Telecom denies exchange scheme

via CAAI News Media

Friday, 12 March 2010 15:03 Ellie Dyer and Nguon Sovan

TELECOM Cambodia’s director general has rebutted accusations that the plan to give the state-run company a monopoly over Internet bandwidth provision has been concocted in part to bolster its company’s finances before its registration on the new Cambodian stock exchange.

Several sources within Cambodia’s information and communication technology (ICT) sector, speaking on condition of anonymity, have said they believe the proposed creation of a TC-managed domestic Internet exchange (DIX) and international Internet exchange (IIX) – through which all of Cambodia’s Internet traffic would be routed – is designed to boost TC’s revenue and position in the market before its shares are traded on the Securities Exchange Commission of Cambodia, set to open later this year.

The centralisation plan would effectively make the state-run company the only body able to sell international Internet bandwidth to domestic providers.

However, TC representatives have said they would earn just US$30,000 to $50,000 from operating the Internet exchange.

Speaking on Wednesday, one ICT-sector source said: “Telecom Cambodia is one of three [state-run] companies pointed as being on the stock exchange. Of course, it doesn’t have enough value to [do this].

“Under the plan, TC will be in control of the sector. Basically, this amounts to stealing all the business from wholesalers and forcing them to buy access from TC. It is destroying the whole Internet market to sell it on the stock exchange for profit.”

This view was echoed by another industry source, who said: “We know it’s about money, but they can’t say it. TC is going to be one of the publicly traded businesses floated on the stock market when it opens.

“They will be in a very strong position to maximise profit if they have a monopoly – everybody would be forced to buy bandwidth from them. All Internet must come through TC, and they decide what price to charge competitors.”

Another anonymous source said Thursday: “There is absolutely nothing in Telecom Cambodia’s assets or the track record to suggest it might survive market competition, let alone grow its business. Its network equipment, management and standards of service are all known to be sub-par.

“Since it can’t win customers on its own merits, the only thing that might persuade investors to buy stock is the promise of favoritism and protection from the government.”

On Thursday, TC Director General Lao Saroeun strongly refuted these statements, countering that the Internet hub would stabilise an “anarchic” system, which he said is currently unable to control content such as pornography.

He added that TC is in a good enough financial position to float on the SECC.

According to Chhun Sambath, director of the securities issuance department at the SECC, speaking in December, a company needs minimum capital of 10 billion riels (US$2.44 million), a last annual minimum net profit of 1.5 billion riels ($365,853) and minimum net profits for the last three years of 3 billion riels ($721,707) to enter the exchange.

According to a TC report, in 2009 its revenues dropped 10 percent to $27 million from $30 million in 2008.

It earned a profit of $6 million last year — $1 million less than the profit generated in 2008.

Lao Saroeun attributed the drop to increased competition on the mobile phone market and a drop in international calls.

Revenues projected to rise

Though he declined to provide TC’s latest financial report, he predicted revenues would rise this year to $30 million. He described the market as “tough” but said TC does not owe anyone money.

When quizzed on the claims of industry sources, the director general said: “It’s not right. We expect very little revenue from the Internet hub, maybe $30,000 to $50,000 per year. This amount cannot be used to bolster TC to gain credit in the stock market. We will only control Internet content.”

He went on to say that ISPs will be charged cheap prices for wholesale international Internet bought from Vietnam.

“We will just charge a slightly higher amount than the price we subscribe to from Vietnam, in order to cover the operation of our equipment and staff. The Internet hub is just the transit point. Our main revenues are Internet and ADSL,” he said.

On Tuesday, representatives of TC and ISPs met with Finance Minister Keat Chhon to resolve widespread dissatisfaction with the government’s scheme – spearheaded by the Ministry of Posts and Telecommunications. Private companies have said they believe the centralisation plan could damage the industry.

Keat Chhon ordered the MPTC and the private sector to resolve all issues pertaining to the centralisation plan prior to a meeting with Prime Minister Hun Sen scheduled for next month.

ADDITIONAL REPORTING BY BROOKE LEWIS