via Khmer NZ
Monday, 30 August 2010 15:00 Steve Finch
WHEN Vimpelcom’s new chief financial officer, Henk Van Dalen, officially starts work this week a look at the company’s expenses versus performance in Southeast Asia is likely to come as a shock.
A year after the Moscow-based firm launched Beeline in Cambodia and then Vietnam it is struggling to gain market share despite spending around US$100 million on capital.
With Vimpelcom still struggling to seal a reported $65 million deal for a majority stake in Millicom International’s Laos mobile network one year since a provisional deal was agreed, Southeast Asia is not turning out the way the Russian firm intended.
After Beeline became the ninth operator in Cambodia in May last year, Vimpelcom’s Executive Vice President Vladimir Raibokon said the firm was aiming for half a million subscribers by the end of 2009 and 6 percent market share. The company is nowhere near.
By the end of March, Beeline had secured a reported 338,620 connections according to government data, but the actual user numbers for Beeline and all other operators in the Kingdom are much lower when we consider that total connections were reported at 7.3 million.
Most executives in the industry in Phnom Penh believe the total number of individual users to be roughly half this which explains why Beeline recorded a disastrous $3.50 in average revenue per user each month in the first quarter. In Vimpelcom’s main market, Russia, ARPU was three times higher, and even in India – a market considered to offer very low income per user – the average market return is $7.
More worrying for Vimpelcom, however, is sliding market share in Cambodia despite targeting 20 percent of the market by May 2012.
In the second quarter, government figures showed that the firm lost more than 80,000 users despite increasingly desperate marketing exercises such as mid-May’s Pitbull concert in Phnom Penh which required attendees to purchase a Beeline SIM card.
By the end of June, Beeline’s market share had slid to just 3.5 percent, compared to 4.8 percent at the end of March, making it the seventh operator in Cambodia by users. Even the most generous analysts agree that that Kingdom cannot sustain more than five mobile firms in the longer term, more likely four.
With plans to spend a total $200 million in Cambodia by mid-2012 alone, the firm’s new CFO has to therefore help decide whether Vimpelcom may end up pouring a huge amount of money down the drain ahead of what is expected to be a challenging year financially in 2011.
The company has nearly $2 billion in debt that is due to mature next year, more than the $1.8 billion due this year, plus Vimpelcom is reported to be considering the purchase of wireless acquisitions from Egyptian tycoon Naguis Sawiris, deals that would likely cost hundreds of millions of dollars.
On Thursday, Vimpelcom’s plight in Southeast Asia should become clearer when it launches results for the second quarter, providing the firm offers a more detailed breakdown than those for the first three months.
Again, financials for this region are not expected to make pleasant reading. Having entered Cambodia as the last of nine operators, Vietnam as the last of seven and with Laos still on hold, has Vimpelcom simply come to Southeast Asia much too late?
No comments:
Post a Comment