launched by Telkom (July 2004) had shifted the way of user internet behavior from “slow and frustrating” into “quiet better accessibility”

Copper telephone cabling infrastructure for telephony access was the dominant resource for fixed line method While fiber optic/VSAT/Cable TV were not in

significant position to reach end user

Broadband Service in Indonesia

The Technology Preference Fixed line infrastructure was to minimal to cover people Huge investment was needed to provide good

coverage to most of the Indonesian people Geographic, geo-nature and demographic

considerations The new player will never beat the pioneer on

telephony line infrastructure – Telkom What is the economics and optimum communication

technology to compete on?

Broadband Service in Indonesia

Wireless Communication Technology Using GSM/CDMA wireless communication protocol

as the backbone infrastructure GSM with 3G or 3.5G technology CDMA with CDMA 2000-1x technology

The mobile internet infrastructure Accessibility anywhere, anytime Less investment compare to fixed line infrastructure Gain more coverage ratio

Broadband Service in Indonesia

The Challenges Broadband service increase along with degree

of competition in domestic market Content service will also drive the market

growth of broadband industries Customer wants low price, reliable

performance and high speed data access Content innovation is one of the key factor to

get more revenue on the broadband service

Broadband Service in Indonesia

Supporting Situation The only one company in Indonesia that can

provide customer with 3.5G HSDPA technology (December 2007) while the other competitor only provide in 3G baseline

To support the content delivery to user, Indosat has IM2 to cover the Internet Service Provider

Enhance setup to align with the next generation model to reduce the cost of investment – rapid changes on technology in Telco industry

What Technology Should Indosat Use?

Recommendation Using GSM technology instead of changing to CDMA Existing infrastructure can be optimized to enhance VAS

(Value Added Services) Keep the leading path through its 3.5G and optimize for the

next generation technology – thinking further for infrastructure development

Most of competitors are playing in GSM, instead of CDMA (and we know exactly how CDMA failed in this country)

Global technology using GSM, major gadget vendor produce and focus on GSM handset other than CDMA

The use of common tower can be one of the “token” to expand the coverage (capital optimization vs. service deliverable)

What Technology Should Indosat Use?

Background Indonesia has low internet penetration, mainly because

less of connectivity Service to be offered to customer – the basic needs and

wants The technology and application changes in Telco and IT Telco company will not survive if just relying on

infrastructure base business – do some innovation

Strong Point International gateway backbone and domestic fiber optic Backbone network established Leased line service coverage IM2 for multimedia content support

The Positioning of Indosat Broadband Service

Recommendation Develop the multimedia content/value added service on top

of broadband infrastructure service Gain more profit from VAS business Lease the infrastructure to competitor to optimize the

bandwidth usage and gain some revenue The trend shifted of customer from basic communication

service into multimedia application service Compete with the competitor and be the leader by doing it now Capture the market and maintain the leadership It is predicted 5 years later that the internet user will be doubled

and broadband services will become more interesting to have

The Positioning of Indosat Broadband Service

Background Two big player in broadband industries Collaboration of Telkom and Indosat can give

more significant impact to Indonesia’s telco infrastructure and user penetration

Should Indosat Collaborate or Compete with The Other?

Recommendation Learned from India, the government should support the

collaboration in order to strengthen each company and for national strategic development

Indosat with experience connecting international network and wireless broadband access combine with Telkom with its strong point in fixed line infrastructure and market leader in this segment

At the end, the people of Indonesia will have better Internet access and good telecommunication infrastructure covering across the country

The integration of the people across the nation will support the enhancement of educational level, knowledge and prosperity level, national security, and national collaboration for better Indonesia

Should Indosat Collaborate or Compete with The Other?

Leading in 3.5G technology Great Internet Service Provider, proved by

winning Top Brand Award in 2005 until 2007 Strong financial to support capital

expenditure One of the market leader in Telco industry

Indosat key success