Ministry warns telcos

Photo by: Sovan Philong

A Beeline promoter makes a call last month.

(Post by CAAI News media)

Tuesday, 06 October 2009 15:00 Steve Finch and Nathan Green

Letter on pricing and interconnectivity 'crisis' in mobile industry sent to prime minister's office

THE Ministry of Posts and Telecommunications (MPTC) and the Ministry of Economy and Finance have attempted to bring a dispute in the mobile-phone sector under control through an inter-ministerial circular released last week promising to crack down on “unfair competition”.

In the September 29 circular, a copy of which was sent to the prime minister’s office and all mobile-phone operators, MPTC Minister So Khun and Finance Minister Keat Chhon called on companies to “cease immediately any advertising, programmes and strategies for market competition, any blocking of interconnection between networks, which have caused the telecom crisis in Cambodia”.

Although the letter doesn’t specify the “crisis”, it is almost certainly referring to a feud between Mobitel and Beeline that led the former to launch legal action against its Russian-based rival in August over alleged price-dumping, an accusation most operators in Cambodia have backed. Meanwhile, Beeline says Mobitel has blocked interconnectivity, thereby undermining consumers’ interests, and has in turn been accused of using Mobitel’s prefixes to circumvent the blocks.

Deputy Prosecutor Sok Roeun, who is overseeing the case at Phnom Penh Municipal Court, declined to comment further on the case Monday.

Last week’s letter represents stronger wording on the issue by MPTC, which last month set up a task force under MPTC Secretary of State Sarak Khan to create a new sub-decree or prakas (edict) to address the problem.

The letter singles out “free of charge” call tariffs – that would appear to include Beeline’s “Super Zero” tariff launched last month, which charges only for the first minute of any call up to 15 minutes’ duration.

Beeline’s General Manager Gael Campan said Monday that the company “charged for every call”. He has previously said that Beeline’s pricing policies do not constitute price-dumping, as the company could be profitable on its overall service offering. “Right now we’re just going to keep feeding the government with information [on our pricing policies],” he said.

Mark Hanna, chief financial officer at Royal Group, which owns a stake in Mobitel, was unavailable for comment.

Although last week’s circular appears to address the Beeline and Mobitel conflict in particular, Smart Mobile also appears to have been dragged into the wider dispute over pricing.

Cyprus-registered Smart Mobile is the only operator other than Beeline to offer free minutes within network under its “Wow” plan, which offers 30 minutes of free calls daily within the network for those who top up with more than US$5 credit. Those who add less than $5 can get 20 minutes of free calling daily.

Smart Mobile CEO Thomas Hundt said Monday the company was still analysing the inter-ministerial circular and would not comment until it had determined a response.

In the circular, the ministers called on operators to abide by its provisions from September 29, but Hundt confirmed Smart Mobile had not altered its pricing plans or its advertising.

Tax problem raised

The circular also said that offering “free calls” within networks or calls across networks at a price “lower than the one fixed by the state” robbed the government of tax revenues by reducing company profits, adding that any firm that violated tax law would be subject to government legal action.

One tax expert, who asked not to be named, said Monday that special pricing plans did not violate tax laws and called the proposal “without precedent” for Cambodia.

“Even if a temporary market penetration strategy of the enterprise causes it to make no profits for a certain period, tax authorities will have to accept that under the letter of Cambodian tax law,” the expert said.

Government-private sector tax committee Co-chair Edwin Vanderbruggen acknowledged Monday that telecom operators “have been struggling with Cambodia’s tax laws and policy for some time now” but said the General Department of Taxation was consulting with the private sector on how “these issues can best be clarified”.

“There remain a number of uncertainties in applying tax laws to various types of telecommunication services, particularly in terms of Specific Tax, Withholding Tax and VAT,” he said.