Telecom Companies Eyeing Consolidation

In an effort to keep their hold on a highly competitive market, four mobile telephone service providers have entered into consolidation negotiations, Posts and Telecommunications Minister So Khun said yesterday.

Mr Khun said Hello and Mfone entered consolidation negotiations on their own and without prodding by the government.

“We don’t need to encourage them to consolidate with each other because they can do it by themselves,” he said yesterday. “Some of them have started already…such as 011 and 016.”

Cambodia’s mobile telephone market is serviced by nine operators that court an estimated 7.3 million subscribers, according to figures provided by Mr Khun.

In the country’s mobile telephone market, often described as oversaturated with operators and under-populated with subscribers, consolidation negotiations have taken place between four companies, an official said yesterday.

Posts and Telecommunications Minister So Khun said yesterday that two operators–he described them as “011 and 016,” prefixes used by Mfone and Hello, respectively–have discussed consolidating. He also said two other carriers he declined to name were also involved in consolidation negotiations.

A February “Deal List” released by legal and tax adviser DFDL Mekong lists Hello’s parent company Axiata–shown as Telecom Malaysia; it’s former name was Telekom Malaysia International–as a client in the purchase of Mfone’s parent company Camshin. The Deal List also showed AZ Communications, which owns and operates Internet provider Online, as another suitor for Camshin. The information was in the report’s “Focus on Mergers and Acquisitions” section.

However, a DFDL Mekong representative said yesterday the list does not necessarily represent ongoing or completed negotiations.

Hello CEO Simon Perkins said yesterday that he was unaware of any consolidation or merger discussions, but added that such talks could have taken place between parent company executives, which would not have had to involve him. He said consolidation could be in Hello’s future, though.

“It’s possible,” he said. “But Likely? That’s hard to comment on.”

Mfone and AZ Communications representatives could not be reached for comment yesterday. Telekom Malaysia International is now known as the Axiata Group.

Mr Perkins, along with several other telecommunications representatives who asked not to be quoted, said earlier this week that the actual number of subscribers is likely much lower.

“I think there is a lot of confusion around those numbers,” Mr Perkins said. “It tends to overstate the number of active users.”

With inflated subscriber numbers and an abundance of carriers, Mr Perkins said earlier this week that consolidation is inevitable.

“There has to be consolidation or combining some how,” he said, adding, “I think the free market will take care of it.”

Each month, mobile telephone operators are required to submit subscriber figures to the Ministry of Posts and Telecommunications. Hello counts subscribers as “active users,” or those who make at least one phone call per month. Tol Ga, CEO of Star-Cell, said his company uses the same criteria to report subscribers. However, Mr Ga said other operators, without naming names, define subscribers differently.

“How you define being a subscriber is very difficult,” he said.

CEOs from MobiTel and Smart declined to comment when asked about subscriber numbers.

Mr Ga said some companies count active SIM cards as users; so if one person uses three SIM cards, that individual is counted as three subscribers. Other companies may count seldom-used accounts, where subscribers only make a phone call every two or three months.

Mr Perkins said the actual number of active SIM cards is probably closer to 4 or 5 million. Of those, he said his “gut feeling” was that the actual number of individual subscribers probably hovers around 3 million. He said Hello probably services 20 percent of active users.

Mr Perkins said the Ministry of Posts and Telecommunications asks operators to submit active users that make calls at least once a month, but he said the request is not enforced.

“It’s a bit of a mess around this sort of stuff,” he said.

Bretton Sciaroni, a senior partner at Sciaroni and Associates, which offers commercial and investment support and advice, said more consolidation discussions would likely take place within the next year or two

“I think it’s pretty clear the market is oversaturated,” he said, adding, “With that number of operators, it’s hard to make money.”

Mr Sciaroni declined to comment on consolidation discussions.

 

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