After ten years and an investment of more than $20 million, the Australian
telecommunications company Telstra Corp will hand over its long-distance and
pay-phone service contract in Cambodia to the Ministry of Posts and
Telecommunications (MPTC) on October 10.
But the Government won't have a
monopoly on long-distance for long. On November 1 a start-up called TELE2,
formed by Millicom International and Royal Group, will begin service.
move will give users a choice of long-distance carriers for the first time.
However the MPTC will also be a partner in TELE2 and the lion's share of its
revenues will go to the Government.
Analysts who follow the industry are
welcoming the competition in the market because they say it will probably result
in better long-distance service and quality and lower rates. The MPTC has
slashed Cambodia's long distance rates by nearly 50 percent in the past few
years, but rates remain high.
The tariff for a call to most countries in
Asia is now $1.82 a minute. However the cuts in tariffs have been significant.
For example the tariff for a five-minute call to the United States or France was
$19 in 1997. Today a five-minute call costs $10.15.
But the entry of a
second long-distance carrier won't do anything to solve the bigger problem with
telephone service in Cambodia: the lack of adequate fixed line service in many
provinces and the high cost of local phone use that has resulted from the
proliferation of mobile phones at the expense of much cheaper land
While there is no shortage of foreign investors who want to
operate gateways and mobile service in Cambodia, no private investors are
stepping in to build a fixed-line phone infrastructure covering the
The government of Germany has recently installed fiber-optic
cable from the border of Thailand through Battambang and over to Vietnam. But in
much of Cambodia fixed-line service is very limited and the gap has created a
situation where Cambodia has nearly five times more mobile users than land-line
users, according to analysts.
So far the MPTC has not indicated what its
long-distance marketing strategy will be. Officials of TELE2 also said they
don't know what kind of rates they will be allowed to charge because they are
waiting for word from regulators.
Despite that, most people, including an
MPTC official, said long distance rates should go down soon after the Millicom
start-up enters the market.
"Because of the competition we expect the
rates to go down," said Koy Kim Sea, Undersecretary of State for the
"The Government expects more usage of the telephone, lower rates
and the same revenue to the Government as in the past, if not more," he
Telstra is expected to continue to work with MPTC under a six-month
consulting contract. But the ministry intends to operate the service itself,
said Sea. Although the technical staff have been trained by Telstra, the MPTC
doesn't have a billing and marketing center yet.
"Telstra did a good job
for the contract we had. The rates are high but Telstra had no say in that,"
said Sea. "However Telstra didn't help us do any marketing, which is essential
in the coming months as we face competition. The MPTC will have to do it," he
The new company, which is a partnership of Millicom International
of Sweden, (the parent company of MobiTel), Royal Group International, and the
MPTC, will begin limited operations on November 1, said Ronny Melander, general
manager of Royal Telecom International Co Ltd.
Royal Group is involved in
a variety of businesses in Cambodia. It is the distributor for Canon, Motorola
and Bell Helicopters, said its Chairman and CEO Meng Kith.
granted a gateway license in 1997 and is in the process of investing $10 million
in the first phase of its plan. It has built an earth station in Prek Ho in
Takmau, said Melander. The facilities include a large office and switching
center as well as a 100-meter-high communications tower and satellite dishes
providing the links to other countries.
The company has been licensed to
operate for 15 years with a five-year extension. Melander said a total of $30
million can be invested, depending upon growth. He said revenues from calls will
be split with the MPTC, with the ministry getting "a majority of
Under the Telstra contract, the Australian company received 49
percent of the revenues from inbound calls and 12 percent of the revenues from
The theory behind the split was that Cambodia would get
the majority of revenues from calls generated inside the country. But in reality
the costs of making calls from Cambodia to the rest of the world was so high in
the early years that most people avoided spending much time on the phone by
sending faxes instead.
Andrew Hankins, Telstra's general manager in
Cambodia, said the contract was profitable overall and became more so in the
later years. He declined to say how many calls are now being made or how much
Telstra took in from the contract last year.
One analyst said that with a
monopoly contract, "Every minute the phone is on, they're printing money. All of
the calls in and out of the country must go through that gateway. Every mobile
operator would like to get that."
Hankins defended Telstra's performance
under the contract, saying Telstra came to Cambodia at a time when the business
climate was "fairly risky". During its tenure Telstra invested $20 million in
infrastructure and $10 million more in indirect services such as
He said Telstra built an earth station linking Cambodia to Asia
and Europe and an Intelsat satellite station linking Cambodia to North America.
It provided the international gateway exchange as well as 1,000 international
lines, a 5,200 line local exchange and about 170 public pay phones.
1990 when Telstra began work Cambodia had eight international lines, all
connected by operator to Moscow and Hanoi. The domestic phone network had been
cut up by the Khmer Rouge but there were about 5,000 lines working in Phnom
Hankins said Telstra will continue to operate its Big Pond
commercial Internet service, which began it 1997 under a separate open-ended
license. Big Pond is the largest Internet service provider in Cambodia. It
competes with the Government's Camnet.
Hankins said Telstra is waiting
for the MPTC to complete a review of its plans before it can say whether it will
have a future role in Cambodia beyond Big Pond. Telstra, based in Sydney, is
struggling to increase profits under intense competition at home and
The company recently announced a joint venture in Hong Kong
with a company called Pacific Century CyberWorks to establish a mobile-wireless
company and an Internet Protocol network.
Telstra's contracts in Laos and
Vietnam also end on October 10.
Although Cambodia's phone penetration
remains low, with a ratio of 0.3 land line phones per 100 people overall, the
MPTC has a master plan to connect the rest of Cambodia by the year
A Japan International Cooperation Agency advisor working with the
ministry says the implementation of the plan depends on both private investment
"In the rural areas the business is not so profitable and no
one wants to invest," said Shiro Tamura.
He said the government of Japan,
which has made considerable contributions in phone infrastructure, including
16,000 lines, is considering whether to fund an expansion of service in
Phone Charge Chart
Cambodia's long distance rates dropped 30% this
Rates for 2000
- To Vietnam, Laos, Thailand: Peak $1.68 per minute. Sat-Sun off peak:
- To the rest of Asia: Peak $1.82 per minute. Sat-Sun off peak: $1.46
- To the rest of the world: Peak $2.03 per minute. Sat-Sun off peak $1.63
Rates for 1999
- To Vietnam, Laos, Thailand: Peak $2.40 Sat-Sun off-peak $1.90
- To the rest of Asia: Peak $2.60 Sat-Sun off-peak $2.00
- To the rest of the world: Peak $2.90 Sat Sun off-peak $2.30
Source: MPTC tariffs as of March 2000