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September 7, 2010
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P.T. Telekomunikasi Indonesia Tbk. (TLK), the largest integrated telecom service provider of Indonesia, has undertaken a massive project to upgrade its backbone network. The new transformation initiative will converge IP and optical networks to enable Telekomunikasi to effectively tackle growing data traffic, simplify network structure, and reduce costs.
In order to counter increasing competition in the Indonesian telecom market, Telekomunikasi has already decided to spread out its radio access network infrastructure throughout the country. The company is upgrading its existing HSPA network to HSPA+ that will enable it to offer broadband access speed up to 21 Mbps to its subscribers.
Telekomunikasi has selected Alcatel-Lucent (ALU) to supply infrastructural gear for its latest backbone network transformation project. During the last one year, the company’s fixed broadband subscriber base grew 79% and mobile broadband subscriber grew by a whopping 607%. Alcatel-Lucent is an existing network infrastructure vendor of Telekomunikasi proving IP/MPLS and optical network solutions.
Deregulation of telecom segment by the Indonesian government has enabled several competitors to provide similar services at lower costs to subscribers. Indonesian wireless service providers slashed prices in order to capture market share. As a result, ARPU (average revenue per user) reduced across the industry. Major competitors of the company are P.T. Indosat Tbk. (IIT), and P.T. Excelcomindo Pratama.
Telekomunikasi has also decided to acquire smaller telecom service providers in Indonesia like Bakrie Telecom to expand its CDMA network. This will help the company to consolidate its market position that currently commands 45% market share for both mobile and fixed-line telecom services in Indonesia.
We maintain our long-term Neutral recommendation for Telekomunikasi. Currently it is a short-term Zacks #3 Rank (Hold) stock.
Read the full analyst report on "TLK"
Read the full analyst report on "ALU"
Read the full analyst report on "IIT"
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