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NEWS UPDATES 6 September 2009

Price war looms over Cambodia’s mobile sector

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Cambodia’s Ministry of Posts and Telecommunications (MPTC) has warned mobile-phone operators to monitor one another's prices amid a continuing disagreement over the tariffs offered by Beeline, citing "remarkably" declining revenues in the sector, reported Englsih-language daily the Phnom Penh Post.

In an official account from a meeting of mobile operators, MPTC departments and Telecom Cambodia in Phnom Penh on August 14 obtained by the Post, the ministry recommended that companies report sector misdemeanors to the government.

The document refers in particular to below-cost pricing, the illegal use of other companies' prefixes - charges Mobitel has brought against Beeline - and blocking of network interconnectivity, a counter-accusation by the latter in a dispute that thus far remains unresolved.

"All companies were encouraged to monitor the service tariff offered by other companies and should not offer illegal services because the annual income generated has remarkably declined," the document notes.

It notes that these recommendations came from MPTC Minister So Khun following the meeting, which was chaired by MPTC Director General Mov Chakrya.

Figures released from various companies this year show that revenues in the sector have declined sharply.

Axiata, the parent company of Hello, said last month that revenues for its Cambodian operations fell 17.4 percent in the second quarter, citing aggressive promotional activities in the industry, including the distribution of free SIM cards.

Millicom International, the Luxembourg-registered telecoms multinational that currently holds a majority stake in market leader Mobitel, cited over-competiveness in the Kingdom's mobile sector for its decision to withdraw. It is currently finalising a deal that would see the Royal Group buy its stake for $346 million.

However, one industry insider, who declined to be named, noted that penetration and users were increasing across the sector, and that growing revenues were being redistributed from early entrants to the newer arrivals.

Moscow-based Vimpelcom, the parent company of the Beeline brand through its local subsidiary Sotelco, announced 28 million rubles ($884,468) in revenues for its Cambodia operations since its launch in May. It noted "initial sales have been strong".

It has been accused by Mobitel of pricing its services, at $0.05 a minute, at below cost, a charge it denies. The company on Tuesday stopped taking new customers on its "Boom" tariff but has promised existing customers they will continue to benefit from its low rates.

Simon Perkins, CEO of Hello in Cambodia, said Thursday that even $0.06-a-minute calls were "not sustainable".

"Only the larger players can generate sufficient revenue to meet their operating costs at these levels because they have the critical mass of total customers," he told the Post by email. "Once the revenue drops below certain levels, operators have to cut back on capital investment."

Mark Hanna, chief financial officer of Royal Group, accused Beeline on Thursday of "damaging the industry" through its pricing policies. "Selling below cost in order to gain market share is irresponsible in any industry," he said.

Beeline defended itself this week, arguing that charging $0.05 a minute on certain tariffs didn't represent below-cost price overall because it was still making money on other mobile-phone services.

Industry insiders say that it costs all mobile firms in Cambodia $0.0595 for a one-minute call. Beeline added that it charges users by the second, whereas it pays interconnect charges by the minute or part thereof, meaning it did not necessarily lose money on the calls.


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