Vietnam’s telecom industry opens for integration
Viettel on August 10 received a licence to provide VoIP (voice over Internet protocol) services in Cambodia and became the first telecom business in Vietnam to investing in services abroad. Accordingly, this company will invest US$1 million in Cambodian market.
Viettel’s Deputy General Director Nguyen Manh Hung said that the firm’s viewpoint is investing in foreign market would help the company better develop its market.
“Viettel will lose opportunity of investment abroad when it completes investment in Vietnam. Therefore, we invest in Vietnam and Cambodia in parallel,” Mr Hung said.
He added that by investing abroad Viettel will create alliances with extremely cheap charges. For example, Singapore has a policy allowing customers using mobile phone service in the alliance including the US, Singapore, Hong Kong to enjoy free calls.
The Vietnam Post and Telecommunications Group (VNPT) has long targeted to open a branch in the US to carry out market research activities and assist its affiliates to expand relations with American partners. Moreover, the existence of a branch in the US can help advertise the image of VNPT in the US.
VNPT chose the US over other markets because it is the world’s largest ‘telecom wholesale market’, with modern network infrastructure connected to all countries. All international calls coming through the US to other countries have cheaper charges. The main reason is the US forces countries that want to transfer international calls through the US to reduce charges. For example, a call from France to Vietnam will have higher charges than one from France, through the US to Vietnam.
The US is considered the transit centre for international calls. Most of leading telecom companies in the world has subsidiaries or branches in the US.
On the other hand, a community of Vietnamese American (over 1.3 million) in this country has turned the US a potential market for VNPT in providing retail services like pre-paid phone and Internet card, money transfer service.
VNPT hopes to set up a company in the US to collect transfer charges by attracting all international calls to Vietnam to go through its company in the US. Customers will benefit from this service since the charges will be lower instead of making direct calls to Vietnam.
However, VNPT is facing many difficulties. The biggest is that American laws don’t permit wholly foreign owned companies like VNPT to open wholly foreign owned firms in the US. VNPT can only buy around 25% of stocks of an American company to offer this service. However, in this case, VNPT can’t turn viable profit.
VNPT also plans to invest in Malaysia’s Acasia, which is a joint venture of some big telecom companies in ASEAN member countries.
Calling for investment into Vietnam
Apart from investing in other countries, Vietnamese telecom companies want to seek foreign partners. The pioneer in this field is S-Fone mobile network.
This CDMA network operates under a 15-year business cooperation contract signed between Saigon Postel and the Republic of Korea’s SLD Telecom in 2000. The initial investment of this project is $230mil, including $218mil from SLD Telecom. Saigon Postel contributes $11 million and invisible assets.
Hanoi Telecom and Hutchison Telecom signed an agreement worth $656mil in 2005 to build another CDMA mobile network, which is about to operate.
So far, many big names in the world telecom industry have come to Vietnam, like Telstra, Alcatel, Ericsson and Nokia.
Vietnam will equitise its state-owned telecom companies to facilitate capital raising from the international market. The current form of investment is no longer suitable and foreign investors are looking for a new form, for example joint venture.
According for experts, as basic investment cost in telecom will increase while profit goes down because of increasing competition, if Vietnam maintains contracts, it will only be able to attract low-quality investors.
In the Vietnam-US Bilateral Trade Agreement, Vietnam agrees the establishment of telecom joint venture companies. According to BTA, which took effect in December 2001, American investors are allowed to own up to 49% of capital in joint venture companies that provide basic telecom services in Vietnam (mobile and satellite telephone services) after four years since the BTA takes effect, own up to 49% of capital for fixed telephone service after six years and 50% in added value telecom services after two years.
The Vietnam Economic Times - September 5, 2006.
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