Vietnam talks to save landmark telecom deal
HANOI - Vietnam's
telecommunications monopoly confirmed on Friday that
it had begun talks with Korea Telecom to revise the
communist country's first contract with a foreign
company for investment in the domestic telephone
network.
``Both sides see the necessity to sit down and start
renegotiation. We are discussing this,'' an official with
state-owned Vietnam Posts and Telecommunications
(VNPT) said.
``The contract period is quite long, and it's difficult to
anticipate all changes in the economy,'' he added.
Park Kyun-chul, Korea Telecom's Hanoi-based
Southeast Asia managing director, told Reuters on
Thursday that a weaker dong currency and cuts in
Vietnamese telephone tariffs threatened to push his firm's
pioneering project into the red.
State-owned Korea Telecom became the first foreign
firm permitted to invest directly in Vietnam's domestic
telephone network when it entered into a $40 million
Business Cooperation Contract (BCC) with VNPT in
1996.
BCCs limit foreign partners to financing, technology
transfer and some management rights in return for a
share of revenue.
The plan was to spend three years installing 40,000 fixed
lines in Vietnam's northeast provinces of Haiphong,
Quang Ninh, Hai Duong and Hung Yen, followed by a
seven-year revenue-sharing period with VNPT.
Park said installation would be completed within budget
in April 1999, but the number of new lines had been
increased almost four-fold to 150,000 to help make up
for revenue shortfalls.
He added that revenue projections were now quite
different from earlier forecasts and now hovered around
the minimum required to cover project risk but fell short
of offering profit.
The official from VNPT said that since negotiations on
the existing contract began in 1994 there had been big
changes in the domestic and regional economy.
``When both sides have the same aim to successfully
implement the contract...there are always possibilities for
changes if the changes are reasonable,'' he told Reuters.
Under the contract the two sides can adjust the revenue
shares three years into the seven-year period if returns
have been less than expected.
A Korea Telecom executive, who declined to be named,
said on Friday that his firm and VNPT both shared the
opinion that it would be better to renegotiate now rather
than wait until April 2002.
``VNPT is positively considering the situation. We are
now negotiating the adjustment after a joint two-month
feasibility study in the project area,'' he said.
``Even though VNPT has some difficulties because of
the Asian economic situation their positive consideration
encourages me and Korea Telecom to keep our project
and also expand the project for the long-term
partnership,'' he added.
In the past year, three major international telecom firms
have also entered into BCCs with VNPT to develop
fixed networks in Hanoi and southern Ho Chi Minh City.
Britain's Cable & Wireless (CW.L) was awarded a
$207 million contract in August to install 250,000 lines in
Hanoi.
Late last year France Telecom (FTE.PA) received a
$467 million licence for 500,000 lines in the former
Saigon and Japan's Nippon Telegraph and Telephone
Corp (9432.T) agreed to invest $194 million in 240,000
lines in Hanoi.
Reuters - September 25, 1998.
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