It is clear now that S-Fone has decided to switch to 3G technology in an effort to rescue its poor business performance. However, it is still unclear who will be behind the reform which is believed to cost hundreds of millions of dollars, while its result remains an unknown.

Investing in mobile networks is the multi-billion dollar game

The history about the Vietnam’s mobile network development witnessed some telcos starting their business from zero and listing themselves among the “multi-billion dollar businesses” just after a short time.

However, analysts have commented that the golden age of the mobile network market is over. This means that any investor, who wants to jump on the bandwagon now, have to have billions of dollars for investment. In other words, mobile service market is only reserved for the rich investors.

Beeline Vietnam is an example. In 2011, VimpelCom decided to pump more capital into the network in order to strengthen the network and make it more competitive. VimpelCom then announced an additional investment sum of 500 million dollars which would be disbursed until the end of 2013. 

The first sum of 196 million dollars has been transferred to the joint venture’s account, raising the ownership ratio of the foreign partner in the joint venture from 40 percent to 49 percent.

The other sum of 304 million dollars would be funneled in the time to come, if the joint venture of GTel-Mobile can obtain certain business targets and get the necessary approvals from competent agencies. With the new investment sum, the total investment capital of VimpelCom in Vietnam would reach one billion dollars--a hefty sum of money.

Like Beeline, Vietnamobile has also got nearly one billion dollars in investment. Hanoi Telecom, together with its partner Hutchison Telecom, has poured 880 million dollars into the joint venture, while the investment may reach 1.1 billion dollars in the next year. With the huge investment, Vietnamobile has been able to expand the coverage area, while it succeeded in its plan to develop the number of subscribers in 2011, which then helped Vietnamobile to jump into the fourth position in the mobile service market in Vietnam.

Who would inject money in S-Fone?

After SK Telecom withdrew from S-Fone projects, sources said that two Chinese equipment producers Huawei or ZTE would join hands with Vietnamese SPT to develop S-Fone network.

However, there has been no further information about the cooperation so far.

Buu dien newspaper has quoted its source as saying that SPT is drawing up a plan to “change the blood” of S-Fone by switching to HSPA technology (3G) with the 800 MHz waveband. The information has been confirmed by an official from the Ministry of Information and Communication.

A new question has been raised that who will back the S-Fone’s reform. Analysts believe that Saigon Tel, a big shareholder of S-Fone, is not powerful enough to do that, even though the owner of Saigon Tel is one of the richest Vietnamese stock millionaires, because the reform is believed to cost multi billions dollars.

According to the Ministry of Information and Communication, SPT had the turnover of 786.73 billion dong in 2011, a modest figure. In 2011, SPT tried to look for the investors for S-Fone. However, analysts commented that it is an impossible mission to find domestic investors, and that it would be better to find foreign ones.

Buu dien has cited its sources as saying that two foreign partners are eyeing S-Fone, including one from ASEAN countries, and the other from Europe. Meanwhile, SPT\s President Tran Thi Ngoc Binh has declined to provide any information about that.

If S-Fone changes from CDMA to HSPA, it will have to change terminal equipments for clients, the thing that Hanoi Telecom and Hutchison did when switching from CDMA to eGSM. The work would cost a big sum of money. Besides, S-Fone would also need more money to expand the coverage area. It is estimated that the total cost for “changing blood” S-Fone has to pay is equal to the expenses spent by Vietnamobile and Beeline.

Source: VNN