opportunities

Indonesia’s telecommunications sector is at a historic crossroads.  After a decade of consolidation, three groups — TelkomGroup (with Telkomsel), Indosat Ooredoo Hutchison (IOH) and XL Axiata/Smartfren (XL Smart) — now control about 95% of the market’s revenue .  This “healthy oligopoly” promises economies of scale and opens the door for infrastructure sharing, yet it also raises a sobering question: will these carriers become mere commodity providers squeezed by over‑the‑top (OTT) platforms, or will they emerge as strategic national enablers for Indonesia’s digital economy?

The Stagnation Trap: Core Problems and Risks

Low ARPU and Prepaid Dominance – Nearly 97% of Indonesian mobile subscribers are prepaid .  Customers churn easily, forcing operators into price wars.  As a result, the blended average revenue per user (ARPU) sits at only ~IDR 35,700 (US$2.38) and has been almost flat.

population was covered by 5G, mainly using refarmed 4G spectrum .  The for years.  Such thin margins, coupled with commoditization of connectivity, echo a global pattern where telco revenues grow slowly while capital expenditures continue to rise .

Limited 5G Spectrum and Slow Deployment – Indonesia’s 5G rollout remains selective and urban.  In 2024 only 26.3% of the country currently has 360 MHz of mid‑band spectrum assigned for mobile services, far below the ~2 GHz average required to capture 5G’s full economic impact.  Analysts note that refarming the 2.6 GHz and 700 MHz bands and releasing more mid‑band frequencies are urgent to prevent Indonesia from falling behind .

Spectrum Reform and Regulatory Bottlenecks – Twimbit’s 2023 update observes that spectrum scarcity has delayed 5G launches and forced operators to invest cautiously.  Government digital roadmaps push for 5G, but licensing remains fragmented and expensive.  Without transparent auction policies and neutral‑host models for shared infrastructure, the industry risks duplication and inefficiency.

Cybersecurity and Trust Deficit – High‑profile data breaches — including leaks affecting more than a billion SIM‑card activation records — spurred Indonesia’s Personal Data Protection law.  Implementing this law will require significant investment in cybersecurity.  EY research warns that two‑thirds of consumers want better explanations of how AI is used and 40% of telco employees feel unprepared to use AI responsibly.  Moreover, 57% of telecom executives worry about security attacks on physical assets, and Southeast Asian operators must balance innovation with strong compliance and trusted AI to counter rising cyber risks .

Talent and Skills Shortage – Telcos struggle to attract and retain digital talent.  EY’s Telco of Tomorrow survey shows that industry executives rank talent and culture as their top transformation inhibitors; poor collaboration and missing skills hinder innovation.  Competing with hyperscalers for AI and cloud expertise is an uphill battle, especially as Indonesia’s young engineers often migrate to global tech firms.

Financial Pressures and Capital Intensity – Globally, telco revenues are projected to grow at a compound annual rate of only 2.9% to 2028, while ARPU continues to decline.  Indonesia’s carriers therefore face a scenario where most cash is absorbed by capital expenditures, dividends and debt servicing , leaving little room for innovation.  Without new revenue streams, their role may stagnate.

Hidden Opportunities: Why Indonesia Still Holds Promise

Despite these headwinds, the country’s 280 million citizens and rapidly growing digital economy offer unique opportunities.  Indonesia’s GDP grew 5.3% in 2022 and its telecom revenue is expected to grow at 6.1% CAGR between 2023–27, outpacing global averages.  Operators and policymakers can tap several levers:

Infrastructure Sharing and Neutral Hosts – With three large players and tens of thousands of towers, sharing becomes logical.  Twimbit notes that Telkomsel, XL and Smartfren operate more than 165 000, 91 000 and 43 000 4G sites respectively.  Active sharing, fibre co‑build and neutral‑host models reduce duplication and free capital for new services.

Accelerated Spectrum Release – Refarming of the 2.6 GHz and 700 MHz bands and auctioning the 3.5 GHz mid‑band could enable Indonesia to meet the 2 GHz requirement.  Transparent, cost‑effective auctions will encourage investment and prevent a repeat of 5G’s initial delays.

