VietNam Business

Thursday, October 14, 2010

Telecom providers in race to slash service charges

An S-Fone subscriber makes a phone call. Mobile phone users of the network will enjoy lower charges from on Wednesday - Photo: Courtesy of S-Fone

HCMC – S-Fone and Vietnamobile have announced to slash their mobile service charges by 10-15% after other major players, including Viettel, MobiFone and VinaPhone, had kicked off the race since early August.

Ho Hong Son, CEO of S-Fone, said in a statement that the charge reduction aims to sharpen S-Fone’s edge in competing with other players and ensure their clients’ rights. According to Son, it is an obvious fact when S-Fone is put under a serious competition from other players.

S-Fone currently has nearly seven million subscribers, which is just a fraction in comparison with the biggest player Viettel with over 45 million subscribers. Under S-Fone’s new charge policy, its clients will enjoy charge reduction of between 10% and 15% for internal and external calls.

Subscribers who use four main packages, comprising Standard, Economy, 4M and Smile, will enjoy fee reduction since on Wednesday.

For example, for Standard package, the internal calling fee is VND15.3 per second compared with the previous charge of VND18 per second.

The move by S-Fone was also reciprocated by Vietnamobile, which declared to cut external and internal charges by nearly 10% effective from Wednesday.

With the fee reduction, Vietnamobile subscribers will pay only VND1,380 per minute of external and internal calling.

According to Vietnamobile, subscribers of service packages like Maxi Talks, Max Circle, VM Text and Flexi Data will enjoy the benefit. To participate in the charge reduction, subscribers should send the text DK_Eco to the call center number 123 for registration.

Since early August, giant telcos Viettel, MobiFone and VinaPhone had cut down charges by 10% to 15%. Industry insiders say the race to slash charges only focuses on basic services like SMS and calling, while charges for added value services on the third generation networks like mobile internet, video call, news and music searching has remained unchanged to date.

Recently, the UK-based market researcher Business Monitor International said that the Average Revenue per Unit (ARPU) has been falling year on year and could harm the turnover of mobile carriers.

The researcher, citing official figures publicized by the Ministry of Information and Communications, calculated that the mobile ARPU rate for Vietnam fell by 8% in 2008 to reach US$6, having fallen in the previous year from US$7 in 2006 to US$6.5 in 2007.

Thus, the market researcher suggested the index continued falling in 2009 and in the coming years.

Meanwhile, a senior telecom official who asked not to be named said that the ARPU now is only US$4.

The fall resulted from poor customer service and customer management. In addition, the ARPU decrease is also blamed on the undercutting race among telecom providers.

In related news, Yahoo! Vietnam and Viettel last week shook hands to provide Yahoo! Messenger in mobile version to Viettel’s subscribers. The U.S giant also co-worked with S-Fone to provide Yahoo! Chat service to its subscribers.

The General Statistic Office reported that the first eight months of the year saw an additional 32.5 million mobile subscribers, increasing 17.6% over the same period of last year.

Brokers: Market to maintain uptrend this week

Investors follow stock prices at Rong Viet Securities Co. in HCMC. Stock brokerages expect the market rally to extend this week after strong rises last week - Photo: Le Toan

HCMC – Local securities enterprises expect that the market would continue its uptrend this week after strong VN-Index rallies and high trading volumes last week.

APEC Securities Co. in its weekly comment said investors might be more excited after the National Day holiday with three rising sessions last week and the VN-Index gaining 29.61 points, or 6.9%, from the previous session to close at 458.75. Liquidity strongly improved with the average daily trading volume of 45.7 million shares worth VND1.2 trillion, increasing by 15.8% and 20% against the week earlier respectively.

“The VN-Index will have the supporting level of 430 points and resistance level of 475 points this week. We continue to advise investors to boost investment in steel, sugarcane, food and property stocks with good basic factors this week, especially in correction phases,” APEC said.

Vietnam International Securities Co. (VIS), meanwhile, noted active participation of foreigners during the week. They were net buyers to the tune of around four million shares worth VND222 billion.

Foreigners played an important role in the VN-Index rally last week as they boosted buying many large caps, making local investors feel more confident and demand outpace supply on the market. As a result, the gainers far outpaced the losers at 234 to 16 at the end of the week, the broker commented.

“As we have mentioned in earlier reports, the market needs a new cash flow to sustain a strong rally. Though exact information of a new strong cash flow from foreigners is not clear during the past time, we think that foreigners have brought about a cash flow into the local market, but it is not strong enough to maintain a long-term uptrend,” VIS said.

However, VIS believed that the cash flow would keep investors optimistic and improve liquidity on the market. “With the cash flow, the market may continue recovering its lost ground, while investors may use more financial leverage products and trading volume will be higher this week,” VIS added.

HCMC Securities Co. (HSC) after the last session of the week said the technical driven rally could only go so far and many stocks have already recovered 15% or more from the bottom. “Therefore, we can say that valuations have now gone from cheap to reasonable again and to drive us higher requires a change in the external environment,” it said.

