Photographer: Dimas Ardian/Bloomberg

Build Network or Lose License, Indonesia Telecom Minister Says

  • Only four carriers should exist by 2019, Rudiantara says
  • Indonesia's wireless market dominated by three companies

Indonesia’s telecommunications minister warned he could revoke most of the nation’s 10 mobile-phone licenses unless carriers merge or build out networks able to provide wireless Internet services.

Minister of Communications and Technology Rudiantara. Photographer: Adem Salvarcioglu/Anadolu Agency/Getty Images
Minister of Communications and Technology Rudiantara. Photographer: Adem Salvarcioglu/Anadolu Agency/Getty Images

"Each permit has requirements for the operator to invest and to build, so if they don’t build anything, I can revoke their permit," Minister of Communications and Information Technology Rudiantara, who was an executive at the nation’s two biggest carriers before joining the government, said in an interview last week.

"But my background is in the private sector, so I’m pragmatic," he said. "I will suggest they consolidate to have the capability to invest and retain their permits."

Indonesia should have a maximum of four mobile operators by the time the minister’s term ends in 2019 and smaller players should either merge or exit the industry, said Rudiantara, who like many Indonesians goes by only one name.

Rudiantara’s comments reflect the frustrations of a ministry that’s struggling to improve the efficiency of an industry currently dominated by three companies with an estimated 80 percent of the market and seven players battling over the remaining 20 percent. The minister said such inefficiencies are part of why phone coverage is still patchy in parts of the country despite Indonesia having more than 300 million wireless subscriptions, greater than the populations of Japan and Germany combined.

Though he didn’t name any companies, Rudiantara said some mobile operators aren’t fulfilling agreements to develop their network infrastructure, even after being fined.

"So far we’ve handed them fines and penalties, but my job isn’t to accumulate funds for the government," he said. "I only need to enforce the permits and I’m prepared to do that, but I’d rather take the business-friendly and practical approach and suggest they merge to keep operating."

Indonesia’s three largest carriers are state-owned PT Telekomunikasi Selular, PT Indosat and PT XL Axiata, which control more than 80 percent of the market, according to the International Telecommunication Union.

Then there are the smaller competitors, including PT Bakrie Telecom, PT Smartfren Telecom and PT Hutchison 3 Indonesia. Some license holders don’t even offer wireless services.

Separately, Rudiantara said the government plans to auction orders for 15-year contracts to build Internet infrastructure in the Riau and Maluku islands to expand the nation’s high-speed Internet access.

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