December 28, 2013
That Viettel, MobiFone and VinaPhone simultaneously recently raised their 3G rates by 40% has landed a major blow on consumer confidence. The public have expressed skepticism about a possible behind-the-scenes deal on service rate hikes and unfair competition in the telecom market. And together with it, the time for floating telcos may be coming.
Experts and organizations believe Vietnam should accelerate flotation of telecommunications companies to give birth to a truly competitive market.
VAFI recommendations
In mid-November, the Vietnam Association of Financial Investors (VAFI) contended that flotation and listing are the only way to better manage State assets at Viettel, MobiFone and VinaPhone. It is also a way to effectively exploit and manage these three State-owned enterprises, and create a transparent mechanism to enlarge their contributions to the national budget.
According to VAFI, the recent 3G charge increase stems from the deep-rooted monopoly in the local telecom market. A preliminary survey inititated by VAFI shows that the average revenues and profit of Viettel, MobiFone and VinaPhone have kept surging given their monopoly with a combined market share of more than 90%.
VAFI argued that with their constantly high profit margins, these three mobile carriers had no reason for hiking their charges simultaneously. Also, VAFI suspected corporate governance at these three firms was just above average, citing the development of their 3G networks as an example. After several service rate hikes to offset the costs of construction, operation and maintenance, they have kept raising charges with no commitments to better service for consumers. Moreover, Viettel has shown signs of dispersed investment in its non-core operations such as finance, real estate and pay TV.
Therefore, to make the telecom market transparent and healthy, VAFI proposed the Government should soon float VNPT and transfer MobiFone and VinaPhone to the State Capital Investment Corporation (SCIC), while tightening control on these businesses’ scattered investment.
Echoing this view of VAFI, Dr Nguyen Quang A, a noted economists, said that flotation is the best way to manage State assets and make the market transparent not only for the telecom but also for any sector.
“Floating State-owned enterprises helps improve their competitiveness. And in some way, it makes the market more transparent, albeit insignificantly,” he said.
Pham Tien Thinh, general director of New Horizon Internet JSC., former director of S-Fone, said Vietnam’s telecom market has never gone beyond monopoly and unhealthy competition. The market is still being dominated by the above three State-run mobile network operators. “To make the telecom market truly competitive, the State should open the door wider to private investors. And one of the best ways to do so is to accelerate the flotation of State-owned telecom companies,” he said.
An independent management agency needed
Thinh said Vietnam should study the way Indonesia manages its telecommunication sector. In its early stage, the Indonesian telecom market was uncompetitive as most players were State-run and were in direct competition with other service providers.
From the very beginning, Indonesia established an independent management unit in charge of the telecom market, which consists of representatives of mobile carriers, consumers and some relevant agencies. The board’s member diversity and the authority granted by the government has helped the telecom market run smoothly based on the interests of consumers and the mechanism of transparent and healthy competition for market players.
Moreover, the Government of Indonesia has introduced a lot of policies on encouraging private investors to engage in this industry. So far, there have been three 100% private telecom service providers in Indonesia, which have set up a truly competitive telecom market.
Holding the same view, Nguyen Quang A suggested the Ministry of Information and Communications should not directly manage the telecom industry but let an independent agency do the job. “The Authority of Telecommunications may be separated from the ministry and take charge of the telecom market on the condition that this agency is not a law enforcement body,” he said.
In its petition, VAFI said the Ministry of Information and Communications should only serve as a State administering agency rather than interfering in every enterprise. “It’ll be more efficient to assign private investors to business administration.” VAFI concluded.
(By Ha Van)