VietNamNet Bridge – VimpelCom has withdrawn from Vietnam. EVN Telecom has been taken over by Viettel after many years of taking loss. S-Fone still has not found the way out after many years of stagnation. The Vietnamese telecom market seems to take a step back after 10 years of witnessing rapid development.
Giant gets off the hook by leaving Vietnam
GTel Mobile, the joint venture between Vietnamese Global Telecom and Russian VimpelCom, which developed Beeline mobile network, enjoyed a special business mechanism and a lot of other preferences which were not offered to other investors.
VimpelCom planned to inject one billion dollars in Beeline. The two partners in the joint venture obtained an agreement that VimpelCom would raise its ownership ratio to 65 percent in the joint venture. Meanwhile, under the current laws, in the telecom sector, Vietnamese partners must hold the controlling stakes in any telecom legal entities.
High ranking officials of the Russian government, in a working visit in Vietnam affirmed the will of the Russian telecom group to make long term investment in Vietnam, if it can obtain more resources and the right to use frequency band to provide more advanced added value services.
However, VimpelCom finally decided to end the games, even though it once drew up an ambitious investment plan in Vietnam, enjoyed a special mechanism and many other privileges. Though VimpelCom has injected 463 million dollars in Beeline, it got only 45 million dollars back from the sale of the 49 percent of stakes.
Analysts have commented that Beeline accepts to bargain stakes away to get out of the danger.
Beeline has “run away” from the market which shows disadvantages to small networks. It had to struggle hard in the war triggered by big networks which were holding 95 percent of the market share.
Beeline’s ARPU was very low at 0.9 dollars per capita per month in the fourth quarter of 2011, the lowest level among the 19 markets where VimpelCom invested.
Meanwhile, it could not see brighter prospects in the near future. Beeline did not obtain license for 3G, while Beeline was the only network which was not granted reasonable frequency band to provide 3G. This means that Beeline needs at least 20,000 base trans-receiver stations to ensure the best services, or it would have to spend huge sums of money to install the stations. Meanwhile, other service providers would need just a half of the number of stations to have better coverage efficiency.
A step back of the telecom industry?
To some extent, the withdrawal of VimpelCom shows that the Vietnamese telecom market is not attractive as people thought. It has also raised a question about the existence of small networks. An expert has said that the withdrawal also shows the foreign investors’ worry about the balance in the investment in Vietnam’s telecom.
State owned mobile networks now hold up to 95 percent of the domestic telecom market. This explains why telcos have been triggering the competitions in which they do not care for profits. The competitions have led to the ARPU decreasing continuously. The market has become saturated with voice services, while telcos have not thought of providing other services that target new groups of consumers.
According to BMI, the ARPU in Vietnam dropped from 6.5 dollars in 2007 to 5.52 dollars in 2009, 5 dollars in 2010, while the figure is expected to drop to 3.51 dollars by 2015.
Hoang Ngoc Diep, a well-known telecom expert, has warned that all the three biggest network operators have been focusing on basic service packages and pre-paid services, while they have not offered added value services to businesses, state agencies. The price war has made networks gradually get exhausted.