Cambodia's mobile price war: peace in sight?

Beeline Cambodia: late entrant doing battle in a fierce tariffs war

DevelopingTelecomsWatch depends on the indispensable Phnom Penh Post for news of all things Cambodian, quoting that organ quite liberally, for example, when donning a flak jacket to report on the mobile price war which has been gripping the southeast Asian country for months.

It was also via that esteemed news outlet that DTW learned this week that the Cambodian Government has tired of waiting for the country's numerous cellcos to end to their damaging tariffs battle. A long-awaited edict setting minimum tariffs was signed by the Government last Friday, telecoms Minister So Khun is quoted as saying.

"We offered free-market principles, but operators kept having conflicts with one another, so the government needs to have a hand in it," So Khun said. The government will suspend the licence of any operators that violate the minimum tariff set by the edict, he added.

The Cambodian mobile market is currently contested by no less than nine MNOs. If there is another country with a population under 15 million whose cellular sector is split so many ways, it does not spring immediately to mind. Of that crowd of cellcos, one, so far, has reacted positively to the imposition of a minimum tariff regime. The Phnom Penh Post quotes Simon Perkins, CEO of Axiata-controlled Hello, who says he supports the initiative "to bring some structure to the telecom tariffs, in the absence of the usual competition guidelines and rules that exist in a lot of markets".

This decision, of course, comes too late for Millicom International Cellular, which announced in July that its three Asian operations (in Sri Lanka and Laos as well as in Cambodia) were to be reclassified as assets held for sale. The Luxembourg-headquartered mobile group cited problems around ongoing profitability in these Asian markets as a key reason for selling up and focusing its efforts on its African and Latin American properties. As DTW reported in the summer, Millicom CEO Mikael Grahne appeared to attribute much of the blame for deteriorating profits at Cellcard, the Cambodian cellco in which Millicom has a 58.4% stake, to the disruptive market-entry strategies of latecomers to the country's mobile arena. The same DTW piece, however, noted that another major shareholder in Cellcard does not agree with Millicom's assertion that this is negatively impacting profitability: "[There are] no concerns on profitability from our side," said Mark Hanna, CFO of Royal Group, which owns a 38.5% stake in the cellco, denying in July that margins had become tighter.

Such was the confidence of the Royal Group in this assertion that the local Cambodian conglomerate agreed to acquire Millicom's stake in Cellcard. This confidence also seems to be shared now by the Royal Group's bankers. According to a Bloomberg article earlier this month, Royal Group has hired Standard Bank Group Ltd. and Australia & New Zealand Banking Group Ltd. to arrange an 18-month bridging loan to help with the purchase of Millicom's share of the MNO.

The appetite of the Cambodian authorities for intervention in the mobile market does not end with tariff control.

Again, we are indebted to the Phnom Penh Post, this time for coverage of a debate around mobile network sharing in Cambodia.

Last month, the newspaper carried news of Minister So Khun calling for the country's MNOs to share infrastructure. So Khun said the initiative would avoid duplication of infrastructure, thereby reducing costs across the sector, as well as moderating the effect that mobile base stations are having on their surroundings.

"We do not want to see too many antennas dotted along roads in the future," said the Minister. Perhaps it would be too sarcastic to respond by asking "So why did you license nine mobile operators in a country of that size?"

Given that some of these nine are well-established players feeling the effects of the later entry of certain rivals, it seems reasonable to suggest that the response to any mandatory network infrastructure sharing might be rather mixed. As the Phnom Penh Post points out, the operators with an established presence in the market have spent many millions of dollars on infrastructure as part of their efforts to gain competitive advantage.

The Government has shared a draft of a proposed telecoms law one of whose provisions would be to make infrastructure sharing obligatory. The private sector response has been to agree that while there do exist benefits around cost reduction and environmental impact, market forces in Cambodia have not been given sufficient time to work.