“We are of course still waiting for positive developments concerning adjustments to Decree 13. And now that we have recovered over 40 points on the VN-Index, investors will start looking for some fundamental reasons to drive stock prices higher next week, either better macro news flow or a material change in supply-demand situation. The macro environment is unlikely to be the source of positive news, therefore our best hope lies with an improvement in the supply-demand on the market,” HSC said.

The Hanoi market also enjoyed strong rallies with the HNX-Index adding 13.38 points, or 11.31%, from the previous week to close at 131.66. The daily trading volume averaged at 37 million shares worth VND835 billion. The market is expected to continue improving this week.

Wednesday, October 13, 2010

Four more detained at debt-laden shipbuilder

HCMC – Ministry of Public Security police have arrested four more former senior executives of the debt-laden shipbuilding giant Vinashin in a high-profile mismanagement case, according to a statement of the ministry.

The statement, which was posted on the Government site at about 3:30 p.m. last Friday, half an hour after Lt. Gen. Hoang Kong Tu, chief investigator of the ministry, called a news conference in Hanoi, says the four are accused of intentionally violating state regulations causing serious consequences.

Tran Quang Vu – who succeeded Pham Thanh Binh as general director of Vinashin shortly after the Party Central Committee’s Commission for Inspection proposed disciplining the then chairman and general director Binh over mismanagement two months ago – is among the four put into police custody last Friday for interrogation.

Late last month Prime Minister Nguyen Tan Dung signed a decision suspending Vu from the board of directors of the state-owned Vietnam Shipbuilding Industry Group (Vinashin) and asking the board to suspend him from the post of general director.

Tran Van Liem, another board member and chief controller who was also suspended by the Government leader, is the second to be arrested. The other two are Nguyen Van Tuyen, ex-general director of Hoang Anh Shipbuilding Industry Co. Ltd., and Nguyen Tuan Duong, ex-chairman of Cuu Long Investment Co.

The Ministry of Public Security statement says clues were uncovered during the probe into Pham Thanh Binh, who was arrested in Hanoi early last month over intentional violations of State rules on economic management which caused serious consequences and put Vinashin on the brink of bankruptcy. Vinashin’s total debt is VND86 trillion (about US$4.5 billion) while its combined assets are VND104 trillion.

The clues indicate the Prime Minister’s instructions had not been strictly implemented and violations of regulations on economic management causing serious consequences committed in connection with the purchase of a secondhand Italian-built ship locally known as Hoa Sen, the development of Song Hong power station and the sale of a mortgage asset by Nam Trieu Shipbuilding Industry Corporation (Nasico).

Tran Quang Vu, while serving as Nasico CEO, was aware that the Government did not allow the buying of used vessels but he and the then Vinashin chairman Binh approved a plan to convert Bach Dang Giang ship, which Vinashin had bought for steel, into a floating hotel.

Vu used the ship as collateral to borrow VND105 billion from Vinashin Finance Co. with funding coming from an international Government bond sale. But finding that the vessel could not be converted, Vu ordered its dismantlement for steel scrap without seeking consent from Vinashin leadership and reporting to Vinashin Finance.

The money gained from the sale of the steel scrap was not returned to Vinashin Finance, according to the ministry’s statement.

Tran Van Liem was assigned by Binh to oversee the project to buy Hoa Sen ship but he did not organize a competitive tender. Even worse, he signed the purchase contract before the project was formulated, and no technical inspection was done before delivery, the acts that went against a Government decree on ship buying.

Nguyen Van Tuyen of Hoang Anh Shipbuilding Industry Co. Ltd., and Nguyen Tuan Duong of Cuu Long Investment Co., together with Pham Thanh Binh, decided to build Song Hong power plant in Nam Dinh Province though they all knew the Government had not permitted it.

Tuyen and Duong bought equipment made in the 1960s from two old power stations in South Korea which stopped generation in 2004, including transformers containing a toxin which was banned from export by South Korea and prohibited from import by Vietnam.

The two even used falsified documentation in the name of the ministries of Natural Resources and Environment, and Industry and Trade to facilitate the import of the equipment.

Imbalance in steel industry

Imbalance in steel industry At first glance, the figures do not make sense.

Vietnam has a surplus production of about three tons of steel every year, and yet, every year, it also imports four million tons of the alloy.

The mystery is easily solved, but the problem is not.

The surplus production is of construction steel and imports are of steel billets needed for industrial production.

“The rampant development of construction steel mills has created a surplus. Their combined capacity is some eight million tons per annum, far exceeding the demand of five million tons,” Dinh Huy Tam, general secretary of the Vietnam Steel Association, told Thanh Nien Weekly.

Meanwhile, investment in turning out steel for industrial sectors like ship building and mechanical production is still limited, so Vietnam has to import most of the products. Each year, the country imports some 4 million tons of hot-rolled steel to serve these sectors.

