So Khun is belatedly protecting the investments of those who did his job for him.
THERE’S possibly no better place for former Thai prime minister Thaksin Shinawatra to start in his new role as economic adviser to Hun Sen than Cambodia’s woefully mismanaged telecoms sector.
His credentials in the sector are impressive, as he amassed his family’s multibillion- dollar fortune through telecommunications ventures including Internet, television and mobile-phone networks.
Though allegations of corruption have swirled around these investments – note, however, he is a fugitive from justice on conflict of interest charges regarding an undervalued land sale to his wife, not the tax-free sale of his stake in the country’s largest telecoms group to Singapore’s Temasek Holdings – this is arguably an advantage when it comes to deciphering the mess that is Cambodia’s telecoms sector.
Under the watch of Telecoms Minister So Khun, the Kingdom has managed to develop world-class mobile phone infrastructure in spite of the efforts of the man in charge. Credit instead belongs almost exclusively to the private sector: with Mobitel, Hello, Mfone – owned by Thaksin’s former telecoms group – and latterly the Vietnamese military all investing millions of dollars to connect the country.
So Khun’s influence can probably best be seen in the fixed-line and broadband sections of the market, both of which are distinctly Wal-Mart in terms of quality and Gucci in terms of cost – Cambodia has the runoff bandwidth from neighbours including Vietnam, whereas the price of a connection is among the highest in the region.
But So Khun’s reverse-Midas touch is now beginning to afflict the domestic mobile-phone market amid allegations of price-dumping and network-blocking between incumbents and a host of new entrants.
The origins of these new players are mostly known, but how much they paid (and to whom) for the privilege of entering a massively overcrowded market is a mystery.
The World Trade Organisation Agreement on Telecommunications dictates that licences should be public documents held in a public register. Not only does Cambodia fail on this front, cable television provider Phnom Penh Cable Television (PPCTV) claims that its monopoly licence to provide cable television services over its fibre-optic network – known as IPTV - has a clause preventing it from being shown to a third party.
That licence, which in So Khun’s defence was granted by the Ministry of Information rather than the Ministry of Posts and Telecommunications, points to the utter lack of consistency, clarity and impartiality in the regulatory environment. Competing cable television provider Cambodia Cable Television (CCTV) seems to be unaffected by PPCTV’s monopoly position, whereas new entrant Digi looks set to be barred from offering the same service over its network.
Bizarrely, that network was built with an IPTV broadcast licence granted by So Khun even before PPCTV received its licence, even though he knew, or should have known, that his ministry doesn’t wear the pants in the TV sector. So although Digi can continue providing telephone and Internet services over its network, its business plan of bundling TV with the services to create a “triple play” offering appears to be in ruins despite its having played by what it thought were the rules.
In a market where some 30 Internet service provider licences have been issued, Digi was counting on the bundled offering to stand out from the crowd. If the government fails to get its house in order, who will compensate the firm for the bungled regulatory effort?
Which brings us back to the mobile-phone sector. Market leader Mobitel has invested some US$700 million building a world-class countrywide mobile-phone network, according to some analysts’ estimates, connecting people even as Telecom Cambodia got bogged down in its rollout of fixed-line telephones. Mfone, Hello and Viettel have also invested heavily in the market, which most telecoms watchers believe is large enough for four firms at most.
Cambodia now has nine. Sector insiders say the newcomers have been accommodated by a “request” from the ministry that incumbents return some of their spectrum to be parceled out in what So Khun and his ministry officials say is the spirit of free competition.
The newcomers are doing what newcomers are wont to do: aggressively marketing their services and dropping prices to win market share, while the incumbents, naturally, try to block them, largely by stalling on interconnection.
The incumbents have a point: The new players can cherry-pick the urban subscribers who spend most on mobiles by offering discounts because they do not have expansive networks to maintain, nor a major capital investment to recoup.
Lobbying has been intense, and So Khun now seems willing to admit things are out of hand and has said he will set minimum tariffs. The free market has failed in Cambodia, but only because the regulatory environment has failed.
By moving to set a minimum tariff across the sector, So Khun is belatedly protecting the investments of those who did his job for him in building up the telecoms sector. But this will not sit well with the new entrants, who entered for the most part in good faith, if they are limited to competing on service offerings and quality.
As this saga plays out, there will be losers. Aside from So Khun, who has watched over the sector with his eyes shut and his arms open, it is hard to see who the winners will be.
Thaksin seems like an unlikely saviour, but he could hardly be worse.