R. Ganbold, CEO, Unitel: Interview

R. Ganbold, CEO, Unitel

Interview: R. Ganbold

How are changing trends in mobile usage impacting the profitability of the telecoms industry?

R. GANBOLD: Subscriptions have grown rapidly over the past decade. In terms of traditional telecom services, such as voice and SMS, the market is nearing saturation, with a penetration rate in excess of 100%. While usage growth for these services is beginning to decline as a result, it has been offset by an explosion in data consumption. The industry sees this acceleration as a positive sign, as there is no limit to the amount of data that can be used – especially as more devices are connected to mobile data networks and a growing number of Mongolians are starting to use video and audio streaming services on their mobiles. By comparison, the number of calls and texts that one person can send is limited by the number of hours in the day. Already, declines in average revenue per user for voice have been offset by growth in data usage, allowing for greater profitability among the country’s mobile service providers.

In order to meet this growing demand, however, network operators must build out their data capacity. As a point of reference, for the first few years after its introduction in 2009 only 10% of Unitel’s 3G network capacity was utilised. By 2013 that figure had jumped to 25%, and was already at 60-70% in 2014. Indeed, we may reach full capacity by year end. Mongolia’s other 3G providers have experienced a similar pattern, and as more people buy smart phones data usage will only accelerate. Already, nearly 40% of our customers use smart devices.

What network infrastructure improvements can help meet growing demand for data services?

GANBOLD: Capacity increases require considerable capital expenditures on the part of network operators. Hundreds of new base stations must be built and the capacities of existing base stations need to be expanded through hardware upgrades and new technologies, such as fourth generation long-term evolution (4G LTE). Likewise, new fibre-optic networks need to be erected to connect these new and improved stations.

While the government has a role to play in making these investments, its current fiscal situation necessitates that private players take the lead. For the moment, however, private operators are limited to expanding coverage by means of deploying new bases stations and upgrading existing ones, as the government began restricting private sector investment in the fibre-optic network in recent years so as not to cannibalise the business of the state-owned network company. Without a more inclusive approach and investment on both sides, there is little chance that Mongolia will be able to meet growing demand for data. Fortunately, the government and the industry are more willing to work together to solve the issue than they had been in the past.

Given the large costs associated with network infrastructure upgrades, the industry as whole must follow a more unified plan by developing synergies and avoiding competitor redundancies. There are many ways to achieve this, such as sharing base stations, coinvesting in infrastructure developments and renting out excess capacity to other service providers, among others. If we do not tackle this issue in a more efficient manner, smaller operators will be unable to keep up, as the costs are too high and the returns too low, which would result in higher prices for end-users.

Over what timeframe will 4G be implemented, and how much potential does the technology have?

GANBOLD: The government has yet to set a timeline for the issuance of 4G licences, so the industry has not made any investments in the segment thus far. However, we expect licences to be awarded in the near future and believe the introduction of 4G is essential to meet the growing demands of Mongolia mobile data consumers, which are constantly evolving and becoming more sophisticated. The expansion of 4G technology will also help bring increased connectivity to rural areas of the country. Indeed, the 3G capacity that is freed up as more advanced technology is implemented in Ulaanbaatar can be shifted to the countryside.

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R. Ganbold

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The Report: Mongolia 2015

Telecoms & IT chapter from The Report: Mongolia 2015

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