After just eight months in Cambodia, Vietnam’s Viettel has already provoked accusations of government favouritism by other operators; Managing Director Nguyen Duy Tho responds

CEO TALK

By Nathan Green

When Viettel launched Metfone in February 2009 it conducted a well-publicised campaign of giving away free sim cards to build market share. According to press reports late last month, it now has 2 million subscribers, making it the second largest mobile operator in Cambodia. How do you calculate the figure? How many of those sim cards are active, and how do you characterise active?

The subscribers figure was provided by the Ministry of Posts and Telecommunications based on the monthly revenue reports of each operator and it is in line with figures from our network management system, which we analyse every day. In fact, as of [Tuesday], we calculate that we have 2.5 million active subscribers, two-thirds of whom use the service in a regular manner. We stopped the free sim promotion in May due to its ineffectiveness and because it wasted our series number resources.

It is hard to believe that number and I know the majority of operators are sceptical. How many subscribers does market leader Mobitel have?

I don’t have that number but it must be higher than this because they have already been here for the last 16 years.

How long until you become number one?

That’s a very good question, but I don’t think it is that important whether we are number one or number two. The most important thing is how many cell phone towers we have in our network and what percentage of the population we cover, and if the quality of your service is good enough and the price suitable for your customer. It’s also important what our customers think of us.

How much of the country do you cover now?

We have 2,000 base transceiver stations already active and we will activate another 3,000 by the end of November which will mean we will cover 90 percent to 95 percent of the population. We already cover 100 percent of districts, and 80 percent of villages. Each village will have one media station. Around 85 percent of our base transceiver stations are connected by our 12,000-kilometre fibre optic network, and the rest by microwave signal. We invested $80 million in our broadband network.

You launched a 3G network in Laos last week. Does Viettel plan to introduce 3G to Cambodia, and when?

Next year. In the beginning of the year.

There are currently nine operators, and most experts agree that consolidation in the market is inevitable. Do you expect consolidation to occur through mergers and acquisitions or do you see some operators simply disappearing?

Following the natural law, there will come a time when the market becomes saturated and when that point is reached consolidation will be a necessity. This consolidation will happen in several ways. Some operators will cooperate with other operators to become one, or one operator may buy another and take its market share. The physical law of transformation means that these companies will not disappear from the market; they will change from one form to another and just their name will change.

But given that the small operators tend to have towers in the same places, why bother buying a competitor out. Surely a better strategy is to wait for them to fold?

If, for example, Smart Mobile bought qb, then its not that they only buy their towers; they also buy their customers and their infrastructure, which includes distribution channels, technical capacity, not just the base stations.

How many operators will survive, and will Metfone be one?

Metfone understands and accepts the natural law. All nine operators will answer “yes” that they will survive but when the time comes reality will tell them that they were wrong. I think Cambodia will be able to support three or four operators, and Metfone will be one.

Viettel is a wholly owned subsidiary of the Vietnamese military. Operators have said that has helped it get preferential treatment from the government in terms of policy and also in terms of its ability to erect cellphone towers in areas where other operators cannot, particularly in Phnom Penh.

Can you give me an example where Metfone is getting preferential treatment? The government’s policies apply to all and the difficulties are also the same for every company. I don’t see any special treatment for Metfone from the government, but if it exists I think that the government as well as the customers have the right to choose which operator can bring the best quality and service price. We also have had difficulties in constructing base transceiver station towers but the difference is that we are determined to surpass the difficulties and accept a high rent.

What is Metfone’s enterprise strategy – is the company active in group deals with businesses, government, etc. Do you bundle mobile phone packages with your broadband offering?

Our Metbiz package offers 30 minutes of free calling per month for each line and is bundled with our leased line service, which we will discuss in our conference [Thursday]. It’s suitable for organisations where the proportion of internal calls are higher than the number of calls outside. I can’t tell you how many subscribers we have because it is commercially sensitive but there are more than 100 companies, each with 30 to 50 staff. The biggest is a bank with more than 400 staff. I can’t tell you which one but I’m sure you can work it out.