"Mandatory facilities sharing will reduce the incentive on operators to build such infrastructure," said these recommendations. "This may result in less than the optimal number of towers being constructed such that when the operators commence infilling their networks to improve coverage and provide better service, they are unable to do so as all tower capacity has been filled."

DevelopingTelecomsWatch finds the mobile market of this particular Asian country to be fascinating. We'll keep watching.

Cambodia's mobile price war: peace in sight?

India's WiMAX/3G debate revisited

It does seem to be India week here on Developing Telecoms Watch. When I posted a link to this blog at the Mobile Consultants LinkedIn group, a member who has worked as an RF networks engineer for a number of the country's cellular operators was very keen to assert in response that his market is "the blue eyed baby for the [global] telecom sector nowadays and adding 8 million subs per month". In my respondent's view, interesting developments to look out for in India will include:

• Site sharing to save OPEX and CAPEX, with "some operators [having] set annual targets of 50-60% incremental sharing".
• As a result of looking at carried traffic and site utilization, "operators are taking a call to switch off some sites during night time to save OPEX".
• Single billing systems for all services provided by an operator, such as mobile, DTH, data usage, IPTV etc.
• Operators identifying common weak coverage areas and areas in high security zones - and planning single sites instead of deploying multiple sites in those areas.
• Operators waiting for number portability "to be deployed ASAP to maximize their revenues".

I concluded Sunday's India-themed post by choosing to infer from a recent report by consultants BDA that there seems to be reasonable case for WiMAX and an even stronger one for 3G in India. Since then I've read articles in which the prospects for both are enthusiastically talked up.

Making the case for 3G, in an interview in an interview with Business Line yesterday was Mr P. Balaji, Ericsson India's VP of Marketing and Strategy. Balaji asserts that Indian operators will be able to roll out services with minimal additional infrastructure costs and that 3G will help to bridge the urban-rural digital divide. "Telemedicine, e-education and e-governance can be offered through 3G in rural pockets," says Ericsson's Balaji, "and this is bound to improve the quality of life of the people."

Asked how 3G stacks up against WiMAX, Balaji states "we believe the Government should leave it to the market forces and not dictate technology choices" and that in his opinion "3G will score in the Indian telecom market because it offers greater economies of scale, faster time to market and multiplicity of handsets".

This is not very surprising. Outlined in a white paper released last month, the Ericsson view of comparisons between WiMAX and HSPA can is as follows: "While the peak data rates, spectral efficiency and network architecture of HSPA Evolution and Mobile WiMAX are similar, HSPA offers better coverage. In short, Mobile WiMAX does not offer any technology advantage over HSPA. What is more, HSPA is a proven mobile broadband technology deployed in more than 100 commercial networks... [and] can be built out using existing GSM radio network sites and is a software upgrade of installed W-CDMA networks. Compared with other alternatives, HSPA is the clear and undisputed choice for mobile broadband services."

The Swedish vendor certainly seems to have lost enthusiasm for the IEEE 802.16 family of standards since making extremely positive noises when joining the WiMAX Forum in December 2004.

Feeling more upbeat about WiMAX in India is research and consulting house Strategy Analytics, whose recent study sees the country's WiMAX subscriber base hitting 14 million by Year 2013 and growing annually by nearly 130%. An Economic Times article on Saturday indicated that the Strategy Analytics report predicts initial investment in WiMAX ventures will top $500 million in India. The US-based research firm feel that after initial deployments primarily in major urban areas pockets, "WiMAX will find relatively greater utility and less competition from competing technologies in smaller towns and villages."

This last point seems to go head-to-head with the claims made by Ericsson's Balaji regarding his envisioned role for 3G networks in India's rural areas. I wonder who will turn out to be right? Or will it be a case of both being half-right?

Another thing for me to wonder about: I wonder if tomorrow will be the day when I finally managed to discuss something other than India's WiMAX and 3G prospects here...

India's WiMAX/3G debate revisited