IIT » Topics » Cellular Subscriber Growth and Usage Patterns

This excerpt taken from the IIT 20-F filed Apr 15, 2009.

Cellular Subscriber Growth and Usage Patterns

Since the launch of our cellular services in Indonesia, we have recorded our cellular subscriber growth each year. Our cellular subscriber base has grown from 16.7 million subscribers as of December 31, 2006 to 36.5 million as of December 31, 2008. Operating revenues from cellular services have grown from Rp9,227.5 billion, representing 75.4% of our total operating revenues in 2006 to Rp14,178.9 billion, representing 76.0% of our total operating revenues in 2008. This growth has been driven by continued growth in demand for cellular and other telecommunications services in Indonesia coupled with expansion of our cellular network and capacity and our marketing efforts to attract new subscribers. The number and usage behavior of new cellular subscribers may vary from quarter to quarter, depending in part on the pricing packages we offer during a particular quarter and those offered by our competitors.

Following the merger of Satelindo and IM3 into Indosat in 2003, we began a network integration process to combine these two networks using a common cellular platform. As this network integration process involved a wide geographical area and equipment compatibility issues, some of our cellular subscribers experienced periods of inconsistent cellular service quality during various stages of the integration, particularly in 2005 and in the Java region. As a result, we were unable to launch marketing initiatives related to our cellular services on a nationwide basis until the first quarter of 2006. We believe these network integration issues contributed significantly to our decrease of approximately 1.5 million cellular subscribers during the first quarter of 2006. We completed our network integration during the first quarter of 2006 and we believe our cellular service quality has improved. After the network integration, we began launching several nationwide marketing initiatives to attract new cellular subscribers, including Mentari “Freetalk,” Mentari “Hebat” and IM3 “Raja SMS.” As a result of these initiatives, we experienced increased SMS usage and voice traffic relative to the number of cellular subscribers in 2007 and 2008 as compared to prior periods. In 2008, we continued to launch several marketing initiatives, including Mentari “Free Talk” and IM3 “Raja SMS,” and to promote the Mentari “Hebat” campaigns. As a result of these programs, we also recorded a 49.0% increase in the number of cellular subscribers from 24.5 million in December 2007 to 36.5 million in December 2008. Although our cellular network quality has improved and several marketing initiatives have been launched in the first half of 2007, the effect of these events on our financial condition continued into the second half of 2007 and in 2008.

Our operating revenues from cellular services have grown at a slower rate than our cellular subscriber numbers primarily due to a combination of increased penetration to lower-income subscribers, a decrease in our effective revenue per minute due to discount offers and extended local zones. Consistent with industry trends in other countries, as the market penetration for cellular subscribers in Indonesia increases, the usage levels of new subscribers declines. Other factors have contributed to this trend, including increased usage of SMS, rather than voice services, and the tariff packages we have offered to attract such new subscribers. Many new cellular subscribers are younger retail subscribers who typically use SMS heavily, but generate less cellular voice traffic than our existing cellular subscribers. Such cellular subscribers typically have higher price sensitivity and are more likely to switch telecommunications operators based on price and promotional factors.

 

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This excerpt taken from the IIT 20-F filed May 5, 2008.

Cellular Subscriber Growth and Usage Patterns

Since the launch of our cellular services in Indonesia, we have recorded our cellular subscriber growth each year. Our cellular subscriber base has grown from 14.5 million subscribers as of December 31, 2005 to 24.5 million as of December 31, 2007. Operating revenues from cellular services have grown from Rp8,645.0 billion, representing 74.6% of our total operating revenues in 2005 to Rp12,752.5 billion, representing 77.3% of our total operating revenues in 2007. This growth has been driven by continued growth in demand for cellular and other telecommunications services in Indonesia coupled with expansion of our cellular network and capacity and our marketing efforts to attract new subscribers. The number and usage behavior of new cellular subscribers may vary from quarter to quarter, depending in part on the pricing packages we offer during a particular quarter and those offered by our competitors.

Following the merger of Satelindo and IM3 into Indosat in 2003, we began a network integration process to combine these two networks using a common cellular platform. As this network integration process involved a wide geographical area and equipment compatibility issues, some of our cellular subscribers experienced periods of inconsistent cellular service quality during various stages of the integration, particularly in 2005 and in the Java region. As a result, we were unable to launch marketing initiatives related to our cellular services on a nationwide basis until the first quarter of 2006. We believe these network integration issues contributed significantly to our decrease of approximately 1.5 million cellular subscribers during the first quarter of 2006. We completed our network integration during the first quarter of 2006 and we believe our cellular service quality has improved. After the network integration, we began launching several nationwide marketing initiatives to attract new cellular subscribers, including Mentari “Freetalk” and IM3 “Raja SMS.” As a result of these initiatives, we experienced increased SMS usage and voice traffic relative to the number of cellular subscribers in 2006 as compared to prior periods. As a result of these programs, we also recorded a 46.9% increase in the number of cellular subscribers from 16.7 million as of December 31, 2006 to 24.5 million as of December 31, 2007. Although our cellular network quality has improved and several marketing initiatives have been launched in the first half of 2006, the effect of these events on our financial condition continued into the second half of 2006 and 2007.

Our operating revenues from cellular services have grown at a slower rate than our cellular subscriber numbers primarily due to a combination of increased penetration to lower-income subscribers, a decrease in our

 

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effective revenue per minute due to discount offers and extended local zones. Consistent with industry trends in other countries, as the market penetration for cellular subscribers in Indonesia increases, the usage levels of new subscribers declines. Other factors have contributed to this trend, including increased usage of SMS, rather than voice services, and the tariff packages we have offered to attract such new subscribers. Many new cellular subscribers are younger retail subscribers who typically use SMS heavily, but generate less cellular voice traffic than our existing cellular subscribers. Such cellular subscribers typically have higher price sensitivity and are more likely to switch telecommunications operators based on price and promotional factors.

