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ProjectEYE What we observed, analyzed, and accomplished

Mongolia Mobile Phone Project

Helping 2.76 Million People Communicate(Page 1/3)

February 2011

Proposal for a Mobile Phone Service

Because of his involvement in Japanese overseas development aid (ODA) projects, Masaaki Ouchi had been a frequent visitor to the Mongol Telecommunications Company (MTC) since around 1992. One day in 1993, Boldbaatar Tserenpuntsag, the former CEO of MTC, surprised Ouchi with an unexpected request: “The telephone penetration rate is still very low in Mongolia, but this nation lacks the resources to improve this situation. Can you establish a private mobile phone company with the most advanced technologies available for Mongolia?”

In Boldbaatar’s view, the promotion of industry by private corporations was essential for Mongolia’s development. As mobile phones had the potential to radically change the lives of Mongolian people, he believed the establishment of a mobile phone service led by the private sector could serve as a symbol for the greater development of Mongolia.

While fully appreciating Boldbaatar’s passion, Ouchi was afraid the proposal was a little premature. In those days, the penetration rate of mobile phones was only around 3% even in Japan. The Mongolian government went ahead, however, and invited a tender for mobile carrier license in 1994. By that time, Sumitomo Corporation had begun internally discussing its own entry into the communications carrier sector. A satisfying result in Mongolia would be a breakthrough in terms of the company’s expansion efforts. Ouchi made up his mind; it was now or never.

Masaaki Ouchi, Assistant to General Manager, Telecommunication Business Dept.

There was someone else who shared Ouchi’s sentiments: his supervisor and then general manager of the department, Yoshihiko Shimazu (now acting as an advisor to Sumitomo Corporation). He too had visited Mongolia many times and knew by direct experience the strong determination that Boldbaatar and the Mongolian people shared to develop the country. Shimazu believed that if they could acquire the operating license, Sumitomo Corporation could make a fundamental contribution to the national development of Mongolia. Finally, the decision was made and the project was launched.

Even for Mongolian people living in a ger, a traditional Mongolian tent, mobile phones have become a necessity.

Mobile Phones in Mongolia?

Ouchi’s proposal for a mobile services business in Mongolia, however, was met with big doubt from many of his colleagues. At the time, even the prospects for the mobile phone business in the Japanese market had been much disputed and no one could provide a clear answer. In order to avoid becoming entangled in unproductive discussions, Ouchi offered a suggestion, telling them, “Let’s think of this as a private ODA project.”

This did not mean, however, that Ouchi disregarded the potential profitability of the business. Based on a realistic assumption as to the number of potential subscribers, he created a business plan that sought to turn a profit in the third year and recoup the investment in the fifth. KDDI (then KDD), which had previously cooperated with Sumitomo Corporation on ODA projects in Mongolia, also won management approval for the proposal and came on board. Three companies, KDD, Sumitomo Corporation, and Newcom, which had been established as Mongolia’s first private telecom company, then began preparations for the license tender.

After a screening in February 1995, three groups submitted tenders in May of the same year. “In terms of content, ours is indisputably the best,” was Ouchi’s confident declaration. Sure enough, his coalition was awarded the license in September. Two months later, MobiCom was born, bringing the plans of Ouchi and Shimazu to fruition. In March 1996, Mongolia’s first mobile phone service was finally launched.

The signing ceremony for the Joint Venture Agreement among MobiCom shareholders took place in front of a ger.

Column:Mongolia in the Spotlight

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Located in Northeast Asia, south of Russia and north of China, Mongolia’s official name is Mongol Uls. The capital is Ulaanbaatar. Mongolia’s population is about 2.76 million, roughly the same as the City of Osaka’s. The country has an area of 1.564 million ㎢, which is four times that of Japan and puts it at 19th in the world. 80% of that land is grasslands and is used as pasture, meaning livestock farming is a major industry. Another valuable industry is mining, and with its rich natural resources such as gold, copper, molybdenum, and coal, Mongolia has attracted international attention in recent years.
A number of Mongolian wrestlers have joined Japanese sumo stables, participating in grand sumo tournaments in Japan and fascinating many fans.

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