Government may sell stake in Canal+ joint venture

The newswire quoted a report signed by VTV deputy general director Nguyen Thanh Luong that VTV had just sent to the Government’s Office as saying that the joint venture is incurring huge losses.

According to the report, since VTV does not currently have a say in the management of VSTV—the operator of the K+ brand - as per the joint venture contract, VTV is going to renegotiate the terms of the venture and the company charter with Canal+, get a representative to join in the management of VSTV, and try to find ways to improve the company’s performance.

“In case everything fails, we will turn to the prime minister to allow the divestment of state capital from VSTV,” the report said.

The report said in the 2009-2015 period the number of subscribers rose from 95,602 to 803,229. Revenue rose from VND24.6 billion ($1.1 million) to VND1.27 trillion ($57 million). Losses after subtracting loan interests widened from VND59.5 billion ($2.7 million) in 2009 to VND83 billion ($3.7 million) in 2015. The accumulated loss at the end of 2015 was VND1.98 trillion ($88.8 million).

According to the report, the capital used in VSTV’s operation since its establishment was mostly borrowed with Canal+ as the guaranteeing party. VSTV borrowed $66 million out of its working capital of $86 million at the end of 2015, or 77 per cent. As of now, each year the company pays VND100 billion ($4.5 million) in interest.

According to VTV, there are two reasons for VSTV’s losses. First, there are competitors that are strong in terms of technical infrastructure and finance, such as Viettel, MobiFone, and FPT. Second, because VSTV has a lot of debts, its financial costs are high, not to mention that the USD/VND exchange rate is on a steady trend of increase.

On top of all these, copyright infringement is rampant, people’s purchasing power has decreased because of the economy in general, and Vietnamese people have a deep-seated love for free and cheap products.

VTV said the strategy to sell high-end high-price TV channels and programmes is not suitable for the Vietnamese market. Also, the company is not flexible enough so it is losing market share to competitors.

According to VTV, in 2016 and the following years, Canal+ suggested decreasing the price of subscription to VND125,000 ($5.6 per month), and that VSTV look for other sources of income beyond subscriptions, such as advertising. The company will also have to invest in content to be able to compete.

VSTV is the joint venture between VTV and Canal+, in which VTV holds 51 per cent of the total chartered capita of $20.1 million, Canal+ contributed $9.8 million in cash and VTV $10.2 million in assets. Earlier in June 2015, the company reported that it had broken even.

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