TELKOMSELINDONESIATELKOMSELINDONESIA 1 H agency interconnect the most difficult issue for a new...

T E L K O M S E L I N D O N E S I A 11

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interconnectinterconnectthe most difficult issue for a new operator ?

(Indonesia’s Experience)

1997

Cannes, France

Koesmarihati SugondoPresident Director -Telkomsel

February 1997

the most difficult issue for a new operator ?

(Indonesia’s Experience)

1997

Cannes, France

Koesmarihati SugondoPresident Director -Telkomsel

February 1997

++66

22

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WW OO RR LL DDWW OO RR LL DD

CONGRESSCONGRESSCONGRESSCONGRESS


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TELKOMSELCOMPREHENSIVE INTEGRATED SUPPORT

GSM OPERATOR IN INDONESIA POSITIONING AS “GSM SPECIALIST” AND “MARKET LEADER IN QUALITY & SERVICE”

SETCO : INDONESIAN QUALIFIED PRIVATE COMPANY

SETCO5.00%

KPN : DUTCH TELECOMMUNICATION CARRIER

KPN17.28%

TELKOM : NATIONAL TELECOMMUNICATION CARRIER

TELKOM42.72%

INDOSAT : INDONESIAN INTERNATIONAL TELECOMMUNICATION CARRIER

INDOSAT35.00%

TOTAL COMPANY VALUE : US$. 2 BILLION


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COVERAGE & CUSTOMERS

INDONESIAINDONESIAINDONESIAINDONESIA

TELKOMSEL’S COVERAGE5200 kms

2000kms

ALL 27 PROVINCIAL CAPITAL CITIES200 DISTRICT CAPITALS306 TOTAL CITIES

current : 215.000 customers in less than 2 years of operationaggressive growth : > 1.100.000 customers in the year 2000

TELKOMSEL'S CUSTOMERS&

MARKET SHARE (CELLULAR MARKET)

4%

11%

30% 30%29%

27% 26%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1994 1995 1996 1997 1998 1999 2000

0%

5%

10%

15%

20%

25%

30%

CUSTOMERS

MARKET SHARE


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TELECOMMUNICATION SECTOR OF INDONESIA

FIXED-TEL MOBILE/CELLULAR FUTURE

* 2 INT’L GATEWAYs * NATION WIDE * PHSs* REGIONAL OPR. ~ RBOC’s - 3 GSMs * DCS 1800s

- 2 TELKOM’s - 1 NMT-450 * GMSSs- 5 KSOs * REGIONAL- 1 Fixed Cellular - 3 Analog AMPSs

* LONG DISTANCE- 1 Div. NET

GOVERNMENT :-FUNDAMENTAL TECH. PLAN

-INTERCONNECT

-REVENUE SHARING

-TECHNOLOGY

-TARIFF-

LICENSES & FREQ. ALLOC.

-SUPERVISION

METROSELMETROSELTELESERATELESERA KOMSELINDOKOMSELINDO regionalcellular

TELKOMSELGSM

TELKOMSELGSM

MOBISELNMT-450MOBISELNMT-450

SATELINDOGSM

SATELINDOGSM

EXCELCOMINDOGSM

EXCELCOMINDOGSM

nation-widecellular

DIVRE IIDIVRE II DIVRE VDIVRE V KSOMGTIKSOMGTI

KSOARIAWEST

KSOARIAWEST

KSOASTRATEL

KSOASTRATEL

KSODATA MALINDO

KSODATA MALINDO

KSOBUKAKA SINGTEL

KSOBUKAKA SINGTEL RATELINDORATELINDO

regionalfixed-tel

DIVNETLONG-DISTANCE

DIVNETLONG-DISTANCE

long-distanceoperator


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MAIN ISSUESINTERCONNECT

INTERCONNECT SYSTEMINTERCONNECT SYSTEM

PHYSICALPHYSICAL PRICEPRICE


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WHY INTERCONNECT IS DIFFICULT ?

