Media & Broadband, Shaky Ground Ahead

While the growth of Indonesia’s media industry has slowed down to 9% (from a 21% mean in 2010-2014), media is still the most effective tool to promote consumer products, due to its long-term prospects. We believe ad spending may improve when the economy recovers. We initiate coverage on the sector with a NEUTRAL rating and prefer FTA and broadband sub-sector over pay TV. Surya Citra Media and Link Net are our Top Picks.

Impact from economic slowdown. Media players are highly dependent on fast-moving consumer goods (FMCG) companies, which contribute to 70% of revenue. Thus, FMCG companies saving costs on advertising and promotions (A&P) would have a negative impact on the performance of media companies, as ad spend growth would soften. Meanwhile, the broadband and pay TV subsectors would be affected by softening consumer spending, as the subscriber growth would be muted. We estimate ad spend, new subscribers for pay TV and broadband to grow 6%/4%/14% YoY in FY15 (vs12%/10%/20% in FY14).

Positive on FTA and broadband going forward. We like the free-to-air (FTA) industry going forward as it rides on structural fundamentals (largest population of users, urbanisation, and an expanding middle class). FTA channels are limited (there are just 10 in Indonesia), and may enjoy charging higher rates while keeping its maintenance capex low. We also like the broadband sub-sector due to the low level of internet penetration in Indonesia (7% in FY14), and growing e-commerce business.

Negative on pay TV going forward. We are less upbeat about the pay TV industry going forward as we believe that pay TV packages are not attractive enough to draw the market, even with lower prices. Most of the top 20 programmes in Indonesia are shown on FTA. Pay TV ARPUs have declined due to new players entering the market that are anxious about their high exposure to USD (80% content costs are USD linked).

Initiating coverage. We initiate coverage on the media and broadband sector with a NEUTRAL call. We have BUY calls on Surya Citra (SCMA IJ, TP: IDR3,000), and Link Net (LINK IJ, TP: IDR6,250). We are NEUTRAL on Media Nusantara Citra (MNCN IJ, TP: IDR2,100); and SELL on MNC Sky Vision (MSKY IJ, TP: IDR1,100).

Risks include: i) a macro-economic downturn that could affect purchasing power, ii) weakening IDR, and iii) competition putting downward pressure on ARPU for the broadband and pay TV subsectors.

Investment Thesis

We initiate coverage on Indonesia’s media and broadband sector. The following is our investment thesis.
Near-term hiccups. The Indonesian economy has had one of the most consistent growth rates in the world over the past few years, with annual GDP growth averaging amost 6%. Over the past few years, the growth of its TV advertising industry has been robust, driven by high and stable GDP growth.

In 2010-2014, the industry grew at an average of 21% YoY, in line with the high GDP growth average of 6-6.5% YoY. Since 2012, however, revenue growth has decelerated to 10-20% as GDP growth has also cooled down. Thus, we believe that a slowdown of the Indonesian economy would negatively impact the industry, and do not expect high growth to resume and continue in the near term.

Challenges to the media and broadband sector. Currently, Indonesia is in the midst of an economic and political transition; Indonesia is remains resilient due to several factors:
i. Consumer spending has softened
ii. Exports growth is struggling
iii. The Government has yet to start spending
iv. Investments are put on hold for now

Due to the condition of the economy, we are NEUTRAL on the media and broadband sector.
Positive on recovery
The slowdown of Indonesia’s economic growth has impacted many sectors, including media and broadband. The FTA industry has been hit by the FCMG corporations cooling down their spending on A&P. Meanwhile, the pay TV and broadband industries have been impacted by the slowdown in consumer purchasing power, which has affected subscriber growth.

However, we are positive on the recovery of the FTA industry on the strength of its fundamentals, ie there are limited national FTA channels, which implies higher advertising rates and a low maintenance capex.

Indonesia’s broadband industry has significant growth potential, due to the rising middle class, growing urbanisation and the increasing popularity of e-commerce.

Negative on Pay TV industry. We are negative on the pay TV industry going forward, as we see little difference in the premium between FTA and pay TV channels. We believe that pay TV packages are not attractive enough to draw the mass market. Furthermore, we do not like the high level of USD exposure (100% of capex is USD-linked).

We initiate coverage on the media and broadband sector with a BUY on Surya Citra Media, due to its high audience share, strong operational margin and lean balance sheet.

