Low Frequency Spectrum Prevents Operators from Merging

Jakarta, Indonesia – The recent acquisition of XL Axiata, one of the giant telecommunications providers in the country, of one of its smaller rivals, Axis Capital Group has infuriated its fellow operators. The move, which was strategized for months, enabled the company to acquire more subscribers listed under Axis making XL Axiata the second largest telecommunication provider in Indonesia, stealing the place from Indosat which held it for years.

Telkomsel and Indosat are also looking forward to merging with other smaller rivals. However, the low frequency spectrum prevents them from doing so. Despite high demand for access, the frequency limitation slows down internet connection, disrupts calls and prevents users from properly communicating on calls and messages to loved ones abroad.

The Communications and Information Ministry stated that it would be impossible for providers to merge unless the issue of inadequate frequency spectrum is addressed. It is only sufficient for the country to have four GSM (Global System for Mobile Communications) but Indonesia currently has 5: PT Telkomsel, a subsidiary of state-run PT Telkom; PT Indosat, controlled by Qatar Telecom Pte Ltd; XL Axiata, controlled by Malaysia's Axiata Group; Axis, controlled by Saudi Telecom Company (STC); and PT Hutchison 3 Indonesia, controlled by Hong Kong-based Hutchison Whampoa Ltd. According to reviews, these are the companies which ask for mergers with other small rivals. If permitted, it would be impossible to stabilize the spectrum because of the competing network for each one which can lead to total collapse of Indonesia’s telecommunications sector.

The country could not risk its telecommunication to fall as despite its low frequency spectrum, Indonesia remains one of the top markets in the industry. With 240 million citizens, fourth most populous in the world, Indonesian has been at every top ten in telecommunications ranking: the most number of Twitter, Facebook and Instagram users, the most number in prepaid subscribers and the top country in terms of the number of mobile phones (the ratio of individual to mobile phones in Jakarta is 1:2, not counting the dominating fraud mobile market). This has incited more competition both for subscribers and frequency usage.

What is more surprising is that the country’s government has allocated less frequency spectrum for mobile operators, focusing more on television and radio networks. The providers are now asking for fair and equal network capacity and coverage especially since the merger of two of the leading telecommunication companies.