“BIG BROTHER”(PSTN OPERATOR)

“BIG BROTHER”(PSTN OPERATOR)

“LOOSING SHARE” “COMPETITION”

“LOOSING TRAFFIC” “IMAGE CHALLENGED”

NEW ENTRANCES ARE SEEN AS “THREAT”INSTEAD OF “PARTNERS” WHICH CONTRIBUTE

(BRING & CREATE) MORE REVENUE TO PSTN OPERATOR

NEW ENTRANCES ARE SEEN AS “THREAT”INSTEAD OF “PARTNERS” WHICH CONTRIBUTE



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NEW

OPER

ATO

RN

EW

OPER

ATO

R

NEW

OPER

ATO

RN

EW

OPER

ATO

R

NEW

OPER

ATO

RN

EW

OPER

ATO

R

PSTN

OPE

RA

TOR

ORIGINAL TELECOMMUNICATION MARKET

LEA

SED

LIN

ES

TRA

FFIC

THE MONEY GO BACK TO FIXED-OPR

PSTN OPERATOR SHOULD NOT SEE NEW ENTRANCES AS “THREAT”BUT AS “BIG CUSTOMERS” AND “PARTNERS” WHO CONTRIBUTE



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EVOLUTION OF INTERCONNECT ARRANGEMENT

1. INTERCONNECT WITHIN MONOPOLISTIC MARKET

PSTN

RSACELLULAR MOBILE C.

RS ACELLULAR MOBILE B.

TELKOMSELCELLULAR MOBILE A.

INTRA PRICING

TELKOM

2. INTERCONNECT BETWEEN LIBERALIZED& MONOPOLISTIC MARKET

PSTN

CELLULAR MOBILE C.

CELLULAR MOBILE B.

CELLULAR MOBILE A.

PT. TELKOM

3. INTERCONNECT BETWEEN TWO LIBERALIZED MARKETS

CELLULAR MOBILE C.

CELLULAR MOBILE B.

CELLULAR MOBILE A.

PSTN B

PSTN A

PSTN C

A

B

C


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MOBILE OPERATOR’S TRAFFIC PROFILE(MINUTES)

TRAFFIC INDONESIA GERMANY

- MOBILE-MOBILE 10 % 5 %- MOBILE-FIXED 90 % 95 %

MOBILE OPR CONTRIBUTION TO PSTN-OPR

LEASED LINES17%

INTERCONNECT60%

NET. REV.-USAGE23%

BIG PORTION OF CELLULAR TRAFFIC REVENUE STILLGOES TO PSTN OPERATOR

BIG PORTION OF CELLULAR TRAFFIC REVENUE STILLGOES TO PSTN OPERATOR

TOTAL TRAFFIC/USAGE REVENUEMARKET IS SUPPORTED BYATTRACTIVE CUSTOMER GROWTH

CELLULAR MOBILE TELEPHONEDEMAND FORECAST (‘2000)- JICA (‘92) : 230,000 CUSTs.- BOOZ ALLEN (‘94) : 600,000 CUSTs- GOVERNMENT

- ORIGINAL (‘94) : 400,000 CUSTs- REVISED (‘97) : 1.200.000 CUSTs

- TELKOMSEL : 4.000.000 CUSTs


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HOW SHOULD THE GAME BE PLAYED ?

INTERCONNECT SHOULD BE TREATED AS “SERVICE”

SERVICE

SUPPLIER(BIG STOCKS)

BUYER(BULK PURCHASE)

THE PLAYERS

PSTN OPERATORNEW ENTRANCES

“WHOLESALE TREATMENT”


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BUYER(NEW ENTRANCE)

SUPPLIER(PSTN OPERATOR)

SERVICEDELIVERY

* QUALITY/RELIABILITY

* CAPACITY* PRICE* AVAILABILITY

RESPONSIBILITY,RIGHT

&OBLIGATION

INTERCONNECT SHOULD BE TREATED AS “SERVICE”

“SERVICE” SHOULD APPLY “RIGHT & RESPONSIBILITY” DEAL

COMMON BUSINESS PRACTICE


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4 MAIN REASONS TO BUILD OWN OVERLAY NETWORKCOMMON BUSINESS PRACTICE

OWN OVERLAY NETWORK IS JUST LIKE A COMMON INVESTMENT WHICH REQUIRES “HUGE FINANCE” &

COSTS “OPERATION & MAINTENANCE HEADACHE”

