The long-awaited consolidation of Cambodia’s overcrowded mobile phone sector began yesterday, as Smart Mobile and Star-Cell officially merged into one company.

Following the announcement of the prospective deal last month, the firms yesterday claimed to have obtained the “necessary approvals” for the merger.

The newly formed provider will operate under the roof of the Smart Mobile brand and claims to be the third largest of the Kingdom’s eight mobile operators, with some 850,000 subscribers – though some in the industry have previously expressed skepticism at the number.

“There is a competitive advantage for those who are leading the market, including Smart Mobile,” said Smart’s chief executive officer Thomas Hundt at a Phnom Penh conference on the merger yesterday.

“Those who cannot leverage on the economy of scale, they will have more difficulty to be successful, to be profitable.”

The number of operators is likely to shrink further to reflect the reality of the Cambodian market, he said, to perhaps four or five providers.

“There are not so many countries in the world comparable to Cambodia, which have such a high number of operators relative to the number of people,” said Hundt.

Existing Star-Cell outlets and dealers will be rebranded to Smart Mobile by March this year.

The combined provider will be 75-percent owned by Smart’s owners, Cyprus-based Timeturns Holdings, and 25 percent by Star-Cells’s parent company, TeliaSonera AB.

The two owners have also co-operated in other markets.

On December 6, the same day that TeliaSonera first announced the merger, TeliaSonera increased its ownership in Nepal service provider NCell to 60.4 percent, from 40.8 percent. Smart Mobile’s owners Timeturns also have a stake in NCell, according to their website.

Thomas Hundt said cooperation by the owners in other markets was a positive factor influencing the Kingdom merger – but not its main impetus.

“At the end of the day, it was a pure [business] decision based on the facts and based on the value for the investors here in Cambodia,” he said.

Hundt said that no cash payment had been made from one side to the other in respect to the merger.

The deal came after rival Cambodian providers had also expressed interest in acquiring Star-Cell. qb chief executive officer Alan Sinfield has said that his firm made a cash bid for Star-Cell. Smart plans to expand its coverage to the Kingdom’s 24 provinces by the first half of 2011, as well as make 3G service available in the larger cities.