Document: 024_TCF_06.indd.ps;Page: 1;Format:(21.000 x 29.700 cm);Plate: Composite;Date: Nov 10, 2011 15:42:25 feature Consolidating Vietnam With seven mobile operators for approximately reorganisation plan submitted by VNPT to the 87 million customers and a high penetration Pauline Renaud government to merge its mobile phone units, rate, the Vietnamese market is overcrowded. Senior reporter, Vinaphone and Mobifone. Some of the operators, most of which are TelecomFinance The companies already share their network state-controlled, are struggling to survive, partly infrastructure in most of the country’s because of generally low tariffs. But rumoured provinces. M&A deals may mark the beginning of a hedging as to the propagation of each of the The merger plan follows a new decree, consolidation wave. technologies. Some CDMA players remain but effective since June, which prohibits a company their market shares are dwarfed by the leading which owns 20% or more in one telecom GSM operators,” Dharmapalan points out. operator from controlling more than 20% of A highly fragmented another operator in the same market. VNPT needs to merge its subsidiaries into a market Is consolidation single entity in order to comply with the new Until 2003, the Vietnamese mobile operator regulation. Otherwise it would have to dilute market was a duopoly, split between on its way? its stake in one of the companies below the Mobifone and Vinaphone, both controlled by Two other companies, Vietnam Television 20% threshold. government-owned telco VNPT. Corporation (VTC) and Indochina Telecom, Some experts fear that such a merger would But in recent years, several state-owned have yet to launch services, either on their own result in a company with a 55%-60% market companies and governmental bodies – or as an MVNO. But it remains to be seen share, making survival for smaller operators including the Ministry of Defence, the whether nine operators could survive. even more challenging. Ministry of Post and Telecoms, and Electricity With most mobile operators being majority of Vietnam – launched their own mobile state-owned, consolidation initiatives are offerings, attracted by a fast-growing and young heavily dependent on the government. EVN The role of foreign consumer market and an expected growth in 3G usage. players Although growth has now slowed down, But Lam Nguyen, country director of IDC the mobile penetration rate is estimated ‘VNPT needs Vietnam, believes that the decree will create a to have reached between 95% and 130%. more level playing field for all operators. In comparison, fixed-line penetration is to merge its “The next step chosen by VNPT will likely approximately 17.5%. have a big impact on the development of the Licences were granted to increase subsidiaries into country’s telecom market in the next few years.” competition and bring tariffs down, according This next step could be the long-awaited to Tuan Nguyen, managing director at a single entity in privatisation of Mobifone, expected to make Vietnam-based ANT Consulting. the market more attractive in the eyes of both “This, in return, has benefited a majority of order to comply domestic and foreign investors. But earlier subscribers,” Mr Nguyen said. with the new attempts never materialised due to valuation But as a result, three operators dominate and regulatory issues. today’s market, while others are struggling regulation’ However, some experts believe the financially. government will continue encouraging foreign The top players in the current market are investments in the country’s telcos, despite Viettel (owned by the Ministry of Defence), some restrictions. Vinaphone and Mobifone. Vietnam entered the World Trade The other four companies – S-Fone (a JV Telecom, one of the smallest operators, could Organization (WTO) in January 2007 with between Saigon Postel and South Korea’s lead the way. a commitment to allow foreign ownership SK Telecom), Vietnamobile (a partnership “The latest round of merger and acquisitions of up to 49% in telecom services providers, between Hanoi Telecom and Hong Kong- talks seems focused on consolidating a which control their own transmission facilities. based Hutchison), GTel-Mobile (a JV between loss-making cellular outfit, EVN Telecom, Since January 2010, the country allows 65% state-owned Global Telecom and Russia’s with a larger competitor,” explains Nicole of foreign ownership in telcos that do not own Vimpelcom) and EVN Telecom (owned by McCormick, senior analyst at Ovum. their own transmission capacity but contract it. Electricity of Vietnam) – have a combined In early April, VTC reportedly considered But under the country’s Telecom Law, one market share of 4% to 7% only. buying a 12% stake in EVN for VND800bn foreign investor cannot own more than 30% of Jonathan Dharmapalan, global (US$38m), following the withdrawal of charter capital in a telco. telecommunications leader at Ernst & Young, technology company FPT from the acquisition Also, recently, Vietnamese Prime Minister says that most joint ventures appear to be process. Nguyen Tan Dung reportedly signed a decision, opportunistic, “while the role of operator has But it has now been suggested that which will see the government own a majority been assumed by players from other industry Vietnamobile may be the most likely acquirer, stake in five telecom companies: Viettel, VNPT, sectors, for example power and utilities and after the company was quoted saying that it was GTel-Mobile, Indochina Telecom and Vietnam foreign tech firms.” looking to buy EVN’s 3G network. Maritime Communications and Electronics The situation has been complicated further Viettel, the country’s largest mobile operator, (Vishipel), a telecom infrastructure company. by a mix of technologies. “GSM has dominated has also reportedly been approached for a stake The move indicates that the government is the landscape from a technology point of view in EVN. determined to continue having a role in this and perhaps the government institutions were Another potential transaction is the lucrative industry. 24 www.telecomfinance.com.