Telecom sector may see M&A activities

The Vietnam telecom market is too crowded with nine companies providing mobile telecommunications services. A senior manager in telecom industry confirmed that merger and acquisition (M&A) activities would surely increase in the next one or two years. He added that M&A trend in telecommunications sector will become popular, when there are too many licensed businesses in the market.

General director of Ericsson Vietnam Eddie Ahman said the telecommunications market of Vietnam has too many businesses sharing interests; hence, M&A trend would definitely happen. This is partially shown in the 3G licensing contest in Vietnam in the recent time.

Currently, there is no legal provision in telecom sector that bans the M&A activities in telecom networks. Head of Telecom Department (Ministry of Information and Communications) Pham Hong Hai said Vietnam Telecommunications Law does not prohibit telecom networks M&A activities. Nevertheless, during the M&A process, business has to return the license to the Ministry of Information and Communications. At the same time, they must complete negotiations with all partners and most importantly guarantee the users’ benefits.

M&A proposal could also be approved if the buyer ensures licensing standards and conditions. For example, foreigner is not allowed to hold more than 49 percent of the capital, according to commitments to join the World Trade Organisation (WTO), added Hai.

However, according to foreign investors’ points of view, if domestic telecom businesses conduct M&A activities then only the big holders of market shares could be able to sell to the partners. For businesses that account for less than 10 percent market shares, the possibility of success is very low.

To date, the three major network providers including VinaPhone, Viettel and MobiFone has held 90 percent of market shares, the rest 10 percent was shared by three smaller providers including EVNTelecom, Vietnamobile and S-fone.

S-Fone, after seven years in operations, to date has reached 7.5 million subscribers, accounting for approximately five percent market shares of the total mobile subscribers of Vietnam. Whereas EVNTelecom and Vietnamobile in about four to five years in operations together have been able to attain market shares for approximately five percent. For MobiFone, although the equitisation process has been postponed for years, there are still more than ten foreign investors, including well-experienced investors from the Europe, expecting to be the strategic partners and aiming to hold as many market shares as a foreign investor is allowed to hold.

Talking to reporter of Dau Tu newspaper, Country director of Orange France Telecom Vietnam Jacques Fulcrant confirmed that they would wait for the government’s decision on MobiFone equitisation, although this process has been very slow.

Tags: Vietnam M&A, Vietnam Telecom, Vietnam telecom industry

Posted by VBN on Jul 15 2010. Filed under M & A, Telecommunication. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry