The Telecommunication Regulator of Cambodia (TRC) last week requested that the country’s judiciary launch criminal proceedings against CEO Thomas Hundt. On Tuesday, Axiata announced Hundt, who sources say is currently in Germany, would be giving up his responsibilities in Cambodia and joining its Malaysian operations.
Experts say the TRC’s move, which comes as regulators have rapidly ramped up their auditing of the telecom sector, could have major repercussions for foreign investment in the developing country.
In a letter dated Oct 22 sighted by Nikkei Asia, the TRC requested a “prosecutor to summon and take legal action against Thomas Hundt the CEO of Smart in accordance with criminal procedures”.
In a statement released on its website, the TRC detailed its claims against Smart, one of Cambodia’s largest mobile and internet service providers, which is owned by Axiata Group, a publicly traded Malaysian conglomerate.
It says a “special audit” done with the ministry of posts and telecommunications’ general inspectorate had uncovered “illegal laying of fibre-optic cables” by the company in three rural areas totalling some 16km.
“As a result, evidence has been seized and retained for further legal procedures, which may lead to possible arrests of related individuals and actions against Smart Axiata,” the statement says.
Smart, the telecommunications ministry and TRC, an autonomous body under the ministry, did not immediately respond to requests for comment.
In a statement on its website, Axiata Group said Hundt has been appointed as its group chief strategy and technology officer with immediate effect and would step down as CEO of Smart and relocate to Kuala Lumpur. The statement did not mention any legal issues in Cambodia.
It notes Hundt began as CEO of Smart Mobile in 2008, steering the company through mergers with Star-Cell in 2011 and Hello Axiata in 2013.
“Under his capable stewardship, Smart Axiata grew rapidly to eventually become the No. 1 player in the country,” group president and CEO Izzaddin Idris said in the statement.
On its website, Cambodia’s TRC said it would continue to inspect all fibre-optic networks and take action on “noncompliant installations,” warning that “some telecom operators blatantly continue in breach of the laws”.
The case against Smart comes amid a broader crackdown by the telecom ministry that experts warn could undermine the industry and the broader economy.
“This is sovereign risk writ large,” said Stephen Higgins, managing partner of investment management and advisory firm Mekong Strategic Partners.
Higgins said the sector’s opaque regulatory environment means companies have long faced uncertainty over compliance issues.
“That a company CEO can be threatened with prosecution for something so seemingly minor and for which the approval process has never been particularly clear – it’s quite extraordinary,” he said. “This would send a chill up the spine of anyone thinking about doing business in Cambodia.”
The enforcement of regulatory violations ramped up after Chea Vandeth, the founder of a private university and head of a company that managed Cambodia’s “Killing Fields” genocide memorial site, was installed as minister for posts and telecommunications in April 2020.
The ministry has since audited telecom operators and re-evaluated the amount they owe authorities under long-standing revenue-sharing arrangements. The ministry has also begun demanding businesses abide by provisions set out in a sweeping yet inconsistently enforced 2017 sub-decree.
The decree stipulates a range of activities for which individuals and businesses must obtain certificates and licenses, including broad categories such as providing “online services” or “charged consultation and technical services”.
One veteran telecom industry insider, who requested anonymity due to the sensitive nature of the topic, said the new minister’s “aggressive” approach would freeze, or even reverse, progress in the sector.
“There’s no consultation, no transparency,” the person said. “All the telco companies are worried. … If he doesn’t back off, it’s going to hold back a dynamic economy.”