New decree believed to trigger a new M&A boom in telecom sector

Published: 24/05/2011 05:00



The new regulations on the ownership ratios in Vietnamese telecom companies stipulated in the Decree No 25, which will take effect from June 1, 2011, are believed to accelerate the process of merger and acquisition (M&A) in the telecom sector.

Lawyer Tran Manh Hung from Baker & McKenzie, said on Dau tu that the new regulations on the ownership ratios in Vietnamese telecom companies will bring the opportunities to purchase stakes of mobile networks in Vietnam to foreign investors.

“Foreign investors are expecting the sale of stakes in the telecom sector. However, it is still necessary to wait for the legal documents to guide the issue,” Hung said.

The persistent pursuit of the French Orange France Telecom of the equitization process of MobiFone, one of the three biggest mobile networks in Vietnam, is the most convincing evidence for Hung’s viewpoint. In 2006, when MobiFone announced the plan to go equitized, Orange France Telecom immediately expressed its willing to become the strategic partner of the Vietnamese mobile network.

“We are still pursuing the goal of becoming a strategic partner of MobiFone,” said Jacques Flucrant, Regional Director of Orange France Telecom in Vietnam.

According to Jacques Flucrant, the Decree No 25 will help accelerate the equitization process of MobiFone, which has not made any considerable progress in the last five years. However, he also said that the equitization will depend on many factors.

“The equitization is clearly a better solution for the time to come, when the decree 25 takes effect,” he said. “If VinaPhone and MobiFone, the two biggest mobile networks, merge into teach other, there will be only two big networks on the market, which should not be seen as a good factor for the healthy competition on the market”.

The main principle of the Decree 25 is that an institution is now allowed to own two mobile networks. Therefore, VNPT, the Vietnam Post and Telecommunication Group, which owns both MobiFone and VinaPhone, will have to restructure the group.

According to Buu dien, there are two scenarios for VNPT to choose: either to equitize one of the two mobile networks, or merge the two mobile networks.

What to choose proves to be a difficult question for VNPT, because both the solutions will force VNPT to “sacrifice” its benefits. Both VinaPhone and MobiFone are the big mobile networks in Vietnam which can bring fat profits to VNPT.

In case the equitization of MobiFone does not occur, he said, Orange France Telecom will still be interested in the opportunities to invest in Vietnam’s mobile networks by considering other cooperation opportunities.

Orange France Telecom is not the only foreign investor who wants to invest in Vietnam’s telecom sector through merger and acquisition, instead of setting up joint ventures or business cooperation contracts (BCC).

Dau tu has quoted its sources as saying that some months ago, “a Singaporean partner decided to purchase 20 percent of the stakes of EVN Telecom, but the affair failed to be done.”

Foreign investors want to become the owners of mobile networks by purchasing existing networks in Vietnam, while they do not like BCC or joint ventures. Experts believe that they have learned the lessons from S-Fone (BCC) and Beeline.

Both the mobile networks are in big difficulties, while the foreign partners in the two networks have been pushed into a dilemma. SK Telecom, the foreign partner in S-Fone has withdrawn from the project, but it still cannot get the money from selling 20 percent of the capital contribution to SPT.

Meanwhile, Vimpelcom, the foreign partner of Beeline, has announced the plan to inject 500 million dollars more in the network from now to 2013. However, Beeline needs to gain certain business results in order to receive all the promised money.

Commenting about Vietnamese market, Sameer Padhye, Vice President of Cisco Group, said that Vietnam is now in the first stage after shifting from conversation to data. Therefore, he can see great development opportunities in data and content services in the time to come.

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Provide by Vietnam Travel

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