Whatever scenario happens, the good sign for the Vietnamese mobile telecommunications market is that spinoffs and mergers of mobile networks are an inevitable trend.
The information that MobiFone will be separated from the Vietnam Posts and Telecommunications Group (VNPT) has stirred up the Vietnamese telecom market recently. Although the VNPT restructuring scheme has been initiated for a few years with many changes entailed by numerous forecasts and rumours, the scenario that MobiFone will no longer belong to VNPT Group is considered a broad change to the mobile communication market in the coming years.
Who stays, who goes?
Circular 10/2012/TT-BTTTT of the Ministry of Information and Communications specifies that a mobile communication service company is prohibited from holding over 20 percent in other mobile communication service companies. This document is seen to pave the wave for the separation or merger of MobiFone or VinaPhone, both owned by VNPT Group.
However, the merger or spinoff story continues to spread until the Ministry of Information and Communications officially asked VNPT Group to keep VinaPhone and MobiFone brand names in the process of restructuring.
This means that these two carriers will not be merged. Then, the Ministry of Information and Communications directed VNPT Group to equitise MobiFone, and VNPT Group will divest from MobiFone in accordance with the roadmap approved by the Prime Minister. Minister of Information and Communications Nguyen Bac Son said VNPT Group’s restructuring will be officially started in September.
Although whether VinaPhone or MobiFone will be separated from VNPT Group has not been decided, the forecast is for MobiFone’s divorce.
In fact, despite both being owned by VNPT Group, MobiFone usually outperforms VinaPhone on the mobile market in recent years. MobiFone, VinaPhone and military-run Viettel are three largest carriers in Vietnam.
In the long run, MobiFone often reports lofty revenues, profits and high growths. On the other hand, this unit has maintained a relatively independent operation from VNPT, particularly compared with other VNPT members. According to VNPT’s financial statements in 2012, MobiFone contributed about 77.6 percent of the group’s total profit of VND8.5 trillion, equivalent to VND6.6 trillion, and accounted for 31.2 percent of its revenue of VND130.5 trillion.
Thus, compared with slow and much-dependent VinaPhone, the privatisation of MobiFone will be safer and likely cause less disarray. However, some suggested that it is better for VinaPhone to go public because it will force it to gain more independence in business operations and end its current slowness. And, keeping MobiFone will be better for VNPT.
Opportunities for small carriers
Although the final decision is not yet out, this move will have a huge impact on the mobile telecommunications market. According to the White Paper on Information Technology released by the Ministry of Information and Communications, Viettel is the largest mobile network with 40.05 percent of market share, followed by MobiFone with 21.4 percent (holding third place in 2011 with 17.9 percent) and VinaPhone with 19.88 percent (ranking second in 2011 with 30.1 percent).
Thus, following the spinoff, VNPT’s market share will be equal to about a half of Viettel. And in that situation, difficulties for MobiFone, VinaPhone and VNPT are inevitable.
According to some telecom experts, once spun off, MobiFone will not face much disorder because it is quite independent from VNPT in business operations. Nevertheless, this network will encounter difficulties in transmission infrastructure. In reality, as VNPT keeps the best transmission infrastructure in Vietnam, particularly the national telecommunication axis, MobiFone has an ideal transmission infrastructure for development.
Once separated, VNPT will keep no more than a 20 percent stake in MobiFone. Will MobiFone be in favour as before, or be left behind in comparison with VinaPhone? Depending on the answer, this carrier may face enormous difficulties.
Looking at Vietnammobile as an example, we see that when relying on hired transmission lines, it is very hard to lead sustainable development given potential disconnection or rate hikes, according to an expert. There is also a prospect that independent business units of VNPT will hold MobiFone’s stake and VNPT’s interest in MobiFone may be much higher than the limit of 20 percent.
According to industry insiders, this prospect is highly likely. The reason why VNPT repeatedly delays its divestment from MobiFone is the second largest carrier is still a ‘golden goose.’ If MobiFone is spun off from VNPT, the telecom market will foster strong competition among three big players, and this is likely a golden chance for small carriers like Vietnamobile and GMobile to emerge.
Vietnamese