We re-initiate coverage on Media Nusantara Citra with a NEUTRAL call due to its unfinished TPI litigation (where it could lose market share), diminishing audience share and high USD exposure. While its valuation is attractive, we believe that the valuation is also fair due to the unresolved case. We think Media Nusantara Citra has a higher potential to re-rate to narrow the valuation gap with Surya Citra Media once the TPI case has been resolved.

We also initiate coverage on Link Net with a BUY call. We like its high market share in the broadband industry, which we believe would benefit from the country’s low internet penetration. Furthermore, we expect it to chart significant growth going forward, due to rising middle-class incomes and growing e-commerce.

We initiate coverage on MNC Sky Vision with a SELL call. In our view, the intensifying competition in the pay TV space could pressurise its ARPU, while it also lacks premium content on the FTA platform, while having high exposure to the USD.

Low Ad Spend But Macro Headwinds Remain
Hiccups in the media sector
Bumpy road ahead. Indonesia has had one of the most consistent growth rates among the global economies over the past few years, with annual GDP growth averaging amost 6%. In 2012, the growth slowed down to just over 5% from 6.2%, and is projected by the World Bank to remain in the 5-5.7% range through 2017.

In the past few years, Indonesia’s TV advertising growth has been pretty strong, being driven by high and stable GDP growth. In 2010-2014, the industry grew at a 21% average pa, in line with the the high GDP growth of 6-6.5%. Since 2012, however, we have noted that revenue growth has slowed down, in line with the slower GDP growth (see Figure 2). We do not expect advertising revenue growth to keep up the pace of expansion seen during 2010-2012, due to the slowdown of the Indonesian economy. Based on our estimate, we expect advertising spending (ad spend) to grow at 5-10% YoY in FY15.

Fragile outlook ahead
In general, Asian economies are settling into more muted growth over the long term, while macro conditions are expected to substantially improve in the foreseable future.

Indonesia is in the midst of an economic and political transition, and we expect the economy to remain resilient due to several factors:
i. Softer consumer spending. Consumer spending, which has been the driver of economic growth in Indonesia, is showing signs of softening due to the weaker rupiah, high interest rates and inflation on the back of fuel price hikes.

ii. Exports are struggling. Exported commodities are in a decline, due to slowing demand from China, the country’s main export market. Indonesia exports palm oil, rubber, coal, tin and other natural resources.

iii. Government has yet to start spending. Indonesia’s president, Joko Widodo (Jokowi), has pledged to use billions of rupiah from savings eked from scrapping fuel subsidies to build infrastructure, eg roads, bridges, and ports – which could lead to stronger economic growth. However, the implementation of infrastructure programmes has barely begun. Difficulties in acquiring land also imply that projects can get delayed for years. As for this year, the Government has spent IDR7trn on infrastructure projects, compared to the IDR290trn it originally set for 2015.

iv. Investments put on hold for now. Due to the delay in the implementation of infrastructure projects, foreign investments have been put on hold. Since then, President Jokowi has been courting foreign investors to help fund the infrastructure programmes, and pledging to improve the ease of doing business.

Market realities dampen growth expectations
Due to the country’s economic condition, we are NEUTRAL on the media sector. We now forecast Indonesian TV ad spend to grow 9%/12% in FY15F/FY16F respectively, as slowing GDP growth and floating fuel prices could put pressure on advertisers’ sales growth and profit margins. Media Partner Asia expects the industry will grow at 10% in FY15F.

Sensitivity analysis for ad spend revenue
In our sensitivity analysis, we examine the effect of Indonesia’s GDP growth falling ahead or below 5% on ad spend and how this, in turn, impacts the revenue and earnings of two companies in our coverage, namely Surya Citra Media and Media Nusantara Citra.

In our base case, we assume that GDP grows 5% YoY in FY15, with a 0.9x GDP multiplier. If this is the case, ad spend growth would be at 6% and 3% for Surya Citra Media and Media Nusantara Citra, assuming else remains constant.

In our bear case scenario, we assume a GDP growth of 4% YoY, with a 0.6x GDP multiplier. In the bear case scenario, infrastructure project would still not have been realised, and Surya Citra Media and Media Nusantara Citra would record ad spend growth of 4%/0% respectively.

