Telstra, Australia’s largest telecommunications company, has become the latest player to join a long list of foreign firms who are striving to snap up a strategic stake in MobiFone
Telecommunications Corporation (MobiFone), Vietnam’s second-biggest mobile operator, according to local media reports.
The list also includes Sweden’s Comviq, Norway’s Telenor, Malaysia’s Axiata, Singtel, Deutsche Telekom, Orange (formerly France Telecom) and Vodafone.
Race of Trio
Comviq, Telstra and Telenor seem to have advantages in this race as they have either historic ties with the Vietnamese telecom industry or notable strengths.
Telstra in 1988 signed a business cooperation contract (BCC) with Vietnam Posts and Telecommunication Group (VNPT), from which MobiFone was split in July 2014, becoming the first offshore telecom company to be allowed to enter Vietnam.
The Australian firm, rated among the top telecom companies globally with revenue reaching $26.6 billion in 2015, had invested a combined $240 million in telecommunications infrastructure in Vietnam until the BCC ended in mid-2003.
A MobiFone executive was quoted by VnEconomy as saying that among the foreign companies eye a stake in the Vietnamese telecommunications provider, Telstra has shown the strongest resolve.
More than a year ago when MobiFone geared up its privatization plan, Telstra expressed its hope to return to the Vietnamese market at a meeting with former Minister of Information and Communications Nguyen Bac Son.
It reiterated its interest to become a strategic investor of MobiFone at a gathering with Mr. Son’s successor, Minister Truong Minh Tuan, on May 24.
“2016 and 2017 are two key years for MobiFone’s equitization plan. Telstra, a traditional reliable partner of Vietnam, is expected to continue having a good relationship with MobiFone,” Minister Tuan said.
Another formidable competitor in the race is Comviq, which provided equipment and technologies for MobiFone in the 1990-2005 period, helping the Vietnamese operator gain a considerable market share and rapid expansion.
It showed hope to become an investor of MobiFone as soon as the latter hinted its share sales intention in 2006 and is still waiting for the final answer over the past ten years.
The third notable racer is Telenor, who beat Vietnamese top telco Viettel to win a license to operate in Myanmar in 2013. Telenor is now the second largest mobile operator in Myanmar with 14 million subscribers and is planning to increase presence in Asia.
Telenor had 202.8 million mobile phone subscribers in 2015 and was ranked 10th among the largest telecoms firms by subscribers by the GSMA Intelligence, according to Deal Street Asia.
What Stake Can Foreigners Buy in MobiFone?
It remains a question how large the stake is that foreign investors can buy in MobiFone when the firm is set to undergo equitization in the first half of 2017 at the latest.
Under Vietnam’s commitments with the World Trade Organization (WTO) and other free trade agreements, foreign investors can own up to 49% in state-owned enterprises, according to former Deputy Minister of Information and Communications Le Nam Thang.
It implies that state-run telcos can sell at most a 49% stake to foreign buyers when they undergo privatization.
However, foreign holding in MobiFone will be lower than 49% because VNPT is eligible to acquire a 20% stake in MobiFone when the latter conducts an initial public offering (IPO).
Overseas investors seem to be indifferent to the ongoing privatization process of state-owned enterprises (SOEs) in Vietnam as the Vietnamese government is cautious in offering large shares in SOEs while foreign players want to acquire majority stakes.
The government has not unveiled the size of the stake it will offer in MobiFone. The foreign ownership could be around 20% as the telecommunications is considered a sensitive sector and it is the common figure in the latest IPOs of major state-run corporations.
‘The Gem in the Crown’
Together with Sabeco and Vietnam Airlines, MobiFone is reckoned ‘the gem in the crown’ as it is among the few highly profitable SOEs in the country.
MobiFone earned a profit of 7.4 trillion dong ($329 million) in 2015 on revenue of 36.9 trillion dong ($1.64 billion) in 2015. Its return on equity (ROE) reached 49.35%.
At a conference in October 2015, MobiFone Le Nam Tra said that the firm held a 26.71% share in the mobile market.
It is heading for revenue of 100 trillion dong ($4.45 billion) in 2020. Its brand was valued by Brand Finance at $539 million in 2015, rising 76% from a year earlier.
In June 2014, Ho Chi Minh City
Securities Corp (HSC
), among the leading brokerage houses in Vietnam, valued MobiFone at $3.4 billion, much higher than $2 billion announced by Credit Suisse five years earlier.
The firm’s value could surpass $4 billion after its IPO, according to HSC.