Vietnam - The world’s big guys who have to pack up and go

VietNamNet Bridge – A lot of big guys, who have been prospering in the world market, did not succeed with their business performance in Vietnam and have to leave the potential market.

In July 2009, VimpelCom, a big mobile network operator in Eastern Europe and Central Asia, joined forces with Vietnamese Gtel to set up a new mobile network in Vietnam – Beeline. At that time, VimpelCom made an investment deal of 267 million dollars to hold 40 percent of the stakes in the joint venture.

In April 2011, VimpelCom reached an agreement with Gtel on the additional investment sum of 500 million dollars which would be disbursed until the end of 2013. The first disbursement sum of 196 million dollars helped increase the ownership ratio of the foreign partner in the joint venture from 40 percent to 49 percent.

The remaining sum of money worth 304 million dollars would be disbursed in the next steps, which would raise VimpelCom’s stake proportion in the joint venture to 65 percent.

However, after exactly one year, VimpelCom decided to “pack up and go.” The big guy sold its stakes to the Vietnamese partner for 45 million dollars. With the deal, the brand “Beeline” would disappear in Vietnam after six months.

Before deciding to bargain its stakes, Beeline met a lot of big difficulties in developing new subscribers and it was weak in the competition with other rivals.

The mobile network operator announced that the network coverage had reached 50 cities and provinces. However, even in big cities and provinces like Hanoi and HCM City, the service quality is worse than that of other big mobile networks. Meanwhile, Beeline was also inferior to other big networks like MobiFone, VinaPhone and Viettel in terms of the sales agents, brand popularity and the range of services.

VimpelCom reported the average revenue per subscriber at 0.7 dollars only in the third quarter of 2011 and 0.9 dollars in the fourth quarter, the lowest level among the countries where VimpelCom sets up mobile networks.

The figures were 2-3 dollars in Cambodia at the same time and higher in other markets, 4.9 dollars in Laos. Vietnam and Cambodia are the two markets where VimpelCom took a loss, totaling 527 million dollars.

Meanwhile, other big mobile networks had higher average revenue per subscriber in 2011: Viettel 4 dollars, MobiFone 5 dollars. Even big mobile networks would fall into difficulties, if the revenue is lower than 2 dollars, let alone small networks.

In fact, VimpelCom is not the only big guy who has to leave the Vietnamese market. Prior to that, in early 2010, SK Telecom, the biggest South Korean mobile network which holds more than 50 percent of the market share in the country, also announced the withdrawal from the Vietnamese market.

Not only mobile network operators, but the foreign investors in many other investment fields also have to stop their business or shifted to other types of business in Vietnam.

Sony is a typical example. In late 2008, Sony terminated its production in Vietnam. The big guy established a new company specializing in importing goods for domestic consumption.

The representative of Sony then, explained that Sony decided to stop the production of tube TVs in most of the countries in the world. However, experts said that when taking loss, investors will have to think of shifting to another type of business.

A lot of foreign investors, including Sanyo, Toshiba, Hitachi, Matsushita, JVC, LG Samsung, flocked to Vietnam in early 1990s, when the electronics industry was considered a key industry for Vietnam which could enjoy the government protection with the import tariff of 50 percent on complete built imports.

No automobile manufacturer has officially left the Vietnamese market. However, the withdrawal of many foreign manufacturers proves to be inevitable, since the market has become narrow with the policy on not encouraging people to use cars.

Source: Dat Viet

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