In our bull case scenario, we assume a GDP growth of 6% YoY in FY15, with a 2.0x GDP multiplier, and infrastructure projects have already been realised in 4Q15, the value of the rupiah has recovered, and commodity prices improve. In this case, Surya Citra Media and Media Nusantara Citra would record ad spend growth of 12% and 12% respectively.

TV ad revenue growth outlook is less upbeat
Media companies are highly dependent on corporate ad spending (70% of the sector’s revenue comes from FMCG companies spending on advertisements). Therefore, if companies cut back on their A&P expenditure, this would have a negative impact on media companies. As we can see from Figures 9 and 10, Mayora and Unilever have reduced their A&P expenses due to declining consumer purchasing power while Indofood’s ad spending is growing due to what we believe is its aim to maintain its market share.

Why did ad spending slow down?
The slowdown in ad spending was due to cooling earnings growth in most FMCG companies. Advertisers have struggled in the current economic condition (due to the depreciation of the IDR as well as rising interest rates, wages, fuel prices and electricity costs). For most, earnings growth has slowed down to the low single digits or even turned negative – only Indofood Sukses Makmur (INDF IJ, BUY, TP: IDR7,380) and Gudang Garam (GGRM IJ, BUY, TP: IDR63,000) seem to be holding up well.

We do not expect ad spending to recover in the near term – and may even remain muted over the next few quarters, as advertisers may continue to face challenges.

Insignificant impact on cigarettes TV ad restriction
The Ministry of Communication and Information Technology plans to ban cigarette advertising on television, as the Government has been very negative on the cigarette sector because of health risks. According to Nielsen, the cigarette industry spent an estimated IDR3.6trn on TV advertising in FY14.

However, we believe this imminent new policy would not have a significant impact on the performance of media players (Surya Citra Media and Media Nusantara Citra) due to the low contribution to revenue from the cigarette industry (6-10%). We also believe that the proportion of contributions from cigarette advertising may be replaced by companies advertising their online services, like Lazada and Beli-Beli.

A Short-Term Slowdown
We are positive on the media industry in the longer term, due to the following:
i. We are positive on the recovery of the Indonesian economy, as the Government is anticipated to finalise the infrastructure projects. We expect the economy to recover in FY17F.
ii. Indonesia has strong fundamentals – the largest population in ASEAN (250m), the urbanisation trend and an expanding middle class.
iii. Demand exceeds supply, with only 10 national FTAs channels while only 20% of airtime can be allocated to advertisers.
iv. There is room for TV ad rates to grow, due to the conditions listed above.
v. The sector has a low maintanance capex of c.USD10m-40m

Positive on recovery
We believe the outlook for Indonesia’s media sector still seems promising; as Indonesia has a low media penetration rate, at 60%, compared with Malaysia (96%), Singapore (100%) and Thailand (97%). On the other hand, Indonesia’s GDP per capita stood at USD3,523 as at 2014. As we expect the economy in Indonesia to recover, we believe TV penetration has the potential to grow.

Rates have room to grow
Indonesia’s TV advertising rates are considered the lowest in the region. Surya Citra Media’s SCTV and Media Nusantara Citra’s RCTI channels charge a primetime rate of IDR60m (USD5,400) per 30 seconds. In Thailand and the Philippines, companies charge around USD10,800/USD17,135 per 30 seconds respectively. For non-primetime hours, Surya Citra Media and Media Nusantara Citra charge rates that are 30%-40% lower than primetime rates. As we deem the TV ad rates in Indonesia low in comparison, Indonesian players have room to increase them.

Limited TV advertisement space
We believe that there is still room for TV stations to bargain or increase ad rates, considering the substantial demand for TV ad space – c.66% of Indonesian media advertisements are still on TV. While, the Indonesia’s TV ad space is limited, with only 10 FTA TV stations available, there are four major groups that control Indonesia’s TV space and own 97% of the market. The largest is Media Nusantara Citra, which owns three FTA channels – RCTI, MNCTV and Global TV – and has a 38% market share.

The next largest is the Surya Citra Media, which owns and operates two channels SCTV and Indosiar (it acquired the latter in 2011) – and has a 28% market share. The third largest group is Trans Group, which is owned by businessman Chairul Tandjung, and has a 16% market share with its Trans7 and Trans TV channels. The Bakrie group has a 15% market share with its channels ANTV and TV One. We believe that the greater the market share, the larger the bargaining power of the TV station would have in increasing its ad rates.

