Cambodia and around the world, telecommunications services

Telecoms Sector Regulatory Overview

By Allens Arthur Robinson

In Cambodia and around the world, telecommunications services are an essential input into an efficient and effective economy, as well as an essential part of everyday life and modern business. Cambodia has a very active telecommunications sector, particularly in relation to the provision of mobile telecommunications services.

Cambodia is an attractive investment destination for telecommunications operators due to its political stability, liberal investment and economic policies (Cambodia is a free-market economy with relatively few limitations on foreign investment and no specific restrictions on foreign investment in the telecommunications sector in Cambodia), and the perceived business opportunities arising from low levels of market penetration. There have recently been a number of new entrants into the market, and competition in the sector appears vigorous. Substantial investments have been made, and continue to be made, to develop modern telecommunications infrastructure and services in Cambodia.

Cambodia has limited fixed-line telecommunications coverage due to the impact of the extended period of civil conflict in Cambodia through the 1970s and 1980s. Costs of fixed-line calls (particularly international calls) are relatively high compared to neighbouring countries. The arrival of mobile operators in Cambodia started in the late 1980s and early 1990s, with the first two major service providers at the time being Camshin and Samart. Liberalisation of the Cambodian economy generally, and the absence of specific restrictions on foreign investment in the telecommunications sector, has fuelled significant investment in this sector, which now includes the following nine licensed mobile telecommunications service providers currently operating in Cambodia:

- Applifone Co., Ltd – trading as 'Star-Cell' (under the prefix 098);
- Cambodia Advance Communication Co., Ltd. – trading as 'QB' (under the prefix 013);
- CamGSM Co., Ltd. – trading as 'Mobitel' (under the prefixes 012, 092, 017, 089 and 077);
- GT-TELL (Cambodia) Investment Company Ltd. – trading as 'Excell' (under the prefix 018);
- Latelz Co., Ltd. – trading as 'Smart Mobile' (under the prefixes 010 and 093);
- Mfone Co., Ltd (under the prefixes 011, 099 and 085);
(g) Sotelco Ltd. – trading as 'Beeline' (under the prefixes 090 and 068);
- Axiata (Telekom Malaysia International (Cambodia) Ltd) – trading as 'Hello' (under the prefixes 015, 016 and 081); and
- Viettel (Cambodia) Pte. , Ltd. – trading as ' Metfone' (under the prefix 097).

It is noteworthy that all of the operators are wholly or majority foreign-owned, except for Mobitel, which very recently became 100 per cent owned by the Royal Group following the exit of its international joint venture partner, Millicom.

Industry estimates place the size of the mobile telecommunications market in Cambodia at just under 5 million customers (out of a population of around 14 million), or a market penetration of approximately 36 per cent. While a dramatic increase from market penetration estimates of 10 per cent just 3 years ago, this level of market penetration is generally considered to provide significant room for growth. This has encouraged a number of high-profile recent market entrants (including Metfone, Smart Mobile and Beeline, which all commenced operations in 2009) and stimulated increased competition between the current operators. The current market leader is Mobitel, with an estimated 55 per cent market share.

Current Regulatory Framework
The telecommunications sector in Cambodia is currently regulated by a patchwork of laws and regulations, and there are a number of significant gaps in the current regulatory framework. There is currently no overarching law governing the telecommunications sector, although a draft law exists (see below for further details). Accordingly, many key regulatory aspects of the sector are governed by practices and procedures of the Ministry of Post and Telecommunications (MPTC).
There is currently no independent regulator for the telecommunications sector in Cambodia. The MPTC is responsible for policy making and also holds regulatory and supervisory roles, including responsibility for issuing and administering licences and frequency spectrum for the telecommunications sector in Cambodia. Until the establishment of Telecom Cambodia in 2005, the MPTC was also an active industry participant as the monopoly provider of fixed-line services. Telecom Cambodia was established to operate the PSTN and international gateway (previously operated by MPTC) so that the regulator was not also a commercial participant in the market.

As a matter of practice, a licence must be obtained from the MPTC to construct, own and/or operate a telecommunications network or provide any telecommunications services. Operating licences generally contain similar terms, although it is generally acknowledged that there is some variation between the terms of the older and more recently issued licences. Operators are generally afforded the freedom to set tariffs for their services (although interconnection fees are regulated) and are obliged to share fixed percentages of their revenue with the Government.

