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MOBILE PHONES IN INDONESIA Euromonitor International November 2012

Mobile Phones in Indonesia

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Market Research on the size and future prospects of the mobile phones industry in Indonesia

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Page 1: Mobile Phones in Indonesia

MOBILE PHONES IN INDONESIA

Euromonitor International

November 2012

Page 2: Mobile Phones in Indonesia

M O B I L E P H O N E S I N I N D O N E S I A P a s s p o r t I

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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Category Data .............................................................................................................................. 3

Table 1 Sales of Mobile Phones: Volume 2006-2011 ............................................... 3 Table 2 Sales of Mobile Phones: Value 2006-2011 .................................................. 4 Table 3 Sales of Mobile Phones: % Volume Growth 2006-2011 ............................... 4 Table 4 Sales of Mobile Phones: % Value Growth 2006-2011 .................................. 4 Table 5 Mobile Phones Company Shares 2007-2011 ............................................... 4 Table 6 Mobile Phones Brand Shares 2008-2011..................................................... 5 Table 7 Sales of Mobile Phones by Distribution Format 2006-2011 .......................... 5 Table 8 Forecast Sales of Mobile Phones: Volume 2011-2016................................. 5 Table 9 Forecast Sales of Mobile Phones: Value 2011-2016.................................... 6 Table 10 Forecast Sales of Mobile Phones: % Volume Growth 2011-2016 ................ 6 Table 11 Forecast Sales of Mobile Phones: % Value Growth 2011-2016 ................... 6 Table 12 Smartphones by Operating System 2008-2013 ........................................... 6 Table 13 Mobile Phones by Type of Contract 2006-2011 ........................................... 7

Page 3: Mobile Phones in Indonesia

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MOBILE PHONES IN INDONESIA

HEADLINES Mobile phones sees robust 21% volume growth, to reach 35 million units sold in 2011

Blackberry fever continues in 2011

Smartphones captures all attention with 100% volume growth in 2011

Nokia still hangs on to volume leadership with 30% volume share in 2011

More stable good performance expected in the forecast period at 8% volume CAGR

TRENDS Mobile phones continued to be the star performer of consumer electronics in Indonesia up to

2011. Possession of mobile phones has grown rapidly over the historic period, and it was not

uncommon for consumers to have several mobile phones by the end of 2011.

Amidst the smartphone fever, feature phones still formed the bulk of mobile phone sales in

2011. Whilstmany consumers have been lured by smartphones’ multiple features, the price of

feature phones is still much lower, making it much more accessible for the bulk of population.

In addition, there are also a good variety of feature phones also offering internet access

including access to Facebook, Twitter and other social networking sites. Therefore, middle- to

low-income Indonesians for the most part still find feature phones to be more than sufficient

for their communication and social networking needs.

For feature phones, more local and Chinese brands had presence on the market, with

competitive pricing, in 2011. In particular, the concept of the dual SIM card has taken off well

for feature phones in Indonesia, due to Indonesian consumers’ penchant to have multiple

phone numbers in order to have lower calling costs to their contacts. This habit to have

multiple numbers is also translated into the most common purchase of mobile phones as

“phone only” over the historic period. Pay-as-you-go purchasesare less common, and a

monthly subscription is the least popular type of contract, since a lot of Indonesians find

subscriptions too expensive and unnecessary. Nonetheless, growth in monthly

subscriptionsincreased in 2011, due to growing purchase of smartphones.

The smartphone boom has been largely attributable to consumers’ demand for convenience

in social networking, with secondary reasons including convenience to take photos as well as

play music. For a smartphone operating system, Symbian used to be the most popular OS in

2008 due to Nokia’s past leadership of smartphones. However, over the historic period,

Blackberry has boomed – especially with its instant messaging BlackBerry Messenger (BBM),

which resulted in BlackBerry OS overtaking Symbian by 2011. However, the OS that has

caused the most buzz is the open-source Android, which has grown at an even faster pace

since its debut in 2009, and by 2011 it had already become the second most popular OS,

used by various smartphone brands in contrast to the exclusivity of BlackBerry OS. Android

will likely be the leading smartphone OS in the future, with Samsung Galaxy III also to adopt

Android for its OS.