This excerpt taken from the IIT 20-F filed May 10, 2007.

Cellular Subscriber Growth and Usage Patterns

 

Since the launch of our cellular services in Indonesia, we have recorded our cellular subscriber growth each year. Our cellular subscriber base has grown from 9,754,607 subscribers as of December 31, 2004 to 16,704,639 as of December 31, 2006. Operating revenues from cellular services have grown from Rp7,342.1 billion, representing 70.4% of our total operating revenues, in 2004 to Rp9,227.5 billion, representing 75.4% of our total operating revenues, in 2006. This growth has been driven by continued growth in demand for cellular and other telecommunications services in Indonesia coupled with expansion of our cellular network and capacity and our marketing efforts to attract new subscribers. The number and usage behavior of new cellular subscribers may vary from quarter to quarter, depending in part on the pricing packages we offer during a particular quarter and those offered by our competitors.

 

Following the merger of Satelindo and IM3 into Indosat in 2003, we had two separate networks which were previously operated by Satelindo and IM3. In 2004, we began to integrate such legacy networks to create a common cellular platform. This network integration process was complex and time-consuming, involving a wide geographical area and equipment compatibility issues. During various stages of the integration, particularly in 2005 and in the region of Java, we experienced significant difficulties executing our cellular network integration plans. As a result of such difficulties, we were unable to launch marketing initiatives related to our cellular services on a nationwide basis until the first quarter of 2006. In addition, our customers experienced periods of inconsistent cellular service quality, which contributed significantly to a decrease of approximately 1.5 million subscribers during the first quarter of 2006. We completed our network integration during the first quarter of 2006. Since then, we believe our cellular service quality has improved, and we have launched several nationwide

 

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marketing initiatives to attract new subscribers, including Mentari “Freetalk” and IM3 “Raja SMS.” We believe that improved network quality and several aggressive promotions in the first half of 2006 resulted in a positive impact on our financial performance in the second half of 2006 and we experienced cellular subscribers growth until the end of 2006.

 

Our operating revenues from cellular services have not grown at the same rate as our cellular subscriber numbers primarily due to a combination of increased penetration to lower-income subscribers, a decrease in our effective revenue per minute due to discount offers and extended local zones. Consistent with industry trends in other countries, as the market penetration for cellular subscribers in Indonesia increases, the usage levels of new subscribers declines. Other factors have contributed to this trend, including increased usage of SMS, rather than voice services, and the tariff packages we have offered to attract such new subscribers. Many new cellular subscribers are younger retail subscribers who typically use SMS heavily, but generate less cellular voice traffic than our existing cellular subscribers. Such cellular subscribers typically have higher price sensitivity and are more likely to switch telecommunications operators based on price and promotional factors.

 

This excerpt taken from the IIT 20-F filed Jun 28, 2006.

Cellular Subscriber Growth and Usage Patterns

 

Since the launch of our cellular services in Indonesia, we have recorded cellular subscriber growth each year. Our cellular subscriber base has grown from 5,962,444 subscribers as of December 31, 2003 to 14,512,453 as of December 31, 2005. Operating revenues from cellular services have grown from Rp5,111.9 billion, representing 62.1% of our total operating revenues, in 2003 to Rp8,645.0 billion, representing 74.6% of our total operating revenues, in 2005. This growth has been driven by continued growth in demand for cellular and other telecommunications services in Indonesia, coupled with expansion of our network coverage and capacity and our marketing efforts to attract new subscribers. The number and usage behavior of new cellular subscribers may vary from quarter to quarter, depending in part on the pricing packages we offer during a particular quarter and those offered by our competitors.

 

Our operating revenues from cellular services have not grown at the same rate as our cellular subscriber numbers, primarily due to a combination of lower usage levels by new cellular subscribers as compared to existing cellular subscribers and decreased usage in late-2005 by certain existing cellular subscribers. In addition, we also experienced higher churn rates among our prepaid cellular subscribers, increased SMS usage and decreased cellular voice traffic relative to the number of cellular subscribers in 2005 as compared to prior periods, despite overall growth in cellular voice traffic and operating revenues from cellular services.

 

Consistent with industry trends in other countries, as the market penetration for cellular subscribers in Indonesia increases, the usage levels of new subscribers declines. Other factors have contributed to this trend, including increased usage of SMS, rather than voice services, and the tariff packages we have offered to attract such new subscribers. Many new cellular subscribers are younger retail subscribers who typically use SMS heavily, but generate less cellular voice traffic than our existing cellular subscribers. Such cellular subscribers typically have higher price sensitivity and are more likely to switch telecommunications operators based on price and promotional factors.

 

In the first quarter of 2006, we completed the optimization of our cellular network for Java. In anticipation of increased competition in the major cities of Java by new market entrants, we upgraded and replaced certain existing cellular equipment in Java and re-deployed such cellular equipment to other areas of Indonesia in an attempt to maximize the performance, capacity and quality of our cellular network in the major cities of Java while maintaining extensive cellular network coverage. This initiative resulted, in late 2005, in unanticipated limited periods of lower network performance and quality. During late 2005, we believe certain existing cellular subscribers temporarily decreased usage of our cellular services, thereby resulting in lower growth in operating revenues from cellular services in 2005. As result of new marketing campaigns designed to encourage usage, we expect our operating revenues from cellular services to increase as we continue to expand our network coverage, capacity and quality and add new cellular subscribers.

 

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