OTHER NETWORKOWN OVERLAY

NETWORK

1. QUALITY/RELIABILITY

2. CAPACITY3. PRICE4. AVAILABILITY

1. QUALITY/RELIABILITY

2. CAPACITY3. PRICE4. AVAILABILITY

IF THE SERVICE IS NOT SATISFACTORILY DELIVERED ,IT WILL ENCOURAGE THE DEVELOPMENT OF

EXCLUSIVE OVERLAY NETWORKWHICH BECOMES IN FACT,

A LONG DISTANCE OPERATOR


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INTERCONNECTION NEED A PRICEINDONESIA'S SITUATION : INTERIM SOLUTION

REVENUE SHARING IS APPLIED AS EACH PARTIESARE NOT ABLE TO DETERMINE THE PRICE OF

EACH “INTERCONNECT BUILDING BLOCK”

PSTN

CELLULAR

X

X X

X


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X

X X

Customer baseCustomer acquisition

Cost of revenue-collection (RISK)

800 900

XMobile operator is eligible for 15 % of long distance tariff

ALL KIND OF VALUE ADDED SERVICES AND PREMIUM MAKE REVENUE SHARING EVEN MORE DIFFICULT

REVENUE SHARING IS APPLIED ON “USAGE CHARGES”NOT ON DELIVERED ADDED VALUE

REVENUE SHARING DOES NOT INCORPORATE ALL SERVICE ASPECTS


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INTERCONNECT ARRANGEMENT ?MOBILE-PSTN

PHYSICALPOINT OF INTERCONNECT

PHYSICALPOINT OF INTERCONNECT

VIRTUALPOINT OF INTERCONNECT

VIRTUALPOINT OF INTERCONNECT

USER TARIFFBASIS

USER TARIFFBASIS

COST BASISCOST BASIS

INTERCONNECTSYSTEM

INTERCONNECTSYSTEM

INDONESIA

RECOMMENDED


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HOW TO MEET THE GOALINTERCONNECT PRICE

BASIS :COST BASIS (ADDED VALUE)

COMPONENT OF BUILDING BLOCK “WHOLESALE”

BASIS :COST BASIS (ADDED VALUE)

COMPONENT OF BUILDING BLOCK “WHOLESALE”

BASIS :USER TARIFF

RETAIL


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Australia Finland Japan New Zealand UK US

Negotiated/Determined N/D N D N N/D D

Tariff/Cost based C T C/T T C/T C

Historic/Current cost H - H - H H

Marginal/Fully allocated costs M - F - F F

Actual/Model costs A - A - A A

Return on capital allowed (%) 16.80 - 5 - 15 11.25

Australia Finland Japan New Zealand UK US

Negotiated/Determined N/D N D N N/D D

Tariff/Cost based C T C/T T C/T C

Historic/Current cost H - H - H H

Marginal/Fully allocated costs M - F - F F

Actual/Model costs A - A - A A

Return on capital allowed (%) 16.80 - 5 - 15 11.25

INTERCONNECTION ENVIRONMENT

Source : “Interconnect”, Ovum, London, 1994


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CONCLUSIONHOW TO COME TO “WIN - WIN” SITUATION

STEP 1. The connecting parties should see each other as customer and supplier

> PROVIDING BEST SERVICE

STEP 2. The network development plan of each parties should be well coordinated

> TO ENSURE DELIVERY

STEP 3. The regulator must set “clear rule of the game” and play as “referee”

> TO SUPPORT EQUAL TREATMENT

STEP 4. The ”interconnect building block” of the service must be priced

> COST ALLOCATION


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THANK YOU ...THANK YOU ...for your attentionfor your attention

TELKOMSELTELKOMSELLandmark Center Bld. Tower A, 19th Fl.

Jl. Jend. Sudirman No. 1Jakarta 12910 - Indonesia

Tel. +62-21 5200811, 5272930Fax. +62-21 5712672, 5711324

kartuHALO +62-811100908

THANK YOU ...THANK YOU ...for your attentionfor your attention

TELKOMSELTELKOMSELLandmark Center Bld. Tower A, 19th Fl.

Jl. Jend. Sudirman No. 1Jakarta 12910 - Indonesia

Tel. +62-21 5200811, 5272930Fax. +62-21 5712672, 5711324

kartuHALO +62-811100908

T E L K O M S E L I N D O N E S I A


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TELEKOMUNIKASI SELULARINDONESIA

TELKOMSELINDONESIATELKOMSELINDONESIA 1 H agency interconnect the most difficult issue for a new...

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