Infrastructure Leap = Investment Potential

Jayesh Easwaramony

Vice President ICT Practice

Investment in Indonesia: What are the upcoming opportunities ?

Investment Opportunities in:

ICT

2

Key ICT trends

3

Indonesia Market: Bracing for next wave

S/N

Key Factors Impacting Indonesia

Extent of

Impact

1. Strong economic growth driving consumer and enterprise spending

2.

Technological changes and commoditization leading to lower costs of deployment e.g. Fibre, cloud computing, devices, SDR)

3. Large population base with a rich content ecosystem and popularity of latest trends

4. Supply side push to drive growth / existence of well funded corporates

5. Regulatory structure and ability to attract foreign capital

Strong structural factors hold promise for Indonesia; however growth will need

further investments

Unfavorable

impact Moderate impact Favorable impact ◔ ◑ ◕

◑ ◕

◑

◕

◕

◑

4

ICT Evolution

Underinvestment in

fixed line /oligopoly

in mobile

Popularity of gaming

and social

networking

Basic Infrastructure Creation

Consumer Content

Data centers

WAN Services

Domestic BPO

Ecommerce

M-payments

Broadband Enablers

Greater localization

of content

Enterprise Services

Pre-2007

Mobile Price War

and explosive

growth

Creation of national

backbone and fibre

infrastructure in key

metros

Growth of mobile

broadband

Tower sharing

Eventual

consolidation

Managed ICT

Services

Cross-platform

content

Pay TV

2008-09 2010-11 2012-13

5

Overall ICT investment themes

Smart Capital for further

infrastructure Creation

Enterprise Services : Increase in scale and scope

Next Wave of consumer

services : Emulation of

other markets Leapfrog Indonesia

closer to BRICs

• Data center services

• Managed services

• BPO

• Value unlocking of tower

business

• Lack of growth capital for

subsidiaries /

deconglomerization

• Handsets/ Mobile apps

• E-commerce

• Mobile Payments

• Pay TV

6

Note: The base year is 2010. Source: Frost & Sullivan analysis.

Theme 1:Smart Capital Indonesia mobile growth

Australia

Bangladesh

Cambodia

China

Hong Kong

India

Indonesia

Japan

Malaysia

New Zealand

Pakistan Philippines

Singapore South Korea

Sri Lanka

Taiwan

Thailand

Vietnam

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% 180.0%

20

10

Mo

bile

Re

ven

ue

CA

GR

(%

)

2010 Mobile Penetration Rate (%)

Mobile Revenue and Penetration Rate in Asia

Indonesia continues to be a healthy mobile revenue market compared with the 4th highest

CAGR in APAC

7

1%

7%

9%

3%

6%

2%

12%

30%

26%

27%

36%

26%

1%

1%

5%

8%

8%

12%

33%

43%

60%

63%

83%

93%

India

Thailand

China

Philippines

Vietnam

Indonesia

Malaysia

Hong Kong

Australia

Singapore

South Korea

Japan

2010 Wireless Broadband Penetration Rate

2010 Wireline Broadband Penetration Rate

Source: Frost & Sullivan Analysts, Asian Development Bank, IMF, Bank Indonesia

1 Wireless broadband

growth 2 Government

Initiatives

5 Rise of data usage 4 Availability of cheap

smart phones & tablets

3 Sustained

Economic Growth

• Palapa Ring Project to ensure

backbone connectivity

• Developing ‘Desa Pinter’ – to

distribute internet access to

villages

• Accelerating development of

broadband access with or

without cable

• Social media integral part of life

style – world’s 2nd highest user

base on Facebook, highest

number of tweets from APAC

• Further growth will be fueled by

new apps like m-commerce, m-

payment, m-health, m-education

• GDP expected to grow at a

robust CAGR of 6% till 2015

• Income per-capita hitting $3,000

in 2010 (13% growth from 2009)

• Upper middle class has more

than doubled in last decade –

growing faster than Philippines,

Thailand and Malaysia

• Falling prices of branded

phones

• Increased indigenous

handsets and cheap

imports from Taiwan and

China

• User friendly tablets

growing rapidly

Theme 1:Smart Capital Indonesia mobile growth

Multiple drivers exist for sustained growth in mobile broadband

8 Source: Frost & Sullivan Analysts, Asian Development Bank, IMF, Bank Indonesia

Theme 1:Smart Capital Indonesia mobile growth

Mobile broadband will continue to grow in Indonesia

-

10.0

20.0

30.0

40.0

50.0

60.0

2010 2011 2012 2013 2014 2015

Large screen Small screen Multi screen

Mobile Broadband Subscribers in Indonesia

(millions)

9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Mobility Maturity

En

terp

rise IC

T a

do

ptio

n

ma

turity

Japan

Singapore

Vietnam Indonesia

Malaysia

Australia Taiwan

South Korea

Mobility Maturity : Smartphone penetration in the country taken as a proxy for Mobility maturity in the country

Enterprise ICT maturity: Total ICT spending by enterprises divided by the number of enterprises ( > 50 employees ) taken as a

proxy for Enterprise ICT maturity adoption in each country

Transitioning

Emerging

Mature

Benchmarking of APAC ICT Maturity

India

Theme 2:Enterprise services- increase in scale and scope ICT adoption

Indonesia needs to improve its ICT adoption

10

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

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

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

Theme 2: Enterprise services Market potential

This will necessitate increase in large players to cater to the local market

11

Theme 3: Consumer Services E-enablement of Indonesia starting now

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

Drivers

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

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

Notes: Digital content excludes mobile content

Thank You