VietNamNet Bridge – The Ministry of Information and Communication (MIC) has released a document guiding the method to define the production costs of telecom services. This aims to prevent the unhealthy competition which may kill the small networks on the market.

Defining production costs helps stabilize telecom service market

The need to define the telecom service production cost and the fights against the dumping has become very urgent in the context of the cutthroat competition in the market.

Mobile network operators have been trying to slash the telecom service fees as sharply as possible in order to scramble for more subscribers. The operators have been repeatedly denouncing others of dumping services on the market, while experts have warned that the price war may lead to the market collapse.

MIC has been urged to set up the floor prices and stipulate that enterprises must not sell products at the prices below the floor prices.

However, a new problem has arisen that how to define the production costs and the floor prices.

At a recent meeting between MIC and the two biggest telecom groups--Viettel and the Vietnam Post and Telecommunication Group (VNPT), the participants all agreed on the concept that the production cost can be defined by the division of the total cost on the output.

However, it is very difficult to calculate the production costs of different telecom services and the production costs of the multi-field enterprises. Each of them follows its own way of calculating the annual armotization, its expenses and its branding advantages. This means that they would have different production cost levels for different types of services.

It is more costly to maintain a fixed line subscriber (the expenses are high, but revenue is low) than a mobile subscriber (the expenses are low, while the revenue is high). In fact, the actual expenses on a fixed line subscriber are double that of a mobile subscriber.

According to Pham Hong Hai, Director of the Telecom Department of MIC, even ITU, the international telecom union, has set up a working group in charge of defining the production costs of telecom services.

New circular on defining production cost to take effect in early 2013

MIC, after a lot of exertions and consultations with relevant parties, has released a circular on defining the production costs of telecom services which would take effects as of January 1, 2013.

The ministry requests enterprises to submit their planned and the actual production costs for every telecom service annually.

MIC would reply to enterprises in written document within 10 days since the day it receives lawful documents from enterprises.

Deputy Minister of MIC Le Nam Thang once said that the telecom charges would be set up based on the production costs and the market demand.

The price management would help prevent the dominating enterprises from dumping their services to eliminate their rivals. If big enterprises lower their service fees, the move would be followed by smaller networks in order to retain their clients. Meanwhile, the moves would kill the small networks because they would not make sufficient profits to survive.

Le Dang Dung, Deputy General Director of Viettel, one of the three biggest mobile networks in Vietnam, applauded the production cost management policy, adding that the management needs to facilitate enterprises to make re-investment and promote investments in new technologies.

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