Bandwidth-Based Frequency Tariff Lowers Operators’ Expenses

The usage rights fee (BHP) based on band frequency has the potential to lower costs of frequency tariff in the long run compared to usage rights fee with radio station license (ISR) base. (IFT/STANLIE)

JAKARTA - The usage rights fee (BHP) based on band frequency has the potential to lower costs of frequency tariff in the long run compared to usage rights fee with radio station license (ISR) base. As of the second quarter of this year, a number of operators have lower frequency lease costs.

According to the IFT Research Department, in the second quarter of 2011, PT Telekomunikasi Indonesia Tbk (TLKM) has 3.8 percent year-on-year decrease of frequency expenses to Rp 1.77 trillion from Rp 1.84 trillion. The decrease burden can be attributed to the implementation the frequency band-based usage rights fee in December 2010.
In the second quarter of 2010, Telkom’s radio frequency usage was increased by an average of 37 percent to Rp 1.84 trillion from Rp 1.08 trillion in the same period of 2008. At that period, the government still imposed radio station license usage rights fee, making any addition of base stations to cause an increase in corporate expenses.
Dian Siswarini, Director of Services & Technology at PT XL Axiata Tbk (EXCL) said the bandwidth-based frequency is better for operators as it improves efficiency.
Last year, XL paid Rp 1.09 trillion for frequency expenses. This year, the company’s operating expenses is estimated to be the same as last year. From the second quarter of 2008 until second quarter 2011, XL’s operating expenses rose with 13.7 percent CAGR from Rp 4.51 trillion to Rp 6.64 trillion. As of the end of June 2011, the company had 24,971 units of 2G and 3G BTS.
The government set a new regulation on frequency tariff from the Decree of the Minister of Communications and Information Technology. The bandwidth-based usage rights fee is applied to all operators with GSM and CDMA operating licenses who are obliged to pay annual usage rights fee for their frequency use measured by a specific formula for 10 years.
At the close of Monday’s trading, XL's shares closed at Rp 5,050, while Telkom's closed at Rp 7,450.
Indosat Expenses Increase
In contrast to Telkom and Telkomsel, PT Indosat Tbk (ISAT) continues to have increases in frequency usage from the second quarter of 2008 to the second quarter of 2011, with an average load increase of 20 percent. The continuing increase is the result of Indosat’s lack of network expansions.
The company’s frequency usage is used mostly on basic services such as voice and instant messaging services, followed by data services. To minimize frequency load, the company will aggressively expand its networks throughout Indonesia.
"We will extend our coverage to the eastern parts of Indonesia," said Djarot Handoko, Division Head of Public Relations at Indosat.
On Monday’s trade closing, shares of Indosat stood at Rp 5,750.