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QUESTION: Select a foreign country and a product/service that you feel to be a wise and long-term potential investment for expansion of your Vietnamese enterprise “VIETTEL INVESTED IN TELECOMMUNICATION SERVICES IN MOZAMBIQUE” I INTRODUCTION - Headquarter: Number 1, Giang Van Minh Street, Kim Ma, Ba Đinh District, Ha Noi - Official brand: TẬP ĐỒN VIỄN THƠNG QN ĐỘI - Brand for international trade: VIETTEL GROUP - Short brand: VIETTEL Main business: Providing services of telecommunication or telecommunications information technology in the country and abroad; researching, consulting, designing, installing, and maintaining telecommunications – information technology; producing, importing and exporting, supplying telecommunications – information technology equipment and supplies Founded in 1989, Viettel participated in Vietnamese telecommunications market in 2000 and began implementing investment strategies abroad in 2006 The company was the first to break the monopoly in Vietnam’s telecommunications industry It is also ranked 83 of 100 the world’s largest telecom brands (by Informa in 2008); the fastest growing mobile network in the world (by Wireless Intelligence magazine); the world’s best telecom service providers in developing countries (by World Communication Awards 2009) Viettel is currently the No telecommunication enterprise in Vietnam with over 40 million subscribers, accounting for over 40% market share Viettel now employs nearly 30,000 employees Its revenue reached nearly $ billion, equivalent to a profit of $ billion in 2011 II VIETTEL’S INTERNATIONAL INVESTMENT STRATEGY (Source:Viettel) Viettel’s decision to invest abroad stemmed from its philosophy and vision It is very dangerous that a company lacks growth, due to the lack of opportunities for people to strive In addition, people who are not in the challenge will rapidly deteriorate So Viettel needs growth However, there will be a time that no growth can be made due to the limitation of population of over 80 million people in Vietnam On the other hand, looking at the current flow of the telecommunications industry, the most prominent trend to be seen is to cooperate and merge There are now about 700 operators in the world But this number is expected to reduce to a two-digit number within the next few years Therefore, there will be about 600 operators disappearing because have no market share and subscribers These trends directly affect Viettel Without investment in foreign markets, market expansion, and further growth with a large amount of subscribers, it will be among the 600 Viettel divides telecommunications markets in the world into three categories: saturated market (mature market), growing market (bullish market), and young market (fledgling market) Obviously, the fledgling markets such as Myanmar, North Korea, and Cuba are the most potential, but there are some of them left The growing market consists of 60 nations with billion people Viettel is currently focusing on promoting and looking for investment opportunities in these countries through tendering licenses or acquiring small companies which already have licenses Most of the countries that Viettel focused on are developing markets in both economy and telecommunications This is also an advantage of Viettel in contact with the them Among a total of 30 international telecom investors, Viettel is the poorest one Thanking to being poor and growing up in a poor market, Viettel has a lot of experiences to business in difficult markets and understand and share the things that developing countries are struggling Viettel expands abroad with a guideline of bringing the best in the country abroad and being patient in the light of the strategy “network goes first, business follows” Expanding to foreign markets, Viettel has to compete with large corporations in the world such as Vodafone, Telenor, Orange, etc This is a challenge Meanwhile, Viettel is in the situation of “slow buffalo drinks muddy water” It invests abroad later than those of other countries about 10-20 years when there is not much “fertile soil” However, Viettel always sets the goal that once it invests in a market, its telecommunication network has to be ranked no or no in that country From now to 2015, Viettel intends to invest abroad in 10-15 countries with approximately 300400 million people Through the investment, Viettel expected revenue of $ 2-2.5 billion and to be among 30 the world’s leading telecommunications service providers, one of the 10 companies which have largest international telecommunications investment By 2020, Viettel will have a market of about billion people, which can bring revenue of over $ 20 billion III INVESTMENTS IN MOZAMBIQUE FOR EXPANSION IN AFRICA Africa ranked third in the world in terms of population and area, following Asia and the Americas, with 800 million people in 54 countries accounting for about 1/7 of the world’s population A research conducted by Informa Telecoms & Media (headquartered in the UK) which was announced on November 12nd 2012 showed that African mobile phone market is becoming the fastest-growing in the world The number of mobile subscribers in this market may reach 761 million by 2015 Informa Telecoms & Media predicted African mobile phone market will grow 18% by the end of 2013 while the worldwide market growth averages 11% According to Informa Telecoms & Media, by the end of 2017, the number of mobile subscribers in Africa will reach 1.13 billion Africa is a promising market where many international telecommunication investors are heading, including Viettel The reasons for investment telecommunications services in Mozambique Mozambique (MZB) is a country in the Eastern Africa, bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west, and Swaziland and South Africa to the southwest Area: 801,590km2, 2.5 times larger than the area of Vietnam (VN) Population: 21 million people, nearly a quarter of