Decoding telecom giants’ race for 100,000b dong revenue target

Viettel and VNPT are nurturing ambitions to achieve revenues of over 100,000 billion dong in 2010. However, there is a debate on how these two giants could achieve this target while telecom market is at saturation point.

VNPT spokesperson Bui Quoc Viet said that 100,000 billion is an ambitious target but VNPT is determined to achieve it. Of that amount, VinaPhone and MobiFone mobile networks need to strive for 70 percent of the total revenue of VNPT, equivalent to about 70,000 billion dong. Other business segments such as fixed telephone, broadband Internet, postal services, financial services, etc, share the rest 30 percent.

In mid June, VNPT has achieved about 40 percent, equivalent to 40,000 billion dong. The corporation hopes to achieve the rest 60 percent, equivalent to 60,000 billion dong, in the remaining months of the year.
Viet also said that they have been promoting value-added services on 2G and 3G networks. This is a potential source of income in the future. Despite such confidence, VNPT is still unsure whether it will get the first position in the telecom market, said Viet.

VNPT’s major source of income currently relies on two mobile networks VinaPhone and MobiFone, accounting for approximately 55.41 percent shares of the market. If these two networks only obtained 61,000 billion dong revenue as in 2009, there would be little possibility for VNPT to achieve 100,000 billion dong this year. This is because VNPT’s revenues from postal services, broadband internet, and fixed telephone of may be much higher than that of other businesses, but they account for less proportion compared to revenues from VNPT’s mobile services. Meanwhile, VNPT does not have many investments activities outside the sector such as banking and finance.

In the case of Viettel, 60 percent revenue of this corporation also comes from mobile services. The rest is from other sources of income such as real estate, mobile phone distributions, postal services and broadband internet. Viettel leaders affirmed that Viettel is half way through the target, approximately 50 percent. The corporation therefore will go according to plan and achieve 100,000 billion dong.

In domestic mobile market, Viettel ranks second in revenue and the number of subscribers compared to VNPT (including both VinaPhone and MobiFone). Nevertheless, Viettel has made big investments in “left-hand” fields such as real estate, banking, and finance, terminal device manufacturing and printing services. Those investments are expected to bring considerable income to Viettel in the future. Viettel currently is the only one provider that owns 3G coverage to all the regions of the country. In addition, the major promising service of the provider is D-com 3G, which allows subscribers to get access to the internet in all the regions of the country, where there is Viettel’s mobile coverage.
D-com is also the service that brings main 3G mobile network income for Viettel.

Another factor that makes these telecom giants to be confident in 100,000 billion dong revenue target is because overseas investment projects have begun to bring considerable revenue. Shortly after being launched, the two mobile networks in Cambodia and Laos now rank first in infrastructure and second in the number of subscribers. In 2010, revenue from overseas investment services is expected to grow over 300 percent compared to that in 2009.

According to senior executives of Viettel, apart from the telecom business’s revenue, Viettel also gets revenues from real estate, banking and finance revenues, etc. The revenue from those sectors account for 40 percent of the total revenue of 60,000 billion dong in 2009, and is expected to increase to 50 percent in 2010. “Whatever the market needs, Viettel will provide. Whatever Viettel does, that needs to be number one”, said an official of Viettel.

A knowledgeable expert in telecom market said the key problem is that the two giants are not talking about on how much profit they would get in 2010, but only on the 100,000 billion dong revenue target. According to him, 100,000 billion dong target in fact is not very difficult for VNPT and Viettel since the cost calculation method used is unclear.
Thus, they totally could set the revenue target to 100,000 billion dong, even more.

This expert also analysed, in 2009, VNPT achieved 78,600 billion dong in revenue, which increased by 30 percent compared to that of 2008. However, profits reached only 13,500 billion dong, the total state budget contribution was 8,100 billion dong.

As with Viettel, in 2009, it announced 60,000 billion dong revenue achievement, but profits only reached 10,000 billion dong. Of that, 40 percent of the total revenue was from telecom services, the rest was from other sources. Not to mention, Viettel considered the internal cost from its members as revenue for the whole group. For example, export-import company of Viettel imported equipments for sale to Viettel Telecom and Viettel offices in Laos, Cambodia, etc. The export revenue is of other members’, but it was regarded as revenue of the whole group.
The number of revenue achieved by Viettel therefore did not seem to be meaningful. Viettel itself admitted that in the 40,000 billion dong revenue from telecom services, 40 percent was from promotion activities. However, this 40 percent was still included in the total revenue of this group.

In the interviews with VnExpress.net, Viettel and VNPT leaders confirmed that the profit in telecommunication business sector is lesser through time. If it was three to five years ago, the profit of mobile networks was around the threshold of 30 to 35 percent, while in 2009, this number decreased by half to only about 15 to 17 percent.

However, specialists said that VNPT has held first position in telecom market. The 100,000 billion dong, if VNPT and Viettel achieved, would not only be announced by these groups themselves but also be verified by the tax authorities. In particular, profit is still the number to assess the effectiveness of the telecommunication business.

Tags: Vietnam Telecom, Vietnam telecom maket, Viettel, VNPT