S-Fone in a fragile position

Last week, the People’s Court in Hanoi’s Hoan Kiem district handled a lawsuit between S-Fone and S-Fone Hanoi branch’s former head of customer services Truong Thi Hong Hanh.

Hanh claimed that though S-Fone agreed for her to stop working from November 2, 2011 with a total severance allowance package of around VND48 million ($2,200) she got nothing in return. Hence, she brought the case to court.

At the trial later last week, the Judging Council came to a decision compelling S-Fone to pay Hanh VND51 million or $2,400 of the severance allowance and associated interest due to late payment. In the meantime, ailing S-Fone had to give back her social insurance book, pay social insurance fees for her to end of October 2011 and incur associated legal costs.

Under the decision, S-Fone would be forced to realise the court decision if the two sides could not compromise.

Earlier over 200 workers who used to work at S-Fone Ho Chi Minh City, Danang and Hanoi branch offices accused S-Fone of owing a huge amount of severance allowances parallel to unpaid social insurance fees which reportedly amount to VND41 billion ($1.9 million) including VND19 billion ($905,000) unpaid social insurance fees and VND22 billion ($1.05 million) severance allowances.

On June 11, S-Fone announced to stop labour contracts with all employees to end its Business Co-operation Contract mechanism and change to a limited liability company. But, it did not mention whether these labourers would be later employed when S-Fone completed the conversion.

The decision was reached under an agreement between Saigon Postel (SPT), S-Fone's parent company, and S-Fone's trade union, according to a company representative.

In the meeting with S-Fone labourers in Ho Chi Minh City in July 18, SPT general director Hoang Si Hoa promised to pay all debts to labourers following a specific roadmap. Accordingly, from August 2012 each month the company will pay them VND5 billion ($238,000) including VND1 billion ($47,600) to social insurance funds and VND4 billion ($19,000) debts to labourers losing jobs.

Having started operations in Vietnam in 2003 as the third mobile operator after MobiFone and Vinaphone, S-Fone was a joint venture between Korean telecom giant SK Telecom and SPT.

The company also became the first mobile operator to apply the advanced CDMA technology (Code Division Multiple Access) in the country, while other carriers used the GSM (Global System for Mobile Communications).

However, due to the limited model of CDMA's terminal handsets, the company was unable to raise its customer base, with just over one million after a decade of operations.

After SK Telecom withdrew from the venture in 2010, S-Fone has been unable to find a new investor to develop its ailing network.

The company, also envisaging change of its network technology from CDMA to HSPA (High Speed Packet Access) to boost demand, had a turnover of merely VND786 billion ($37.4 million) in 2011.