The issues arising from the absence of an overarching regulatory framework were exposed during a high-profile dispute in 2009 between the largest current mobile operator, Mobitel, and one of the recent market entrants, Beeline. Beeline’s entry strategy included aggressive pricing and discounting. Mobitel alleged that Beeline’s pricing involved below-cost pricing, and Beeline counter-alleged that Mobitel was refusing to interconnect Beeline customers. The MPTC sought to mediate an agreement between the parties, however the dispute continued and resolution was eventually elevated to the Prime Minister, who was reported to have issued a letter warning all mobile operators not to block interconnection of competitors or price their services below cost. The MPTC also subsequently issued a directive imposing minimum prices for calls between-networks and within-network respectively and prohibiting free call promotions offered by operators. The dispute highlighted that the existing regulatory framework does not include any competition law provisions and did not appear to provide the MPTC with an ability to resolve commercial disputes of this nature in a timely manner.

Regulatory Developments
WTO commitments - Cambodia acceded to the World Trade Organisation (WTO) and became a member on 13 October 2004. Under its Schedule of Specific Commitments (Services Schedule), Cambodia set out the service sectors to which it agreed to apply the market access and national treatment obligations of the General Agreement on Trade in Services and any exceptions that would apply in relation to those services. Cambodia committed to provide market access and national treatment for a broad range of telecommunication services including voice telephone, data transmission, facsimile, email, voice mail and electronic data interchange services.

Cambodia retained the right to maintain foreign ownership restrictions in respect of certain services until 1 January 2009 and, after 1 January 2009, to require a local shareholding of up to 49 per cent in relation to such services. The services in respect of which foreign ownership restrictions may be applied are voice telephone services, packet-switched and circuit-switched data transmission services, and telex, telegraph, facsimile and private leased circuit services, but do not include 'mobile services' (undefined in the Service Schedule) or email, voicemail and certain data services. The Service Schedule does not provide any guidance on whether indirect foreign interests in an entity are included in the calculation of foreign ownership.

The Services Schedule also attached a reference paper setting out further specific commitments made by Cambodia in relation to principles on the regulatory framework for basic telecommunication services, which include provisions in relation to Provisions in relation to prevention of anti-competitive practices, interconnection, universal service obligations, public availability of licensing criteria, independent regulation and a requirement that procedures for the allocation and use of frequencies and numbers must be carried out in an objective, timely, transparent and non-discriminatory manner.

Draft Law on Telecommunications - Since 2000, the Royal Government of Cambodia has proposed a number of draft laws on telecommunications as part of its efforts to address the WTO commitment note above. A revised version of the draft Law on Telecommunications (Draft Law) was released in 2009, although there is currently no clear time table for its enactment or guarantee that it will be enacted in its current form.

The Draft Law, if enacted, would significantly improve regulation of the telecommunications sector in Cambodia, providing a more comprehensive framework for the licensing and regulation of operators. However, there are several key issues relevant to investors which remain the subject of ongoing consultation between the Government and the industry, including the following.

- The Draft Law does not contain any transitional or 'grandfathering' regime which regulates the manner in which existing operators in the telecommunications would be transitioned to the new regime and whether their existing rights would continue.

- The Draft Law appears to allow the Minister (of the MPTC) to impose foreign ownership restrictions in relation to certain licences. However, the intended scope of the provision remains unclear, in particular which networks or services may be subject to foreign ownership restrictions in future and what level of foreign ownership restriction may be imposed.

The general view of the private sector is that, given the emergent state of the Cambodian telecommunications market, the promotion of increased investment in infrastructure will best serve the long term interests of end users.


About the author
Allens Arthur Robinson - As a leading commercial law firm in Cambodia Allens Arthur Robinson has a depth of local experience, combined with first class international experience. The focus of the practice is major projects (particularly energy and infrastructure), banking and finance, inbound investment, telecommunications and corporate and commercial advice. Allens Arthur Robinson have been advising the Royal Government of Cambodia, international investors, corporates, financiers and multilateral organisations in Cambodia since 1994. The practice has an impressive track record in the negotiation and implementation of major projects and has been closely involved with some of the largest international investments in Cambodia. www.aar.com.au

The Internet in Cambodia...










There are currently about 20,000 subscribers in Cambodia and some 150,000 people use Internet cafes. The number of users is expected to grow substantially over the coming decade, driven by greater competition in the marketplace, reduced tariffs and cost of PCs and laptops.

