Hello’s goodwill cut by $15m

Photo by: Rick Valenzuela
Seng Lam, 25 from Daun Penh district, talks on a mobile phone on the banks of the Tonle Sap river yesterday.

---------------------------------------------------------Performance [at Hello] continued to be affected by a highly competitive environment
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via CAAI

Thursday, 25 November 2010 19:07 Jeremy Mullins

The owner of Cambodian mobile provider Hello has cut the value of “goodwill” towards its operations by 49 million ringgit (US$15.7 million) in its third quarter results.

“During the financial period to date, the company recorded an impairment on goodwill of Hello Axiata Company Limited of RM49 million,” a report from Malaysia-based Axiata Group stated.

Goodwill, generally defined as the value of a firm beyond its tangible assets, could include factors such as the value of a brand name or the company’s reputation.

Axiata is the latest telco to consider the value of its Cambodian assets. Last month, TeliaSonera said it had “no goodwill” towards its Star-Cell brand and wrote down the worth of its operations by more than $100 million.

Officials from Hello declined to comment directly on its goodwill yesterday, but said that its third quarter results illustrated a recent promotional drive.

The firm claimed 800,000 subscribers at the end of the third quarter, a 63 percent increase on the end of the second quarter, according to Axiata.

However, revenues dropped 14 percent during the same period - partly due to costs of the firm’s strategy, officials said.

“They are related. We’ve been conducting more aggressive promotion,” said Hello’s chief executive officer Simon Perkins yesterday.

In a presentation accompanying the results, Axiata stated: “[Hello’s] performance continued to be affected by a highly competitive environment.”

However, the results have some positives for the firm in Cambodia’s crowded market.

The 800,000 subscribers, recorded in the recent quarter, push it ahead of Mfone, which claimed 569,472 subscribers at the end of the third quarter in its most recent report.

In June, Mfone climbed ahead of Hello to become the third largest telecoms company in Cambodia, according to Ministry of Posts and Telecommunications statistics.

One industry insider, who requested anonymity, said there would likely be three mobile providers left standing in the Kingdom within five years, given the competitive nature of the market.

The companies would be “Mobitel, Viettel and one other. It is that last spot where the attention will be focused,” the insider said.

Recently, Hello launched a promotional campaign worth US$1 million at the end of the third quarter, in a bid to target “quality” subscribers, according to chief marketing officer Eric Chong.

Axiata Group Bhd saw its global third quarter profits increase by 27 percent from a year earlier.

The group – which has been the second strongest performer on the benchmark Malaysian index this year – saw net income rise to 639.1 million ringgit ($204 million), in the three months ended September 30, from 503.7 million ringgit a year ago.

Its Cambodia operations make up around one percent of its overall business, according to its results.

ADDITIONAL REPORTING BLOOMBERG