Smart Axiata predicts industry consolidation in the future

Sangeetha Amarthalingam / Khmer Times No Comments Share:
Smart Axiata’s Thomas Hundt and other tech leaders pose for a picture at the Cambodia Tech Summit on Friday. KT/Jean-Francois Perigois

Market consolidation in the Cambodian telecommunication sector, oversaturated as it is, would generally be expected, said Smart Axiata Co Ltd chief executive officer Thomas Hundt.

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But he stressed that the mobile service provider, which is 82.5 percent-owned by Kuala Lumpur-listed Axiata Group Bhd, has nothing on the table in terms of acquisitions.

“I can’t make any particular statement of our corporate plans but we are the leading telecom company in Cambodia and mobile operator. Certainly we are looking at how to grow. We have a good market position and are growing on our own, so we are not in the position to do something now,” he told Khmer Times on the sidelines of its Sustainability Report 2017 launch.

“Having said this, if there is an opportunity that makes sense, then I would say nothing is impossible,” he said.

The Cambodian market currently has six mobile telcos, including the major three – homegrown CamGSM Co Ltd, provider of Cellcard, Vietnam’s state-owned Viettel Military Industry and Telecoms Group that owns Metfone, and Axiata Group’s Smart Axiata – and smaller ones such as SEATEL, Qb and Cootel.

In 2013, Axiata’s then-subsidiary Hello Axiata Co Ltd, which operated under the brand Hello, and Latelz Co Ltd, which operated under the Smart Mobile brand, merged in a $155 million deal to form Smart Axiata in a bid to consolidate the market.

In June this year, Axiata sold 10 percent of its stake in Smart Axiata to Mitsui Co Ltd’s subsidiary M&Y Asia Telecom Holdings Pte Ltd. The company had previously sold another 10 percent of Smart to Mitsui Co. The increase in Mitsui’s shareholding in Smart is certainly an endorsement of Smart’s strong market operations and financial performance as well as its positive perception in the industry. The expertise of Mitsui (and its investee companies) in various digital portfolios is expected to enable Smart to further strengthen its digital leadership and continue evolving into a lifestyle and entertainment brand, beyond being a traditional telco player in Cambodia.

Based on its own numbers, the company now claims to have a 40 percent market share with 7.3 million customers.

Nonetheless, the market remains saturated, which has led to fierce price wars among providers. This has delighted users, who commonly own two or three SIM cards due to the attractive data packages available.

Mr Hundt also explained that a level playing field is required to further boost the sector in a holistic manner.

He notes that Smart Axiata pays more taxes in Cambodia, where last year alone it paid $76 million in taxes, levies and regulatory fees. The sum is nearly 17 percent more than in 2016. Taxes paid in 2017 alone make up 3 percent of state coffers in terms of tax income.

“We are paying more taxes in Cambodia year-on-year, posing a challenge to us apart from the price war. It is understandable that we need to contribute to national income, but it is vital that everybody is measured as well as treated equally in Cambodia,” he added.

With publicly listed Axiata as its parent company, Mr Hundt said Smart Axiata is doing what is required by shareholders.

“We are one of most profitable subsidiaries in Axiata. We are smaller but in terms of absolute contribution of profit after tax to revenue, we are one of the most profitable companies for the group,” he said.

Mr Hundt expects the company’s performance to improve in the following years, arguing that the company continues to grow despite the challenging environment in which it operates.

“2017 was already challenging because the price war unfolded. The first quarter of this year was relatively tough for us, but the second and third quarters were very good. So we see growth,” he added.

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