Another sign that the mobile phone market of Indonesia is saturated is that the number of (active) mobile phone numbers has only grown by 1 percent between the end of 2015 and the end of Q1-2016. Previously, we reported that the attractiveness of Indonesia's telecommunications market has been weakened due to sharp competition between operators, slowing profit margins and a saturating voice and SMS services market. However, there remains room for growth in data services and value-added services given Indonesia's still relatively low smartphone penetration (as well as low Internet penetration).

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The number of smartphone users in Indonesia is expected to grow strongly up to (at least) 2019 in line with overall economic growth of Southeast Asia's largest economy in combination with rising Internet penetration as well as the young and large population according to market research company eMarketer. Currently, less than 40 percent of the Indonesian population owns a smartphone (implying a still low smartphone penetration rate), while Indonesia is busy expanding its 4G technology network (a necessity for smartphone or tablet users) across the Archipelago.

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Samsung Electronics Co Ltd, the multinational electronics company headquartered in Suwon (South Korea), said that it plans to establish a factory in Indonesia to produce mobile phones for Indonesia’s domestic market. Samsung Electronics, subsidiary of the Samsung Group (a leading global information technology company), wants to set up the factory in West Java and production is expected to start later this year. Samsung Electronics already owns factories in China and Vietnam.

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Line, a free social network from Japan which provides applications for instant messaging on smartphones and personal computers, had about 30 million Indonesian users at the start of August 2014 (total global users of Line stood at 490 million around the same time). Most of Line Indonesia’s revenue, approximately 60 percent, is accounted for by games, followed by stickers and official accounts (each contributing twenty percent to the company’s revenue). However, Line Indonesia refrained from mentioning absolute financial figures.

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Indonesian Finance Minister Chatib Basri estimates that the trade balance of Indonesia may post an USD $500 million surplus in May 2014 amid improved performance of the country’s crude palm oil (CPO) exports, both in terms of price and volume (crude palm oil being one of the most important foreign exchange earners of Indonesia). Concern about Indonesia’s trade balance (and current account balance) had returned after Indonesia recorded an USD $1.96 billion deficit in the previous month.

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After already having warned in April 2013 that Indonesian telecommunications operator Bakrie Telecom is likely to default on its debt and is in need to restructure its USD $380 million senior unsecured bonds due in May 2015, Fitch Ratings downgraded the company's long term foreign- and local currency issuer default rating to Restricted Default (RD) from C (highly vulnerable) on Friday (30/05). Bakrie Telecom (BTEL) is a subsidiary of the controversial and politically-linked Bakrie & Brothers holding company.

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Both Indonesia's Ministry of Industry and Trade propose to impose a luxury goods sales tax (PPnBM) of 20 percent on all imported mobile phones. Previously, the Ministry of Industry said the new tax rule - if approved - would only apply to cellular phones with a price tag of at least IDR 5 million (USD $442). Now, however, all imported cell phones will be affected. This new tax policy aims to curb imports of mobile phones (thus impacting positively on the trade balance) and to support the development of a domestic mobile phone industry.

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Three Indonesian telecommunication and network providers are considered to have great room for improving their corporate earnings in the second half of 2017. These companies are Telekomunikasi Indonesia, Indosat Ooredoo, and XL Axiata. Reason why these companies should experience a good performance in H2-2017 is Indonesia's "data consumption trend".

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The high level of consumption in Indonesia is remarkable. In fact, household consumption in Indonesia is an important engine of economic expansion in Southeast Asia’s largest economy as it accounts for about 55 percent of economic growth. One of the most popular consumption products are gadgets, in particular mobile gadgets. Just take a look in urban environments in Indonesia; everywhere people are holding, playing with, and communicating through some sort of mobile technological device.

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