Vietnam Looks to Open Up Telecom Market

SINGAPORE (07/04/2000) - Vietnam will make moves to deregulate its telecommunications market, but the changes will be gradual, according to Do Trung Ta [CQ], chairman of the board of management of monopoly carrier Vietnam Posts and Telecommunications Corp. (VNPT).

Deregulation efforts will need to take into consideration the role that telecommunications plays in national security, Ta said in a transcript of an interview published by VNPT.

The two companies that are expected to offer alternative services to VNPT will be government-linked -- Saigon Post and Telecommunications Corp. and the army-owned Military Electronic and Telecommunications Co. (Vietel). They will enter the market in 2000 and 2003, according to analyst Pyramid Research.

Telecommunications costs in Vietnam remain extremely high because the industry only began significant development in 1990, whereas most countries have had 70 years to build up their infrastructures, Ta said.

"We will reduce the charges in the future when demand in the domestic market increases," Ta said. "Our branches in 43 cities and provinces are still experiencing losses, and we still have to balance revenue over the whole sector."

Foreign companies are limited to a business model known as business cooperation contracts (BCCs), which are proving unpopular. The Vietnamese receive side benefits from BCCs, because foreign investors contribute the bulk of the capital but forfeit all decision-making rights, Ta said.

"Foreign investors are tied in BCCs and do not have decision-making rights; that's why they do not want this model," he said.

However, to change the business model would require changing the law, which prevents any foreign telecommunications company from having a direct interest, in terms of operational and management responsibility, in any telecom infrastructure.

Last year, the U.K.'s Cable & Wireless PLC withdrew from its US$207 million [M] BCC to install 250,000 phone lines in the capital Hanoi. The reason, according to VNPT officials, was disagreement on profit-sharing terms in the contract.

Australia's Telstra Corp. recently put on ice a $500 million [M] BCC that had not been signed but on which an agreement had been reached with VNPT to develop the telecommunications network in the commercial hub of Ho Chi Minh City.

France Telecom SA, Nippon Telegraph and Telephone Corp. (NTT), Korea Telecom Corp. and Sweden's Comvik AB still operate services under the BCC model in Vietnam. Korea's SK Telecom Corp. has signed a BCC to run a CDMA (code division multiple access) wireless network in Ho Chi Minh City, a service that will be launched within a few months.

VNPT can be contacted at +84-4-825-6936 or online at http://www.vnpt.com.vn/.

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