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‘The market needed to get smaller’

‘The market needed to get smaller’

9 cellcard ian watson
Cellcard chief executive Ian Watson speaks to the Post on Tuesday. Photograph: Pha Lina/Phnom Penh Post

Against the backdrop of mergers and bankruptcy in Cambodia’s crowded telecoms market, CEO of leading operator Cellcard, Ian Watson, talks to the Post’s Anne Renzenbrink about changes in the market, price dumping and the Mfone subscriber transfer.

There have been many changes in Cambodia’s telco industry in the past few months, with mergers and a bankruptcy. What further changes in the market are you expecting?
I think basically the market, the consolidation that it needed, has finished for now. The market needed to get smaller. There were too many players, it was difficult for a lot of the smaller ones to actually make profit and invest in the infrastructure they needed to grow the market. With having four players, the market is a much more stable market; people are able to invest in the future.  

If four operators is a healthy amount for the market here, how long do you think it will take until that happens?
It will probably take another two years. It’s very difficult, you know, with the business models of new operators coming in, how they will actually attack the market, how they will position themselves. But over the next 18 months the market will consolidate slightly more to a four player market or maybe a three player market.
 
Who will be the players?
I think we’ll be there; I think Viettel will be there; I think Smart will be there. And maybe a smaller niche player. There will be I think three dominant ones and a smaller niche player.

Would you say, because of the amount of players, investment has been rather small in the industry?
No, I think the investment has been substantial. We’ve always continued to invest in the network, in the infrastructure, to support customer growth. But I think some of the investments may have been misplaced in terms of how they got a long-term strategy to actually survive. And we have to look at some of the pricing models by some of the operators – you often wonder how can they invest in infrastructure and actually make a profit as well. It’s impossible. It is impossible for some of the previous incumbent operators here to utilise the pricing model they’ve got and then invest long term in the future.

Some companies continue price dumping. It restricts the investment because I have to use money on commercial offerings while I should be investing in infrastructure out in the provinces.

What do you think about the government regulating price dumping? Is that a healthy thing to do? Shouldn’t that be coming from the market itself?
Yes and no. As a mobile market evolves, there’s a need for a pricing structure to be adhered to. It’s not good for the growth of the Cambodian mobile market for price dumping to take place. It’s a short-term fix, and it doesn’t benefit the customer long term.

In essence, in terms of ongoing investment, in terms of infrastructure and expansion of network, it’s limiting the Cambodian public’s access to the latest technology, products and service, and everything else. And it’s been demonstrated in other emerging markets that a vibrant telco sector adds substantially to the GDP of the economy.

And the pricing before the price dumping is pretty competitive anyway. It’s not out of line with other markets. If you compare other regional markets such as Thailand, Malaysia, Laos, our pricing, without the price dumping, is fairly competitive anyway.

I admire the regulator now for taking the lead and making minimum pricing part of the strategy. It’ll clean up the market, bring more consistency and in the end bring long-term value to the market rather than short-term gain for some of the other operators.

The reason why Mfone went bankrupt is because price dumping was allowed to happen for a period of two or three years.

Regarding the subscriber transfer, people say the subscribers are a major part of the company’s assets.

I think people’s perception of a subscriber as an asset is totally wrong. Everybody forgets that Mfone was insolvent. As the only Cambodian-owned operator, we did what we did because we thought it was morally the right thing to do and migrate those customers across to our network and honour the existing balance.

And I think we did it fairly and we did it transparently. We didn’t hide it from anybody. We went out to the market and said this is what we are going to do. Everybody forgets that it costs us a substantial amount of money to honour the balances of the existing customers of Mfone. And people were given the choice. They didn’t have to come across to us. The customers were given the choice. It’s a free market.

In other mobile markets in the world, it’s subjective whether a mobile subscriber, especially a pre-paid one, is an asset of the company.

Did you pay for the customers, for the Mfone subscribers?
No, we didn’t pay. We migrated them, but in terms of the cost base we added a lot of money to it in terms of SIMs, staff and the balance that we wouldn’t pay for them. I wouldn’t have paid for them. Because the customers and all inherent effect were worthless. They were worth no money.

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