Frost & Sullivan : Indonesia ICT Outlook

The Big Leap Ahead

FEBRUARY 15, 2012

Everybody wants a share of the action

Indonesia is leaping ahead in usage….

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

World Indonesia Malaysia United States India

Yahoo acquires Koprol

CT group- Detik ($60mn)

Rakuten JV Facebook Republic

Internet Users per population

The next wave for consumer data is here

• 6.5 % GDP growth

• Next BRICs story

• Record $ 19 bn FDI in

2011

• Upgrade of country

grade (2011)

• 100% mobile SIM

penetration

• 15% smartphone

users

• Internet growth of

400%in 5 yrs

Entry of large players

Entry of Rakuten, Ebay

Growth capital from

incubators

Talent improvement

Young population / long

commutes

98% internet users on

social media

3rd largest Twitter and

Facebook

Growing

adoption

Robust

Fundamentals

Social/Entertainment

oriented Culture

Creation of

Enablers

Enterprises need better ICT services

2010 2011

7.7

• New ICT requirements – data centers, unified

communication

• More services - contact center etc

Inside out : FDI investment by

Indonesia $ bn

2011 2010

2.7 185%

Outside-in : FDI investment into

Indonesia $ bn

19

15 22%

Indonesia should prepare for next wave of ICT Growth

Infrastructure Centric Growth

dominated by Telecom operators

Service Centric Growth shared

by ICT ecosystem

Smart Capital for further

infrastructure Creation

2. Enterprise Services : Increase in scale and scope

3.Next Wave of consumer

services

• Data center services

and cloud

• Managed services

• BPO and contact

center

• Value unlocking of tower

business

• Incubation

• E-commerce / m-commerce/

social commerce

• Pay TV/ Multiscereen

1. Embrace the Data Phase of

telecom

• Mobil Internet the

biggest driver for

telecom

“ From Voice to Data” – the new era

1. Maturing industry – lower revenue growth

Source: Frost & Sullivan

0

20,000

40,000

60,000

80,000

100,000

120,000

2008A 2009A 2010A 2011E 2012E 2013E 2014E

1.10

1.05

1.06

1.05 1.04

• As overall industry is maturing –

total revenue growth is projected in

range of 4% - 6% on the next 5

years

• Key factors impacting revenue

growth:

• Increase in CAPEX needs in

line with increase in data

services

• Data revenue monetization that

is still in “learning curve”

• Operator anticipation for LTE

network deployment

Cellular Industry Market Revenue

(IDR Bn)

1. Mobile data opportunity is huge

Source: Frost & Sullivan

Internet Users Forecast

3.7

16.9

39.6

18.3

4.2

22.9

145.2

21.8

0

20

40

60

80

100

120

140

160

Singapore Malaysia Indonesia Thailand

Mill

ion

s

2010 2015

CAGR: 29.7%

CAGR: 3.6% CAGR: 6.3%

CAGR: 2.8%

2011 2016

Data connections

167 mn

62 mn

• Of the 167 mn , 109 mn will be on

smartphones

• 22 mn will be on tablets and large screen

devices

Drivers

Strong offload potential from Philippines for

certain processes

Domestic call centers like Infomedia looking to

expand

Overseas players like Aegis scouting for

opportunities

Contact Center

Services/BPO

Market Size (US$ mn)

435

1097 369

775

97

462

169

355

194

680

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2010 2015

Contact Center Services/BPO

System integration

ICT Managed Services

Software Development

WAN Services

Huge interest in data center investments by

domestic and international players

Prevention of „Singapore hop‟

Next generation data centers to support cloud

computing based approaches

Includes cloud computing

ICT Managed

Services

System integration continues to grow – ERP

spending the key driver

Fragmented market

Players are niche or narrowly focused only on

BFSI vertical

System

integration

2: Enterprise services

Market potential of $ 3bn

Huge opportunity in enterprise servics

3: Consumer Services

E-enablement of Indonesia starting now

Notes: Digital content excludes mobile content

0%

2%

4%

6%

8%

10%

0.0% 0.5% 1.0% 1.5% 2.0%

4.5%, tokobagus

8.8%, Detik

8.6%, Kaskus

6.6% Kompas

4.0 %, Kapanlagi,

UV as % of total Internet users

UV as % of population

Indonesia

Top 5 Local Websites UV Per Month

One-stop sites perform

better when they have

both breath and depth

44.78% 40.96%

33.32%

20.75%

19.12%

0%

10%

20%

30%

40%

50%

0% 2% 4% 6% 8% 10% 12% 14%

UV as % of total Internet users

UV as % of population

Sanook

Kapook

Mthai

Manager

Thailand

Top 5 Local Websites UV Per Month

Local entertainment portals have

high following among local users

due to abundance of free content

available Pantip

• Huge gap exists on online service creation

3: Consumer Services

E-enablement of Indonesia starting now

Drivers Market Size (US$ mn)

1820

172

780

57

378

120

650

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2010 2015

E-Commerce

Ecosystem enablers

Digital Content

350

Rakuten‟s entry into Indonesia through JV

Other international players scouting for JVs –

Korean and US based

Indonesia online shopping % half of Thailand

E-commerce

(transaction

revneues)

Many app developers looking at Indonesia as a

base for global development

Huge interest from local entrepreneurs

Difficulty in monetization

Digital Content

Payment mechanisms still a concern in Indonesia

Mobile payments – issues in regulation

Ecosystem

enablers

Consumer e-enablement can potentially be $ 1.5 bn + market by 2015

Notes: Digital content excludes mobile content

For Indonesia alone, the impression is the world’s second largest,

after India, with a total impression of 3.76 billion and is one of four

countries that have advertising impressions in total more than 1

billion in one quarter (BuzzCity, July 18th).

Based on Indonesia mobile-centric market, “mobile content” is still limited by bandwidth availability

- they fit more into small-screen applications rather than band-width hungry apps.

Some key takeaway…

Big screen vs. small

Indonesia broadband market is predominantly “mobile” centric to

access voice & data content. Rich content is more likely goes

through big screens. RBT, video clip, games are booming within

mobile ecosystem while video streaming is more through PC/

netbook.

Full video vs. clips

Current market is keen of video clip, music, & games download

through mobile phones while full video is not feasible due to sub-

optimal network quality (long-wait or fail to load) i.e. high

bandwidth/ capacity requirements to have ideal ecosystem for

streaming rich content

Rise on digital ads

Some key takeaway…

Demand is

there..are we ready?

As the market has shown, the demand for “everything online” is

there – from a simple browsing to mobile payment & transaction.

The next question: Are we ready? In terms of basic infrastructure,

market education, human competency, and market readiness

Who drives

the “CAPEX”?

“CAPEX” is key function in delivering good-experience on data

centric services i.e. cross platform, cross devices, cross

geographical areas

The next question: Who drives the budget? As almost all of

Indonesian operators are in majority owned by foreign investment

and budget allocation is certainly governed by interest of the major

shareholders

15

Way forward

Focus on verticals/ cross

industry business models

Enter media and cloud

Short term

QoS management is critical

to sustaining market

momentum

VAS: Variety of „appiifed‟

services

Long-term

Leverage network-based

intelligence (smart enabler)

Smart investments

„Back to

basics‟

„Non Telco

revenues;

„Change in

Services

Model ‟

See you somewhere…online

Linkedin: Jayesh Easwaramony

Twitter: Jeaswaramony