Rosy Viettel outlook strangled by competition in Cambodia

July 17, 2017

Metfone, a mobile telecommunications brand in Cambodia owned by Vietnamese military-run Viettel Group, is confronted with intense competition vying for its leading position in the Cambodian market.

Rosy Viettel outlook strangled by competition in Cambodia

Viettel’s Cambodian operations flew past the break-even point and are sending home more than its initial investment capital in profit

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Competition heating up

Currently, there are nearly 20 million mobile subscribers in Cambodia, of a 16-million population. Metfone is leading the Cambodian mobile telecommunications market with about 8.9 million subscribers.

The second position belongs to Malaysian brand Smart Mobile (Smart Axiata) with 7.4 million subscribers, then Cellcard of The Royal Group of Cambodia (Cambodia’s largest diversified conglomerate and holding company with investments in various industries) with 2.4 million subscribers. Qb, Seatel, and Xinwei have the least number of subscribers in Cambodia.

The growth of Smart Axiata was thanks to the acquisition of Hello, another mobile operator in Cambodia, in 2012. The deal was valued at $155 million. In 2016, Smart Axiata announced that it had three million mobile data subscriptions, while Metfone had only 1.6 million.

In 2010, two years after entering the Cambodian market, Metfone became a formidable competitor in Cambodia. Among nine mobile operators sharing 6.3 million subscribers in Cambodia, Metfone held 24.1 per cent of the market with about 1.7 million subscribers.

This year, Cellcard of the Royal Group ranked above Metfone with 37.7 per cent of the market share and Hello (12.8 per cent) and Mfone (9.6 per cent) are closing up. The last positions in this ranking were Star-Cell, Beeline, and Smart Axiata. Each of them held about 4-5 per cent of the market share.

According to Im Vutha, representative of the Telecommunications Regulator of Cambodia, Metfone’s strength lies in providing phone call services, while Smart Axiata has an advantage in mobile data subscriptions.

The competition among mobile operators in Cambodia is getting more intense as they are coming out with a range of competitive mobile data packs. When Smart Axiata offered a $1 pack for $125 texting within a week, Metfone responded by offering a similar $1 pack for $150 texting. Next, when Smart Axiata increased its pack to $1 for $300 texting, Metfone offered the pack of $1 for unlimited texting.

Cambodian authorities do not set a ceiling or floor price for the mobile market, so mobile operators can freely compete in prices. On one side, this benefits customers, but on the other side, it damages small mobile operators. For example, Mfone declared bankruptcy in 2013.

Huge investment to extent coverage

With the strategy of “building the most extensive network with the best possible coverage,” at present, Metfone has the largest network in Cambodia, with 20,735 kilometres of optical fibre cables covering all the districts and 98 per cent of communes in Cambodia. There are 9,014 2G, 3G, and 4G base transceiver stations (BTS) all over the country.

In addition, Metfone is the only mobile operator in Cambodia to use Metro Ethernet Full-MPLS, one of the most innovative transmission technologies in the world. This technology helps Metfone provide nearly entire cities and provinces with network coverage. Since the introduction of 4G technology in the middle of 2016, Metfone has signed with more than 400,000 4G subscribers in this market.

Moreover, Metfone’s strategy is aimed at “bringing information technology and telecommunications to every person, every family, and every corner of social life,” so it has a huge number of customers, including those in the most remote areas.

Vu Minh Thanh, director of Metfone in Siem Reap (a province in northwest Cambodia), said, “Other mobile operators may sell their products through their agencies and distributors, but Metfone directly offers products and services to customers. This means that Metfone’s salesmen travel to each selling point, including those in remote areas, to reach the target sales volume in each area.”

Thanks to this strategy, as of the end of June 2016, the subscribers of Siem Reap branch of Metfone increased by 26,000, a 10 per cent growth compared to the same period in 2015.

Social responsibility

With the business philosophy of “business development hand-in-hand with social responsibility,” Metfone has made a lot of important contributions to improve living standards in Cambodia, with the aim of building a better life for Cambodian people.

In particular, Metfone supported the Cambodian government to set up e-government services and the royal army to build a private mobile network. As of the end of 2016, Metfone paid an accumulated tax of nearly $400 million to the Cambodian government.

Meanwhile, it invested $5 million in the internet system for schools and took part in a plenty of social activities. In addition, Metfone has brought more than 3,000 job opportunities so that Cambodian people can have stable incomes, which helps to stabilise social security.

Recently, Viettel Group has released its pre-tax profit figures generated from its nine foreign investments in the first half of 2017. In particular, its total pre-tax profit transferred to Vietnam from foreign markets was nearly VND1 trillion ($41.2 million), a growth of 155.7 per cent compared to the same period last year. Viettel’s revenue from foreign investments in this period also increased to VND14 trillion ($600 million), a rise of about 25 per cent compared to the corresponding period of 2015.

Metfone is the only investment of Viettel Group that generated profit after only three years of operation. In 2011, Viettel transferred more than $40 million of profit to Vietnam earned by Metfone, more than its initial investment in the Cambodian market.

Now, Metfone has recovered its capital and brought more than $200 million of profit to Vietnam, which is five times as much as its initial capital. In 2016, Metfone generated a revenue of more than $240 million. Also in this year, according to Brand Finance, the world’s leading independent branded business valuation and strategy consultancy, Metfone was in the top 30 valued telecom brands in the region. At the time, the brand name Metfone was valued at about $94 million.

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