Electricity, dollar increases worry Internet providers

Published: 25/02/2011 05:00



After incurring heavy losses from ADSL services in the past two years, in early 2011, broadband Internet providers, were further distressed by the dong devaluation and the electricity price increases.

In 2009, Viettel reported that it got 675 billion dong in turnover from ADSL services. Meanwhile, the channel leasing alone gobbled 1500 billion dong. Besides, Viettel had to pay other expenses to maintain its services. The giant telecom service provider has not released figures about the ADSL business in 2010, but a senior executive of Viettel said that the company didn’t make profit from the service.

While the company is still incurring losses from the service, the dong/dollar exchange rate has increased by 9.3 percent and the electricity price will increase by more than 15 percent as of March 1, 2011.

A senior executive of Viettel said that all the equipments for broadband Internet, including ADSL, are imported. When the dollar becomes more expensive, the company will have to pay more for the imports. In other words, the  production costs will be higher.  The price of electricity, a big expense item, will also increase. All that bad news have discouraged? Worried? the company.

A representative from another telecom company which also provides broadband Internet said that the equipment imports account for 40-50 percent of the total investment expenses of the company. Therefore, the exchange rate will have severe impacts on the company’s operation.

Meanwhile, higher electricity price will also make the costs on maintaining stations and the core network technical infrastructure higher. This  will also affect the purchase of copper cable. Meanwhile, the company has to increase its staff’s wages due to the high inflation rate. As a result, the total costs have increased dramatically.

“We think we cannot keep the current prices. We may have to consider raising service fees in the time to come,” the representative said.

If so, this will be a surprise to Internet users, who have become used to seeing telecom service fee decreasing for the past many years.

Meanwhile, another telecom company explained that it did not provide ADSL and copper cable to households, because the business only brings losses. A source from the company said that with the exchange rate adjustment and the electricity price increases, the companies which do not intend to raise fees on ADSL services, will not be able to survive.

A source from VDC has also affirmed that there is a close link between the costs of broadband Internet services and the expenses on imported equipment, the electricity price and labor force costs. If the costs all increase sharply, all service providers will suffer because the production costs will be very high.

VnExpress has quoted a senior executive of a telecom company as saying that his company is considering adjusting the broadband Internet service fees in order to ensure the sustainable development of the services. He said that unlike mobile services, the broadband Internet in general, and ADSL service in particular, requires very high investment costs. Meanwhile, due to the fierce competition, most of companies have been trying to force the service down, resulting in big losses.

The executive said that with the shocks from the exchange rate adjustment and the electricity price increases, no company will be enthusiastic about developing ADSL services.

He went on to say that those companies, which provide many kinds of services, will not be as affected by the price increases, because they can make profit from other services. Meanwhile, the companies which rely on one kind of business, will be most affected.

C. V

Provide by Vietnam Travel

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