The Current State of Indonesia’s Media and Telecommunications Industry
Indonesia’s telecommunications industry has played a pivotal role in developing the country’s economy in the last few years. The billion-dollar Indonesian telecommunications landscape is nothing short of small, with over 100,000 mobile towers all over the country. Technology in the telecommunications industry moves rapidly, so it is safe to say that the current state will see constant changes as it transforms to keep up with the more digitally advanced, younger generation of users.
Indonesia’s 5G rollout plan will be a catalyst to providing faster internet speeds, lower latency, and allow more connected devices at the same time. The need for 5G is evident with the country’s growing population and the competitive prices of technology in the market nowadays.
The three leading telecommunication companies – Telkomsel, Indosat, and XL – are racing to meet the demand for affordable data prices and improved services. With the number of smartphone users only increasing by the minute, this growing market opens up many opportunities for foreign investors to pursue activities in Indonesia.
With the newly established Omnibus Law banishing the restrictions to foreign ownership, there are still some barriers to entry in the telecommunications market. Investors will need to set up a foreign-owned company and apply for a Telecommunications Service License Provider that the Ministry of Telecommunication and Informations issues. Another possibility is for foreigners to conduct a merger or acquisition of a local company.
Opening a Telecommunication and Media Company in Indonesia: 2022 Outlook
It is indisputable that trends are moving from offline activities to completely digital. The industry will see a surge in data traffic in terms of telecommunication, resulting in even more affordable data tariffs and higher investment in network capacities.
A projection by PEFINDO, one of Indonesia’s leading credit rating agencies, predicts that data traffic from the top three telecommunication operators will reach a high of 30 million terabytes (TB). This growth is 30 times that of 0.9 TB in 2015, which stems from the speedy evolution of technology.
One of the reasons for Indonesia’s digital transformation is minimizing human contact amid the 2020 pandemic. In 2025, Indonesia is projected to be the largest digital economy in Southeast Asia, with a transaction value of USD$ 130 billion. This can be seen by the high number of competitive e-commerce companies in Indonesia, with a collective transaction value of USD$27 billion. This shows the potential for opening a media company in Indonesia and capitalize on these opportunities.
Seeing that the distribution of Indonesian users is heavily concentrated in the Island of Java, foreign investors looking to focus on capital expenditure outside this region may find success in doing so.
Opening a Media Company in Indonesia: Understanding The New Investment Regime
Following Law No 11 of 2020 regarding Job Creation, also known as the Omnibus Law, the President of The Republic of Indonesia issued Presidential Regulation No 10 of 2021 (PR 10/2021) consists of the much anticipated legal framework on business investment known as the Positive Investment List.
|Indonesia’s Business Fields According to the Positive Investment List|
|Business Fields Category||Number of Business Lines that Open or Closed for Foreign Investment|
|Priority sectors||245 are open for foreign investment|
|Business fields that stipulate specific requirements or limitations||46 are open for foreign investment|
|Business fields open to large enterprises, including foreign investors, but are subject to a compulsory partnership with cooperatives and micro, small, and medium-sized enterprises (MSMEs)||51 are open for foreign investment|
|Business fields reserved for cooperatives and MSMEs||112 are closed to foreign investment|
The PR 10/2021 serves as a hallmark in the substantial changes of the government’s approach to foreign investment in the country. The regulation says that all business sectors are 100% open to participating in the country’s growth in terms of foreign investment. The government has taken all necessary steps to speed up administrative processes by assuring business licensing and complete transparency.
In this new investment regime, telecommunication business activities that were previously restricted to 67% now have no limitations to foreign ownership. These recent changes may push foreign investors to move their business in the telecommunications sector without needing a local partner.
As for media and broadcasting activities, the new regime allows a maximum of 49% of foreign ownership for a publicly listed company. While previously, it was fully reserved for domestic investment.
Opening up the country for foreign investors will be a significant growth driver to the nation’s economy and a massive window of opportunity for foreigners as industries will receive strong support and incentives from the government.