Indosat’s recent appointment of DDB to its US$15 million creative account marks the latest move in Indonesia’s increasingly competitive telecoms sector. As brands vie for position, marketing spend is booming.
Telecoms firms spent IDR2 trillion (US$209 million) in the first half of 2008, a 57 per cent increase on the first half of 2007, according to Nielsen’s Adquest Millennium. In comparison, Indonesia’s total adspend grew 23 per cent to IDR20 trillion. Telecoms are now Indonesia’s largest adspend category.
Until recently, few of the archipelago’s 260 million inhabitants had a phone. Now more than 10 firms - both former Government monopolies and foreign newcomers - offer some form of mobile service. Wireless penetration exceeds 60 per cent on Java, where 126 million live, and the battle is spreading to the hinterlands.
Yet savage price competition rules, and advertising is based on a single promise - cheap phone with cheap connections. Brand loyalty is abysmally low, and churn rates are miserably high.
“Telecoms companies don’t have a way to retain users,” says Andy Zain, CEO and president director at Elasitas Technologies, a mobile content provider.
“Ninety-five per cent of the market is pre-paid. There is no contract.”
Robby Susatyo, MD at Synovate Indonesia, says telecoms offer only marginal differences, except for the come-on gimmicks. “There are lots of tricks,” he explains. “They advertise special rates, but there are many conditions. You have to call after midnight, or the low rate starts after five minutes.”
There is an upside, though. Plummeting handset prices and connection fees have fostered a mass market, whereas not long ago, telephone service was the privilege of an affluent elite.
Indonesia’s telecoms industry was virtually untapped in the late 1990s, with total mobile penetration a mere half a per cent. Things began to change after the end of the Suharto era in 1998, and the major turning point came in December 2002, when Telkom launched a wireless service with a limited coverage, Flexi, with both pre- and post-paid options. Flexi’s price - roughly one quarter of what a normal wireless company would charge - is what brought mobile to the masses.
In 2005, 20 per cent owned phones, but triple that rate - 68 per cent - did the following year, according to Synovate. Viewed by socio-economic strata, ownership has saturated the wealthiest quartile (59 per cent in 2006; 99 per cent in 2007) while penetrating the poorest quartile (seven per cent in 2006; 45 per cent in 2007). Today, the bulk of the market is the $22 to $30 handset bundled with a card. CDMA-based Esia offers Hwawei handsets, and Flexi is partnered with Nexian. The GSM operators are bundling with brands such as Nokia and Samsung.
Even Javans who cannot afford to make voice calls purchase second-hand phones and use them for SMS. Indonesia is a caller-pays market - users do not pay for incoming calls. Over 30 per cent of mobile subscribers are believed to use their phones only for SMS or voice messages. SMS accounts for 31 per cent of telecom revenue.
How can telecoms companies brand their service in such a market? Stuart Green, MD of Interbrand Asia-Pacific, points to two possible ways: “Through partnerships or through innovative ways in packaging their products.”
Sellers of pre-paid services are experimenting with the latter. “One company might offer three cards - one for working people, another for young executives and another for young people - even though the connection rate is the same for each,” says Susatyo. Some companies position pre- and post-paid options by giving them different prefixes.
Indonesia’s considerable population and growth potential have many foreign telecoms firms eyeing the archipelago. But they may have already missed their chance. “I think they have come to the conclusion that the low-hanging fruit has been picked, and that it will be very difficult to enter now,” concludes Susatyo. “There are too many telecoms companies.”
Got a view?
Email [email protected]
Telecoms firms spent IDR2 trillion (US$209 million) in the first half of 2008, a 57 per cent increase on the first half of 2007, according to Nielsen’s Adquest Millennium. In comparison, Indonesia’s total adspend grew 23 per cent to IDR20 trillion. Telecoms are now Indonesia’s largest adspend category.
Until recently, few of the archipelago’s 260 million inhabitants had a phone. Now more than 10 firms - both former Government monopolies and foreign newcomers - offer some form of mobile service. Wireless penetration exceeds 60 per cent on Java, where 126 million live, and the battle is spreading to the hinterlands.
Yet savage price competition rules, and advertising is based on a single promise - cheap phone with cheap connections. Brand loyalty is abysmally low, and churn rates are miserably high.
“Telecoms companies don’t have a way to retain users,” says Andy Zain, CEO and president director at Elasitas Technologies, a mobile content provider.
“Ninety-five per cent of the market is pre-paid. There is no contract.”
Robby Susatyo, MD at Synovate Indonesia, says telecoms offer only marginal differences, except for the come-on gimmicks. “There are lots of tricks,” he explains. “They advertise special rates, but there are many conditions. You have to call after midnight, or the low rate starts after five minutes.”
There is an upside, though. Plummeting handset prices and connection fees have fostered a mass market, whereas not long ago, telephone service was the privilege of an affluent elite.
Indonesia’s telecoms industry was virtually untapped in the late 1990s, with total mobile penetration a mere half a per cent. Things began to change after the end of the Suharto era in 1998, and the major turning point came in December 2002, when Telkom launched a wireless service with a limited coverage, Flexi, with both pre- and post-paid options. Flexi’s price - roughly one quarter of what a normal wireless company would charge - is what brought mobile to the masses.
In 2005, 20 per cent owned phones, but triple that rate - 68 per cent - did the following year, according to Synovate. Viewed by socio-economic strata, ownership has saturated the wealthiest quartile (59 per cent in 2006; 99 per cent in 2007) while penetrating the poorest quartile (seven per cent in 2006; 45 per cent in 2007). Today, the bulk of the market is the $22 to $30 handset bundled with a card. CDMA-based Esia offers Hwawei handsets, and Flexi is partnered with Nexian. The GSM operators are bundling with brands such as Nokia and Samsung.
Even Javans who cannot afford to make voice calls purchase second-hand phones and use them for SMS. Indonesia is a caller-pays market - users do not pay for incoming calls. Over 30 per cent of mobile subscribers are believed to use their phones only for SMS or voice messages. SMS accounts for 31 per cent of telecom revenue.
How can telecoms companies brand their service in such a market? Stuart Green, MD of Interbrand Asia-Pacific, points to two possible ways: “Through partnerships or through innovative ways in packaging their products.”
Sellers of pre-paid services are experimenting with the latter. “One company might offer three cards - one for working people, another for young executives and another for young people - even though the connection rate is the same for each,” says Susatyo. Some companies position pre- and post-paid options by giving them different prefixes.
Indonesia’s considerable population and growth potential have many foreign telecoms firms eyeing the archipelago. But they may have already missed their chance. “I think they have come to the conclusion that the low-hanging fruit has been picked, and that it will be very difficult to enter now,” concludes Susatyo. “There are too many telecoms companies.”
Got a view?
Email [email protected]
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