Thomas Hundt, CEO of Smart Axiata – now Cambodia’s second largest telco provider and market leader for mobile data services – said in an interview last week that there is no secret recipe for success. Luck, he believes, is always part of success.
More than sheer luck though, Smart, the eighth telco to register in Cambodia, was nurtured through Hundt’s determination “to do whatever it takes to be successful”.
The story of Smart is about Hundt’s hunger. Of course, he would never admit that – especially after he revealed that complacency broke some of his competitors’ backs and made others lose a lot of market share to Smart.
“If you think you are unbeatable, that’s the beginning of the end,” Hundt said.
In his headquarter office on Monivong Boulevard last week, Hundt gave the impression of a humble go-getter, and more significantly, of an approachable CEO dressed simply in a Smart-sponsored football jersey, jeans and sneakers – a gesture seemingly deviating purposely from the regular suited-up CEO.
“When we came to Cambodia to set up Smart we simply broke away from certain conventions,” Hundt said. That was in July of 2008.
Hundt was aged 30 then. All he had was a was a piece of paper containing the license to operate a telecom network, a relatively young 19-strong start-up crew, and around $25 million collected from a group of private investors. By that time seven other operators had already either registered, were setting up a network or were already successfully operating in Cambodia. At the same time, Beeline – today long gone from the Cambodian telco market – announced they were investing $200 million into a network.
Hundt described it as a “suicide mission”; entering the Cambodian telco market so late with a much smaller starting capital than any of his competitors.
Regardless, moving ahead with the investment was no irrational decision of a hot-headed 30-year-old rife with ambition, according to him.
“What gave us confidence was the fact that the market was dominated by one player, highly fragmented and unprofessional. Network quality was a disaster and [end-consumer] rates were really high,” he said, noting that their feasibility study and investment plan showed a scenario of success.
Amid substandard competition and low market penetration, Hundt spotted his chance to seize the market.
Comparing Smart to his competitors of much deeper pockets, he said, “We had exactly one chance to win. If we had screwed that up we would have been blown out of the water.”
Smart took its chance and launched in Feburary 2009, and began winning, initially following one basic principle.
“If you are using your network at full capacity, you can make money so you should fill it up quickly. That’s why we went into the market so aggressively,” Hundt explained.
While their biggest competitor Cellcard at that time charged around $0.16 per voice call minute, Smart introduced the “TalkLikeCrazy tariff” that still exists, though slightly amended, today – for $0.10 per day people could then talk as long as they wanted. In addition, Smart handed out bundles of SIM cards to families, which no other competitor did.
But not only rock bottom prices were helping Smart to quickly build up a subscriber base.
Hundt took another breach of convention by the horns, simply by building a consistent brand image that would resonate and stay with consumers. During the early days, Hundt claimed, other operators were “changing their brand image like some people change their t-shirts.”
Smart kept strictly to their branding, heavily investing in advertising and marketing from the get go. Today, it can afford to brag that its $100 million investment thus far in advertising and branding has paid off, to put it mildly.
In 2009, however, aggressive marketing and pricing showed an only partly desired effect.
“The effect was that people were literally talking like crazy,” Hundt said and added that the network was hopelessly overstrained at times. “We also had to learn our lessons, and made adjustments.”
Nevertheless, the goal to fill up the network capacity was achieved and Smart aimed at increasing the subscriber base through ongoing aggressive pricing, constant investment in the network, mergers and acquisitions.
And network and subscriber base grew. Through the merger with competitor Starcell in early 2011, Smart became the third largest telco provider serving close to one million subscribers. In the same year, the company already offered 3.75G mobile data services.
Only a year later, Smart would overtake the second biggest provider and triple its subscriber base.
In early 2013 the initial investors sold out, and, through a merger with Hello, Smart became part of Malaysian Axiata group while reaching a subscriber base of five million.
Regardless of Hundt’s determination for Smart, he attributes some of the success to luck.
“The interesting fact about our ascent was that we were all a bit lucky in a way because at the beginning, our fellow main competitors probably didn’t take us seriously; so, Smart was flying under the radar because everybody was focusing so much on Metfone and Beeline,” he said.
Playing the underdog did not last too long, though.
Recalling a bitter incident, he recounted, “Through the lobbying of our incumbent operators, the insane Prakas 232 was issued by the Ministry of Post and Telecommunications.” This prakas prescribed a minimum price per voice call minute of 4.5 cents.
“That was purely intended to screw up Smart’s pricing strategy.”
The enforcement of Prakas 232 lasted no longer than a month however. Public outcry over multiplying telephone costs was backlashing so tremendously that the Council of Ministers, in December 2013, nullified the prakas.
Whether the prakas was really intended to kill Smart’s business or not, the company had gained too much critical mass with their subscriber base, and momentum to be affected by the telco chaos.
More than a year earlier than the rest of the competitors, in January 2014, Smart launched 4G LTE mobile data service, which today accounts for more than half of the company’s revenue.
Hundt finds it hard to understand why “the key competitors started to invest in 4G LTE so late.”
Keeping up with worldwide trends is key, said Hundt, and “you can never relax; there are so many innovations you have to bring into the market. User behaviour is rapidly changing from making calls to using data. We have to permanently evolve, come out with new solutions and new ideas.”
“I think the evolution is going even faster, now that everybody talks about virtual reality, internet of things, autonomous driving, augmented reality and all this stuff.”
Today, Smart has 7.6 million subscribers in its previously shallow pocket, and a reported revenue of $232.6 million for the year 2015.
Being ahead of the curve with Smart – and probably not only in the digital data market – Hundt could probably just keep on escalating up a steady career path.
But having spent almost his entire 30s in Cambodia, Hundt is now approaching 40, and expressed a moment of pondering. Married, with a young child, he is still very much attached to his hometown of Munich, Germany.
“At the moment I feel like there are a lot of cool things in the pipeline, and a lot of potential in the market, with a great team to motivate and inspire and push forward,” he said and added:
“My blood, sweat and DNA is linked to this company, but obviously everything must, one day, come to an end. I cannot imagine running Smart until my retirement. That would also be wrong for the company.”
Fortunately, and according to him, he has a great team that ensures the company does not fall apart whenever he returns to Munich for a week or longer.
“If I’m here I always want to be in Munich, and when I’m in Munich, I would love to be in Phnom Penh because I have a great team, I have Smart, and I have my friends here as well,” Hundt explained.
“It is human nature, you always want what you don’t have.”