VimpelCom Exits Cambodia, Laos Next?

Russia's Vimpel Communications (VimpelCom) announced on April 19 that it has sold its entire indirect stake in Sotelco (branded as Beeline Cambodia) to its local partner Huot Vanthan . The possibility of exiting Cambodia was flagged up in late 2012 as part of VimpelCom's plan to focus on its more profitable businesses. The divestment chimes with BMI 's view that the Cambodian telecoms market has long lost its lustre, and VimpelCom's departure also deprive s us of a valuable source of operational data.

VimpelCom had a 90% stake in Sotelco, which was purchased for US$28mn from Altimo in July 2008. The Russian operator did not disclose the value of the sale to its local partner, who is the chairperson and CEO of Cambodia's First Investment Specialized Bank . Sotelco has been struggling in Cambodia's mobile market - BMI estimates that it had 6% market share in Q212, an equivalent of 1.1mn subscribers. By Q412, VimpelCom reported that its subscriber base had declined to 597,000. Further signs of a deteriorating business include Sotelco's ARPU reaching US$1.6 in 2012, down from US$2.9 in 2011 and US$3.5 in 2010, and the churn rate surging to 210% in 2012, up from 128% in 2011 and 167% in 2010. VimpelCom reported that the weak performance was due to competition and the halting of bundle offers in light of network congestion.

We have seen a number of significant developments in Cambodia's mobile market in the past year. Besides VimpelCom's exit, Thailand's Thaicom has also retreated from the country, initially by a failed sale to a local company before filing Mfone into insolvency ( see our online service, February 18 2013, 'Thaicom Finds Stability In Laos' ). Meanwhile, Axiata acquired Latelz 's Smart Mobile in December 2012, reducing the number of operators to seven ( see 'Consolidation Taking Off In Cambodia', December 13 2012 ). BMI believes that further consolidation is likely. Mfone had agreed to transfer its subscribers to Mobitel , and we believe that Sotelco's assets would be better utilised by another telecoms operator.

VimpelCom Cambodia And Laos Mobile Operations
2010 2011 2012
Laos' 2010 mobile subscriber base is BMI estimate. Source: BMI, VimpelCom
Mobile subscribers ('000)
Cambodia 651 1,013 597
Laos 456 405 318
Churn (%)
Cambodia 167 128 210
Laos na 258 141
MOU (minutes)
Cambodia 331 419 336
Laos na 233 97
Cambodia 3.5 2.9 1.6
Laos na 5.1 5.6

VimpelCom had been a valuable source of telecoms data given that it provided subscriber figures, ARPU, churn and even MOU. With its departure as well as Mfone's insolvency, Axiata's hello is the only operator to divulge operational information. This makes our ability to evaluate the Cambodian mobile industry more challenging, especially when the ministry of Posts and Telecommunications does not publish data on a regular basis.

The Russian operator sold its entire indirect 49.9% stake in GTEL Mobile to G TEL Transmit and Infrastructure Service in April 2012 for cash consideration of US$45mn. VimpelCom had originally saw opportunities in its South East Asian cluster of operations, and we believe that it is a matter of time before it sells its Laotian business. In Q412, VimpelCom reported 318,000 mobile subscribers in Laos, down from 405,000 in Q411. MOU in 2012 declined to 97 minutes, down from 233 minutes in 2011 due to a limitation imposed by the government on the operator's commercial activity. However, ARPU increased from US$5.1 to US$5.6 over the same period on the back of a smaller subscriber base, which was due to the loss of mostly lower-value subscribers. The churn rate also improved from 258% in 2011 to 141% due to regulatory changes that slowed down the price competition.

The bad experience in South East Asia could have also prompted VimpelCom to reconsider participating in Myanmar's licence issuance. While the operator reportedly submitted an expression of interest, it decided not to follow up due to a complex regulatory environment and uncertain political climate.

This article is tagged to:
Sector: Telecommunications
Geography: Cambodia, Cambodia, Laos, Myanmar, Cambodia, Cambodia

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