Within mobile phones, there is growing trend in Indonesia for the product to be sold bundled

with an internet access package, such as offers to buy Samsung mobile phone bundled with a

3-month internet subscription. Due to the growing popularity of various apps such as the BBM

and Whatsapp, more Indonesian mobile phone owners keep changing mobile phone numbers

just to latch onto the cheapest internet offer packages. This trend has been facilitated by BBM

and Whatsapp being the most popular mobile messenger applications in 2011.

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In 2011, CDMA mobile phones were becoming more popular to use for accessing the internet,

although its usage is limited to only within a specific region, except for CDMA phones that use

Smartfren or AHA SIM cards. Over the historic period, there was a significant increase in

Indonesians using their mobile phones to act as internet modems, and usually they use

CDMA phones, as these typically have a faster connection. Therefore, there is a shift away

from using CDMA mobile phones just to make phone calls towards using them for accessing

the internet. In fact, there is also a growing overall trend from making phone calls to sending

Short Messaging Service (SMS) or text messages.

Up to 2011, the price gap between feature phones and smartphones remained quite steep,

with the average feature phone costing only slightly over Rp1 million compared to an average

of over Rp4 million for smartphones. Both feature phones and smartphones have seen their

prices fall considerably over the historic period, but the decline in price of feature phones has

been more significant in terms of making it affordable even to lower-income consumers. In

comparison, the price decline for smartphones has made it more accessible to middle-income

consumers.

COMPETITIVE LANDSCAPE The biggest player for mobile phones in 2011 remained Nokia Indonesia, but the company

continuously lost volume share over the historic period and is in danger of being overtaken by

Samsung within the next few years of the forecast period. In fact, second-ranked Samsung

has also been declining in volume share in percentage terms due to the rapid rise of

Research in Motion’s Blackberry; however, its volume share has declined at a slower rate

than that of Nokia.

In feature phones, Nokia’s leadership weakened notably over the historic period, whilst

Samsung managed to experience a lesser decline towards 2011. The biggest gainer was the

Chinese company Huawei Technologies, which grewits volume share from 11% in 2006 to

15% by 2011. Huawei’s competitive pricing has appealed to lower-income consumers looking

for a mobile phone they can afford. Affordability is also the key reason why local player

Metrotech Jaya Komunika Indonesian withits Nexian brand was also able toincrease its

volume shareover the historic period and in 2011.

Whilst local and Chinese players are growing in importance for feature phones, the opposite

trend is seen in smartphones. Nokia and Sony were the early movers, and Nokia took an

early lead of smartphones by launching more products. However, Blackberry entered with a

bang in 2008, and has taken Indonesia by storm ever since. The Blackberry phenomenon has

eroded Nokia’s share rapidly, and as of 2010 already had closed the gap very much. By 2011,

Blackberry already became the clear leader of smartphones in Indonesia, with volume sales

almost triple of Nokia’s.

Blackberry’s success has been driven by a number of factors. One key factor has been the

use of the QWERTY keyboard, which has proven to appeal to Indonesians more than the

touchscreen from the likes of iPhone. Indonesian consumers use their smartphones largely

for chatting (such as using BBM) and find the physical keyboard more convenient to use. The

other key factor is the success of Blackberry’s instant messaging system, BBM itself, with

consumers finding the chatting feature of BBM to be very convenient way of staying in touch

with friends, colleagues and relatives.

In smartphones, other players growing strongly in volume share are also the higher-end

brands including Samsung. Ever since its entry in 2009, it has been the other key threat to

Nokia and Blackberry. Its Samsung Galaxy series has been a particularly successful launch,

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and the company’s volume share in smartphones has grown from 8% in 2010 to 10% in 2011

thanks to Samsung Galaxy series.

PROSPECTS Mobile phones are still set for a bright future in Indonesia, with the penetration rate expected

to keep improving to reach optimal level towards 2016. Overall volume growth will stabilise to

a single-digit (8%) CAGR, with feature phone sales starting to decline – compared to the still

healthy volume growth up to 2011 – whilst smartphones are set to post a double-digit volume

CAGR of 23% over the forecast period.