Diversifying Beyond Connectivity – Telcos are shifting to non‑connectivity revenue streams.  Telkomsel created INDICO, focusing on education, health and gaming verticals, and saw its digital business revenue grow 17.4% year‑on‑year .  Enterprise services are a priority: carriers now offer IoT, cloud computing and managed services to businesses.  This pivot from consumer to B2B mirrors global advice that AI, fixed connectivity and vertical solutions are the ingredients for growth.

Trusted AI and Data Sovereignty – Indonesia can leverage its telcos as sovereign enablers rather than mere “techco”  By investing in secure sovereign clouds, digital identity and data‑classification systems, carriers can provide AI‑powered services while ensuring national data stays onshore.  EY’s insights stress that as AI becomes pervasive, building trust and clear privacy policies is essential.  Indonesia’s new data protection law compels operators to bolster cyber defenses, turning compliance into a competitive advantage.

Bridging the Digital Divide – Indonesia’s archipelagic geography means connectivity gaps persist.  The government’s Palapa Ring fibre backbone connects remote islands, but 5G coverage remains low.  Satellite‑enabled non‑terrestrial networks, community internet for rural areas, and targeted subsidies can help ensure that digital inclusion accompanies growth.

A Path Forward: Policy and Industry Recommendations

For Indonesia to avoid stagnation and instead become a digital powerhouse of the Global South, stakeholders must act in concert:

Enact Pro‑Growth Regulation – Regulators should adopt an orchestrator role, promoting shared infrastructure and neutral‑host models, streamlining spectrum auctions and fostering healthy collaboration.  Transparent policies can align private investment with national goals.

Prioritize Mid‑Band Spectrum – Release at least 200–300 MHz of the 3.5 GHz band and integrate it with the 700 MHz auction .  Reserve prices should be conservative to encourage robust 5G rollout.

Invest in Talent and Innovation – Government, academia and industry must co‑create programs to develop AI, cybersecurity and cloud skills.  Public‑private partnerships can sponsor scholarships and nurture a local digital workforce.

Leverage AI Responsibly – Telcos should harness generative AI to reduce costs, personalize services and improve network efficiency, while adhering to strict privacy standards .  Clear communication about AI use can rebuild customer trust.

Expand Non‑Connectivity Services – Operators need to emulate digital leaders by offering integrated fintech, healthtech, education and entertainment services.  Building “digital ecosystems” will differentiate them from commoditized connectivity and create new revenue streams.

Conclusion

Indonesia’s telco sector stands between two futures.  One path leads to commoditization and slow decline, as global OTT giants capture the value created by local networks.  The other path requires bold policies, shared infrastructure, spectrum reform and investment in AI and talent.  By choosing the latter, Indonesia’s operators can become sovereign digital enablers — powering not just connectivity but the nation’s broader ambitions for health, education, industry and sovereignty.  The moment for decisive action is now.

Israeli Prime Minister Benjamin Netanyahu said he would meet with President Trump again on Tuesday to discuss a Gaza ceasefire. He also praised Washington’s “unprecedented” military ties with Israel following a meeting with Capitol Hill lawmakers.

Following the U.S. attack on Iran’s primary nuclear facilities at Fordo, Natanz and Isfahan, Tehran faces nothing but bad options. Militarily, Iran can escalate the conflict by attacking U.S. forces and allies in the region, as it did on Monday with missile attacks on U.S. bases in Qatar and Iraq. Iran could also close the Strait of Hormuz, withdraw from the nuclear nonproliferation treaty or even attempt a rapid “breakout” run to a bomb with its residual capabilities. Each of these options virtually assures an American military response that goes far beyond Iran’s nuclear program, possibly leading to a targeted campaign to topple the regime, the Islamic Republic’s greatest nightmare.

A more likely military response would therefore be for Iran to respond by continuing to attack Israel — as it did just hours after the U.S. strike — in an attempt to turn the conflict into a war of attrition that Israel can ill afford. Israel could escalate to try to end the war more swiftly and avoid prolonging losses.

Diplomatically, Iran can return to negotiations but rebuff President Trump’s demand for an “unconditional surrender,” whose terms he had not spelled out. In reality, these would likely include the complete dismantlement of Iran’s nuclear and missile programs and significant curbs to its regional role, along with long-term inspections and more. Should Tehran rebuff these demands, it would greatly increase the risk of further American military action, including against the regime itself — targeting military and civilian leaders and infrastructure, not just nuclear sites.

