YOGYAKARTA, OCTOBER 23, 2024 – Management of PT XL Axiata Tbk (XL Axiata) is preparing to face future business challenges, which are expected to remain tough. In addition to industry competition, there are uncertainties surrounding regulations that could impact the operations of operators, including XL Axiata. Key issues include the existence of RT/RW net, the emergence of Starlink, unclear regulations regarding Over The Top (OTT) services using operator networks, and policies related to regulatory charges and frequency auctions.
Chief Corporate Affairs of XL Axiata, Marwan O Baasir, stated, “The telecommunications industry in Indonesia will remain very challenging. Competition among operators will continue to be tight, and the evolving tastes and needs of customers will significantly influence business strategies. Additionally, we must contend with new competitors introducing innovative technologies, such as Starlink. At the same time, several issues remain unresolved, which could disrupt industry operations.”
According to Marwan, although competition will remain intense, there are still opportunities to enhance business growth, especially as industry competition becomes more rational, with a primary focus on quality and service. XL Axiata will certainly optimize these opportunities by continuing to prioritize the development and enhancement of new and innovative services to meet customer needs, including convergence services.
Furthermore, XL Axiata's management recognizes the challenge of ensuring industry sustainability while providing competitively priced services that maintain high quality. This strategy is vital for a thriving telecommunications sector and ensuring that the public has access to quality internet services.
XL Axiata wish the government can assist in creating a positive and healthy environment that will support the acceleration and equitable distribution of national development. Marwan emphasized the urgent need for government intervention to address several issues that remain unclear, which are clearly disruptive to national telecommunications operators.
One significant regulatory challenge is related to incentives for regulatory expenses. The financial burdens associated with operational costs, including frequency spectrum taxes, have become increasingly heavy.
“In conducting our telecommunications business in Indonesia, we strive to adhere to all policies and regulations set by the government. This includes the rising Non-Tax State Revenue (PNBP) from frequency spectrum, which has been increasing regularly, directly impacting the operational costs of operators,” said Marwan.
XL Axiata urges the government to consider the regulatory burdens currently placed on the telecommunications industry. The ratio of Frequency Usage Fees (BHP) to operators’ gross revenue has reached 13-14%, exceeding the ideal range of 5-10%
Regarding the need for additional spectrum to enhance service quality, XL Axiata is also advocating for the government to conduct spectrum auctions suitable for 4G and 5G networks. XL Axiata is interested in participating in the upcoming 700 MHz and 26 GHz frequency auctions, hoping for a more affordable reserved price that won’t burden operators.
XL Axiata believes that a minimal starting price and the application of reduction factors in regulations will help ensure the economic viability of operators’ businesses and encourage network development, including in remote areas. Thus, XL Axiata emphasizes the importance of synergistic collaboration between the government and operators to build networks in locations designated for frequency auction winners.
Additionally, another immediate challenge is, first, the proliferation of illegal internet service reselling practices (RT/RW net). XL Axiata highlights the negative impact of these practices, which not only harm customers but also operators and the government. These practices evade frequency fee obligations (BHP), resulting in unhealthy internet service pricing and potential threats to customer data security. The government needs to regulate and enforce comprehensive measures against these practices, involving all relevant stakeholders.
The RT/RW net clearly violates regulations, including Law No. 36 of 1999 on Telecommunications and the Regulation of the Minister of Communication and Information Technology No. 13 of 2019. Government enforcement of existing regulations is essential, as these illegal practices have harmed XL Axiata as an operator that has invested in network development and holds valid licenses. XL Axiata is also committed to combating RT/RW Net through education, collaboration with government entities, and strict enforcement of service subscription terms and conditions.
Second, regarding the emergence of Starlink, while XL Axiata welcomes its presence in Indonesia, it also sees it as an opportunity to provide fast internet services in remote areas. However, XL Axiata's management stresses the need for the government to implement balanced regulations to create a fair playing field for all industry players.
“The government must ensure an equal playing field between Starlink and existing operators. This will promote healthy competition and enhance service quality for the public. We are also ready to collaborate with Starlink and explore partnership opportunities to expand internet service reach,” Marwan added
Third, concerning OTT services that rely on operators' networks, regulations are necessary not to favor operators but to ensure fair competition. Operators are required to pay PNBP, spectrum fees, and USO charges, and they must continually invest to guarantee service quality for customers. In contrast, OTT services do not pay these fees at all, and their tax contributions may be uncertain. Therefore, clear regulations are needed to govern OTT services and to ensure an equal treatment between operators and OTT providers.
XL Axiata believes that OTT businesses are reaping substantial profits from the Indonesian internet industry. In contrast, telecommunications operators, including XL Axiata, are not seeing significant revenue increases despite offering more affordable services. Instead, the increase in traffic primarily benefits OTT providers.