Telecom fund to bring greater parity

Ministry of Post and Telematics (MPT) officials said the fund was designed to create a level playing field for telecoms players, of which only the state-owned firm Vietnam Post and Telecommunication Corporation (VNPT) is required to provide free-of-charge services.
“The MPT is trying to collect responses from relevant ministries such as the Ministries of Finance and Planning and Investment and other domestic companies to outline the Vietnam Public Telecom Service Fund proposal before submitting it to the government this week,” an MPT official said.
The official said the fund would help reduce VNPT call costs so the telecoms giant could compete on an equal footing with its healthier foreign rivals.
VNPT has born large losses by providing services to remote and rural areas at below cost. As such, it would be difficult for the company to compete with other domestic providers, which will be allowed to set their own phone prices from next year.
VNPT receives VND25 billion ($1.5 million) every year from the state budget in order to develop public telecoms services.
According to the proposal, Vietnam aims to collect some VND70 trillion ($4.3 billion) for post and telecoms development by 2010, including VND10 trillion ($625 million) for public telecom services development.
“The fund is one way to collect money for such a development,” the official said.
The fund is expected to have a value of VND500 billion ($31.2 million), of which VND200 billion ($12.5 million) will come from the state budget and the rest will be covered by domestic telecom companies.
Under the proposal, mobile phone service providers would have to contribute 6 per cent of their annual revenue to the fund. Meanwhile, the rates for international fixed line telephone providers and inter-provincial fixed phone line providers would stand at 5 per cent and 4 per cent, respectively.
Comvik and Saigon Postel, the two firms behind MobiFone and S-Fone, told Vietnam Investment Review that they needed to go over the proposal in more detail before making any comment.
The proposal said the fund would spend money on developing public telecom services, which are defined as inner-city fixed telephone service and Internet access at public access spots and for individuals.
The fund would support costs for maintaining and developing public telecom services to those who make losses from providing public services and it would provide loans for infrastructure and Internet development.
It would also give priority to extending fixed telephony to around 3,295 remote communes where the number of telephone subscribers is less than 20 per cent of the national average.
The fund would be used to install fixed telephones in 560 communes by 2005, which currently have no telephone lines.
The contribution rate has become controversial among new and old service providers.


Hoang Trung Hai, director of the GPC company, the VinaPhone service provider, said the contribution would absorb a large part of the company’s spending each year.
“I think it’s really a lot of


spending for the company, which has earned an average revenue of VND6 trillion ($375 million) a year, but the company has to accept it,” Hai said.
Meanwhile, Electricity Telecom Company (ETC) deputy director Nguyen Manh Bang said the rate of contribution applied to mobile phone service providers was very high for such a new entrant into the market as his company.
“We are piloting the system to provide telecom service. It is not good to apply a common rate to every actor in the market including the big man VNPT who has made profits from their old equipment while newcomers have had to reinvest in expanded networks,” Bang said.
He said the company suggested a rate of 2.5 per cent of revenue be applied to new service providers and 6 per cent to old providers.