Cable project to break new ground

The cable will keep Vietnam connected with the world

Tricom Asia reopened its representative office in Hanoi last week after postponing the move for several months due to staff changes while preparing to sign the contract with VNPT. The signing is scheduled to take place in the first quarter next year after the two sides agree on negotiation issues and receive approval from local authorities to go ahead with the cooperation form.
Tricom Asia is asking local authorities to allow it to sign a consortium contract – Vietnam’s first-ever such form – with VNPT to build the $50-million cable. Although new to Vietnam, consortiums are used worldwide to build cable systems, such as the SEA-ME-WE3 cable system which stretches through Southeast Asia, the Middle East and western Europe.
However, the current Vietnamese legal system only allows a foreign investor to cooperate with local one in the form of a business cooperation contract (BCC).
Tricom Asia CEO Peter Landgren said the consortium may be a new model of cooperation in Vietnam because it allows the third party including investors and operators to participate in to build another link to Vietnam with the rest of the world and run a business on the cable network along with VNPT and Tricom Asia.
“There are three outstanding issues in the negotiation process comprising the consortium issue, term of contract and final revenue indication,” Landgren said.
He hopes the company will get approval from local authorities, including the Ministry of Planning and Investment and the Ministry of Post and Telematics, to go forward with construction.
Vietnam’s communication demands are expected to grow by at least 35 per cent in the next 10 years, while the current cable networks are operating at almost 100 per cent capacity.
The 1,100-kilometre multi-terabyte international fibre optic cable system linking Vietnam and Hong Kong is scheduled to begin construction in the third quarter of next year after the tender process is completed to select four construction companies – NCC, Fujitsu, Alcatel and Tyco.
The cable will have an initial capacity of 20 gigabytes per second at the beginning of 2007, which can rise to 2,500 gigabytes per second when demand requires.
In 2004, Tricom Asia and VNPT signed a memorandum of understanding to build a telecommunications network with a connection from Hong Kong to the Vietnam Telecom International cable landing station in Danang. The project was expected to require approximately $150 million. Tricom Asia was to fund it and VNPT was to contribute labour and infrastructure.
However, Landgren said as times changed and production costs decreased sharply in the world, both sides will now contribute money to build the network, and VNPT will run the business on the cable in Vietnam while Tricom Asia will operate it in Hong Kong.
However, it has been tough to get approval from local authorities on the consortium model during negotiations with VNPT. An anonymous VNPT official said it would be difficult for authorities to approve a consortium form between the two companies, as it’s such a new concept in Vietnam, but the official also said it would be difficult for the two sides to sign a BCC contract, as a BBC only includes the two companies and leaves no room for other investors and operators to participate in the project.
“We can’t build a cable network under a BCC now,” the official said.
Vietnam currently has three undersea fibre optic cable lines: a $160-million TVH with a capacity of 565 Mbps, a 10 gigabyte-per-second line connected to SEA-ME-WE3, and a C2C line linking Hong Kong, Singapore and Vietnam. The first BCC on building the cable network was between Telstra and VNPT which expired in 2002. Telstra invested $237 million to build and upgrade the country’s international telecommunications network infrastructure, including updating its international gateway and building a TVH cable and two satellite stations.