Cambodian telcos battle for the final frontier

Cellular phone services are battling for market share in Cambodia, despite it being one of the smallest and poorest countries in the region, and they are willing to spend big on promotion, at least by local standards.

Last year, the top nine mobile companies spent US$12.4 million on TV and print, an 8.7 per cent increase compared to 2008, according to data released by Indochina Research.

The sum was sufficient to make mobile phone services the country's top adspend category. The driver behind this growth was crowding. A third wave of mobile players arrived in Cambodia just as the economy dipped with the global recession, forcing them to compete in print and TV advertising for a share of voice.

In the first quarter of this year, Cambodia's economy improved and total adspend - $20.3 million for those three months - was up 33 per cent on the previous quarter, almost returning to the peak level achieved before the downturn. Mobile adspend in the quarter was $2.9 million.

In Cambodia, mobile telephony isn't new. Fixed line never really took off - subscribers peaked at 40,000 lines - and from the beginning telecoms dabbled in mobile.

The turmoil of civil war ended with the signing of a comprehensive peace settlement in October 1991 and half a dozen telecom companies were soon operating within Cambodia's borders. From these emerged the big three. The first was Casacom in 1992, since acquired by Telekom Malaysia, which later rebranded its cellular service in 2006 as Hello. Next was Camshin, originally launched in 1993 as a joint venture with Thaicom and the Ministry of Posts and Telecommunications of Cambodia (MPTC). Its current brand, Mfone, has been available since 1998. The last of them to launch was CamGSM in 1997; the network behind the Mobitel and Cellcard service brands.

The big three shared a market of 1.6 million subscribers by the middle of the last decade, according a 2006 report from Pyramid Research. That represented roughly 11 per cent penetration among Cambodia's 14.3 million inhabitants. Further, average ARPU for prepaid was $9.11. With per capita GDP at $474 annually, that meant a mobile subscription was equivalent to 21 per cent of a monthly salary. Typical prepaid plans used $5 cards, and GSM or CDMA network access cost around 10 cents a minute.

Then, as now, few international handset makers had sales networks in Phnom Penh and small dealers sold Nokia, Samsung, Motorola and other major brands. Most Cambodians shopped on the second-hand market.

For mobile telecoms, Cambodia - along with Laos and Myanmar - was the final frontier in Asia. When the MPTC freed up frequencies, mobile providers descended on Phnom Penh.

Today, there are nine cellular providers. Newcomers include Cambodia Advance Communications' network Cadcomm, which went live in December 2006, Applifone with Star Cell, Viettel with Metfone, Latelz, and GT-Tell with ExCell. The last to arrive was Sotelco with Beeline in June of last year.

This competition has driven down prices, while subscriber numbers have soared. Paul Budde Communication estimated total subscribers at 5.2 million last year, more than triple the 2006 level, and forecasts a total of 7.9 million next year.

How many mobile services can Cambodia support? Conventional wisdom has it that many of the small companies are underselling their service to boost subscriber numbers so they can achieve a hefty price when they are eventually bought out by stronger players.

Phnom Penh ad agencies are not complaining. For now, they are enjoying a bonanza in accounts for telecoms, all eager to get their names and brands out there before the Cambodian public.

Analyst comment

Peter Evans, senior analyst, Asia BuddeComm
In any developing market, country risk is a major issue. For foreign mobile operators in Cambodia, it must have been disconcerting to witness the recent farcical situation where the government wrongly assigned frequency spectrum.

Wireless spectrum 2.5 to 2.7 GHz was allocated to more than one operator, making it likely that a number of them will be forced out of the wireless broadband market.

The duplication came to light last January when Star Digital TV was awarded a wireless internet licence by the MPTC.

That is not all. Last year, mobile operators, CamGSM (Mobitel) and Vimplecom-owned Sotelco (Beeline), were locked in a dispute with each alleging unfair competition. Mobitel accused Beeline of price dumping and Beeline claimed Mobitel was blocking interconnectivity between networks. Eventually, Mobitel took legal action against Beeline.

In a situation where the regulator clearly has an important role to play, MPTC had trouble making its presence felt. Undeniably, it is difficult for MPTC to operate as regulator in a business environment such as Cambodia's where political influence and patronage play a major part.

Despite the lack of total independence by the MPTC, and the regulatory dysfunction that results, Cambodia shows signs of developing into a healthy and competitive telecom market. Mobile penetration is still below 40 per cent, and wireless broadband in particular is grabbing lots of attention. The market is destined to grow and foreign companies will look to be a part of it.

This article was originally published in the 17 June 2010 issue of Media.