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Metfone stake up for grabs: sources

An employee grabs a Metfone SIM card for a customer at a Phnom Penh store.
An employee grabs a Metfone SIM card for a customer at a Phnom Penh store. Sovan Philong

Metfone stake up for grabs: sources

Viettel, the Vietnamese military-owned operator of Cambodia’s biggest telecom firm, Metfone, is looking to sell a stake in its Cambodia operation to raise capital for its other global ventures after the company reported its lowest growth in earnings since 2012, according to international media reports.

During a general shareholder meeting last week, the state-owned telecommunications giant reportedly announced that it was considering divesting from its operations in Cambodia and other overseas subsidiaries.

“The group is considering the sale of part of the holdings in these companies while they have good valuation. We will use the proceeds to acquire new businesses. So it does not conflict with our strategy of targeting a global presence,” the online financial news platform Deal Street Asia quoted an unnamed company representative as saying.

If Viettel goes ahead with the stake sale, the company would offer no more than 49 per cent of Metfone’s operations, leaving the Vietnamese generals with a controlling share, according to media reports. The equity sale would signal the company’s first retreat from a foreign market.

A Phnom Penh-based industry insider, speaking on the condition of anonymity yesterday, said Viettel has been quietly seeking investors to buy into its Cambodian operations for some time now.

“They have been trying to find investors for Metfone for a while,” the source said. “But their business is not doing too well, nor does anybody want to be a minor shareholder while the majority is held by the Vietnamese military.”

Metfone is Viettel’s largest operations outside of Vietnam, and claims to hold the biggest share of Cambodia’s mobile phone market, with upwards of 8 million subscribers. Metfone generated $256 million in revenue last year, according to one media source – about 40 per cent of Viettel’s overseas telecom turnover.

In April, Brand Finance, a London-based consultancy service, calculated that Metfone’s brand value had grown to $94 million last year, up nearly 10 per cent over the previous year.

Metfone’s parent company, however, has seen mixed results as it expands global operations. In 2015, Viettel Global – the group’s international investment unit – generated $660 million in sales revenue, while net profits slumped to $22 million – its lowest bottom line since 2012.

Nearly half of the losses were in Africa, where Viettel’s four subsidiaries experienced strong sales growth last year, but suffered $10.4 million in losses due to volatile foreign exchange markets in the region. The company also saw leaner earnings in its three Southeast Asian markets – Cambodia, Laos and East Timor – where net profits declined by 28 per cent last year to $5.5 million.

Nevertheless, Viettel is still trying to expand in the region and last month reportedly entered final negotiations to form a $1.5 billion joint venture with two companies in Myanmar to bid for the country’s fourth and last telecom licence.

Anthony Galliano, CEO of Cambodian Investment Management, said Viettel could be looking for an investor in Metfone as the company – which has built a strong ISP franchise and nationwide mobile network coverage in Cambodia – assesses the capital costs of further expansion.

“Metfone’s strategy, not unlike the parent’s international strategy, is total population and territory coverage for voice and data,” he explained. “In order to do this, the capital expenditure, including equipped base stations and tens of thousands of kilometres in fibre optic cable, is a massive investment.”

“The challenge in telecoms is rapidly depreciating equipment and investment demand in new technology to deliver fast data services to subscribers seeking high-speed internet delivery,” he continued.

Galliano said “it would be timely” for an outside investment in Metfone as the company faces the prospect of diminishing returns on investment.

“So it may be a matter of sell high, or at a high point, before the valuation goes south,” he said.

Neither Viettel nor Metfone could be reached for comment yesterday.

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