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    Southeast Asia
     Sep 16, 2009
BlackBerry success has sour taste
By Sara Schonhardt

JAKARTA - Indonesians are crazy about BlackBerry, the wireless handheld device made popular worldwide for its ability to send and receive e-mail. They can be seen poring over the gadgets at Starbucks or killing time confirming friends on social networking site Facebook while waiting for the bus.

BlackBerry use has surged in Indonesia, rising 550% year-on-year in 2008. There are now more than 350,000 users across the country, a number that could reach 1 million by the end of this year, according to Marc Einstein, an industry manager at research and consulting firm Frost and Sullivan.

That's small compared with the estimated 28 million BlackBerry users worldwide, but with its accelerating new user growth rate

 
amid a population of 240 million people, Indonesia offers a huge market opportunity for mobile distributors looking to the developing world for growth. BlackBerry users worldwide represent about 20% of all smart phone users, but in Indonesia the devices dominate the market. Apple's iPhone, with about 15,000 users, pales in comparison, industry analysts note.

That fast growth prompted the government in June to clamp down on Research In Motion (RIM), the Canada-based firm that developed BlackBerry, by requiring it to establish a service center in Indonesia before it could import more devices into the country. On September 8, Indonesia's Communications Ministry approved RIM's Jakarta office and lifted a two-month freeze on the selling of new BlackBerrys.

The overture could be largely symbolic because an estimated 80% of the devices sold in the country trade hands on the greymarket. Smuggled electronics in Indonesia can go for hundreds of dollars less than those offered by authorized dealers, who must pay import duties on their products and increase their prices accordingly.

"BlackBerry became popular in Indonesia because of the parallel market," said Mas Wigrantoro, chairman of the Indonesian Telecommunications Society (Mastel), a non-profit association representing the information technology (IT) sector. While he blamed the government and RIM for not doing enough to stop the greymarket supply of BlackBerrys, he also predicted that the device's popularity would drop dramatically if cheaper versions were no longer available.

RIM has only recently seized on growth opportunities in Indonesia, as sales at licensed dealers have lagged those at places such as Roxy Mas, a five-story mall in west Jakarta renowned for dealing in greymarket IT products. Consumers can buy BlackBerry handsets through more than 50 distributors across the country, but only four official operators are licensed to provide BlackBerry services.

Underground sales
The Ministry of Communication and Information Technology, which has a decree in place requiring phone producers to open service centers if they sell in the country, had prior to June only loosely enforced its regulations on smart phone importers. RIM was not expecting the government action to freeze its imports, but reacted quickly by establishing the required service center.

Users who only purchase the handset and use the device through a prepaid service are considered "non-enterprise" users, according to the industry jargon. The situation is "not ideal" for RIM, according to Einstein, but in certain ways having a strong presence is a good business strategy to eventually convert non-enterprise users into those that pay license fees.

Einstein estimates that more than 40% of RIM's global base at present comes from the consumer market, noting that even in the United States, non-enterprise users make up 50% of the market. Achieving similar levels could take time in Indonesia: the day after the government and RIM settled their spat, business among Roxy's greymarket BlackBerry suppliers was still brisk.

At a popular kiosk on the fourth floor, a saleswoman named Lisa picked through BlackBerry models with names such as "Bold", "Storm" and "Javelin". The cheapest on offer was a new "Curve 8310", which sold for 2.4 million rupiahs (US$240); the same model sells through licensed operators, who include customs tax payments in their prices, for about 6 million rupiahs.

Researcher IDC defines the greymarket as second-hand and refurbished IT devices, as well as those that come in through the parallel market. That trade tends to start in Canada to licensed sellers in Singapore or Hong Kong, who then pass the devices along to tax-evading unlicensed vendors in Jakarta, according to Ashadi Cahyadi, research manager for Indonesian telecommunications at IDC.

Owning a BlackBerry was first seen as a sign of status among Indonesian businessmen, but the device is increasingly prized because in a country where most people still don't have home access to the Internet, it allows users mobile access to text messaging and online social networking sites such as Facebook.

When mobile service operators such as Indosat began to offer a prepaid option in mid-2008, which reduced the cost of using BlackBerry's services by around US$30 per month, the market opened up to a new segment of young professionals. Local mobile operators such as Indosat and Telkomsel have since marketed strongly to individual consumers rather than just businesses, said Einstein.

The local launch of BlackBerry Connect, a push e-mail service that can be used with other phone brands and lets users send and receive e-mail anywhere they receive a mobile phone signal, has also helped to drive the popularity of BlackBerry. Add in low-cost mobile Internet plans and many people are finding it more affordable to have a BlackBerry than buying a computer and using it at home, estimates Mastel's Wigrantoro.

Three of Indonesia's main telecom service providers - Telkomsel, Indosat and Excel (XL) - offer prepaid subscriber fees that allow for unlimited data and e-mail service for around $16 a month.

Arbitrary regulation
RIM began selling BlackBerrys through its main provider Indosat in late-2004. The government did not take issue with RIM's lack of a service center until this June, after users started complaining there was nowhere to go locally for services and repairs. The nearest after-sales center was in Singapore, and because there were suddenly so many BlackBerrys on the market, the potential for problems grew, said the IDC's Cahyadi.

A decree from the Ministry of Communication and Information Technology was already in place requiring phone producers to open service offices once they began selling products in the country. It wasn't until BlackBerry's growth took off that the ministry decided to enforce the standing regulation for RIM as well.

"We need customer protection in Indonesia," said ministry spokesman Gatot S Dewabroto, claiming that the BlackBerry case sets a precedent for how the regulation will be applied to all companies in the future.

He admitted that the ministry took action against RIM because of the huge jump in its subscriber base. In comparison, the US$1,100 price tag for Apple's iPhone is too costly for most Indonesians, while other brands from China and Taiwan haven't enjoyed the same popularity because many lack push e-mail capabilities.

Cahyadi, for one, believes increased awareness of the benefits of buying BlackBerrys from an official distributor will eventually drive consumers away from the greymarket. When customers buy from a licensed provider, he notes, they are guaranteed support if they encounter a technical or software problem.

For its part, RIM said it is working to stem the illegal trade of its devices in Indonesia by encouraging customers to purchase BlackBerry smart phones and services only through authorized carriers.

Wigrantoro, however, is less optimistic. "If the regulation is good for the customer and assures the company's reputation, then there shouldn't be a problem with enforcing this kind of measure," he said. "But it doesn't have the intended effect if companies don't comply with it 100%."

The Communications Ministry, meanwhile, is working with the ministries of Trade and Finance to wage what Gatot has called a "war against illegal products". The campaign will entail periodic spot inspections of shops that sell BlackBerrys. Currently, only four operators are legally licensed to sell BlackBerrys in Indonesia, according to Cahyadi.

That leaves nearly 50 additional traders who import the devices and they must soon prove, according to the government's regulations, that they have appropriate service and repair facilities. According to Gatot, since the crackdown on RIM in June, the government has started to enforce its regulations with other traders.

Unless BlackBerry comes out with a new, more affordable model, greymarket vendors will continue to lead the market, some analysts predict. Cahyadi expects the new lower-priced BlackBerry model "Gemini 8520", which sells for closer to US$400, to go some way toward closing the price gap.

But according to a local news report quoting Indosat's chief operating officer, Guntur Siboro, even that low-end model will be priced higher than the going rates on the greymarket.

Sara Schonhardt is a freelance writer based in Jakarta, Indonesia. She has lived and worked in Southeast Asia for six years and has a master's in international affairs from Columbia University.

(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)


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