Vietnam profit-stressed telcos unlikely to ink deals with free apps

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Photo courtesy of Thoi bao Kinh te Saigon Online

Telecom firms have sought cooperation with free call and message app providers to cut lost usage due to the apps, but a deal seems impossible as the two sides do not share the same profit vision.

Sources from the three market dominators Viettel, VinaPhone and MobiFone said no agreements have been reached though they had joined talks with providers of OTT (over the top) apps like Zalo, Line and Kakao Talk, which are not linked to traditional telecom or Internet service providers, but operate atop established Internet connections.

Insiders said developing a joint product would be the most simple way for the telcos to lessen the impacts of the apps on their revenues, compared to developing their own apps or taking over the providers.

But they also said such a product is unlikely to be developed as telecommunication businesses and OTT businesses are two different models. The former make money from charging calls and messages while the latter from ad impressions served up on the apps.

The telcos have offered to provide 3G packages attached to the free apps of the providers they cooperate with, but the latter’s condition that the packages are also free or at low charges in the beginning seems unfeasible for the telecom companies.

An unidentified telco leader told Thoi bao Kinh te Saigon (Saigon Times) Online that a telecom company won’t accept such a condition as OTT providers spend around ten times less on their investment than telcos on their 3G network.

A representative of an OTT business, who also asked to speak  anonymously, said telecom companies are too worried about their immediate benefits.

Nguyen Son Hai, deputy head of the sales department of VinaPhone, said the company has plans to develop its own OTT apps.

The military-run Viettel has also announced its intention to buy South Korean app Kakao Talk and Vietnamese Zalo.

MobiFone said late last year that it has been losing around VND1 trillion (US$47.45 million) each year to OTT social apps, while Vietnam Post and Telecommunications Group, which owns MobiFone and Vinaphone, said the apps have reduced its revenues by around 10 percent.

The three telecom companies have asked the government to bar the apps until methods are established to control them. They also hiked their 3G prices twice last year, by 25 percent in April and 40 percent in October to VND70,000 a month.

UK-based market research and analysis company Ovum has estimated that mobile operators lost $32 billion in traditional SMS revenue to OTT apps in 2013, and that the figure will increase to $86 billion in 2020, according to a report in The Wall Street Journal.

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