VNPT shakeup faces legal obstacles

>> MobiFone, Vinaphone to merge

At this time, the shake-up plan of VNPT is under consideration by the Ministry of Information and Communications (MIC).

One question is whether VNPT’s proposal to merge VinaPhone and MobiFone would go against the Competition Law’s economic concentration regulations. Under current law, economic concentration is forbidden in case merged entities report combined market share of over 50 per cent.
 
However, merged entities are immune from economic concentration regulations in two following cases:

First, if one or several involved parties face going dissolved or bankrupt.

Second, economic concentration would help expand exports or contribute to social and economic development, or entail technological innovations.

The first-case scenario is unlikely as VinaPhone and MobiFone businesses remain healthy.

In the recent list of top 1,000 largest corporate tax contributors in 2012 MobiFone ranked second while VNPT was in ninth position.

In respect to second case scenario, VNPT is unlikely to pass since if VinaPhone and MobiFone are restructured, there remains only two big players (VNPT and Viettel) with up to 90 per cent combined market share in local telecom market.

The telecom market is planned to accommodate at least three major businesses equivalent on scale to ensure healthy market competition, according to head of MIC’s Telecom Department Pham Hong Hai.

“Merging some member units under a business group operating in the same field is one of the solutions to boost operation efficiency of member companies particularly and the group generally. But business groups can also ramp up efficiency through resorting to other solutions such as holding up independent units, but creating a chain of operations mutually used between these units,” said Dao Thi Thien Huong, deputy director of the  PwC auditing firm’s investment section.

Huong also said mergers might entail changes to the system and involved parties’ operations. Hence, it must be handled with discretion to ensure smooth performance in post-merger period.

The VNPT is reportedly trying to scale down the market share of its member units VinaPhone and MobiFone to less than 50 per cent to come on par with economic concentration regulations.

Latest Telecom Department figures show that  by mid 2012, VinaPhone’s market share in respect to subscriber number was 31 per cent and that of MobiFone was 18.45 per cent against 28.7 per cent and 29.1 per cent, respectively, in 2011.

A Ministry of Industry and Trade’s Competition Management Authority representative said the market share of businesses involving in economic concentration is based on the revenue whereas current market share of VinaPhone and MobiFone is based on subscriber number.