Giovanni Dustin, analyst at Mirae Asset Sekuritas, said Indonesian lifestyles are increasingly dependent on smartphones and therefore data consumption is on the rise. For telecommunication companies it means there are prospects for growing data revenue. In fact, soon data consumption will replace voice and SMS data as the pillar of income for operators.

For example, Indonesia's largest telecommunication network provider Telekomunikasi Indonesia (Telkom) booked IDR 64.0 trillion (approx. IDR 4.8 billion) in sales in H1-2017, 42 percent of which originated from data, Internet and IT services.

Dustin added that Telkom may see rising earnings from the fixed line segment. Although the traditional "house phone" lost its significance, Telkom's IndiHome Fiber package (which includes the fixed line) encourages rising earnings from this business segment. Regarding fixed line, Telkom controls 99 percent of the market in Indonesia. The number of IndiHome Fiber subscribers rose 34 percent (y/y) to 2 million in H1-2017.

Far behind the dominant position of Telkom come Indosat Ooredoo and XL Axiata. Both rivals will not surpass market leader Telkom. However, Dustin said Indosat Ooredoo has plenty of room for growth, especially as it has renewed its base transceiver station network. Therefore, he regards shares of Indosat as most attractive. Although its shares are less liquid, the company is showing solid fundamental growth.

Smartphone penetration is on the rise in Indonesia. Based on data from research firm eMarketer there were 69.4 million smartphone users in Indonesia at the end of 2016. eMarketer also said this number is expected to grow to 103 million by 2018, which would make Indonesia the fourth-largest smartphone market worldwide after China, India and the United States.

Meanwhile, Newzoo's Global Mobile Market Report (released in April 2017) put its estimate for Indonesian smartphone users at 54.5 million (or nearly 21 percent of the population). Considering Indonesia's total population numbers 260 million (and counting) there is plenty room for further growth in the decades ahead, especially now the Indonesian government is eager to enhance the Internet network across the Archipelago with its Palapa Ring project.

So far this year shares of Telkom have surged 17.59 percent to IDR 4,680 a piece, while Indosat Ooredoo's shares fell 3.73 percent to 6,450 a piece over the same period. XL Axiata's shares have risen 2.78 percent to IDR 3,700 per share so far this year.

Comparison Share Performance Indonesian Telecommunication Firms:

TLKM = Telekomunikasi Indonesia
ISAT = Indosat Ooredoo
EXCL = XL Axiata
* normalized stocks, 1 January 2017 = 100