Feature phones will remain very important for mobile phones sales in Indonesia throughout

the forecast period. Even with a slight decline in volume sales, feature phone sales are only

expected to be eclipsed by smartphones as late as 2016. As the penetration rate of mobile

phones was not yet saturated by 2011, feature phones sales will come chiefly from new

consumers from middle- to low-income brackets which look for affordable mobile phones. In

addition, with Indonesians’ habit of owning more than a phone, even middle-income

consumers are likely to have a smartphone and a feature phone, with the feature phone

considered to be more as a backup or more reliable in terms of battery life.

Smartphones will, meanwhile, be the star performer over the forecast period, boosted by

continued slashing of prices that will make the product more affordable to bigger proportion of

Indonesians. Whilst the price of the average smartphone will remain several times higher than

that of the average feature phones (as feature phone prices will also keep falling), more

consumers may consider purchasing a smartphone to be more achievable in the forecast

period.

A key uncertainty for smartphones will be the performance of Blackberry. The Blackberry

smartphone itself has proven to be a huge success in Indonesia, which even caused a lot of

buzz when Research in Motion (RIM) decided not to open a factory in Indonesia but to open

one in Malaysia instead. The Indonesian government believes that the huge consumer

demand justified the setting up of a factory to open up new employment opportunities. Whilst

Blackberry’s popularity itself is likely to remain, the troubles faced by RIM globally raises

questions about its ability to maintain brand presence for consumer sales of smartphones,

even in a country like Indonesia where it has been very successful compared to Apple or

Samsung.

With Blackberry’s uncertain future, android-based smartphones are most likely to benefit in

volume share over the forecast period, such as Samsung. As such, the BlackBerry OS is

likely to decline in volume share towards 2013, and Android OS is expected to emerge as the

new leading OS in 2013. Windows OS, previously declining in the historic period, is expected

to make a strong return in 2012 with the launch of Windows 8 OS.

CATEGORY DATA

Table 1 Sales of Mobile Phones: Volume 2006-2011

'000 units 2006 2007 2008 2009 2010 2011 Feature Phones 10,811.8 14,055.4 18,272.0 22,840.0 24,500.0 26,000.0 Smartphones 480.7 672.9 1,076.7 1,938.0 4,500.0 9,000.0 Mobile Phones 11,292.5 14,728.3 19,348.7 24,778.0 29,000.0 35,000.0

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Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2 Sales of Mobile Phones: Value 2006-2011

Rp billion 2006 2007 2008 2009 2010 2011 Feature Phones 19,114.7 23,606.7 29,154.2 27,768.6 27,002.5 26,752.1 Smartphones 3,414.7 4,063.5 5,851.4 9,690.0 20,271.5 39,525.9 Mobile Phones 22,529.4 27,670.2 35,005.7 37,458.6 47,274.0 66,278.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 3 Sales of Mobile Phones: % Volume Growth 2006-2011

% volume growth 2010/11 2006-11 CAGR 2006/11 Total Feature Phones 6.1 19.2 140.5 Smartphones 100.0 79.7 1,772.4 Mobile Phones 20.7 25.4 209.9

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 4 Sales of Mobile Phones: % Value Growth 2006-2011

% current value growth 2010/11 2006-11 CAGR 2006/11 Total Feature Phones -0.9 7.0 40.0 Smartphones 95.0 63.2 1,057.5 Mobile Phones 40.2 24.1 194.2

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 5 Mobile Phones Company Shares 2007-2011

% retail volume Company 2007 2008 2009 2010 2011 Nokia Indonesia PT 38.8 37.7 35.9 33.4 29.8 Samsung Electronics 30.1 29.6 29.5 27.2 25.7 Indonesia PT Huawei Technologies Co 11.5 12.3 12.9 12.6 10.9 Ltd Research in Motion Ltd - 0.4 1.2 3.1 10.6 Metrotech Jaya Komunika 7.6 8.3 8.3 7.7 7.1 Indonesian PT LG Electronics 5.7 5.4 5.3 4.7 4.1 Indonesia PT High Tech Computer Corp - - 0.5 0.9 1.5 Sony Indonesia PT 1.4 1.4 1.2 1.2 1.2 Motorola Indonesia PT - - - 0.0 0.4

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Apple Computer Inc - 0.2 0.2 0.3 0.2 Others 5.0 4.7 5.0 9.0 8.6 Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 6 Mobile Phones Brand Shares 2008-2011

