Phone network offers cold comfort

October 23, 2012 | 09:33
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Vietnam’s mobile network market is rapidly growing, but seems to hold little promise for foreign players.

Over the past decade, three foreign investors have partnered with Vietnamese companies to provide mobile network services, including Russia’s VimpelCom, South Korea’s SK Telecom and Hong Kong’s Hutchison. However, two of them have since left the market.

 The remainder is Hutchison, but its joint venture with Hanoi Telecom, known as Vietnammobile, is accounting only around 3 per cent of market share till the end 2011, according to the Ministry of Posts and Telecommunications.

Taking the biggest slices of the mobile pie are domestic service providers Viettel, with 36.72 per cent of market share,  while MobileFone and VinaPhone respectively account for  29.11 per cent and 28.71 per cent.

UK-based market research firm Business Monitor International (BMI), in a Vietnam telecommunications report released in July this year, said that the growth opportunities in the Vietnamese telecoms sector appeared to be diminishing due to market saturation and the dominance of state-owned entities in a highly competitive landscape.

Foreign or private investors had little room to benefit from Vietnamese economic growth, BMI said. “The competitive landscape could see further deterioration if the government approves the Vietnam Posts and Telecommunications Group’s plan to merge its mobile operators MobiFone and VinaPhone,” the firm said in its report.

The General Statistics Office reported that the number of mobile phone subscribers from January to September this year reached 8.8 million, up 10.4 per cent year-on-year. The total mobile phone subscriptions in the country till the end of March were 120.9 million,  about 30 million more than the nation’s population.

BMI said the data indicated that the Vietnamese mobile industry had been experiencing weak growth, adding that the phenomenon will persist given the high mobile penetration rate.

“BMI believes that operators should re-evaluate their strategy and focus on trying to leverage their existing base of subscribers to generate strong revenues. Meanwhile, the government should increase its efforts to promote a level playing field and boost ailing foreign investor confidence,” the firm stated in the report.

The divestment of VimpelCom is seen by some as proof for the need of a re-evaluation of foreign players in Vietnam. In 2011, the Russian company announced to invest further $500 million in Vietnam in order to expand its business here. But in Apri Vimpelcom  announced the sale of its 49 per cent stake in GTEL Mobile Joint Stock Company in Vietnam, withdrawing its entire investment as well as well-known Beeline brand from Vietnam.  

The announcement came after VimpelCom had reported its impairment in Vietnam and Cambodia in fourth quarter 2011 with losses of  $527 million. “VimpelCom does not expect any additional losses related to the sale of the above-mentioned interest,” the company said in the announcement released in April. After three years in Vietnam, the market share of Beeline was only 0.17 per cent.

“We have previously outlined our Value Agenda, within which all of our operations are reviewed to assess their future value to the group. The decision to dispose of our interest in GTEL Mobile is a result of this process, which focuses on allocating capital to those markets where we see the best opportunities to generate shareholder value,” said Jo Lunder, chief executive officer of VimpelCom.

Previously, in 2010, SK Telecom – the largest mobile phone service provider in South Korea – withdrew from Vietnam after nine years in this country. The withdrawal came after the company and its Vietnamese partner, Saigon Post and Telecommunications Services Corporation, faced challenges of fund, technology and also difficulty in legal framework.

Nguyen Van Du, deputy director of GTEL Mobile, said domestic service providers were more successful than foreign ones in Vietnam because they deeply understood the domestic market and foreign companies failed because they did not.

By Nhu Ngoc

vir.com.vn

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