Telecommunications / Smart CEO on why Cambodia’s major telecom companies must diversify

By: Euan Black - Posted on: April 29, 2018 | Special Reports

Smart Axiata is among Cambodia’s ‘big three’ telecoms companies. CEO Thomas Hundt tells Focus Cambodia why the provider is branching out into content and venture capital

Smart Axiata CEO Thomas Hundt in Phnom Penh Photo: Sam Jam

What is the key battle you’re fighting at the moment in the telecoms sector?
People are willing to pay $1,000 for a phone, but they are paying just $4 a month for the mobile phone provider, for the connection… Our costs are increasing, but revenue is not really because consumers, they get so much for very, very little and they don’t see a reason for spending more – and that’s also then the reason why we are looking at venturing into content, right? Looking at ways to increase…

Data consumption?
Consumption, yes. But also how can we change the game, in a way. At the moment, our industry is moving into becoming a commodity… but people have a choice. There is not only one telecom company. There are, at the moment, three major players, but a few smaller rotten tomatoes. So people can switch and change as they wish.

Of course, quality of service is still important – and becomes even more important in the way of data than it was in voice. In voice, either you can make a call or you cannot make a call, and if the call is uninterrupted, typically people are happy. In data, you can make a connection, but then it becomes about speed, about latency, about your experience in a way that there’s no buffering when you’re watching video, etc. So quality of service is different but who actually provides the data is becoming more and more secondary, and that’s why we are venturing into content like iFlix, Jaikon TV, Soyo, Smart Music, and why we are also looking at how we can expand our ecosystem.

We’re trying to look for interesting digital ventures that can synergise with Smart, but also potentially build new markets on their own. It could be e-commerce, fintech, content, IoT [internet of things]… It does not mean that we’re giving up our core, our connectivity, but we’re going in that direction. And we’re not inventing this. This is what all of the telecom companies worldwide are moving into.

Presumably, this is where the Smart Axiata Digital Innovation Fund, a $5 million venture capital fund committed to digital service companies and startups, comes in…
It’s a relatively small amount we’re putting in. We have committed in total $5m – $4m from Smart and $1m from [co-investor] Forte Insurance. But for the Cambodian market, as a starting point, $5m as a venture capital fund is quite a sizeable thing already. We are planning investments between $100k and $500k TELECOMS each, and even if it is $500k every year for everyone, it would be ten investments. The average might be $250k. We can, in general, make 20 investments out of the $5m.

Is that what you’re aiming for – 20? You’ve made three investments so far; so can we expect another 17?
It depends. There will be one or two big investments that hit the $500k mark probably, but there will also be some that are only $100k, and we plan to invest over a period of three years. So, it’s obviously not just about investing money, but grooming these companies, giving them advice, expertise and synergy. And then eventually, in five years, all these companies have bloomed so much – in this case, it’s the venture capital nature of development – we will exit some and reinvest the proceeds again into new ventures. It’s a rolling cycle.

 This article was first published in Globe Media Asia’s Focus Cambodia 2018 magazine