SaigonTel and SaigonPostel: Are Two Weaknesses Likely to Make a Strength?

Ho Chi Minh Stock Exchange has recently placed the stock SGT of Saigon Telecommunication Joint Stock Company (SaigonTel - SGT) on the alert group because of its financial loss in 2011 that reached nearly VND134 billion.

 

But the market is more interested in the important issue of SGT having pursued over the last two years the role of strategic partner of Saigon Post and Telecommunications Services Corporation (SaigonPostel - SPT).

 

SPT has faced difficulties for many years, and having a new partner has failed to solve its problems, especially the stagnation of S-Fone mobile network. The management board of SPT was restructured with the participation of Mr Dang Thanh Tam (Chairman of SGT), and Mr Hoang Si Hoa (General Director of SGT). Last March, Mr Hoa has officially become the General Director of SPT, replacing Mr Ho Hong Son, who had managed S-Fone mobile network from its establishment. SGT is participating in managing other key projects of SPT such as the AAG ocean fiber optics network, NGN network, and other fiber optics networks, besides projects developing SPT office buildings.

 

SGT suffers loss; SPT is not in any better situation because of the unprofitable S-Fone mobile network, as well as of other ineffective investments in finance and real estate. In 2010, SPT suffered the loss of VND91 billion, excluding the loss of its S-Fone mobile network; the accumulated loss of the first 9 months of 2011 reached VND191 billion.

 

The Ministry of Information and Communications recently allowed S-Fone to transform its technology from CDMA to 3G (HSPA) on the 800MHz band, which is deployed by this network operator. Market history has revealed that an alteration and network transformation requires tens of trillions of VND. The potential cooperation is unlikely to lead to a recovery of S-Fone network as well as of other investment fields in SPT. In fact SGT cannot afford to finance S-Fone and the latter is looking for a new cooperation.

 

There is a rumour that Huawei or ZTE of China, two telecommunication networks from ASEAN and Europe, and even domestic partners will join the game.

 

However, whoever the third partner is, the future of the network provider who once created renovation for the Vietnamese telecommunication market remains unclear. Telecommunication market history has shown that most telecommunication networks, even backed with abundant financial resources by their parent corporations, have still failed to compete with the two giants Viettel and VNPT. In the meantime, besides financial difficulties, SGT and SPT also have problems with personnel who are not experienced in technological field, management capacity and market exploitation.

 

These two weaknesses are unlikely to make a strength, so S-Fone must still wait for new opportunities.