Resurgent mobile deals could hurt margins, analysts say
‘Top up $2 and get 30 free minutes daily for 20 days. Top up $5 and expand the same offer for a month. And, for a $10 recharge, that half-an-hour freebie lasts 50 days.” Mobile operator Beeline, which announced the promotion in August, called it “another amazing offer to our subscribers”. But it’s an amazing offer in a market flooded with amazing offers. Four months after the Ministry of Post and Telecommunications scrapped a publicly unpopular restriction on lucrative mobile phone promotions – the order was an attempt to stave off a price war – the battle is raging once again. While popular among consumers, the bonuses and promotions will inevitably reduce the operator’s profit margins, analysts and market observers say. In the long run, those who can’t afford to keep up with the pace will fall by the wayside. “Directionally, we are headed towards the last men standing,” Anthony Galliano, CEO of Cambodian Investment Management, said in a recent interview. “I am surprised at the ferocity of the promotions, which will probably accelerate the pruning process.” In January, local operator Mfone filed for bankruptcy, and analysts predict the market will shrink further to three or four players. … Ministry statistics released in March show that Cambodia, which has a population of about 14.6 million, had 19 million mobile phone subscribers in 2012. Many users have more than one phone. Viettel, parent of operator Metfone, had the largest market share, counting 9.5 million subscribers in 2012. Latelz, parent of Smart, counted 3.2 million last year. Smart merged with Hello in February, increasing the number of subscribers to more than five million. Cellcard parent CamGSM counted three million subscribers in 2012, according to the Ministry’s statistics. … In April, Vimpelcom, the sixth-largest provider of telecommunication services in the world, announced that it had sold its entire indirect stake in the company that runs Beeline to a local partner, Cambodian tycoon Huot Vanthan, after reviewing the value of operations. … “The bonuses and promotions do reduce margins since they reduce the possible revenues that can be generated if these freebies were not offered, while costs are the same,” Minaev said. “In the short run this can be a favorable tactic to attract customers, but it has an adverse affect on a company’s profitability when it becomes constantly practised.” Ian Watson, CEO of Cellcard, said the practice is profitable, but “it just reduces the margin, and anybody who says it doesn’t is lying, basically”.
Anne Renzenbrink
http://www.phnompenhpost.com/business/resurgent-mobile-deals-could-hurt-margins-analysts-say
