Sector Update   /  Telecommunications  /  Click here for full PDF version 
Author: Hans Tantio

• The latest Omnibus law draft had key points which may benefit the overall telco industry (floor pricing may benefit
  TLKM
  while spectrum transfer may benefit smaller telco operators).
• Article 28 establishes the Government's role to regulate upper and lower limit pricing for the industry, though the formula hasn't been finalized.
• Article 33 & 34B allows spectrum sharing and/or transfer, as well as infrastructure sharing amongst telcos, through Government's approval.

Lack of clarity in terms of the upper and lower limit pricing
We expect in the near term, the government to issue a follow up regulation on the upper and lower pricing formula. Recall that the previous telecommunication minister has issued this upper and lower limit pricing back in Feb19 but no update thus far, we think it's imperative for government to issue technical and implementation guidelines for the regulation. This shall benefits operators with efficient network cost as the floor price is linked to average variable cost, which in this case will be

TLKM

.
Spectrum sharing and/or transfer may allow consolidation
Article 33 & 34B shows the government's interest to spread the network utilization, which may be done through spectrum and infrastructure (i.e. duct, tower, and pole) sharing. However, with network sharing, telco operators will be less incentivise to expand their network as it would be cheaper to share instead of expand. This may lead toward consolidation within the industry (i.e. merger between the smaller telcos, adversely impact

TLKM

).
Network sharing may result in more level playing field
By having network sharing, a more level playing field within the telco industry may be formed. Spectrum sharing shall benefit Telkomsel and Tri as their subscriber base per spectrum is above the current industry level (0.8mn subs/MHz). Concurrently, data BTS utilization may benefit

ISAT

the most as their network utilization is 13% higher than industry.
More positive impact on

EXCL

and

ISAT

, neutral for

TLKM

We view article 33 & 34B may benefit the smaller operators more (i.e.

EXCL

and

ISAT

), while article 28 may benefit

TLKM

, though more clarity on pricing formula is needed. In addition, infrastructure sharing is also seen to have a negative short-term impact towards the tower providers as expansion will be prioritized to using the existing operators' tower.



Sumber : IPS