Telecom giants may be selling below cost to kill rivals

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There is suspicion that local large wireless carriers have tried to undercut and eliminate rivals by offering huge sales promotion programs that can eventually hinder the market development, a senior official has said.

Viettel, Vinaphone and MobiFone, which dominate the market, are not allowed to offer their services under cost price, Pham Hong Hai, Director General at the Ministry of Information and Communication's Telecommunication Department, said in an interview published by the Tuoi Tre newspaper Saturday.

"A strong company may accept temporary losses to take over the market later. Selling below cost is an unhealthy practice that needs to be prohibited because it will create market instability and monopoly."

Hai said his department has ordered all mobile phone network operators to report on all of their promotion programs since March 1. He said violations will be punished and added the situation has become "too complicated".

Vietnam's regulations stipulate that bonuses offered by businesses cannot exceed 50 percent of the value of the product they are selling. The Trade Promotion Agency last year specifically ordered mobile phone networks to stop illegal sales promotions.

However, earlier this month, MobiFone launched a program that awarded customers an additional 170 percent of the recharged value of a prepaid card.

Hai said the Ministry of Information and Communication will tighten controls over promotion campaigns to "prevent price wars that can cause the telecom market to collapse."

Businesses can cut prices to benefit their customers in the long term but they cannot take advantage of short term promotion programs to kill off smaller players, he said.

Hai also said wireless carriers will not be granted new series of numbers unless they have actually used up 70 percent of their available numbers.

VinaPhone, MobiFone and Viettel last November requested the Ministry of Information and Communications for a new 11-digit number series each, saying they were running out of numbers for new customers.

Military-run Viettel had 16 million new subscribers last year, statistics from the Ministry of Information and Telecommunications showed. MobiFone and Vinaphone, both managed by state-owned Vietnam Posts and Telecommunications, each attracted more than 10 million new customers.

New regulations governing telecoms' promotion programs are expected to take effect July this year, local news website VnExpress reported Saturday.

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