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5G networks

Cambodia joins the 5G race despite concerns over cost and viability

'Staggering' investment needed to make next-gen services a reality

Cambodian mobile carriers are keen to offer users faster data speeds. (Photo by Ken Kobayashi)

PHNOM PENH -- The buzz around 5G mobile technology is building in Cambodia as major carriers plan to try out services this year and a state-owned telco teams up with China's Huawei to roll out a network in 2020.

But while government and private-sector proponents point to the potential of the superfast technology to transform the country, industry experts say expectations may be racing ahead of reality. Fully functional 5G networks are likely years away for most Cambodians, and analysts question the commercial prospects given what they describe as the underutilization of existing networks.

The excitement in Cambodia comes amid a regional scramble toward 5G data networks, which neighboring countries like Vietnam and Thailand hope will narrow the development gap with Western countries.

In Cambodia, three major carriers are expected to launch trial services this year, including Cellcard, a telco owned by Royal Group, one of the country's biggest conglomerates.

Cellcard CEO Ian Watson told the Nikkei Asian Review that the company will choose network vendors by the end of next month and launch a 5G service on the 3.5GhZ frequency in the last quarter of 2019. Watson said Cellcard's current network vendors, Nokia and ZTE, were options for the rollout, with the Finnish telecom giant likely to "get some of the work."

The first stage would include about 1,000 5G base stations across Phnom Penh, Siem Reap and Sihanoukville, he said. Watson added the company will continue to "maximize" its 4G services and plans to invest $250 million over the next three years in its network.

He did not disclose how much of that investment will go to 5G specifically.

"We'll have a mixture of a very fast 4G network tied to 5G in key cities and key areas where we think it's applicable," Watson said, mentioning the initial 5G targets are the capital and tourist hot spots like Angkor Wat.

"What we want to do is get the system in, get it working and then say, 'We're here, this is what it can do.' ... I think there will be huge demand for it."

Smart Axiata, a unit of Malaysian telecom operator Axiata Group, and Metfone, owned by Vietnam's Viettel, are also planning 5G service tests this year, said Im Vutha, director of the Telecom Regulator of Cambodia.

Thomas Hundt, the CEO of Smart, told local media that users' heavy data consumption was straining the company's current 4.5G network, necessitating the move to 5G.

In an email to Nikkei, Hundt said the company will maintain its annual capital expenditures of $70 million to $80 million, saying he believes the country has a chance to "leapfrog" its neighbors by being one of the first Southeast Asian nations to launch 5G services.

He added, however that in Cambodia, "investments for 5G will be staggering due to the need of new equipment, more sites and additional spectrum, so mobile operators will have to be rational on approaching massive 5G rollouts."

Viettel, busy pursuing its own 5G service in neighboring Vietnam, was less forthcoming about its plans for the technology in Cambodia.

"It depends on the Cambodian government's road map," said Viettel Group public relations director Nguyen Ha Thanh via email. "For the moment, we cannot provide any information."

Despite the flurry of activity, industry analysts reckon it could be several years before serviceable next-generation data networks cater to ordinary consumers across the developing country. They point to the scale of investment needed, the high cost of the few 5G-capable handsets currently available, and Cambodia's nascent mobile internet penetration relative to bigger regional economies.

"This is the first step, an important step, of what is going to be a very long journey," said Marc Einstein, chief analyst at Japan-based IT research and advisory company ITR, who estimated substantial urban coverage would take "a few years" while a rural service could be a decade away.

"5G is really going to do some crazy, amazing awesome things and will totally change a country like Cambodia, but I think we need to be realistic about the timeline," he added.

Smart itself conceded that there are concerns over how to monetize the new technology.

"I do acknowledge that there are still debates about 5G's business viability, and we share concerns when it comes to the magnitude of investment needed in correlation with the extremely low retail prices per [gigabyte]," Hundt said.

He added, however, that he expects there will be a "multitude of new revenue streams as adoption rates" rise. Potential applications he cited included smart cities, artificial intelligence and esports.

Watson, of Cellcard, pointed to video on demand, digital TV streaming and gaming as "quick wins" where "faster speeds mean a lot better experience."

He said innovations like smart homes and the "internet of things" would change the role of telecommunications companies.

"A lot of the telcos will move away from being a pure telco to a life service provider, where every hour we tend to touch what you're doing, whether it's entertainment, health, remote monitoring -- it's all powered by a 5G network."

Frost & Sullivan ITC analyst Sofea Zukarnain, meanwhile, said 5G technology would help improve Cambodia's rural health care, transportation and logistics in the long term, but noted several obstacles could slow its adoption.

Among these, she pointed to debts owed by Cambodia's telcos to regulators, which authorities have demanded be paid by the end of this month, according to local media.

"If mobile operators in Cambodia do not overcome factors such as infrastructure cost and regulatory fees, Cambodia can expect commercial launch of 5G technology [at the] earliest by 2021," she said.

Keen to see 5G adopted in Cambodia, the government is also pursuing a 5G network through an agreement with Huawei Technologies, signed last month in Beijing.

The memorandum of understanding will see the Chinese tech giant work with state-owned Telecom Cambodia, or TC, in a bid to launch services starting next year.

Vutha, of Cambodia's telecom regulator, said the agreement is just a first step for TC.

"I don't know yet if [Telecom Cambodia] have the capacity to do it, but they have the way to go," Vutha said, adding that TC was licensed to run such a service. "They have the right to do it."

TC, which currently runs only a fixed-line phone and internet service, has previously been embroiled in several corruption scandals.

Timelines aside, there is no question that demand for mobile internet is increasing.

A country of 16 million, Cambodia has 19.3 million registered mobile phone SIM cards, according to government figures, suggesting many people have more than one subscription. The figures record 12.9 million subscribers who used their mobile phone to access online content last year, an increase of 22%.

Data from GSMA Intelligence -- which counts individuals rather than SIM cards -- puts mobile subscriber penetration at 67% in 2018, with mobile internet subscribers at 45% of the population.

While forecasting continued growth in coming years, however, senior GSMA Intelligence analyst Jan Stryjak questioned whether 5G is currently necessary and commercially viable for Cambodia, noting there is "still a fair bit of runway" left for 4G expansion.

"Cambodia strikes me as not the most fertile ground for 5G at the moment," Stryjak told Nikkei, later adding that the noise around the new technology had a "huge marketing angle."

"For people, why in the short term would they want to potentially have to pay more for a 5G service when 4G will, in the majority of cases, be good enough?

"This is the same kind of trend we're seeing across many emerging markets -- Southeast Asia, East Africa. Operators love to talk about 5G, but there's still a lot of room left in 4G, even 3G."

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