Nov 24, 2012

Vietnam - Ministry unfazed by foreign telecom firms’ exit

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VietNamNet Bridge – Given that a number of telecom firms have pulled out of the Vietnamese market and that a foreign organization has remarked the local telecom market is losing its appeal, the Ministry of Information and Communications said it is not duly concerned.

For some sectors, poor foreign investment or exodus of foreign players is seen as a failure, but it is different with telecom, said Le Nam Thang, deputy minister of information and communications.

During its infancy, due to the lack of capital and technology, the local telecom industry really needed foreign investment to get started.

However, now Vietnamese telecom firms have sufficient funds, rich experience and modern technology, with some even making investments abroad, Thang explained.

Previously, under a mobile phone business cooperation contract, in which Comvik of Sweden engaged in the business of MobiFone, the Vietnamese party had to ensure a very high rate of return, at 25%. This would not have been the case if the local firm had done business on its own.

Still, under the commitment to the World Trade Organization (WTO), Vietnam has to open its telecom market, allowing foreign firms to join hands with local businesses with capital contribution of less than 49%.

“Despite such a commitment, foreign investors can only pour capital into telecom if they succeed in negotiating with local enterprises on a commercial basis,” said Thang.

Recent data of the U.K.-based Business Monitor Intelligence (BMI) shows that the Vietnamese telecom market is losing its appeal. BMI has lowered Vietnam’s telecom ratings to 42.5 points from 45 points in the second quarter of 2011.

Furthermore, telecom experts shared the view that the local telecom market had become less attractive to foreign investors given the recent changes in the market.

For example, EVN Telecom has been transferred to Viettel; Vimpelcom has withdrawn from Vietnam; SK Telecom has divested capital in S-Fone; and Hutchison of Hong Kong is struggling to operate its joint venture Vietnamobile.  

Several years ago, many foreign telecom firms like France Telecom, ST Telemedia and Telenor set up representative offices in Vietnam. Now, Telenor has closed its office and pulled out of Vietnam, while other firms have laid off their staff and are operating perfunctorily.

In addition, Vietnam Post and Telecommunications Group (VNPT) has suggested a merger of MobiFone and VinaPhone, instead of equitizing the former as originally planned, disappointing many foreign investors who are waiting to invest in this mobile network.


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