You inked an cooperation agreement with the Vietnamese-backed Bank for Investment and Development of Cambodia (BIDC) in August so that is obviously one. What other banks have you signed up?

Canadia Bank, ACLEDA Bank, ANZ Royal Bank and BIDC; we have only four.

Recent press coverage has also said Metfone has 60 percent of ADSL services and 50 percent of the fixed phone market? Can you confirm how these numbers are calculated?

Those numbers make me very happy, though I don’t know where the information came from; maybe the MPTC who control all the monthly revenue reports. We can believe it is the correct number, but I can say we have 7,000 ADSL customers and 40,000 fixed phone customers. Through our brand name METNET – light speed on fibre optic technology – we reach almost all Cambodian districts with 12,000 kilometres of fibre optic cable. By bringing the internet to the furthest customers we can help them understand the outside world. We provide METHOME, our fixed phone service, in 24 provinces.

Cambodia has the lowest penetration of fixed broadband in Southeast Asia outside of Myanmar, and it is 132 out of 150 countries in terms of cost, according to the International Telecommunications Union. Viettel has an almost monopoly position on bringing broadband into Cambodia and many ISPs blame the high cost of buying bandwidth from Viettel as the reason. Why are costs so high, and what is being done to bring them down?

First, we have to accept the reality that Cambodia is considered one of the most expensive in terms of the broadband market. And you say many ISPs complain about the high cost? I can understand that and I will try to optimise our costs in order to reduce the price for our customers. But compare the price now to the price before Metfone existed here; we brought the price of broadband down 40 percent when we launched. But I still think in general the price of broadband is too high and Metfone is committed to reducing the price in the near future. Our plan to reduce prices is to reduce our costs, improve the service quality and share profits with the customer.

The entry of Telcotech is expected to bring competition to the wholesale broadband market, bring costs down and boosting quality of service. Other wholesalers are also laying down fibre-optics. What is your projection for broadband pricing over the medium and long-term?

Only Metfone currently [wholesales] broadband services but other operators are building their networks. For sure the price will continue to strongly reduce, but price is not the only factor that determines whether a company will survive. Other factors like network coverage, service quality and the efforts operators make to satisfy their customers are equally important.

Is that how you plan to compete with the new entrants?

We don’t like to use the word “compete” because we respect all our competitors. We prefer to regularly check our internal affairs and our weaknesses in order to improve our system. If we concentrate on improving our network, we will have stable performance and optimise our price to reduce our performance.

In the meantime, ISPs complain you undercut them with your retail pricing.

That’s a very good question. We do sell to ISPs, and they sell to retail customers. We also sell directly to retail customers. Strategically, we do not compete with the ISPs. The ISPs have developed their market inside the city within a limited distance. There are so many customers in remote areas and they have a need for the service too. We have concentrated on developing our services in areas where ISPs do not reach. And in terms of the complaint from ISPs about our retail prices, if they sell at the same price as we sell to retail customers they will still be able to make a profit.

Come on, you sell internet services to retail customers in Phnom Penh.

In Phnom Penh we have developed just in the outside areas. But some customers have the need and they come direct to our showroom. We cannot refuse. You have to understand that if we provide a service to more and more people, it’s always better than having a few customers [in terms of price]. But I have one question for you. If you run an ISP company, would you expand to remote areas.

No, if I am an ISP I will use your wholesale service and cultivate the biggest and richest clients in Phnom Penh, sell to them at a big profit and spend as little as possible on network expansion. Are you suggesting the ISPs cherry pick the best customers?

Customers in rural areas also have a need for internet services and we see this as our mission. Our strategy is to shorten the distance between the city and the countryside, and balance the difference needs of the cities and rural areas. In terms of our wholesale and retail pricing, if the ISP customer knows how to optimise their costs then they can reduce the price more. But it doesn’t matter what the ISPs want; the most important need is the need of the customer. ISPs want what they want, they have their own needs. We also have our own needs. The customer has their own needs to. Whoever can satisfy the customer will also satisfy their own needs. We hope that ISPs will also develop well, not only in the city but also outside, because ISP customers are also our customers. We should all stand on the side of our customers.