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Market Size

Though mostly ignored by Western investors, the Indonesian cell phone market continues to grow at a rapid rate. (In 2012, this market grew by 68% YOY.) The statistics, below, which I have gathered from multiple sources suggest that this market will soon be large enough for global investors to take notice.

Indonesia Cell Phone Market
ItemVolumeNote
Population250 MMEstimated
Mobile Phones Installed Base158 MM63% population penetration
Smartphone Installed Base22 MM14% of all cell phones
Prepaid Installed Base150 MM95% of all cell phones
2013 Expected cell phone sales54 MM
2013 Expected smart phone sales12 MM22% of cell phone sales

Source: Indonesia Global Business Guide, Index Mundi, GFK Group

The 12 MM smartphones expected to be sold in Indonesia this year compares to 30MM smartphones expected to be sold in India over the same period. While Indonesia's cell phone market is still much smaller than most of the developed world, its rapid growth suggests it will become material for the major world smartphone vendors within a year or two. BlackBerry (NASDAQ:BBRY) is a surprisingly big player in Indonesia while Nokia's (NYSE:NOK) market share there has been ramping lately, much of it due to their increasingly popular Lumia 520.

In preparing this report, I wanted to include a chart showing the market shares of the various cell phone vendors in Indonesia. But the most recent data available were all from 2012. However, the turnover in share has been so great year-to-date, any such chart would not convey the current shares of the various vendors properly. So we will have to wait for IDC's next report to get an official tally. But overall, it is well established that:

  • Samsung is the smart phone market leader
  • Local and Chinese brands are taking share
  • BlackBerry is losing share
  • Apple's market share is tiny (iPhone 5C will not change this)
  • Windows Phone has recently taken a lot of share

Despite losing share, with the overall market growing as fast as it is, Indonesia remains BlackBerry's most important emerging markets territory.

BlackBerry's Last Stronghold

Up until quite recently, one in five BlackBerrys sold worldwide was sold in Indonesia. That amazing statistic is mostly explained by the popularity of BlackBerry Messenger (BBM) among the country's youth. Teenagers represent a disproportionate percentage of the Indonesian cell phone market. Text messaging continues to represent the main mode of communicating among the youth - few use their cell phones for much else.

However, BlackBerry is now rapidly losing market share in Indonesia. They have reacted to this market share loss by changing their business model - the company now licenses its BBM to third parties. Samsung was among the first takers to sign up for a license. While some have surmised that the spread of BBM may help BlackBerry increase its profile and, thus, eventually sell more phones, my view is that this recent development is more an admission by BlackBerry that they can no longer compete effectively on the device front. By licensing BBM to their biggest competitor in BlackBerry's strongest territory they have handed the opposition the keys to the Indonesian (and African) kingdoms. The investment nugget I draw from this, with respect to BlackBerry, is that the BBM is clearly their most valuable asset. In fact, this along with their brand and what remains of their server business may be their only valuable assets. If you want to read more on this subtopic, I recommend the BGR articles by Tero Kuittinen.

Windows Phone 20% Share?

Recently, Jo Harlow, a Microsoft (NASDAQ:MSFT) vice president commented that Windows Phone has 20% market share in Indonesia, Thailand, and Vietnam. She was, no doubt, taking about new shipments. But I have not seen a more objective source like IDC quote similar marketshare figures and, therefore, am reluctant to accept Ms. Harlow's account, especially given that MSFT has recently exaggerated their share numbers in other markets, notably Mexico and Poland. In addition, when I add up the market shares claimed by each vendor, the total comes out to well over 100% so I suspect the actual WP share may be in the teens.

But regardless of what the exact market share number turns out to be, it is clear that Windows Phone is doing well here. Indonesia's smartphone market is even more skewed towards the low end than India's and certainly more than China's. For this reason, price sensitivity of the Indonesian smartphone market is among the highest in the world - they like cheap phones.

Since apps do not matter as much in this market (other than the aforementioned BBM), Operating Systems are not at such a large disadvantage here if Instagram or some other app-de-jour is missing. For this reason, lower priced Lumias have found a strong audience in this price-sensitive market. Without the app focus, other factors like build quality, hardware features, and brand name play a more important role for the local consumer.

Will Windows Phone Go Without BBM?

With BlackBerry rapidly losing ground in Indonesia, WP is probably going to continue to gain some share. However, since Samsung has licensed BBM from BlackBerry, they appear to be in a much better position to take most of the share from BlackBerry's fleeing customer base. In addition, Boy Genius is reporting that generic versions of BBM will appear on Android and iOS soon. If this proves accurate, local vendors will also no doubt benefit. Local brands like Nexian and Chinese brands like ZTE now control about one-third of the Indonesian cell phone market. Alternatively, other messaging services like WhatsApp, WeChat, and LINE may eventually make BBM less meaningful in Indonesia.

But if BBM remains popular, Nokia/MSFT may be forced to consider similarly licensing BBM for their Lumia and Asha lines. (This is my speculation only.) If they did so, it would be a type of "coopertition" we have not encountered anywhere before in the cell phone market between these two hated rivals which have been battling for the #3 position among mobile ecosystems. It would also signal an interesting evolution in the worldwide cell phone market all the while the chatter surrounding a possible change of control continues to grow for BlackBerry.

Source: Share Shifts In Indonesia, Another Reason For BlackBerry To Sell Quickly