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NEWS UPDATES Asean Affairs                       22  August 2011

Telecom price cuts upset market

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Steep price cuts by mobile operator Hello may prompt Thaicom to sell its majority stake in Mfone, according to investment firm Cambodia Capital.

Cambodia Capital claims Hello’s drop in the tariffs it charges customers this year has heavily impacted Mfone’s operations, as well as those of other smaller telecoms in the Kingdom.

“The possible exit by Thaicom has been driven in part by the recent adoption of aggressive price-cutting by the third-largest operator, Hello,” Cambodia Capital said in a report this week.

“Hello, backed by their deep-pocketed Malaysian parent, Axiata, has stated that they intend to remain in the market and drive out smaller operators,” the report said.

Cambodia Capital said that while the firm did not expect to see the effects of Hello’s price cuts so quickly, the industry – and Mfone, in particular – was already feeling pressure as a result of those cuts.

“If the larger Mfone is already feeling the pinch, it is probable that the other smaller operators are also being hit in [the second quarter of 2011] by this major player slashing tariffs. This could drive more rapid consolidation than we had previously expected.”

Last Friday, Thaicom CEO Suphajee Suthumpun reportedly said that the firm was considering pulling out of Cambodia, where it owns 51 percent of Mfone, as well as Laos.

Hello in the first half of 2011 introduced tariff plans charging a flat flee for unlimited monthly calls, which drew criticism from domestic rivals, who claimed they violated a Ministry of Post and Telecommunications prakas regarding minimum pricing per minute.

The company has since defended itself, saying it pushed forward with its pricing plans only after the ministry refused to enforce the prakas as other operators were cutting prices.

Regardless, Hello CEO Simon Perkins this week downplayed the effect his price cuts were having on the industry. He said an overcrowded sector and aggressive pricing regimes over the past two years had finally started to take their toll on some Cambodian mobile operators.

“It’s not just us. It’s the whole market,” he said. “We followed what the rest of the market was doing. Probably because we’re a bit bigger it’s had an impact.”

Perkins also attempted to temper Cambodia Capital’s claim that Hello had previously said it sought to drive smaller players out of business.

“Axiata is committed to this market 100 percent. Cambodia is a strategic operation that we will defend and grow whatever it takes,” he said, though the intention of eliminating competitors was “a step too far”.

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