A quantum leap for Cambodia’s telcos

As mobile phone penetration increases, the proliferation of phone shops follows suit.
As mobile phone penetration increases, the proliferation of phone shops follows suit. Hong Menea

A quantum leap for Cambodia’s telcos

As in the rest of the world, everyday Cambodian life is dominated by the use of smartphones, with consumers glued to social media, streaming videos and staying up-to-date with the latest breaking news and spreading viral content.

This, in large part, has been fuelled by the rapid development of a highly competitive telecommunications industry that continues to fight for market share while aiming to provide affordable data coverage that reaches nearly every inch of the Kingdom.

According to the latest findings from the Asia Foundation, internet and voice services are beginning to reach a saturation point, with 96 percent of Cambodians claiming to have access to a mobile phone last year – and some 48 percent of these owning at least one smartphone.

But after starting from scratch some 25 years ago – when landlines were few, mobile phone access was nearly non-existent, and dial-up connections to the internet required almost no infrastructure – it has been a hard-fought battle to lay the network needed for the rapid leapfrog the industry has taken. While connectivity slowly developed over the decades, the growing pains for the telecommunications industry are widely seen to have begun in 2012, when massive price wars led to a string of losses and insolvencies in an overcrowded market.

Now, Cambodia has just three large mobile network operators – Smart, Metfone and Cellcard – and three smaller operators – QB, Seatel and Cootel – all six of which are currently engaged in a renewed price war that has led to questions to the industry’s future sustainability.

Despite the telecommunications industry being a multi-million dollar sector, the investment needed to continue growth and expand the speed of coverage comes with a hefty price tag. And it appears, with monthly data service costing, as one industry expert put it, “less than a price of a Starbucks coffee”, operators are undaunted in rolling out large investments that vary from $75 million to $200 million annually to keep up with infrastructure demand.

But with Cambodia having a relatively small market of 16 million consumers, there is little doubt that in the near future the industry will once again undergo a period of consolidation. How this consolidation shakes out, however, is up for debate.

Some predict that telecommunications operators will start to snap up Internet service providers or partner with television broadcasting companies to bundle products. Others foresee smaller telecommunications companies eventually going bankrupt, freeing up highly coveted spectrum licences.

But the government’s enforcement of its laws, or lack thereof, remains at the crux of future development. If the price war continues without intervention, company revenues will start to slip, cutting off much-needed funds for investment. If the government does not begin to follow through with its promises to open up broadband frequencies for telecommunications operators, services will begin to lag or licence rights will eventually be so costly that companies will not invest.

And when it comes to taxes on operators, if the government does not clear up accusations that it allows for an unfair playing field, end consumers will eventually bear the brunt of an industry that could begin to decline, even as technological advancements continue to develop at lightning speed.

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