, Indonesia

Indonesian cellular spending share to GDP may recover: Nomura

This is following a 15-year decline.

Cellular spending contribution to Indonesia’s economy could recover to a historical peak, following a 15-year declining trend, with cellular usage considered as the primary activity, according to Nomura.

On a note, Nomura said operators would need to be “rational” with their pricing behaviour to see increased cellular to GDP ratios, noting that robust top-line growth was seen in Telkomsel and Indosat in the second quarter of 2022.

“The path to structural recoveries for companies in the Indonesian telecom sector would see cellular revenue outpacing GDP growth – reversing a 15-year trend. Indeed, over the past 15 years (2007-2021), we have seen a downtrend in cellular spending (i.e., revenue) to GDP from a peak of 1.56% in 2007 to a low of 0.86% in 2021,” the note read.

“We think this is just the beginning,” it added.

With the improved profitability of telcos, a more sustainable and healthier Indonesian telecom industry can be expected which would be crucial to support the Indonesia Digital Roadmap 2021-2024.

How can Indonesia achieve its digital roadmap? Nomura cited the strategic initiatives which include the development of inclusive, safe and reliable digital and connectivity infrastructure with high-quality services.

Indonesia should also develop open and integrated digital government institutions to improve public services, and transform into a technology producer through investment in various platforms, products, and systems from being a consumer nation.

The country should harmonise regulations and increase funding to advance innovations, boost digital capability in priority sectors, and build a digital culture, utilizing the demographic bonus, and empowering Indonesians in developing the digital world, Nomura said. 

It said the roadmap meant an increase in Capex requirements from Indonesian telcos, which funds will come from internally-generate cash flows. 

“Consequently, we strongly believe that rational pricing behavior is imperative. Thus, upward (data) price trends will persist into 2023-24 period. Based on the above analysis, we reiterate our overweight call on the Indonesian telecom sectors,” Nomura said.

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