VNPT let off hook for now

Foreign investors are tired of standing in the telco equitisation line

Decree No.25/2011/ND-CP on the implementation of telecommunications laws relating to stake ownership ratio, commercial rights fees and foreign investment came into force on June 1. The decree states that any institution or individual with more than 20 per cent ownership in a telecom company will be not allowed to hold more than a 20 per cent stake in another telco providing similar services.

It is a ruling which presented VNPT Group with a dilemma. It must now merge MobiFone and VinaPhone or conduct long-delayed equitisation of the two affiliates.

Tran Duc Lai, vice minister of the Ministry of Information and Communication (MIC), said the MIC had considered the complexity of VNPT’s situation and given two more years for the group to devise a proposal.

“In order to execute the decree, we need to set a roadmap for operators to restructure stake ownership and we plan to set a roadmap of two years for operators to prepare for the implementation,” said Lai.

A VNPT source said the group had carried out little preparation for the implementation.

“We did not receive any direction from the MIC and we have yet to devise any plans for dealing with the cross-ownership regulations,” said the source.

Meanwhile, potential foreign investors appear tired of waiting for equitisation of local mobile operators.

Tony Foster, head of the Infrastructure Group at the Vietnam Business Forum (VBF), said their confidence in equitisation had fallen.

“For many years the VBF Infrastructure Group has requested clear information about the reality of equitisation of mobile telcos. While the sub-group recognises that this is a very political area, the VBF Infrastructure Group has little confidence in any equitisation occurring in a meaningful timeframe or in a meaningful manner, so this request is now largely irrelevant,” said Foster.

“Foreign investors’ low confidence in equitisation does not mean they are not interested in equitisation, but the time [now] is not correct,” added Lai.

Pham Hong Hai, director of MIC’s Telecom Department, said the cross-ownership regulation in the decree would also create visible hope for foreign investors waiting for acquisition of MobiFone. However, the decree implementation also creates other ways for companies to go through.

For instance, VNPT could have its independent affiliates acquire stakes in MobiFone and reduce its stake in MobiFone to 20 per cent as regulated, but the total VNPT stake ownership in MobiFone will still be a major one.

MobiFone and VinaPhone contributed around 80 per cent of VNPT’s pre-tax profit last year. MobiFone, reportedly with around 6,000 employees and earned pre-tax profit of VND5.8 trillion ($293 million) in 2010.