Market share change gives more reason to merge vina phone and mobifone 2012
Market share change gives more reason to merge VinaPhone and MobiFone 22 October, 2012MobiFone, one of the three biggest mobile networks in Vietnam, has lost 1/3 of its market share overthe last year, from 29.11 percent to 17.9 percent. This gives VNPT one more reason to persuade thegovernment to approve its plan to merge VinaPhone and MobiFone. Exhibition from MIC releases the 2012 ICT White BookBoth VinaPhone and MobiFone are belonging to the Vietnam Post and Telecommunication Group(VNPT). However, under the new Competition Law, a legal entity must not hold more than 50 percent ofthe market share in order to ensure the healthy competition among service providers in the market.This means that VNPT would have to “say goodbye” to one of the two networks, or merge the twosubsidiaries into one legal entity which has the market share of less than 50 percent.As for VNPT, the second solution is a “perfect choice,” because by doing so, it would be able to retainboth MobiFone and VinaPhone, while both of them are the golden geese that lay golden eggs. Le NgocMinh, President of MobiFone, affirmed that MobiFone makes up 50 percent of the total revenue andprofit to VNPT.The tentative plan by VNPT has been facing the strong opposition from economists, who believe that thesolution would not bring benefits to customers.However, VNPT does not intend to give up the idea, despite the strong opposition.
MobiFone’s market share dropped sharplyIn 2011, the ROE (return on equity) of MobiFone was 49.7 percent. It was also the mobile networkoperator which had the highest APRU (average revenue per user) index in the Vietnamese market. Themobile network has recently completed the installation of 7500 BTS (base transreceiver stations) all overthe country.Therefore, it is enigmatic to many people that the giant has lost a big market share proportion. There isan interesting piece of news that in the white book on the information technology development whichhas been published, VNPT has once again mentioned the possibility of merging VinaPhone andMobiFone.With the market share proportion of MobiFone down to 17.9 percent, the total market share to be heldby both MobiFone and VinaPhone would be 47.97 percent, lower than 50 percent. In this case,MobiFone and VinaPhone merger would be legal.It is understandable why VNPT is determined to retain both MobiFone and VinaPhone.Dang Quoc Tien, Deputy Head of the Enterprise Finance Agency, the merger would ensure the long termbenefit for VNPT. Currently, MobiFone and VinaPhone are both the subsidiaries, but they have beenfollowing separated investment plans and using separated infrastructure systems, which is really a bigwaste.Therefore, if merging VinaPhone and MobiFone, VNPT will not lose anything, while it would get benefitbecause the two can share the same investment system, which allows to save the investment costs andimprove their competitiveness.What will the market be like?Pham Cam Tu, a senior executive of Gmobile, a telco, has admitted the possibility of the merger ofVinaPhone and MobiFone. However, she said if VNPT could be contented would still depend on thestate’s industry programming.Meanwhile, Viettel has declined to make comments about this.According to Tu, if MobiFone and VinaPhone merges to form up a new legal entity one, the marketwould have two “big guys” – Viettel and the new legal entity, which would hold 90 percent of themarket share. Meanwhile, the other four enterprises would hold 10 percent of the market share. If so,this would not ensure a healthy competition in the market. (Source: NCDT)