Vietnam’s population Mozambique is divided into 10 provincias and cidade capital MZB’s political environment is stable, for republic regime with many parties The current ruling party is FRELIMO The President is elected to a five-year term by popular vote The Prime Minister appointed by the President is the head of the government The Congress consists of 250 seats, elected by popular vote, and has a five-year term MZB is an active member of the African Union (AU), a key force in the NonAligned Movement, the Community of Portuguese-speaking African Countries (PALOP), the Commonwealth of Nations (Commonwealth), and a member of the Southern Africa Development Community (SADC) As the Chairman of the African Union (AU) in 2003, Mozambique has contributed actively to resolve conflicts, strengthen cooperation to fight to protect the legitimate interests of African countries and developing countries In foreign policy, Mozambique prioritizes relations with neighboring countries, regions, and traditional friend countries such as Russia, China, and Vietnam MZB and Vietnam have many agreements: Trade Agreements in Nov 2003, the Agreement on Investment Encouragement and Protection in Jan 2007, the Agreements on Double Taxation Avoidance and Tax Evasion Prevention in Sep 2010, etc MZB is one of the world’s poorest countries However, in recent years, MZB has achieved several successes in the process of economic reform and growth maintenance of 7-8 percent per year In 2010 Mozambique’s gross domestic product (GDP) was $ 10.21 billion, equivalent to a growth rate of 8.3% GDP per capita of Mozambique is approximately 500 USD/person/year Mozambique Investment Law was formed in 1993 The law stipulates the forms of foreign cooperation: the establishment of a branch of a foreign legal entity in Mozambique; the establishment a single company; the establishment of a joint venture with local investors in the forms similar to Ltd (Sociedades por Quotas de Responsabilidade Limitada - LDA), joint stock company (Sociedades Anonimas de Responsabilidade Limitada SA), or cooperative association; the cooperation with local investors in the form of membership association (similar to the business cooperation contract in Vietnam) The percentage of foreign investors’ ownership: the contribution of foreign investors in the joint venture is not limited Mozambique Corporation Income Code stipulates: Corporate income tax is 32% (equal to that of other countries in the region); VAT: 17%; Repatriate profits tax: 1.5% of profits; Other tax incentives: For major projects the purpose of which is to build national infrastructure (including telecommunications): discount 80% enterprise income tax for the first five years, 60% from the th to 10th year, and 25% from the 11st to 15th year In addition, for projects with investment larger than 12,500,000 billion Meticais (equivalent to 417 million U.S dollars), investors are exempt from import tax (5%) and can get a number of other tax incentives in the first five year (Source: http://vi.wikipedia.org/wiki/Mozambique) Reasons for selecting telecommunications services Information of Mozambique telecommunications market (2009): The level of competition is low with two mobile service providers MCel and Vodacom (There are often four operators in other African countries) and one fixed line suppliers (TDM); the telecommunications infrastructure is poor, backward, and primarily uses satellite and microwave transmission The market has great potential with low density of mobile and fixed subscribers/100: Mobile 29.1% (investment opportunities exits at the rate of less than 50%); fixed 0.43% High charges: cents/minute for fixed line and 20 cents/minute for mobile (in VN: cents/minute) (Compiled from bidding document of INCM, ITU) Mozambique Telecommunications Law was formed in 1999 Main provisions: Encouraging investment in the telecommunications sector, allowing liberalization and competition in mobile services, enabling telecommunication privatization; reforming for expanding telecommunications sector Despite low population density, the majority is mainly concentrated in two provinces Nampula and Zambezia (nearly 40% of the population) The highest density is in the capital, Maputo (122 people/km2) Average age: 17.5 (younger compared to Vietnamese, Vietnam: 26 years old) Labor force: 53% of the population, or about 10.4 million people A number of difficulties in investment in telecommunications services in MZB Language: Mainly Portuguese (official), only about 7% of people can use English Far distance from Vietnam leads to difficulties in directing the administration and the staff transfer will take long time Low population density (29 people/km2) but wide area makes the deployment of the network will be costly and time consuming Mozambique is a country of multi-cultures and customs with very diverse social etiquettes For example, Mozambique people favoured merrily gathering It is the meet important, not the time Mozambique people not appreciate punctuality, even to trains, buses They leave in time but the time of coming is unknown because they have to catch more passengers The food in Mozambique is mainly cassava, corn Besides, people here often eat much rice, seafood, fruits Especially, fruits can be enjoyed before the main dishes In spite of some difficulties, with the desire to become one of the 10 largest international investment companies in telecommunications and thanking to the experiences accumulated in Laos, Cambodia, Haiti, Viettel will have trust to successfully invest in MZB market in particular and Africa in general 4 Plans to implement strategies of investing telecommunications services in MZB 4.1 Target: To start-up after a year getting permits with the goal of becoming one of the largest mobile operators in Mozambique 4.2 Business Strategy a Competitive Strategy Low-cost strategy: The service providers who enter later must always have something better than their predecessors One of them is the better price Viettel’s price is expected to be 15% lower than its competitors Differentiation strategy: + The Investment Strategy towards “Network goes first, business follows” is derived from the standpoint that telecommunications business is infrastructure business The product of telecommunications is infrastructure To deliver products to the users, it is necessary to invest largely in infrastructure Viettel plans to invest infrastructure network to ensure coverage throughout the MZB, including remote areas Also, Movitel will also develop distribution channels across MZB via a system of stores and agents with a full range of mobile services, including those which are already available in Mozambique and many value-added services which are new to this market + Unlike other operators who just focus towards high-income customers, Viettel runs in the light of the 4-any philosophy (anytime, anywhere, anybody, anyprice) Customers are not just those who can afford but all those who wish to use the services + Viettel strictly follows the philosophy “trading associated with social responsibility” such as free school Internet, government support, hospital, the poor, etc + Unlike other investors who focus on hiring foreign professionals to ensure the job instead of training high-level manpower for the country, Viettel advocate to send its best experts to build the apparatus, train and transfer knowledge The ultimate goal is that after three years of implementation, the apparatus has to be operated by the local people, from technique to business This way will be appreciated by MZB people because of the real value that Viettel brings to their country b Branding strategy On investing abroad Viettel not use the brand Viettel but build a new brand in the market For example, in Cambodia, although the company is 100% owned by itself, Viettel did not use the brand Viettel but invested hundreds of thousands of dollars to research and select the name Metfone Viettel simultaneously determines that the business in the market must be undertaken by indigenous peoples, prioritizing local partners who provide equipments and services to contribute to the general social economy so that all people see Metfone to be a Cambodian network and for the benefit of the Cambodian Running the business according to the proverb “when is Rome, as the Romans do”, Viettel believes that cultural differences will not be a problem 4.2 Market entry strategy in MZB On April 09th 2010 Viettel signed a Joint Venture Contract to establish Movitel Company with a term of 50 years to participate in the bid package for the third mobile license in Mozambique The main content of the Joint Venture Contract: Capital contribution proportion: Viettel Global (70%), SPI (29%), Invespar (1%); Charter Capital: $ 500,000 (in the proportion of capital contribution); loans from shareholders: $ 149.5 million (in proportion of the capital contribution); investment: $ 400 million in five years Information about the joint venture between Viettel - SPI: Name of company: Movitel; Date of Established: June 03rd 2010; Duration: 50 years; Members: Viettel Global (VG), SPI, Invespar; business objectives: to provide telecommunications services and value added services 3.3 Results of implementing investment strategies in Mozambique to the present time On Jan 6th 2011, Movitel (the joint venture between Viettel and SPI Invespar Mozambique) has officially got the 3rd telecommunications license in Mozambique The ceremony of handing the 3rd telecommunications license in Mozambique Immediately after winning the license for $ 28.2 million, Viettel has sent missions to Mozambique to explore, design, and deploy network infrastructure On May 15th 2012 after more than one year building the network, Viettel officially took the mobile network Movitel into use in Mozambique On May 16 th 2012 (two weeks after opening the system), Movitel attracted 415,000 subscribers By the time of its opening, Movitel’s coverage was the largest and deepest in this African country with 1,862 2G and 3G BTS stations It covered 100% of the districts and highways; accounting for 70% of total fiber of Mozambique with 12,600 km Viettel investment was more than 50% of the Mozambique telecommunications infrastructure These numbers contributed to bringing Mozambique to become one of the fastestgrowing nations in terms of telecommunication infrastructure and one of the three countries with largest fiber layer in the region, after South Africa and Nigeria Viettel officially provides mobile business in Mozambique via Movitel network Through Viettel’s initial successes in foreign markets in general and in MZB in particular, it can be seen that if Vietnamese enterprises have aspirations to become a multinational company, with specific and different strategic objectives plus the enthusiastic spirit of the staff, it is possible for us to take our products and services to the international market, contributing to improving the national brand IV REFERENCES: “Viettel’s investment strategy in foreign market”, internal document www.viettel.com.vn http://vi.wikipedia.org/wiki/Mozambique http://www.mofa.gov.vn/vi/ http://vneconomy.vn/20100120092924851p0c10/viettel-dau-tu-ra-nuocngoai-nhung-noi-de-khong-con-nua.htm Data provided by Viettel’s market researchers ... the company is 100% owned by itself, Viettel did not use the brand Viettel but invested hundreds of thousands of dollars to research and select the name Metfone Viettel simultaneously determines... provide telecommunications services and value added services 3.3 Results of implementing investment strategies in Mozambique to the present time On Jan 6th 2011, Movitel (the joint venture between... years Therefore, there will be about 600 operators disappearing because have no market share and subscribers These trends directly affect Viettel Without investment in foreign markets, market expansion,
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