Warning bells sound as C&W Hanoi deal fails
HANOI - A
decision by British telecoms giant
Cable & Wireless to pull out of a
$207 million deal in Vietnam has
sounded warning bells for other
foreign firms battling dimming
economic prospects, executives said
on Tuesday.
They said foreign telecom firms had
been unrealistic in trying to grab a
slice of what in the early 1990s was
seen as one of the most promising
emerging telecommunications pies.
``It's not surprising (C&W failed).
We know there isn't the level of
demand for lines as when Cable &
Wireless started looking,'' a senior
executive with one telecom firm said.
``All those companies were trying to
get into the market...they were
over-optimistic and looking to buy
their way in,'' he added.
A senior executive at C&W in Hanoi
declined to comment.
After almost a decade of stellar
growth, Vietnam's economy has
suffered a downturn and analysts
expect around three percent growth
this year, down from 5.8 percent in
1998. Imports have slumped and
export growth has also slowed.
An official at state-run Vietnam Posts
and Telecommunications, C&W's
partner in the 15-year Business
Cooperation Contract (BCC) that
was signed last August, said the two
sides had mutually agreed to drop
the deal which would have seen
around 250,000 telephone lines
installed in Hanoi.
``(C&W) said they were changing
their business direction and were not
willing to invest in the fixed-line
telephone network,'' he told Reuters.
``The second reason was due to the
impact of the economic (slowdown),
and that the growth in telephone
networks in Hanoi has been slower
than predicted.''
A BCC is short term and gives
foreign parties limited management
rights in exchange for a share of
revenues but no equity. The
provision of telecom services in
Vietnam has remained off-limits to
direct foreign investment.
A source close to C&W said he was
disappointed by the failure but added
the firm would now seek
opportunities in Vietnam's
newly-emerging corporate
information technology sector.
A foreign telecom specialist said
communist-ruled Vietnam had
become less competitive and needed
to relax controls.
``There are now more (telecom)
investment opportunities in the world
because of deregulation rather than
trying to do a BCC in Vietnam in
difficult circumstances,'' he said.
``(Vietnam) has moved back a
bit...and is making it more difficult for
investors.''
Cable & Wireless held one of four
foreign-invested telecom BCCs. In
November 1997, France Telecom
and Japan's Nippon Telegraph &
Telephone Corp signed similar deals
to install lines in Ho Chi Minh City
and Hanoi, respectively, but little
work has been reported.
Korea Telecom, the first foreign firm
to enter into a telecom installation
BCC in Vietnam, has a smaller
project in the northern port city of
Hai Phong, but it said last year it had
been forced to renegotiate as
revenue projections fell.
Australian giant Telstra Corp had
hoped to secure a fixed-line BCC in
Ho Chi Minh City but has put the
proposed project on hold, executives
have said.
Reuters - July 6, 1999.
|