Pressure is mounting on the Kingdom’s telecommunications industry to stay ahead of the game as the demand for data and mobile internet becomes a top priority for Cambodian consumers.
As global smartphone manufacturers saturate Cambodia’s market in an effort to meet the demand for new technology, local telecom firms are being forced to provide increasingly competitive data rates and calculate new streams of revenue through value-added services.
“There’s no doubt the industry is going through an evolution driven by smartphone penetration, attractive data prices and by the relatively low rate of fixed-line connections,” Thomas Hundt, CEO of Smart said.
“The entrance segment to the smartphone market is really competitive – affordability still is the biggest factor.”
Smartphones in Cambodia are dirt cheap. You can pick up an entry-level smartphone capable of video and audio streaming and internet browsing for just $90. Mobile data packages are also very low. For $5 you can receive up to three gigabyte of data per month.
But affordability is nothing new to the Kingdom. For years, competitive pricing strategies on tariffs and bonus top-ups have defined Cambodia’s telecommunications sector. And today, with online instant messaging apps like WhatsApp and Viber threatening the traditional voice-call market, telcos must expand their business models to include a broader spectrum of services without stumbling on prices.
“The value generated via data streaming alone is getting smaller and smaller. All the money is being made by the OTT (Over-The-Top) applications – Facebook, YouTube, WhatsApp - which are bringing in margins that telcos can only dream about,” Hundt said.
Smart has moved to diversify its services, offering users insurance, music and entertainment via partnerships with Bima and Universal Music. Meanwhile, Cellcard has dial-up entertainment packs, allowing consumers to call for jokes, horoscopes or other services, and a rewards program that grants users discounts and prizes. Qb and Beeline also have dial-up entertainment packs.
But the key driver in today’s market appears to be apps.
“The number of smartphones is increasing much faster than the number of value-added services provided by traditional mobile network operators,” Karl Johan Remoy, managing director of IndoChina Research in Cambodia said.
“This development carries a certain potential for emerging technologies such as VoIP [Voice Over Internet Protocol or voice calls over the internet] to supply end users with access to global products and services that already have the advantage of scale,” Remoy said.
Some 907,000 smartphones were sold in Cambodia in 2013, up 42 per cent compared to 2012, according to Singapore-based research firm GfK. GfK estimates that Cambodia’s smartphone market is now a $300 million industry.
“As new-phone purchases increase, Cambodian telecommunications will become truly ‘operator-led’ and move towards a post-paid market with low-cost entry prices and instalment plans on better-quality devices,” said Socheath Chea, head of mobile for Samsung in Cambodia.
The post-paid model sees customers pay monthly instalments for their device in addition to their consumption, rather than purchasing devices outright.
For telcos, however, to ride the smartphone wave with post-paid plans, there is the significant barrier of credit risk.
With up to 90 per cent of the country lacking bank accounts and relying on a cash income, credit records and debt collection resources are few.
“We would like to see more post-paid customers, of course,” Hundt of Smart said. “But the tools to collect unpaid accounts are not yet here, and I do not expect the market to change in this direction in the short term.”
But some in the industry believe Cambodian firms may be able to hedge the risk with help from the country’s consumer micro-finance sector.
Aeon Microfinance is one of just two companies currently offering consumer micro-finance in Cambodia – catering to very small loans for everyday goods such as televisions or motorbikes.
Last year, Aeon Microfinance recorded total sales of $24 million, up 65 per cent compared to 2013. The company received an average of 1,500 loan applications a month in 2014 ranging between $600 and $3,000.
“The graduation of Cambodia’s telco operators depends on the ability to move into this post-paid model,” said Jason Liu, director of consumer business department at Huawei.
“Partnerships with consumer microfinance firms could be a tool to drive growth in this sector and give even people with just $50 the ability to engage with the latest mobile technology and then become involved in the operators’ value-added services,” he added.
For those companies that can overcome the current market challenges, opportunities lie in wait.
“Further rapid expansion of the internet and data usage is set to sweep through Cambodia,” said Peter Evans, a senior analyst with telecommunications research company BuddeComm.
“With 60 per cent of the population under 30 years of age, and with relatively low internet usage, especially among the older population, the stage is set for a major surge.”
Tum Phallar, 21, sales staff for a clothes shop in Phnom Penh
Kun Na, 47, owner of salon shop in Phnom Penh
Phan Chhany, 19, a university student in Phnom Penh