IOH challenges Telkomsel’s dominance in rural areas and regions beyond Java

The merger of Indosat Ooredoo and Hutchison 3 has transformed the dynamics of Indonesia’s mobile market and created Indosat Ooredoo Hutchison (IOH) Indonesia's second-largest mobile network operator based on subscriber share, just behind Telkomsel. IOH aims to capitalize on the strengths of both entities to improve network coverage, service quality and digital inclusivity across Indonesia. The new operator’s primary focus is expanding network infrastructure in sparsely populated regions outside of Java, home to over 40% of the population.

In this analysis, Opensignal evaluates the changes in Indonesia’s mobile network experience landscape following the merger — across Urban, Suburban, and Rural areas — along with the year-on-year (YoY) changes across all networks. The findings suggest that the Indosat Ooredoo and Hutchison 3 merger has significantly impacted the mobile network experience landscape, challenging Telkomsel’s dominance, especially in rural areas nationally and regions outside Java. For this analysis, we have kept 3 and Indosat separate, since they continue to operate as separate brands after the merger.

Key Findings:

• Telkomsel continues to have the best Coverage Experience across Indonesia. However, 3 and Indosat are making headway, with the most significant improvement in rural areas.   
• Our users on IOH experienced the greatest improvements in average download speed across all three locales. As a result, 3 and Telkomsel are matched in Download Speed Experience in Rural areas. Additionally, the disparity between Telkomsel and 3 diminishes as we move outside the Java region, especially for Urban areas.    
• IOH users observe the greatest improvement in the quality of experience while streaming videos. 3 now leads in Indonesia’s Suburban and Rural areas, as well as all locales outside Java.     
• Indosat users see the biggest boost in Games Experience across all three locales, while 3 is top for Games Experience in all three locales outside Java.    
• 3 and Indosat, lead in Consistent Quality across all locales and have seen the biggest YoY improvement in this regard.

Our users on IOH and XL have experienced significant year-over-year improvements in Coverage Experience, which measures the extent of mobile networks in the places people live, work, and travel. However, despite improvements, Telkomsel continues to lead across Urban, Suburban, and Rural areas with Coverage Experience scores ranging from 8.4 to 9.6 points out of 10 in Urban and Suburban areas, Telkomsel leads second-placed IOH by less than two points while its lead more than doubles in Rural areas. The improvements in Coverage Experience our users observe stem from the fact that IOH has focused on expanding its network coverage. In FY 2023, IOH increased its network footprint from 180,000 Base Transceiver Stations (BTS) to 229,000 — a 27.2% increase, a total of 49,000 4G BTS across Indonesia. Comparatively, market leader Telkomsel’s BTS count stands at 247,472.

Our users on IOH have experienced the biggest YoY improvement in Download Speed Experience across all three locales. The average download speed for our users on 3 has increased by 43.6% in Rural areas, 48.5% in Urban and 49% in Suburban areas. Indosat users observed slightly lower improvements in these areas, but they saw the most improvements in Rural areas. Telkomsel users saw improvements of 27.5-29.8% in Urban and Suburban areas, and 40.2% in Rural areas. However, Smartfren and XL users saw significantly lower improvements. As a result, in Rural areas average download speeds on 3 are comparable to Telkomsel’s while in Suburban areas 3 users’ Download Experience is similar to that seen by XL users.

Consistent Quality assesses the proportion of tests that meet the minimum thresholds to support commonly used mobile applications, such as video calling or uploading an image to social media. IOH brands, 3 and Indosat, lead in Consistent Quality across all locales and have seen the biggest YoY improvement in this regard. Telkomsel is the only other operator that saw improvements in Consistent Quality — YoY increases of 0.8-1.4 percentage points in Urban and Suburban areas.

With smartphones being the primary screen, and wireless internet the preferred mode to access content online in Indonesia, video streaming on both global and local platforms has been expanding across the country. As of the third quarter of 2023, around 96.9% of internet users in Indonesia watched any kind of online video content each week. This puts Indonesian operators in the prime position to address demand by providing high-quality video streaming services.

Looking at the quality of experience while streaming on-demand videos our users on 3 saw the most significant improvements across all three locales nationally, followed by Indosat. As a result, IOH brands have whittled away at Telkomsel’s lead in Urban areas and 3 outperformed Telkomsel in Suburban and Rural areas. Our users on 3 enjoy the best Video Experience in Rural areas, followed by Indosat and Telkomsel.

Conversely, when we look at the Urban, Rural, and Suburban areas beyond the Java region 3 leads in Video Experience across all three locales, followed by Indosat and Telkomsel.

Moving onto Games Experience, our users across all operators' networks have seen improvement in the quality of experience while playing multiplayer mobile games online. However, Indosat users have seen the biggest improvements across all three locales. Telkomsel leads in Urban areas by a small margin, while 3 reigns supreme in Rural areas. Moreover, Telkomsel and 3 lead jointly in Suburban areas with statistically tied scores bordering the 79-point mark (on a 100-point scale).

Indonesia is one of the largest mobile gaming markets in Southeast Asia. With the growing popularity of competitive Esports events, multiplayer mobile gaming is becoming increasingly important for Indonesian consumers.

Our data shows that the Games Experience outside Java has also improved across all three locales, with the highest improvements reported by our Indosat users. However, the dynamics are different, as our users on 3 enjoy the best Games Experience in Rural areas, while Telkomsel continues to lead in Urban and Suburban areas outside the Java region.

Indonesia consists of over 17,500 islands, making its geography expansive and unique, with the majority of its population concentrated in Java, while over 40% live in sparsely populated rural areas. This presents an economic and operational challenge for operators seeking to improve mobile connectivity in these regions outside of Java.

The analysis shows that the mobile network landscape in Indonesia has undergone significant changes since the merger. Usually, operators tend to invest in densely populated urban areas since it’s commercially lucrative for operators to prioritize network deployment and upgrades in those areas first. However, IOH's strategic move to focus on rural regions outside Java has resulted in notable improvements. As a result, 3 and Indosat have outperformed competitors in these areas and can challenge Telkomsel's historical dominance in these areas.

This move from IOH has opened up opportunities for 3 and Indosat to onboard fresh digital customers and will likely contribute to Indonesia’s digital economy. It will also play a crucial role in delivering vital services to a significant proportion of users in underserved and remote areas driving positive socio-economic outcomes and digital inclusion. As Indonesia moves towards 5G, the growing competitive dynamics between IOH and Telkomsel could significantly shape the future of the mobile network experience in the country.

Note: This analysis uses Urban, Suburban and Rural geo definitions based on the GHSL-SMOD dataset