The arrival of Jamaica-based telecoms firm Digicel in 2007 was a game-changer for Papua New Guinea’s ICT sector. The country’s internet penetration rate rose from just 1% at the time to 11.7% in 2016, while the mobile phone penetration rate also jumped considerably, from 1% in 2005 to nearly 50% in 2017.
Dominant Force
Digicel’s aggressive growth has helped the company dominate the industry, with an estimated 94% market share in the mobile sector in 2016. In contrast, its closest rival that year was the state-run Bmobile, with a 4.8% market share, followed by Telikom PNG’s Citifon, another state company, with 1% market share.
With the hopes of balancing market shares among providers, the PNG government in February 2017 announced a merger between state-owned communications companies Telikom PNG, BM obile and DataCo. The merger is being undertaken as part of the Kumul Consolidation Agenda, a government initiative to improve coordination and efficiency in its commercial activities and to aggregate state-owned companies in certain sectors, including telecoms. The merger means that while the three entities have essentially remained intact, Telikom PNG, as a 100% subsidiary of Kumul Consolidated Holdings, is now known as Kumul Telikom, while the other two entities have become subsidiaries of Kumul Telikom.
The government has said it hopes the restructuring will allow the three companies to pool their resources and better cooperate, leading to more efficient management and an improvement of telecoms infrastructure. The move is intended to improve performance by government-run entities and stimulate competition, bringing benefits to consumers, including lower prices and better services.
The general consensus among those working in the ICT sector in PNG is that the merger will have a positive impact by boosting competition. The hope is also that the move will encourage operators not only to lower prices, but also offer more variety of services to customers, including entertainment and news, as well as cloud and other technical services.
These changes have already begun to some extent. In 2017 Kumul Telikom began rolling out 4G services in parts of the country at discounted rates – a move that is helping the company compete against Digicel.
Cooperation is Key
For the merger to prove a success, ongoing efforts are required to ensure employees at the state-owned entities are on-board with the new strategic vision and have the required skill-sets to implement it. However, at the time of writing, members of the PNG Communications Workers’ Union were still opposing the merger and petitioning for a halt to the transfer of some business to Kumul Telikom. The government has maintained that jobs and entitlements remain safe under the merger and that infighting is counterproductive as it allows Digicel’s dominance to continue.
Speaking to OBG, Oliver Coughlan, the CEO of Digicel Pacific, said that although a consumer price decrease in 2017 coincided with the merger, the characteristics of the market had not changed, adding that companies in PNG are still operating in accordance with their own strategic plans.
Landscape Challenges
The mountainous nature of PNG — where about 85% of the population live in rural areas — means that market players still struggle to roll out services to many parts of the country, and some rural areas continue to rely on 2G services. For this situation to improve, further investments in infrastructure will be required. Nevertheless, if the consolidated state-owned company can overcome internal opposition from sections of the workforce and focus on achieving its objective of challenging Digicel’s dominance, the business community, as well as society at large, should ultimately benefit from lower prices and the roll out of a wider range of innovative products and services.
Read More from OBG
