The Russian firm’s row with Mobitel reveals the extent to which regulators in Cambodia have failed to keep pace with the fast-expanding mobile sector

Commemt

Steve Finch

WITH Mobitel and Beeline still failing to resolve their differences over claims of price-dumping, “illegally” used prefixes and blocked interconnectivity between the rival networks, Cambodia’s densely populated mobile phone sector has been shown to be woefully deficient in legislation at a time when it is becoming more complex than ever.

It is not just the operators who are unsure of where this legal vacuum leaves them. Even the Ministry of Posts and Telecommunications (MPTC), the sector’s supposed regulator and supervisor, is said to be unsure of what to do next. Indeed, one industry insider told the Post that a senior official at MPTC admitted it did not know what to do to resolve the dispute.

Ahead of a long-awaited telecoms law, which, it is hoped, will enshrine a legal code for the industry and set up an independent telecoms regulator, MPTC last week resorted to setting up a task force to establish a prakas (edict) or sub-decree to plug the regulatory holes. But how exactly this will work, what happens in the meantime, and how the ministry can avoid accusations that it will have retroactively favoured one side remains to be seen.

Although most companies in the sector have lined up behind Mobitel in condemning Beeline’s aggressive pricing policy – Hello, qb, Metfone and Smart Mobile signed a joint letter with the market leader on September 3 requesting that the regulator address Beeline’s alleged price-dumping swiftly – some senior executives in the industry reckon that the ministry will need to also play politics as it navigates the current legal minefield.

One of the main protagonists, Mobitel, will be fully owned by the Royal Group by the end of the year – provided it can find the US$346 million in cash needed to buy Millicom International’s stake. Royal Group is run by Prime Minister Hun Sen’s senior economic adviser Kith Meng.

How do you determine profitability, or price-dumping?

Beeline, the newest entrant into Cambodia’s crowded mobile phone sector, on the other hand, is a brand operated by the Vimpelcom Group based in Moscow. Many expect that Kith Meng will therefore likely hold more sway than his Russian adversaries in this particular confrontation.

Furthermore, mobile-phone executives admit that the alleged price- dumping committed by Beeline relates to a cost analysis that is supposed to have informed a gentleman’s agreement in the sector that competitors would not drop cross-network tariffs below $0.06 per minute. The Russian operator offered tariffs of just $0.05 per minute to call competing networks on its “Boom” tariff, which it stopped offering to new users when it launched a new pricing package on September 1.

However, no one in the industry has so far been able to say what the exact agreement is, what legal avenues exist to enforce it (most likely none) and when indeed it was agreed.

Beeline’s argument is fairly straightforward – how do you determine profitability, or price-dumping, in regard to a break-even point when each company offers so many products?

Also, at $0.05 per minute, Beeline’s competitors say it is charging below the supposed cost price. But Beeline rounds up to the minute when charging customers and pays out by the second. This means a 40-second call generates the full $0.05 in revenues for the company, but cost – in network charges, fees to Telecom Cambodia and taxes – is charged by the second, in this case about $0.04 for the call.

This situation is further confused by the fact that many of Cambodia’s mobile-phone companies only entered the market recently and therefore have little idea of regulatory frameworks and agreements made in the past within the industry and with MPTC.

It is not surprising that most mobile companies support Mobitel’s position – after all, many have reported that revenues have been hit this year as competition in the sector has increased.

But as far as the consumer is concerned, lower cross-network tariffs are a plus, whereas Mobitel’s refusal to boost interconnectivity surely goes against their interests. Will this be factored into the new legal framework being drawn up under the supervision of MPTC Secretary of State Sarak Khan? That remains to be seen.

On the question of Mobitel’s allegations against Beeline that the latter used the market leader’s prefixes illegally, legal repercussions remain equally murky. The International Telecommunication Union told the Post last month that the case “would be an issue to be dealt with by local authorities”. This returns us to the problem of Cambodia’s lack of legal tools.

Within other areas of the economy, analysts say Cambodia’s biggest failing is that legislation is too often not enforced.

In the telecommunications sector – one that is among the most competitive and lucrative, at least in the longer term – the main problem is not one of enforcement. The necessary legislation simply does not exist, and that is exactly why Mobitel, Beeline and to a lesser extent the other seven companies in the industry find themselves in this current legal black hole.