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RAMASAMY Veeran (pic above) shows a video clip of the busy intersection at Silang Road in Kuala Lumpur where his company Merchantrade Asia Sdn Bhd occupies the corner building, during the weekend a few months back.
The video is not to show off the prominent location he enjoys, but is testament to the fact that his company is now seen as a serious competitor by the established mobile operators. Merchantrade is not only the leading Malaysian remittance player – it sent RM3.2 billion (US$850,000) in outbound remittance last year – it has also become a leading mobile virtual network operator (MVNO) in Malaysia. [Edited for clarity.]
The media-shy Merchantrade managing director declines to reveal his customer base beyond confirming that it has not hit one million subscribers.
The video shows, right outside his office, the kiosks of leading mobile network operators Digi and Maxis. In a carnival-like atmosphere, both are touting their IDD call rates to various countries in South Asia, especially Bangladesh, a market Merchantrade has painstakingly built over the last eight years.
Their rates are priced at the ridiculously artificial rate of three sen (less than one US cent) per 30 seconds. Ramasamy flinches just mentioning the amount. [Corrected: The rates were incorrectly priced per minute in the earlier version.]
“It has got to be unethical, selling for such a low price and definitely below costs,” he says, suggesting that Digi and Maxis, including smaller player U Mobile, are desperate to increase their revenue. [In 2013, one of the ‘Big Three’ mobile players in Malaysia, Celcom Axiata, took a 20% stake in Merchantrade.]
Ramasamy claims that Merchantrade used to carry “huge amount of traffic to Bangladesh” until September 2014 when its competitors, led by U Mobile, dropped their rates from 12 sen per minute to eight sen, and then six sen and finally four sen for a short while. “They kept dropping prices because they could not hit us,” he claims.
While he is optimistic that spiralling prices won’t hurt Merchantrade revenue, he recognises that “we are in a war now and have to find a way to defend ourselves.”
However, he does not want to drop Merchantrade’s price per call to Bangladesh very much below the 16 sen it has been charging.
“We can offer them other incentives,” he says, adding that while competitors can hurt its margins, “they cannot hurt our spirit. We know this market and will bounce back.”
However, IDC Malaysia’s Telecommunications research manager Alfie Amir (pic) feels the options are limited for Merchantrade.
“The prepaid segment, especially for migrants, is very cost-sensitive,” he tells Digital News Asia (DNA) via email.
“And with the migrant market becoming one of the MNOs’ (mobile network operators) key segments, any service provider is expected to lose market share if it takes passive action in a price war and retain rates,” he adds.
This is where Ramasamy says Merchantrade is changing its way. “We are planning and changing our marketing and branding to be a stronger presence in the market,” he says.
This includes being more structured in its marketing approach and not adopting so many of the ‘guerilla techniques’ it used to in the past. It also includes speaking to the press more often.
At the same time, Ramasamy feels Merchantrade is very lucky to be able to build a network with 65 branches throughout the country. “We cover practically each zone in the country.” And this is not counting the 250 odd locations where it operates remittance services.
Indeed, Merchantrade has come a long way from when it started out selling calling cards to migrant workers in 2003. It slowly got into the MVNO space as well a few years ago when “nobody wanted to talk to us,” he recalls.
Celcom gave it the break it needed when the telco giant recognised that Merchantrade could do a better job of targeting migrant workers, and leased its network capacity and billing systems to the latter.
Merchantrade’s big break came when it received a 2007 licence to offer remittance services. It has since gradually started cross-selling remittance and mobile services.
Today, with the digital trend, Ramasamy can see how the world of the mobile phone is demanding that consumers change their behaviour. He speaks aloud of the possibility of Merchantrade offering its remittance system to moneychangers, not as a standalone service but one where mobility and remittance are merged.
With an inhouse technical team, Ramasamy says that it can deliver strong technology-led services and products to the market, adding that “we feel we can do a better job building everything inhouse.”
And if this happens, he will be less agitated when competitors drop prices irrationally.
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