FPT’s cold feet over telco deal

EVN Telecom is looking to get its house in order to prosper in the market place

FPT broke the news to EVN Telecom after six months negotiations and a VND700 billion ($33.8 million) deposit with EVN Telecom for 3G network investment.

It cited the rising investment costs for the former’s 3G network development project due to the Vietnamese dong’s depreciation against the US dollar and surging bank interest rates as reasons for it getting cold feet.

“The negotiation process has lasted for the past six months and changes have occurred during the process and we are still considering the deal and we will make a final decision soon,” said an FPT executive.

FPT last week issued an internal document on its decision outlining how the company might even quit the acquisition deal. 

Early this year, Prime Minister Nguyen Tan Dung decided to allow EVN Telecom to sell a 49 per cent stake to FPT. But, FPT has now refused to pour further more money into EVN Telecom.  

Therefore, the state-owned firm plans to sell a 13 per cent stake to Digicom, an arm of Vietnam Multimedia Corporation, and 12 per cent to FPT, Vietnam’s largest private technology firm by revenue.

An EVN Telecom executive estimated that with just $33.8 million of deposit capital, FPT would hold only a 12 per cent stake in  EVN.

“We don’t want to accept FPT’s withdrawal because we missed a chance to sell a stake to a Singaporean partner following the prime minister’s nod to our plan to sell a 49 per cent stake to FPT few months ago. Therefore, we will persuade FPT to hold a 12 per cent stake while selling another stake to a second domestic partner,” an EVN source told VIR.

EVN Telecom, needs to sell a 13 per cent stake to another partner as a condition to make its initial public offering (IPO). Under the Ministry of Industry and Trade’s (MoIT) requirement, EVN Telecom must sell an aggregate stake of 25 per cent before launching its IPO.

If FPT’s stake is just 12 per cent instead of 49 per cent, the ownership structure will favour Digicom. EVN Telecom and non-facility based Digicom signed a strategic agreement for sharing 3G service infrastructure last year. Therefore,FPT still holds a 49 per cent stake in EVN Telecom, Digicom cannot be a stakeholder in EVN Telecom and it will have to find other telecom carriers to provide its telecom services. 

EVN Telecom, with chartered capital of around VND2.9 trillion ($140 million), has completed composing its equitisition plan for approval by the MoIT.

Among telecom services, EVN Telecom earned only VND5.6 billion ($270,500) from 3G services in 2010, meeting only 1.1 per cent of its targeted revenue. The revenue from international and domestic submarine channel circuit leasing, also lagged behind targets, meeting only 19.8 per cent for international circuit leasing target and 22.2 per cent for domestic leasing targets.

EVN Telecom plans to earn revenue of VND3 trillion ($149.5 million) this year, a modest increase of 10 per cent against the figure in 2010. EVN Telecom reportedly earned VND2.8 trillion ($135.2 million) in revenue in 2010, meeting only 61 per cent of its targeted revenue for the year.