GSMA warns Indonesia its 5G spectrum prices are too high

GSMA warns Indonesia its 5G spectrum prices are too high

The GSMA claims that Indonesia stands to lose US$14 billion in GDP gains over the next six years if it doesn’t rethink it 5G spectrum pricing in the next auction.

The Ministry of Communication and Information Technology (Kominfo) is planning to award several frequency bands over the next two years, including 700 MHz, 2.6 GHz and 3.5 GHz, as well as mmWave frequencies in the 26 GHz band. That would more than double the current total supply of mobile spectrum.

However, a new report from GSMA Intelligence points out that estimated annual spectrum costs for mobile operators in Indonesia have increased more than five-fold since 2010, mainly due to auction-related payments and spectrum fees associated with licence renewals.

Making matters worse, average revenue per unique mobile subscriber dropped 48% over the same period (in USD terms). The report estimates that annualised spectrum costs to recurring cellular revenue is currently at 12.2%, compared to the APAC and global median values of 8.7% and 7.0%, respectively.

At the very least, the report says, this could hamper the ability of Indonesian operators to meaningfully invest in 5G infrastructure, which will slow down rollouts and result in poor customer experiences.

The GSMA also frames the issue in terms of the expected socio-economic benefits that 5G will deliver to Indonesia, saying that the country could lose US$14 billion (IDR 216 trillion) in GDP between 2024 and 2030 if it prices 5G spectrum similar to the previous spectrum auction.

The report urges Kominfo to lower reserve prices below estimates of market value, and adjust the way it calculates annual spectrum fees to provide long-run incentives and avoid disproportionate increases in costs that aren’t aligned with market conditions.

The GSMA also recommends that Kominfo come up with a clear and comprehensive spectrum roadmap that accommodates current and future needs, particularly for mid-band spectrum. 

“According to our forecasts, 5G will reach 80% of the population by 2030,” said Julian Gorman, Head of Asia Pacific, GSMA. “For 5G to succeed in Indonesia, the government should focus on the right enabling policies, including spectrum supply and pricing. This requires a well-crafted regulatory framework for a successful auction that delivers a fair return for the government and encourages digital growth.”

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