Telecom industry opens doors to foreign partners

The latest decree draft for the Telecom Law allows a single foreign investor to hold a 30 per cent stake in a local telecom firm

The rule is specified in the first ever regulation draft on foreign investors’ stakes in a telecom operator in Vietnam and is part of the latest decree draft to guide the execution of the Telecom Law, which will come into force on July 1 this year.

The ratio is in step with the country’s World Trade Organisation commitments on allowing total foreign investors to hold up to 49 per cent of an operator’s chartered capital from 2007. The document, compiled by the Ministry of Information and Communications (MIC), will become an official legal framework for any acquisition of telecom operators in Vietnam.

Last year, the government announced to permit EVN Telecom to sell a 30 per cent stake to foreign investors. The operator is now under equitisation with its assets valuation completed in the first quarter.

EVN Telecom previously estimated that its corporate value as of April, 2009 was around VND8 trillion ($421 million). However, the firm revalued its assets as the previous evaluation was made in September, 2008 instead of April, 2009 and its structure had since changed.

MobiFone’s long-awaited equitisation is still delayed and is waiting for new government directions. MobiFone’s corporate value was defined at around $2 billion by Credit Suisse last year.

On the old schedule, the proposed date for MobiFone’s equitisation was April 2009, with a 30 per cent stake sold to investors, including 15 per cent for strategic partners. Around 10 international telecom groups from Europe, Asia and Russia were interested in being strategic partners.

Pham Hong Hai, director of MIC’s Telecom Department, said the Telecom Law did not prohibit a telecom operator to sell its network to its peers and the total foreign stake in a local telecom firm was still only 49 per cent.

“We will not compile any documents on telecom sector mergers and acquisitions. All regulations are clear for acquisition deals,” he said.

Viettel Telecom does not have a clear equitisation plan as it is trying to complete a restructuring proposal by expanding into other business segments such as mobile handset production. The long-awaited VinaPhone equitisation is still a distance away, as VNPT Group’s restructuring proposal has not been approved by the MIC.

The MIC is also compiling three prime ministerial decisions on the transfer of telecom digit stores and frequencies and a dedicated network for the Party’s agencies in line with the decree draft guiding the implementation of the Telecom Law.

According to the RJB Consultants LTDD, as of February this year, Viettel led the mobile service market with a 40.1 per cent market share, MobiFone followed with 32.9 per cent, VinaPhone (21.8 per cent), S-Fone (2 per cent), VietnamMobile (1.5 per cent) and GTel (1.3 per cent) and EVN Telecom (0.4 per cent).