Alternatively, it can essentially accede to Trump’s demands, in which case it avoids direct American intervention and the war ends, but Iran loses its ultimate security guarantor — the nuclear capability — and virtually all of its leverage to seek any concessions in further international talks. The regime would also appear so weak that the probability of a domestic uprising would increase exponentially.

Whichever option Iran chooses, the very future of the Islamic Republic has never been in greater peril. Accordingly, the prospects for a dramatic positive transformation of the Middle Eastern strategic landscape have never been greater.

The decades-long American effort to establish a regional coalition of Arab states and Israel, to contain Iran, will be given a significant boost, as the former gains confidence to do so in the face of a greatly weakened Iran and resurgent U.S. in the region. The dangers of proliferation, at least in the Middle East, might be greatly reduced. Israel will have demonstrated — albeit this time only with critical American assistance — that the “Begin doctrine” (Israeli determination to take all means necessary to prevent a hostile regional state from developing nuclear weapons) still applies. Turkey, Egypt and Saudi Arabia, the three most likely proliferators in the region after Iran, will have little reason to pursue nuclear weapons.

Russia’s and China’s inability to provide their Iranian ally with any practical backing during the war stands in stark contrast to the U.S. and Israel and is particularly galling for Iran because of its strong support for the Kremlin during Russia’s war in Ukraine. Moscow and Beijing will suffer a significant reduction in their regional standing, accruing to Washington’s benefit. The Middle East will once again be considered a clearly American-dominated region, in which Russia and China will have to tread more carefully.

There are some in the U.S. who fear Mideast conflicts distract American attention from the competition with China — the only nation approaching the economic influence of the U.S. today — and Russia. But taking a direct role in this Iran-Israel conflict has not diverted American focus from Moscow and Beijing. On the contrary, it has significantly strengthened Washington’s global stature compared with both countries. China will be more hesitant to attack Taiwan now that the U.S. has demonstrated willingness to bomb aggressors against American allies.

An Israel whose enemies have been dramatically weakened, and which no longer faces an existential threat from Iran, would be in a far better position to make progress on the Palestinian issue, beginning with an end to the war in Gaza. Indeed, it would not be far-fetched to assume that Trump, always transactional, may have made this a precondition for his support for Israel in the war. Saudi-Israeli normalization will be back on the table.

Netanyahu has prepared for this moment for 30 years, for the opportunity to put an end to the only existential threat Israel continues to face. From the reviled leader whose administration allowed the Oct. 7 fiasco and various outrages in domestic affairs, he now stands to be remembered as one of Israel’s great heroes. Moreover, a favorable outcome to the war may very well save him from what otherwise appears to have been a looming electoral defeat — which could have been followed by jail time, given the corruption charges he faces.

The bigger question is whether Netanyahu — whose deep understanding of Israel’s overall strategic circumstances no one has ever doubted — will wish to use this opportunity to crown his legacy not just with saving Israel from an existential military threat, but also from an almost equally severe demographic challenge to its own future as a Jewish and democratic state. Fordo may be gone; the Palestinians remain. He would truly cement his standing in history if he ended the Gaza war and paved the way to a resolution of the Palestinian issue.

Both Netanyahu and Trump deserve credit for taking daring action, and they must be prepared to continue doing so. This is not the time to be fainthearted but to continue pressing the advantage. They have engaged in a classic case of coercive diplomacy, the use of military force for diplomatic ends, and must see it through to the desired end: a diplomatic agreement with Iran that ensures, with an inspections regime of unprecedented intrusiveness, that it can never again develop nuclear capabilities for military purposes, puts severe limits on its missile capabilities and curtails its malign regional role.

Even with a tentative cease-fire now in place, achieving an agreement of this sort will not be easy. The Iranians are unlikely to fully accede to American demands unless they truly feel that they have their backs to the wall, and even then, they are unusually effective negotiators. Persistence, focus and attention for detail, not known to be Trump’s forte, will now be called for. A historic opening has been made; it must not be squandered.

Chuck Freilich, a former Israeli deputy national security advisor, is a senior fellow at Israel’s Institute for National Security Studies. Colin P. Clarke is the director of research at the Soufan Group, a security and intelligence consulting firm based in New York City.