High audience shares could engender higher ad rates
A company that wants to advertise its products on TV stations would look at the station’s audience share first. Typically, advertisers would examine a TV station’s audience share rating for three months before deciding whether to place their ads or not – and if so, the contract would be reviewed each month, dependent on the ratings of the channel. Ratings are calculated by multiplying audience share with the number of audience watching. The TV stations that have a high audience share would have the highest bargaining power to increase their ad rates.

Battling for the top spot
Surya Citra Media and Media Nusantara Citra have been competing head to head for audience share – the former has restructured Indosiar and improved SCTV’s performance and currently leads in terms of audience share. SCTV has 16.0%/16.6% of all-time/primetime audience shares respectively (compared with RCTI’s 15.8%/17.9%) as of May 2015. Indosiar has the highest primetime audience share, at 18.2%, due to D’Academy, a dangdut entertainment programme that is produced in-house.

Meanwhile, ANTV’s audience shares have declined to 10.8% as of May 2015, and its popularity is dependent on the Indian language movies that it screens. TV One is Indonesia’s top news network, with an audience share of 3.6% vs Metro TV’s 2%. Trans Group’s audience share has not recovered after its top show “Yuk Keep Smile” was taken off the air.

Local content still dominates
In general, Indonesians prefer to watch local content, which tend to feature live recordings, soap operas (Sinetron) and variety shows. Outside of big cities like Jakarta, Surabaya and areas like Bali, many Indonesians still prefer to watch local content – largely, we believe, due to the language barrier and their lifestyles.

As such, the demand for imported content (especially from outside Asia) is still limited. Normally, the mid-to-upper class would be the target audience for the imported content like Hollywood movies, which are offered via pay-TV channels from companies such as MSKY (Indovision) and KBLV (First Media). FTA tends to focus more on airing local content.

Reasonable cost to produce local content
The Indonesian preference for local content is an advantage for media companies, as they will be able to save on costs due to the cheaper price of local content. Following our channel checks, the cost per drama series is IDR200m-300m (USD20,000) per episode, while the cost for a variety series is IDR25m-30m (USD2,500). This is much cheaper, compared to Hollywood content that could cost an average of USD30,000 per episode. Local content is priced in IDR, which means no USD exposure.

NEUTRAL on the media sector
We are NEUTRAL on Indonesia’s media sector, in light of slowing economic growth. As media companies are highly dependent on corporate advertisement spending, amid a weak economic environment the corresponding pullback on advertising & promotion (A&P) spending would have a negative impact on their revenue stream. To recap, 70% of media companies’ revenue comes from the highly price-sensitive FMCG industry. However, we believe that the media sector will recover in FY17F, in tandem with a projected economic recovery, which we expect to come from Government infrastructure spending.

Indonesia media sector trading at 21.3x-18.6x FY15F-FY16F P/Es
Indonesia’s media sector is currently trading at 21.3x-18.6x FY15F-FY16F P/Es. Due to its similar nature to the consumer sectors, the media sector has also been historically similarly valued. With its links to, and dependence on, consumer spending patterns, we believe that the media sector is also a proxy to the consumer sector (with a historical average 25% discount to the latter.

Valuation-wise currently, the sector is already pricey at 21.3x FY15F P/E vs the consumer sector at 22.7x FY15F P/E, so we believe in being selective in our media stock picks. However, in the long term, we think the media sector has the potential for re-rating, along with a recovery in Indonesia’s economy.

At this juncture, we view Surya Citra as the best pick due to their high audience share, strong operational margin and lean balance sheet. We understand that Media Nusantara is cheaper vs Surya Citra (at 16.4x FY15F P/E), but we believe that the valuation gap between the two is related to the unfinished TPI litigation, losing audience share, and high exposure to USD.

We think Media Nusantara has the potential to re-rate if the TPI litigation case is settled, however, we do not think this will happen in the near term. We have a NEUTRAL call on Media with BUY call on SCMA, and NEUTRAL call on MNCN.

Risks
Slower A&P spending from FMCG companies. FMCG companies historically contribute about 70% of media companies’ revenues. With the slowing economy, we are concerned that FMCG corporates will reduce or cut their A&P spending, which means slower ad spending growth.

Weaker IDR
Media companies have some exposure to USD/IDR fluctuation with regards to content purchases, with some of them still importing content from overseas. Thus, a further weakening of the IDR vs the USD could increase programming costs further and hurt margins.

