Vietnamese national mobile operator is gung-ho to compete with Kyivstar and MTS

Photo: Reuters

A Vietnamese telecom holding company is emerging on the Ukrainian market. According to the data of the state register Viettel Global Investment (Hanoi, Vietman) founded Viettel Ukraine LLC in November 2014. The operator plans to be involved in retail sales of telecom devices in specialized stores and provision of different communications services. The core business of the company is wireless communication.

Viettel Global Investment is an investment subdivision of the Viettel Group Corporation. It is the largest mobile operator in Vietnam controlled by the Ministry of Defense. The company has been actively expanding its international presence in recent years. Its networks operate in Cambodia, Laos, Haiti, Mozambique and Peru. Viettel has a total of 63 mn subscribers. The company plans to become part of the Top 10 telecom operators in the world by 2015. For this it is seeking investment opportunities in African countries and in Cuba. In 2013, the corporation’s profit reached US $7.7 bn, net profit – US $1.66 bn. For comparison, the gross profit of Ukraine’s largest telecom company Kyivstar was UAH 12.9 bn in 2013, which at the new exchange rate is lower than US $1 bn.

A 3G contender

On December 9 the National Commission for the State Regulation of Communications and Informatization (NCSRCI) introduced a new company on the register of operators and providers in Ukraine. Viettel Ukraine plans to operate in 24 oblasts and in Kyiv (the exceptions are Crimea and Sevastopol).

Yuriy Palshyn was appointed the director of the new operator. He told Capital that he cannot comment on the company’s plans yet, but answered the question about 3G: the company is planning to participate in the future tender for new licenses. As a reminder, the other day the NCSRCI announced the beginning of the tender for three UMTS (3G) licenses – 30 MHz each. The regulator will announce its results in February 2015. The starting price of one license is UAH 2.7 bn. Up until recently, Kyivstar, MTS Ukraine and Astelit (life:)) were the key contenders. Ukrtelecom already has a 3G license, but the Prosecutor General’s Office opened a trial at the end of November on revoking the license apparently due to violations committed when it was issued in 2011.

Old plans

This is not the first time that Ukrainians have heard about Viettel. In September Capital had a copy of the letter of the Ukrainian Ambassador to Vietnam Oleksiy Shovkoplyas to the Head of the Presidential Administration Borys Lozhkin. The Vietnamese national telecom company then proposed to implement a US $1 bn investment project in Ukraine. There was also information in the letter about the interest of the Vietnamese side in a UMTS band with the width of 10 MHz all around Ukraine and licenses for GSM-900 and GSM-1800 (5 MHz and 10 MHz respectively). The company is also planning to provide Internet services. For this it proposes to build a cable network with a length of 60,000 km.

Besides the investments into the infrastructure, Viettel proposed the government a certain social package: creation of the network of electronic communication between the central and local bodies of power, unlimited free Internet access in all secondary schools in Ukraine, in central and regional bodies of executive power and for 700,000 of the least provided for citizens (for example students).

Noteworthy, the plans of Viettel in Ukraine became known back in spring 2011. At the time, Head of the State Investment Agency Vladyslav Kaskiv signed a memorandum of understanding with the Vietnamese. They were ready to invest US $600 mn within the framework of the national project Open World (providing Internet access to secondary school students). However, the negotiations hit a dead end, because Kaskiv failed to find free frequencies for the new player – they were simply not available.

Director of the IT company Telesens Eduard Rubin says he also knows Viettel Holding as he is its partner in development of one of the company’s IT solutions. “For the Vietnamese company Ukraine can become a springboard to Europe,” he says.

Big money goes around the world

Even if Viettel obtains the 3G license it will not be easy for the operator to do without the accompanying 2G license (GSM) that the largest mobile players have, because the coverage of a UMTS-2000 base station is much smaller than GSM-900. That is why the Vietnamese company will have to invest much more money than the existing players in order to ensure comparable coverage.

There is a similar and not very successful experience of this in Ukraine. 3G operator TriMob launched in 2007, which does not have a 2G license, covered only large cities and not all of them with its network. That is why it is still viewed as a niche operator despite the fact that it possesses exclusive frequencies.

“Maybe the Vietnamese will be ready to invest more money than TriMob and will go further,” Director for Regulatory and Legal Provision at Kyivstar Andriy Osadchuk suggested. According to assessments of President of SV Consulting Oleh Stefanyuk, in order to cover all oblast and county centers, large towns and main highways with the use of frequencies within the 2 GHz range a company needs US $500 mn. “This amount includes both capital and operating expenses,” he emphasized. Thus, taking into account the cost of a 3G license, expenses for conversion and building up a new network the Vietnamese will need to invest in Ukraine at least UAH 11 bn to compete with the major players on the telecom market.