[Developing Telecoms] Trading and consolidation will boost penetration rates in Laos and Cambodia

Tuesday, 26 July 2011 13:14  |  James Barton

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The advent of stock exchanges in Laos and Cambodia could be a defining factor for the economic development of the Southeast Asian countries. Operator consolidation in both markets will likely drive growth, according to Business Monitor International.

Cambodia’s Ministry of Posts and Telecommunications announced in January 2011 that there were 9.8mn mobile subscribers in the country, representing a penetration rate of 66%. This figure suggests that there is significant room for further growth, and it is likely that the sector’s actual potential is higher because of number distortions by inactive mobile subscriptions which operators are hesitant to remove.

The industry also saw a consolidation between TeliaSonera-owned Star-Cell and Smart Mobile. The two companies announced in December 2010 that they had agreed to merge their operations under the Smart Mobile brand. In a joint press release, Star-Cell and Smart Mobile announced they would have a combined subscriber base of 850,000. At the time of writing, the deal was still pending approval from the Cambodian regulatory authorities.

Meanwhile, there was also merger and acquisition (M&A) activity in the Laotian mobile industry. Russian operator VimpelCom acquired Millicom International Cellular (MIC)’s Laos unit (which trades as Tigo) after a two-year delay. With this purchase, VimpelCom has telecoms operations in Cambodia, Laos and Vietnam as it continues to tap into the region’s growth opportunities.

VimpelCom’s experience of operating in frontier markets such as Kazakhstan, Kyrgyzstan and Tajikistan could help to ease entry into the Laotian market, allowing the operator to capitalise on the country’s growing demand for telecoms services. Besides experience, VimpelCom also brings a much-needed capital investment in Tigo’s network. Given that MIC decided to divest Tigo in 2009, it is unlikely that the company had committed significant capital to improve the unit’s infrastructure.

The telecoms industry of Laos and Cambodia remain relatively attractive due to low telecoms penetration rates but consumers’ low purchasing power continues to hinder operators’ ARPU levels and profitability. That said, Laos has commenced trading on its new bourse, the Lao Stock Exchange, while Cambodia is not far behind as the Cambodian Stock Exchange (CSX) is scheduled to debut in July 2011. The establishment of a modern capital market in Cambodia and Laos would play a vital role in supporting economic development in the coming years.

http://www.developingtelecoms.com/trading-and-consolidation-will-boost-penetration-rates-in-laos-and-cambodia.html

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