Jan 15, 2013

Vietnam - Telcos weep, because revenue from fixed line services down dramatically

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VietNamNet Bridge – In previous years, fixed line services brought high revenue to the national telecom group VNPT. But nowadays, it incurs the loss of trillions of dong from the services.

What’ll the fate of fixed lines be like?

VNPT, the telecom enterprise, which holds the dominant position in the fixed line service market, complained that it has been incurring big losses over the last few years with fixed line services.

Under the circular which has just been released by the Ministry of Information and Communication. VNPT and the military telecom group—Viettel, have been listed in the group of the companies which hold the dominant positions on the inner-region fixed line service market. Meanwhile, the dominant position in the long-distance domestic telephone services belongs to VNPT alone.

However, ironically, the advantageous service has brought great misery to VNPT.

According to Vu Tien Duong, Deputy Head of the Business Division of VNPT, said VNPT once had 13 million fixed line subscribers. However, with the rise of mobile phone technology, a lot of fixed line subscribers have left.

A lot of others stay, but the usage capacity is very small, because the subscribers only use the service as an alternative to mobile phone service. Duong said the number of fixed line subscribers decreases by 25 percent every year. VNPT now has only 5 million subscribers left, and it’s still unclear how many more subscribers would leave.

Not only the number of subscribers, but the average revenue per subscriber has also decreased significantly. In 2012, the average revenue per subscriber was VND40,000 a month, while it has dropped to VND33,000. As such, every subscriber only spends VND13,000 on services, while the other VND20,000 is the subscription fee.

A senior executive of VNPT said in 2011, the production cost of one minute of inner-region call was VND650, while it charged clients VND400 dong only, which means that it incurred the loss of VND250 for every minute of call.

Duong said there has been no official statistics about the loss incurred by VNPT from fixed line services, but he affirmed the figure could be trillions of dong a year.

No way out found

Facing the sharp decline of fixed line service revenue, VNPT has many times entreated the help from the Ministry of Information and Communication, asking for the permission to raise the connection fee for the calls from mobile subscribers to fixed line subscribers.

The ministry then agreed to raise the connection fee from VND270 to VND415 per minute, commencing form October 1, 2011. However, VNPT said that the price increase is not big enough to feed fixed line network.

In fact, there are very few calls from mobile subscribers to fixed line subscribers, which explains why the connection fee increase cannot ease the difficulties burdening fixed line network.

“We are still meeting big difficulties in maintaining fixed line network,” Duong complained.

Some experts have warned that if VNPT does not think of integrating fixed line service with other services like IPTV or ADSL, the fixed line network would not be able to exist. However, this seems to be not a good solution, because not all clients have the demands for all the services.

The same situation is occurring in many countries in the world. It’s now mobile service which is the goose that lays golden eggs for AT&T and Verizon, which were once the big guys in fixed line service.

Buu Dien

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