Friday, 11 September 2009

Connecting in a crowded market

Photo by: Heng Chivoan
Smart Mobile CEO Thomas Hundt says that price-dumping remains an unresolved issue in Cambodia’s mobile-phone sector.

The Phnom Penh Post
Friday, 11 September 2009 15:01 Steve Finch

Despite the highly competitive nature of the Cambodian mobile-phone sector, Smart Mobile’s CEO Thomas Hundt says it’s still possible to build loyalty with customers in a developing market

CEO TALK
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By Steve Finch

Cambodia's mobile phone market has become increasingly competitive, and we've seen companies report reduced revenues in recent months. How have you been affected?
As you rightfully said, it's a very tough market.

I suppose that the majority of operators are losing money at the moment - that is a matter of fact. We have not planned to earn money at this moment of time.

I mean, we launched in February, so, as a mobile phone operator, you cannot be expected to earn a profit after six months.

But, we are growing - we are growing in terms of subscribers, and we are growing in terms of revenues. And this is the key point - that the incumbents are losing market share, losing revenues. I would say that is more or less normal in such a competitive market.

The young operators are attacking heavily, and I suppose this will continue for a while.

Of course, at the end, everyone is looking to make a profit, and our shareholders are also expecting profits from us - that's why they're investing here. Based on growth of subscribers and also market share, we are capable of gaining profits in this market.

As you say, there has to be an expectation that you will be profitable, but, given the tough market conditions, when will that be?

I cannot tell you the exact break-even point that we are aiming for.

In terms of the number of SIM cards sold in Cambodia, around 33 percent of all Cambodians are statistically supposed to have one. But some or even most people have more than one SIM card, so the penetration in terms of people using mobile phones is round about 20 or 25 percent - no-one knows exactly.

Also these numbers published by MPTC [Ministry of Posts and Telecommunications] and its way of calculating subscribers is different from the operators, and these numbers are not 100 percent reflective of the reality. They are likely 90 or 80 percent true, but no one can tell exactly how many of Cambodia's 15 million people are connected to a mobile phone already.

So that means there is enough room to grow. Naturally, there is not so much room for growth in Phnom Penh anymore, so now it's a matter of looking into provincial cities, and these are exactly the regions that we are looking at.

Coming back to the question of break-even point, it's hard to predict exactly. But to reach the break-even point is very real ... in a foreseeable period of time.

Beeline has recently been accused of price-dumping by competitors. Firstly, do you consider Beeline to be price-dumping, and secondly, what regulations are in place in Cambodia to address this issue?

Yes, we consider Beeline at the price they are offering for cross-network calls to be dumping the price.

However, it is not 100 percent clear to us - and I think to everyone in the market - under which basis those aspects can be regulated. Likely it is more falling under the authority of the Ministry of Commerce than the Ministry of Posts and Telecommunications.

A number of operators, including Mobitel, say that Beeline has only partially resolved this price-dumping issue. Are more meetings planned to address this?

Well, there are no direct meetings now planned with MPTC that I am aware of....

There has been an agreement reached that the tariff for cross-network calls should not be below regulated costs for such calls, and it is now a matter of executing the agreement.

So, I can understand Mobitel's position. And, of course, I cannot understand the position of Beeline to say that if ... Beeline's customers cannot reach Mobitel anymore it doesn't matter for them - it matters significantly. So it is now a matter of executing the agreement.

We have seen that Cambodian mobile customers can be very fickle - many have multiple SIM cards. How do you build and maintain brand loyalty in a market with nine operators?
People are jumping from one to the other operator. And this is a key point that we are working on. The main point for us at the moment is coverage, because people, if they are travelling outside of our coverage area, are practically forced to switch to another operator.

But we are starting our new networks in Battambang, in Poipet, Banteay Meanchey and in Kampong Cham before Pchum Ben festival [September 18 - 21] and Kampong Speu, Kampong Thom, Kampong Chhnang, Sihanoukville and along national highways 1, 4, 5, 6 and 7 in the upcoming weeks.

With this coverage we are enabling our subscribers to keep using us even if they are travelling to their home province, to visit their families or to do business. This is the key to keeping our subscribers loyal to us.

On the other side, even if we don't yet have coverage in the provinces, we have the experience that Cambodian people are very keen to use Smart Mobile because of our brand, our brand consistency, our brand values and our tariffs that we are offering, combined with, I think, one of the best network connections.

We have very short call set-up times, the connection quality is without problems, and also the speech clarity is quite high.

When people return from the provinces, where they have not yet had the chance to use us, they return to us and they use Smart Mobile again.

We tested our brand values in a survey recently to explore how well-perceived we are, how well-known we are after six months of commercial operation, and the result was "outstandingly well".

So, out of the people we asked - randomly selected - more than 50 percent declared that Smart Mobile's branding and marketing campaigns and overall approach in terms of creativity is "highly attractive" or "attractive".

In this regard we were ranked No 2 among nine operators, and 35 percent of the people we asked in Phnom Penh and Siem Reap already have and use our SIM card.

It means when we are spreading out in terms of coverage, we have a very high possibility of keeping our customers loyal to us. And if we are then, as we have been doing so far, offering highly attractive tariffs - the latest one is "WOW!" - customers will be pleased to use us and to remain loyal with us.

Cambodia is one of the most competitive mobile-phone markets on the planet. Can it sustain this number of players?

I believe the market [in Cambodia] is one of the most competitive markets in the world.... And I also believe that, over the mid- to long-term, there will be a consolidation process taking place. Whether four, or five, or six, or seven operators are able to be sustainable and survive in this market is a question that is difficult to answer at this moment in time.

But I believe that nine operators are too many for this market. We see a couple of competitors pretty silent at the moment already. How to interpret those signals is not a question for us.

But Smart Mobile, of course, is building on the strengths that we have developed in the months since our beginning.

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