High connection costs have resulted in a low number of subscribers, but costs are coming down and today an average monthly subscription costs about $40 compared to $100 a year ago.

Cambodia suffers from a lack of IT human resources and very low Internet connectivity in rural areas. The lack of intranet infrastructure inhibiting 98 per cent of the Cambodian population from logging on remains a major problem.

Internet access is available in all provinces, but the lack of a national fibre-optic cable network means that service is slow and unreliable. One major cable crosses Cambodia east to west between Thailand and Vietnam, another links Cambodia to Vietnam and Laos. However, a new high speed cable is set to connect Cambodia to China’s Yunnan Province. It is hoped that the new cable will bring cheaper, faster Internet to Cambodia.

The latest stage of this $18 million infrastructure project is expected to be completed in April 2009 by project implementer Cambodia Telecom. Constructed in two phases – with the help of a Chinese loan – the first a 113-kilometre section stretches from Poipet on the Thai border to Siem Reap province where it then connects to a longer 700-kilometre fibre-optic cable running north of Siem Reap province across the Lao border at Nong Nonkhien. Through Lao it connects onwards to the fibre-optic cable network already in place in China's Yunnan province.

WiMAX
Because of Cambodia’s poor infrastructure and remote rural areas, wireless offers a solution if a company plans to mass market their services.

WiMAX, meaning Worldwide Interoperability for Microwave Access, enables the delivery of ‘last mile’ wireless broadband access as an alternative to cable and DSL. It shows particular potential in bringing lower pricing to both home and business customers and in making broadband access available in places where it has been economically unavailable.

Chuan Wei (Cambodia) Ltd. recently announced the appointment of Alcatel-Lucent to deploy a nationwide WiMAX Rev-e network in Cambodia. WiMAX Rev-e is the big brother of WiMAX Rev-d already operational in Cambodia and used by many Internet Service Providers (ISPs).

Chuan Wei, part of the Thai Boon Roong conglomerate, is counting on the Alcatel-Lucent solution to meet its target of serving one million subscribers, roughly 80 per cent of the country's business and enterprise population, within two years of launch. Alcatel-Lucent is providing a complete turnkey solution for WiMAX Rev-e, including integration, design, installation, commissioning, and maintenance services.

Not all experts are as optimistic however and question the number of potential subscribers bearing in mind that users would have to first equip themselves with a modem or other appropriate equipment to support WiMAX technology. Then there’s the question of speed, WiMAX cannot provide high speed – providing a maximum of 512 Kb/s – and the average speed required by users in the region is expected to be between 3 and 6 MB/s by 2012. Chuan Wei remains undeterred though and you have to admire their enterprise.

"As the first provider to deploy a nationwide WiMAX Rev-e network in Cambodia, Chuan Wei is helping shape the future of communications in the region. The network will provide significant infrastructural support to Cambodia's economic growth, improving communications for local businesses and multinationals," said Chuan Wei's president, Alan Khov. "It will support high-quality voice telephony in addition to broadband access, thanks to the end-to-end quality of service features built into the Alcatel-Lucent solution."

"This large-scale contract win with Chuan Wei highlights Alcatel-Lucent's refocused strategy to WiMAX as the wireless-broadband solution for fixed, nomadic and data-centric mobility needs," said Mike Iandolo, President of Alcatel-Lucent's Wireless networks activities. "Driven to a large degree by demand in high-growth economies like Cambodia, we see the 'enhanced wireless DSL' market growing strongly over the next five-plus years worldwide with close to 90 per cent of WiMAX Rev-e subscribers by 2013, and we are focused on building on our leadership in this space."

Established in June 2008, Chuan Wei was awarded the sole licence to operate the only nationwide WiMAX mobility network in Cambodia. The company is focused on delivering state-of-the-art WiMAX wireless broadband infrastructure for Cambodian society, allowing the country to realise its potential via improved access to digital communications infrastructure.

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Ministry of Posts and Telecommunications

Wat Phnom, Corner of Street 13&102.

Phnom Penh, Cambodia
Tel: (855) 23 426510 or (855) 23 724809
www.mptc.gov.kh

NiDA - National Information Communications Technology Development Authority
Formulates IT promotion and development policies. Information about ongoing government administrative information initiatives, international cooperation.
www.nida.gov.kh

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