Starting a Telecommunications Business in Indonesia

5 min read|Last Updated: Januari 6, 2023|

The Telecommunications Industry of Indonesia

Telecommunications is one of the fastest-growing business sectors in Indonesia. Cellular connections are of a relatively high quality across the country, particularly when compared to the respective conditions of fixed wire and special telecommunications connections. According to the latest statistics, the number of cellular accounts in Indonesia exceeds the country’s total population; this fact gives credence to the quality of the country’s cellular connections. Thus, cellular networks form the cornerstone of Indonesia’s telecommunications industry.

Furthermore, the sheer size of Indonesia’s telecommunications market has created opportunities for business owners across the country to gain many benefits. The country is home to the world’s third-largest telecommunications market; it only trails China and India in this statistic. Although competition has increased and profit margins have been reduced in recent years, opportunities for economic growth nevertheless exist in the areas of data services, value-added services, and Internet and smartphone penetration. As the standards of these areas improve across Indonesia while the population and per capita income of the country also increase, the telecommunications sector of Indonesia is expected to continue to grow and prosper.

As the telecommunications market in Indonesia has continued to grow, foreign investors have begun to become more interested in pursuing major business opportunities which exist within Indonesia’s telecommunications sector. Many foreigners have made the decision to establish a telecommunications company in Indonesia. As long as such foreigners strictly adhere to the process of the incorporation of a company in Indonesia including the obtaining of all necessary licenses, there should not be any difficulties faced by any foreigner who is interested in starting a telecommunications company in Indonesia.

How to Form a Telecommunications Business in Indonesia

Before anyone chooses to set up a telecommunications business, there are several actions which must be taken. The first of these actions is that of registration. Any telecommunications business in Indonesia may be registered as any of certain business entities; these include the public company (Perum), the liability company (Persero), the Firma (FA), the Commanditaire Vennotschap (CV), and the limited company which may either be locally-owned (PT) or foreign-owned (PT PMA). Once an appropriate business entity has been selected, it is then a necessity to secure a premise for the use of the business. It is required to gain approval from all authorities involved before doing so. In certain instances, specific licenses and permits are needed before the premise can be used.

On a related note, if you are interested in starting a telecommunications or any other company of any business entity in Indonesia, we at Paul Hype Page & Co are always ready to provide our assistance. Our incorporation team will help you select a suitable business entity, then work with you to ensure that your new business in Indonesia will be established in a suitable and legal manner.

Once the premise for the business is able to be used, it is then necessary to obtain all necessary licenses for the operation of the telecommunications business. One of these is the Investment Registration. The Investment Registration was created by the Indonesian government to replace the Principle License. The Investment Registration’s purpose is to allow its owner to have an opportunity to create and prepare the necessary facilities and equipment before a specified amount of time elapses. The Operational Eligibility Examination must also be completed. This examination is a technical examination which is either conducted by an accredited agency or a team formed by government authorities. It is used to conduct technical and operational examinations. Once this examination has been completed, the License of Conduct (Modern Licensing) will be obtained. The Minister of Communication and Information Technology is in charge of the issuance of this crucial license. This licence is a contract which includes information about the rights, obligations, and sanctions of the business in question. It may be re-assessed every five years. The details specified in the License of Conduct (Modern Licensing) are related to the operational matters of the telecommunications company to be established. These details are related to how the company owner might begin to undertake the telecommunications operations of the company, how the business is expected to develop, payments for right of frequency usage fees as well as those for right of telecommunications operation fees, as well as sanctions to be imposed on the owner of the license if the owner ever violates any of the regulations explicitly specified by the license’s terms and conditions.

Should you require any assistance with the obtaining of any license in Indonesia, we at Paul Hype Page & Co are willing to offer our services. We will contact any authorities on your behalf. After receiving their response, we will use the information gained to allow you to receive your required licenses with as few problems as possible.

