SK Telecom changes business form

Vietnam’s Saigon Post and Telecommunication Company (Saigon Postel) and its South Korean partner, SK Telecom, last week announced the change of their business marriage from a business cooperation contract (BCC) to a joint venture.

As such, the mobile network S-Fone will continue business under the new form, sweeping away all romors that SK Telecom (SKT) would stop investment in the mobile network in Vietnam by selling the S-Fone mobile network to another telecom provider.

Tran Thi Ngoc Binh, chairwoman of Saigon Postel, said in her statement released on Saturday that it was a breakthrough for S-Fone to consolidate its foothold on the market crowded with seven mobile carriers.

According to Binh, S-Fone that operates on the CDMA technology is facing challenges in terms of technology, investment, legal status and operating system. Saigon Postel has grown unhappy with the BCC that limits its legal rights in business and development. Thus, she expected that S-Fone would develop sustainably after becoming a joint venture.

After becoming a joint venture, S-Fone will continue pursuing CDMA technology and invest more capital to develop the latest technology CDMA 2000 1x. In addition, the telco will upgrade Evolution-Data Optimized (EVDO) technology, a standard for high speed wireless broadband to develop 3G services. S-fone will also offer more added value services like Mobile Internet service.

Since 2001, SKT and Saigon Postel have operated via a business cooperation contract with a term of 15 years to offer CDMA mobile phone service. SKT initially invested US$180 million for the cooperation. The CDMA network has been up and running since 2003 and now has nearly 7.3 million subscribers.

The initial fund for the S-Fone project was nearly exhausted in 2005 but then SKT and Saigon Postel reached an agreement for additional capital. However, for many reasons, the fund was never disbursed.

Vietnam now is a competitive land of telco when the Ministry of Information and Communication reported that the country is a home of seven telecom providers with over 116 million subscribers up to date, including only four million post-paid mobile phone subscribers and 16 million fixed telephones. The remainders are pre-paid subscribers.

Meanwhile, the average rate per user has declined year-on-year. In 2008, the rate was still US$7 per subscriber, but currently, it is around US$5-6 only.

Up to date, 3G services are being deployed by four operators, namely Viettel, VinaPhone, MobiFone and a joint venture between Vietnamobile and EVN Telecom.

Tags: SK Telecom