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|Two large markets of Viettel Global is having “planned-loss”|
Viettel Global (VGI) has officially started trading 2.24 billion shares on the Unlisted Public Company Market (UpCOM), with the total par value of VND22.4 trillion ($9.92 billion) and the reference price of VND15,000 ($0.66). Thus, the company is worth nearly $1.5 billion. On the first transaction session on September 25, VGI’s shares hit the ceiling price of VND21,000 ($0.93).
Viettel Global operates in 10 international markets, but only nine of these markets are included in its consolidated business results: Cambodia, Laos, Haiti, Myanmar, Burundi, Mozambique, Tanzania, Cameroon, and East Timor. Peru is VGI’s largest revenue and profit-making market, but its consolidated business results need to be included in Viettel Group’s books as per Peruvian regulations.
Among these 10 projects, the total investment value of the Mytel operations in Myanmar since June 2018 was $1.75 billion. Next is Halotel, which has been operating since October 2015 in Tanzania, with $783 million.
The two markets with the largest investment from Viettel are also the ones that were meant to operate at a loss at the beginning. With the exclusion of Peru, this leaves seven markets, including Cambodia, Laos, Haiti, Burundi, East Timor, Mozambique, and Cameroon, where Viettel Global reported profit. The corporation has managed to recoup its investment in three of these markets (Laos, Cambodia, and East Timor).
Viettel Group’s total consolidated revenue in 2017 grew strongly, reaching VND199.02 trillion ($841.72 million), an on-year increase of 24 per cent, while pre-tax profit was VND27 billion ($1.19 million). Including the results of its subsidiaries, Viettel Global recorded a loss of over VND481 billion ($21.28 million), decreasing by 612 per cent compared with the corresponding period in 2016 (loss of VND 3.42 trillion - $115.63 million).
Explaining the reason behind the falling consolidated revenue, despite seven out of nine markets getting profit, Viettel Global said that the latest markets that Viettel invested (Myanmar and Tanzania) have larger scale than previous markets, therefore, the profit from previous markets is not enough to offset the huge initial investment needed to break open these two markets.
In 2018-2020, Viettel Global targets to set foot in one or two new markets, with the goal of obtaining one license per year. The company will focus on Asian markets due to the similarities in culture and convenient management.
“Viettel generally starts turning a profit after three years of launching in a foreign market. That these two markets have yet to bring profit is well within our plans. In fact, telecommunications businesses usually reach the breakeven point with their outbound investments at least four of five years after the launch in markets that are highly competitive,” said Le Dang Dung, general director of Viettel Group.
Another cause behind the losses is exchange rate differences, which in 2016 cost VND3.01 trillion ($133.23 million) to the company, accounting for 83 per cent of its financial costs, while in 2017 it was VND2.73 trillion ($120.93 million), accounting for 78.5 per cent.
“As Viettel’s outbound investments are foreign currency denominated (USD, EUR), while revenue in foreign countries arrives in domestic currency, Vittel’s revenue is affected by exchange rate risk when exchanging into USD and re-evaluating the rate of foreign currency liabilities at the end of the term,” noted Viettel’s report.
At the annual general shareholders’ meeting held in June 2018, Viettel Global’s shareholders voted to increase the firm’s charter capital to VND30.43 trillion ($1.34 billion) via issuing 800 million ordinary shares at the price of VND10,000($0.44) (the total value was $3.54 billion).
Viettel Global says that this capital will be used to expand the scale of its operations until 2020. Previously, in the middle of 2017, in a talk with VIR, Le Dang Dung revealed that Viettel is planning to invest in Nigeria and Indonesia—two markets which have a total population of about 450 million, twice as many as the Viettel’s 10 current markets.
“In 2018-2020, Viettel Global targets to set foot in one or two new markets, with the goal of obtaining one license per year. The company will focus on Asian markets due to the similarities in culture and convenient management,” read the prospectus of Viettel Global.
Do Manh Hung, general director of Viettel Global, said that in 2018, the company set the target to break even and start expanding to new markets by 2020 and reach a customer base of 400-500 million people, as well as reach the top 10 global telecommunications companies.