Cambodian: disentangling telecoms

January 5, 2011
By Tim Johnston
Financial Times

Smart Mobile and Star-Cell, two of Cambodia’s larger mobile telephone operators, have formalised their merger, the first of what is expected to be a wave of consolidation in one of the world’s most crowded telecoms markets.

The new company, to be called Smart Mobile, will be 75 per cent owned by Cyprus-based Timeturns Holdings Ltd and 25 per cent by a subsidiary of Sweden’s TeliaSonera, Star-Cell’s parent.

“There are truly too many (operators). Therefore, market consolidation should take place and we have taken a pioneering step,” Thomas Hundt, CEO of Timeturns’ Latelz Co. Ltd, which will run Smart Mobile, told a news conference.

Before the merger, Cambodia’s 15m citizens were a faced with a startling choice of 9 different mobile operators. The competition was great for consumers – Cambodia has some of the lowest rates in the world – but it created a brutal environment for operators: the average return per user (ARPU) was just $5.27 in 2009, according to Research and Markets, a market research database.

In October, TeliaSonera wrote down the value of its investment by $100m, and in November Malaysia’s Axiata, which owns the Hello brand in Cambodia, discounted the goodwill value of its investment by $15.7m,

For investors, it is a difficult market to parse. No one is even sure how many subscribers there are: estimates range from 3.7m users to over 7m. Part of the problem is that many companies count the number of SIM cards they have sold rather than active subscribers, a tactic that might bulk up their profile, but probably contributes to their lamentable ARPU. Even the Ministry of Posts and Communications is unsure, saying that it believes that mobile penetration is somewhere between 50 and 59 per cent.

Certainly there are a lot of duplicates. It is not uncommon for a Cambodian business card to list two, three or even four different mobile numbers that callers try sequentially, and often repeatedly, to get a connection. In the picture above, a Cambodian gambler talks on 18 mobile phones at the same time while commenting on a boxing match in Phnom Penh.

All of which leads to other uncertainties. The newly merged Smart Mobile says it will have 850,000 subscribers, making it the third largest operator behind Mobitel, owned by Cambodia’s Royal Group, and Metfone, part of the Vietnamese military’s Viettel group, but some analysts wonder about the accuracy of the data.

But the problems do not seem to have dimmed foreign enthusiasm for Cambodian telecoms. Last month both France Telecom and PT Telekomunikasi Indonesia announced that they were in the final stages of a deal to buy a stake in Mobitel.