Higher content cost
Content costs are the direct costs for most media companies. Any increase in content costs would thus hurt margins.

Indonesia Pay TV Industry – Long And Windy Road
Riding on Indonesia’s rising middle class and affluent customers
Low penetration and fast-growing industry. Pay TV was first launched in Indonesia in 1994 when Indovision (MSKY) and First Media (KBLV) entered the market. However, despite this long history, Indonesian pay TV has a penetration rate of only 11%, one of the lowest in Asia (vs. the Philippines’ 14%, Thailand’s 28%, Malaysia’s 55%). Media Partner Asia (MPA) forecasts for Indonesia’s pay TV subscriber base to grow at CAGR of 15% from FY13-FY18F – to 6.3m subs in FY18 from 3.2m subs in FY13.

The rise of Indonesia’s affluent middle class
We believe Indonesian households with monthly budget of above IDR3m can afford a pay TV subscription. Indovision’s ARPU of IDR101,000 (3% of spending) and First Media’s ARPU of IDR178,000 (5%) indicates this is possible. Additionally, we think that even with a monthly budget for discretionary expenses of IDR1.5m, subscribers could consider Indovision’s cheaper packages, such as Top TV.

Boston Consulting Group (BCG) forecasted in its 2013 report that the number of households with monthly expenditure of more than IDR3m will likely increase to 73m households (FY12: 32m households) by FY20. We believe Indonesia’s growing middle class is likely to mean a greater number of subscribers for the pay TV industry.

Bumpy road for pay TV business. However, we are overall NEGATIVE on pay TV as we believe:
A decelerating economy will continue to hurt pay TV subscription growth
Pay TV content is not attractive enough to draw a mass market
Competition has pressured ARPU down
Further IDR depreciation could dent pay TV business performance, as 80% of content costs are in USD
LTE might pose a threat to pay TV services

Deceleration of Indonesia’s economy
Indonesia’s economic growth has decelerated, due to weak commodity prices, low exports (due to softer demand from China for palm oil, rubber, coal), and as the Government has yet to start spending. In 1Q15, Indonesia’s GDP growth contracted to 4.71% (4Q14: +5.0%) and we think that FY15F GDP will stay stable at 5%. Consequently, consumer spending, a key driver of economic expansion, is showing signs of softening due to a weaker IDR, high interest rates, and inflation on the back of increased fuel prices.

Impact of fuel price on social welfare
We believe the increase in fuel prices will leave households with less disposable income. The impact of higher fuel prices is likely to be more concentrated on higher income households, who are more likely to own vehicles and who spend a greater absolute sum of fuel. Poorer households will, however, still be affected through increases in what they spend on energy services and any increases in the costs of other goods and services. As pay TV can be considered a discretionary item, this could lead to a drop in the number of pay TV subscribers.

Indonesian viewers prefer local content
While one of the attractive features of pay TV services is the provision of premium channels not available in free to air (FTA) services, in Indonesia we think FTA is still preferred. For example, box office movies and top leagues matches are commonly first aired on pay TV. In the case of Indonesia, the premium content tends to be, mostly, first aired by FTA operators.

Compared to FTA, pay TV packages are not attractive enough to draw mass market adoption, even with the lower pricing (Indovision has been reducing its prices since FY12). Additionally, the language barrier is a further stumbling block.

Furthermore, based on viewership trends, Indonesian viewers prefer local content shows over foreign content, with most of the top 20 programmes in Indonesia shown on FTA rather than pay TV. These include local versions of reality shows such as Master Chef and Indonesia Idol, and local dramas (Sinetron) that are very popular.

Aggresive packages from competitors – reduces ARPU
Pricing competition between the pay TV operators is very intense, especially in the middle-low market. In order to attract more subscribers, the operators have been offering a very interesting packages and discounts. With a relatively similar quality of sevice, we believe pricing is the most important factor in deciding which pay TV operator new subscribers select.

TV viewership might fall due to the LTE implementation – if not ready. We believe the emergence of LTE will pose a threat to the traditional pay TV business; since it will create a more ideal environment for internet TV and over the top (OTT) service to flourish. Currently, TV is the preferred media for entertainmen in Indonesia; because of that, the TV has also been the media of choice for advertisers, ahead of either newspaper or internet media.