% retail volume Brand Company 2008 2009 2010 2011 Nokia Nokia Indonesia PT 37.7 35.9 33.4 29.8 Samsung Samsung Electronics 29.6 29.5 27.2 25.7 Indonesia PT Huawei Huawei Technologies Co Ltd 12.3 12.9 12.6 10.9 Blackberry Research in Motion Ltd 0.4 1.2 3.1 10.6 Nexian Metrotech Jaya Komunika 8.3 8.3 7.7 7.1 Indonesian PT LG LG Electronics 5.4 5.3 4.7 4.1 Indonesia PT HTC High Tech Computer Corp - 0.5 0.9 1.5 Sony Ericsson Sony Indonesia PT 1.4 1.2 1.2 1.2 Motorola Motorola Indonesia PT - - - 0.4 iphone Apple Computer Inc 0.2 0.2 0.3 0.2 Others 4.7 5.0 9.0 8.6 Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 7 Sales of Mobile Phones by Distribution Format 2006-2011

% retail volume 2006 2007 2008 2009 2010 2011 Store-Based Retailing 100.0 100.0 99.8 99.7 99.6 99.5 - Grocery Retailers 14.6 14.7 14.8 14.9 15.0 15.1 -- Discounters - - - - - - -- Hypermarkets 14.6 14.7 14.8 14.9 15.0 15.1 -- Supermarkets - - - - - - - Non-Grocery Retailers 80.0 79.5 77.5 76.0 75.5 75.0 -- Electronics and 80.0 79.5 77.5 76.0 75.5 75.0 Appliance Specialist Retailers -- Mixed Retailers - - - - - - - Other store-based 5.4 5.8 7.5 8.8 9.1 9.4 retailing Non-Store Retailing 0.0 0.0 0.2 0.3 0.4 0.5 - Direct Selling - - - - - - - Homeshopping 0.0 0.0 0.0 0.0 0.0 0.0 - Internet Retailing - - 0.2 0.3 0.4 0.5 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 8 Forecast Sales of Mobile Phones: Volume 2011-2016

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'000 units 2011 2012 2013 2014 2015 2016 Feature Phones 26,000.0 26,930.0 27,564.4 28,024.3 27,033.8 25,276.4 Smartphones 9,000.0 13,500.0 17,550.0 20,182.5 23,008.1 25,769.0 Mobile Phones 35,000.0 40,430.0 45,114.4 48,206.8 50,041.8 51,045.5

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 9 Forecast Sales of Mobile Phones: Value 2011-2016

Rp billion 2011 2012 2013 2014 2015 2016 Feature Phones 26,752.1 25,082.5 23,093.7 21,199.6 19,470.5 17,248.3 Smartphones 39,525.9 53,360.0 64,032.0 67,873.9 70,131.9 72,580.3 Mobile Phones 66,278.0 78,442.5 87,125.7 89,073.4 89,602.4 89,828.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 10 Forecast Sales of Mobile Phones: % Volume Growth 2011-2016

% volume growth 2015/16 2011-16 CAGR 2011/16 Total Feature Phones -6.5 -0.6 -2.8 Smartphones 12.0 23.4 186.3 Mobile Phones 2.0 7.8 45.8

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 11 Forecast Sales of Mobile Phones: % Value Growth 2011-2016

% constant value growth 2011-16 CAGR 2011/16 TOTAL Feature Phones -8.4 -35.5 Smartphones 12.9 83.6 Mobile Phones 6.3 35.5

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 12 Smartphones by Operating System 2008-2013

% retail volume 2008 2009 2010 2011 2012 2013 Windows 30.0 25.0 24.0 10.0 20.0 22.0 IOS 3.5 3.0 1.7 0.9 0.8 0.8 Android 15.0 24.0 25.0 33.0 35.0 Symbian 50.0 35.0 21.0 15.0 BlackBerry OS 8.0 15.0 20.0 41.4 37.0 32.5

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Others 8.5 7.0 9.3 7.8 9.2 9.8 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 13 Mobile Phones by Type of Contract 2006-2011

% retail volume 2006 2007 2008 2009 2010 2011 Monthly subscription 0.8 0.6 1.0 1.5 2.5 2.9 Pay as you go 12.5 13.0 13.5 14.0 14.5 15.0 Phone only 86.8 86.4 85.5 84.5 83.0 82.1 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources