Government-owned Vietnam Posts and Telecommunications (VNPT) will separate mobile unit Mobifone with a view to enticing outside investment. VNPT and military-backed Viettel own mobile operations that account for 92.7% of the mobile market's subscriptions. BMI believes the sell-off would boost competition and increase investment in the market.
|Reducing Government Involvement|
|Market Shares, Dec 2013|
The concentration of the mobile market in the hands of two government-owned players is a key factor in BMI's weak assessment of the country's industry risks scores as part of our Risk/Reward ratings. Although there are five operators in the market, competition is heavily skewed towards the government-owned operators. VNPT also controls third-ranked Vinaphone and would hold onto this operation under the new plans for the market.
Bringing in new investment to the market will be a turnaround for the market. There had been seven players in the market although the Ministry of Information and Communication continued to grant new licences. However, the lack of opportunities saw EVN Telecom absorbed by Viettel and Gmobile's Russian investor VimpelCom sell its entire stake to its local partner, a strategy also followed by South Korea's SK Telecom, which owned S-Fone, an operator with less than 1,000 subscribers, according to regulatory data.
How the deal will be structured is still unknown, with some local newspapers suggesting an IPO might be on the cards. It remains unclear as to whether or not an international investor could be allowed to take control of the company although local news sources suggest a 'strategic partner' will be sought; a strategy BMI believes would provide a strong boost to the company and the wider telecoms market. Mobifone is an attractive asset with its strong market share and established brand. We believe the company would benefit from the expertise and financial backing of a new investor already established in the telecoms industry, helping to boost the launch of new products and drive the market's future. With larger rival Viettel focused on its international expansion, Mobifone has strong potential to boost its share of the market.
Vietnam's regulator has already delayed the auction of 4G spectrum until 2015 owing to low 3G network quality in the country. The increase in competition would, BMI believes, force the largest operators to make significant investments in their network infrastructure, improving the market outlook for subscribers.