We suspect, when LTE is ready for implementation, that it has the potential to accelerate the move away from TVs towards phones, laptops, and tablets. If so, we believe that this would pose a major risk for pay TV subscribers’ growth and may even stall it. We have seen this being the case in developed markets, where people start subscribing to over-the-top (OTT) services instead.

Indonesia’s Broadband Industry – Ready for Future Development

Rising internet industry in Indonesia We are POSITIVE on the internet industry going forward, due to several reasons:
i. Internet penetration in Indonesia is much lower than other countries in Asia
ii. Rising wealth among Indonesia’s middle class
iii. Rising internet penetration
iv. Rising E-commerce
v. Growing urbanisation

Low penetration in the Asia-Pacific
According to Media Partner Asia, Indonesia’s wireless broadband internet penetration will grow to 108% in FY23 from 14% in FY13, on the back of the rising middle class. Furthermore, based on the data from EMC Research (EMC), we found that Indonesia’s population deems internet access a necessity. The market for broadband is also growing rapidly from a low base, reaching 38.4m users in FY13, with 3.4m through fixed broadband services and 35m through mobile, primarily from 3G networks.

Indonesia’s fixed broadband penetration remains low at 7% in FY14 – due to the country’s geographical structure and the lack of investment. Media Partner Asia estimates that broadband penetration will grow at 11% CAGR between FY14 and FY19. We, however, are more conservative, and project that broadband penetration will grow at 10% CAGR between FY14-FY19F.

Riding on a wealthier generation and urbanisation
Indonesia’s population is young, growing, and rapidly urbanising – making it one of the fastest consumer markets in the world. We believe it could further drive the take-up of broadband and pay TV. Based on Index Mundi, 60% of the population in Indonesia is below the age of 30 years, and we believe in the coming years this segment will continue to drive the demand for broadband and pay TV. Today’s youngsters are technologically adept and eager to discover new digital services and products.

Indonesia is urbanising at a rapid clip
Furthermore, Indonesia’s population is swiftly urbanising. According to World Bank data, 54% moved to urban areas in 2010 and the World Bank expects 67% to be in urban areas by 2050. This trend should benefit broadband companies in terms of higher demand. The trend of urbanisation would also help to increase coverage area (27.5% as at FY14).

Growing e-commerce industry in Indonesia
Indonesia’s e-commerce industry is still in its early stages of development, but there is huge potential. The Government expects that online trading could account for 8% of the country’s retail business over the next 10 years (from around 1% now), as more citizens get connected to the internet.

Based on Ministry of Communication and Technology data, it is estimated that the country’s e-commerce transaction value will hit USD24bn by FY16, twice that of USD12bn in FY14. We also notice the increased interest for Indonesia’s e-commerce sector from international investors (like Alibaba, Rakuten) and local players (like Lippo Group).

In the near term, we are NEUTRAL on the sector despite the growing opportunities from the broadband industry; based on the following reasons:
i. Economic slowdown – we believe subs growth will be flat this year
ii. Growing competition in the broadband sector could pressure ARPUs
iii. Bottleneck on digital development – due to infrastructure problems

Economic slowdown would mean muted subs growth
We believe the increase in the fuel price will on average leave households with less disposable income and impact purchasing power – which also leads to higher living costs. At an average broadband package price of IDR339k (11% of expenditure), this could substantially reduce the intention of households with monthly expenditure above IDR3m to subscribe to broadband services. As an aside, we also note that packages for broadband access via mobile phones is cheaper (IDR75k on average).

Growing competition among broadband players pressures ARPU
Competition within the fixed broadband market will likely intensify, as new entrants such as MNC Play Media Go face off with Linknet and Telkom Indonesia. At the same time, network expansion by Linknet and upgrades by Telkom Indonesia (TLKM IJ, BUY, TP: IDR3,600) will also help to grow the market and scale up product offerings. As more players have entered the fray, and with relatively similar products or services, we believe this will mean more competitive pricing. In the next few years, we believe pricing is the most important factor for consumers in deciding which broadband operator to select.

Bottlenecks on digital development
Having said all this, the move towards digitalization has not had much effect on Indonesians in rural areas. According to a 2013 Accenture report, out of an internet user population of 55m, only 4.1% are from the countryside. The main challenges facing penetration into the rural areas are unstable power supply and in some cases, even the lack of a power supply in far-flung areas.