Foreign Ownership of an Indonesian Telecommunications Company

Foreign ownership of an Indonesian telecommunications company has certain inherent differences from local ownership of such a company. Certain restrictions apply to foreign owners of telecommunications companies which are entering the market for telecommunication networks or services in Indonesia. There are several methods through which a foreign business owner in Indonesia may enter the telecommunications market in the country. Any foreign business owner who intends to start a telecommunications business in Indonesia may either acquire shares of an existing telecommunications operator based in Indonesia or establishing a new company by entering into a joint venture with local business owners.

However, if a foreign business owner intends to acquire the shares of an existing telecommunications operator, this share ownership will be subject to limitations which are determined by the government of Indonesia. These restrictions are specified in the Negative Investment List, a list created by the government in order to prevent the Indonesian economy from becoming oversaturated by businesses started by foreigners.

Starting a Telecommunications Business in Indonesia FAQs

What laws govern telecommunications companies in Indonesia?2020-04-02T16:38:28+08:00

Telecommunications companies in Indonesia are regulated by Law No. 36 of 1999 on Telecommunication. This law is supplemented by Government Regulation No. 52 of 2000 concerning Implementation of Telecommunication (GR 52/2000). These laws work together to regulate the operation of the telecommunications networks, telecommunications services and special telecommunications which exist in Indonesia. 

Another important law regarding telecommunications in Indonesia is Government Regulation No. 53 of 2000 on the use of radio frequency spectrums and satellite orbits (GR 53/2000). This law regulates the operation of and also specifies the mandatory fees and licensing requirements for the use of radio frequency spectrums and satellite orbits by any telecommunications company in Indonesia. 

There are also specific decrees and regulations which are issued by the Ministry of Communication and Information Technology. Such decrees and regulations are intended to govern the telecommunications networks, telecommunications services, and special telecommunications operations of Indonesia. 

All information and electronic transactions which take place in Indonesia are specifically regulated by Law No. 11 of 2008 on information and electronic transactions. This law regulates the use of electronic documents and/or information as evidence before Indonesian courts, electronic signatures and transactions, domain names, intellectual property, and the protection of personal rights. It also specifies which related actions are deemed to be illegal as well as the punishments which will be suffered by such offenders. 

Which authorities govern telecommunications companies in Indonesia?2020-04-02T16:38:07+08:00

The Indonesian Telecommunication Regulatory Authority (BRTI) is in charge of regulating Indonesia’s telecommunications sector. The BRTI has the authority to prepare and stipulate regulations on the operation of telecommunications networks and services which are related to areas such as licensing, standards of operational performances, charges with regard to connections, and standards of equipment used for telecommunication purposes in Indonesia. The BRTI also monitors the operational performance of and level of competition among Indonesia’s telecommunications companies. It also serves as the arbiter of any disputes between telecommunications operators in Indonesia, oversees the use of telecommunications equipment by such companies, and implements quality service standards. 

Another important regulatory authority in relation to the telecommunications industry of Indonesia is the Ministry of Communication and Information Technology. The Ministry of Communication and Information Technology oversees the regulation of telecommunication networks and services in Indonesia. Law 36/1999 provides the Ministry of Communication and Information Technology with the right to direct policies of, regulate, supervise, and control the telecommunications industry of Indonesia.  

What percentage of the shares of an Indonesian telecommunications company may be owned by a foreigner?2020-04-02T16:37:02+08:00

Any foreigner who plans to own shares in an Indonesian telecommunications company must abide by the specifications stated in the Negative Investment List. Foreign owners of shares are permitted to own up to 49% of the shares of a company which provides telecommunications services including content services, call centers and other added-value telephony servicesInternet services, as well as certain other multimedia services. 

Foreign shareholderare allowed to own up to 65% of the shares of any company involved in the operation of telecommunications networks consisting of fixed network providers and mobile network providers as well as telecommunications network providers which have been integrated with telecommunication services. 

It is also possible for a foreigner to own up to 95% of the shares of any company in Indonesia which has established or is in the process of establishing a testing telecommunication device agency. 

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