Network news: Boosting mobile penetration looks like a challenge

So many opportunities in Mongolia are just that – potential yet to be fully explored. That is what makes the mobile market so unique – it is one of just a handful of mature segments. Mobile telephony in 2010 attracted approximately 73% of all telecoms investment. There were 91.3 mobile subscribers per 100 people according to the Communications Regulatory Commission (CRC), the regulator for mobile carriers. Compare that with the rate of 9.2 per 100 in 2002 and it is clear to see how rapidly the sector has progressed. The downside of that, however, is that some investors are now beginning to wonder if most of the easy money has already been made.

MAIN PLAYERS: Mongolia currently has four mobile carriers – Mobicom and Unitel operate under the Global System for Mobile Communications (GSM) system, and Skytel and G-Mobile use code division multiple access (CDMA). Of a total of 2.5m subscribers, around 277,000 – or 8.8% – are post-paid customers, with the rest buying credit in advance.

There is one national network, which is owned and operated by the Information Communications Network Company, one of two firms that were created in the mid-1990s liberalisation of the market that among other things introduced mobile telephone service. Commonly referred to as NetCo, the company’s network extends to most of the country.

However, several private sector players have decided to supplement NetCo’s service with their own local networks. This is in part an attempt to improve service quality but is also a bid to avoid what is perceived as NetCo’s high price for access. CRC told OBG that the firm’s high debt load is one reason for this. Sharing network space is mandated by law in Mongolia, according to the CRC, on a first-come first-served basis. Prices to consumers have been steady since 2007, ranging from the MNT70 ($0.05) per minute of talk time that is charged by Mobicom and Unitel, to the MNT40 ($0.03) that is charged by GMobile. Skytel’s service cost MNT55 ($0.04) in 2010.

Provision of third-generation (3G) services began in 2009, and by late-2010 had been extended beyond Ulaanbaatar to Darkhan and Erdenet, the two next-largest cities in Mongolia, and more than 20 provinces, according to data released by the CRC.

MARKET SHARE: The market leader, Mobicom, was also the first to receive a licence, in 1995. Its shares are owned by a combination of private Mongolian company, Newcom Group, and two Japanese investors, KDDI and Sumitomo. Its market share as of 2010 was around 46%, according to figures from the Information Communications Technology and Post Authority of Mongolia (ICTPA), one of two main government bodies responsible for the sector. It is primarily responsible for policy and planning, while the CRC handles regulation and supervision.

The second-largest carrier in the country is Skytel, which had 22% of subscribers in 2010. It too had a major investment from a Korean company, SK Telecom, until 2011. SK, the biggest carrier in South Korea, sold its 29.3% stake for $25.4m in January 2011, saying that the market was nearing saturation point. SK officials said they consider a 60% penetration rate the point at which a market has become mature, and headed toward saturation. Skytel was originally a joint venture between SK and another Korean firm, Taihan Electric Wire, which has also divested. SK’s original 20% stake was acquired in 1999 in exchange for some outdated analogue telecoms equipment, and it later bought a further 9.3% share.

Unitel and G-Mobile are the second generation of providers, having won their licences in the mid-2000s. Unitel is currently the third-largest mobile operator in the market, with approximately 18% of total subscribers. The company won a tender in 2010 that will make it the first telecoms company in Mongolia to offer triple play – a bundled service package that will include internet, television and phone services. G-Mobile, with a 14% market share, has been concentrating on servicing areas outside of Ulaanbaatar.