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Top mobile providers plan to cut rates
Three major mobile service providers, Viettel, VinaPhone, and MobiFone, are seeking approval from the Ministry of Information and Communication to cut call tariffs by 15-20 per cent.
The average cost of calling now is VND1,200 per minute, and if a 20 per cent reduction is approved, it will fall to VND960.
Viettel said it incurs a cost of around VND800 for a one-minute call.
According to a forecast by UK-based emerging markets analyst Business Monitor International Ltd (BMI), average revenue per user earned by Vietnamese service providers will fall by 13.7 per cent annually to US$4.11 this year, and $3.8 in 2011.
Ahman Eddie, general manager of Ericsson Viet Nam, said Viet Nam's telecom market has grown faster than that of other countries in the area but service providers are locked in a fierce battle over tariffs.
"Price competition will not bring stable development to service providers.
"They begin to worry about profits not reaching expectations."
But BMI forecasts growth in Viet Nam's telecom market to surge thanks to the ongoing price war.
Cutting the ‘fat'
The service providers are aware of the consequence of the ongoing price war: falling profits and inability to make long-term investments.
But they state several reasons to justify cutting charges.
A Viettel executive said it is done to reduce "fat."
"A telecom corporation is fat if profits exceed 20 per cent of turnover. It needs to reduce service charges to grow thin," he said.
Earlier this year telecom operators launched a series of promotions after the ministry rejected their demand to reduce mobile charges.
The ministry has responded by tightening promotion norms by issuing a circular last week to clarify certain clauses of the Commercial Law on promotions by mobile service providers.
To make the circle complete, the mobile operators have again asked to cut call charges.
Last year Viettel had sparked off industry-wide tariff cuts by cutting its charges by 15-20 per cent.
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