According to a recent report by the Ministry of Industry and Trade, the country has 74 steel projects with a combined investment of nearly US$22.2 billion in 30 cities and provinces.

However, none of these are plants that can turn out steel for industrial sectors. “Construction of some projects has been delayed,” Tam said.

Investors are not keen on producing steel billets because of the large investments and high technological requirements involved, said Le Manh Hoan, vice director of steel producer Dinh Vu.

The investment capital for a plant producing this kind of steel needs at least $500-600 million, much higher than the $100 million or so needed for a construction steel factory.

The investment exceeds a local firm’s capacity, so they need to cooperate with other firms to get involved in the business, said an industry insider. However, such cooperation has not been looked into seriously.

Rising imports

Tam said it was only after 2000 that some firms began producing steel billets, but their output only meets 60 percent of the local demand.

The mills produce some three million tons of steel billets each year, much lower than their designed capacity of 4.5 million tons. Some small-scale mills lack the ability to run at maximum capacity, while others are learning still about the technology that they have just begun applying, Tam said.

Firms often import steel scrap to produce steel billet instead of getting the raw material from mines, said Tam. As of now, the Thai Nguyen Steel Mill is the sole producer of billet from mines, with an output of some 250,000 tons each year.

Exporters urged to shed Africa inhibitions

Exporters urged to shed Africa inhibitions Vietnamese businesses need to change the way they see the African market and realize its full potential before they are beaten to it by competitors from other countries, experts say.

Vietnam now has diplomatic and trade ties with more than 50 countries in the continent. Trade value increased from about US$360 million in 2003 to $2.1 billion last year.

In the first seven months this year Vietnamese exports to Africa were recorded at $670 million, similar to the same period last year. However, this represented just 1 percent of Vietnam’s total shipments.

Prime Minister Nguyen Tan Dung said at a conference in Hanoi last month that Africa was a promising market in the long term, but Vietnamese exporters have not been able to tap its potential.

Products from Vietnam now hold a miniscule share of 0.18 percent in the continent even though the country is the world’s top exporter of various products.

Le Thi Thai Hoa, deputy head at the Ministry of Industry and Trade’s Africa Department, said the biggest concern for Vietnamese exporters shipping goods to Africa was payment.

“Many African countries are still using outdated payment methods and they often delay payments, sometimes for as long as a year after delivery,” she said. The recent rise of Internet frauds from Africa made Vietnamese exporters even more cautious.

However, Hoa said the risks can be avoided if exporters contact trade agencies like hers to learn more about the market first.

For many years, Vietnamese exporters have considered Africa a new market. They have been saying they do not have sufficient information, that payment risks are high and transportation is not convenient.

But Vietnamese commercial counselor to South Africa, Do Quang Lien, said exporters should not keep citing these reasons to explain their lack of enthusiasm.

He said such difficulties are no longer insurmountable, considering that Vietnamese exporters have successfully entered both the EU and US markets, which are pickier and further from Vietnam.

Many shipping lines have launched new routes linking Vietnam and Africa. Besides, the government has made a lot of effort to promote trade between the two countries, offering opportunities for businesses on both sides, Lien said.

“If businesses really care about the African market, it’s not difficult at all to find information about it on the Internet,” he said.

The problem is, Lien said, local exporters are just uninterested.

Dang Ngoc Quang, commercial counselor to Egypt, agreed. He said although Egypt is now the largest importer of Vietnamese seafood in Africa and the Middle East, the market is still underrated by many exporters.

As Vietnamese businesses only pay attention to regular customers, they do not fully tap the high demand for seafood in Egypt, estimated at several million tons a year, he said, noting that Vietnam’s annual exports to the African nation are only around 30,000 tons.

Experts said the recent economic crisis has proved that it’s not a good idea for local exporters to put all their eggs in one basket, depending solely on traditional markets like the EU, US and Japan. Africa is a place that they can target and disperse the risk, they suggested.

It’s a good time to enter the African market now, before it becomes too crowded with exporters from other countries, they said.

In fact, the competition pressure can be felt already.

Thailand is boosting rice shipment to Africa after reserving enough of the grain, while Myanmar has just entered the market. Meanwhile, the supply of footwear and garment products in Africa is about to reach a balance with demand.

Experts said as the export door gets narrower, Vietnamese companies should start thinking about expanding production in Africa.

Many industries in Africa are underdeveloped and African countries mostly export raw materials, with industrial output accounting for only 25 percent of the gross domestic output.

Vietnamese companies should invest in projects to produce goods in Africa, even though it will be a tougher path to follow than just exporting, the experts said.

The government will start a five-year program next year to promote Vietnamese investment in Africa. The program will focus on ten sectors that Vietnam is strong in, including oil exploration, fertilizer, garment and footwear production, and wood processing.

Nguyen Cong Hien, a trade official responsible for markets in Asia and Africa, said it was a good business plan to expand production to Africa because the EU and US often give preferential treatment to products made there.

Europe, for instance, is offering tax incentives for 33 African countries and Vietnamese investors can make use of this, he said.