Exchange, interest rates take bite out of Viettel's global operations

By Ngoc Tuyen, Dam Tuan   April 20, 2016 | 02:21 pm GMT+7

Exchange rate fluctuations and sharply rising expenses from opening three new markets in Africa have left the international arm of Vietnam's largest telco affected as profits continue to plunge.

Viettel Global’s total business sales reached nearly VND14.9 trillion in 2015, with post-tax profit of VND500 billion. This have not met expectations based on the results of the previous year when the group's foreign investment company made post-tax profit of VND2.3 trillion (more than $103 million). This is the lowest profit after tax Vietnam’s largest teleco has made in the last four years.

According to a report by Viettel Global JSC on the 2015 business results for Viettel Group's regions, business sales in the African market reached nearly VND4.9 trillion (over $220 million), rising 25 percent compared with 2014, but the group’s post-tax profit fell by VND2.6 trillion (about $117 million), three times more than in 2014.

exchange-interest-rates-take-bite-out-of-viettels-global-operations

Exchange rate fluctuations dragged on Viettel's foreign investment profit in Africa. Photo by VnExpress

The Southeast Asian market did not incur a loss but business sales dropped over nine percent to VND6.2 trillion (about $278 million). Post-tax profit was only VND1.2 trillion, declining nearly 28 percent compared with 2014.

Latin America enjoyed a slight increase in business sales and profit reached VND213 billion ($9.6 million), an increase of VND 87 billion from 2014.

A Viettel Global representative said that exchange rates and new markets expenses were the main factors affecting business operations. Viettel told VnExpress that another reason for the loss was that Viettel Global increased its expenditure in Cameroon, Burundi and Tanzania by VND5 trillion ($230 million) in 2015, over 4.5 times higher than in 2014, and therefore needs time to turn a profit. In addition, the report showed that expenses for financial activities in 2015 were higher than in 2014, with the exchange rate variance five times higher and interest rate expenses 1.5 times higher.

Viettel Global reported a net loss from exchange rate variance of more than VND600 billion (nearly $27 million) in 2015. The African market witnessed significant devaluation of domestic currencies against the US dollar, affecting Viettel’s investments in Africa. Exchange rate variance was responsible for up to 32 percent of the total expenditure in African markets.

On the bright side, Viettel Group recorded better revenue growth than other global telcos. For instance, telecommunications giant Vodacom's total revenue grew only 2.1 percent, and the global average revenue growth rate for the industry was 2.3 percent. Viettel's revenue growth increased by nine percent.

Viettel Global JSC is under management of the Vietnam Military Telecommunications Group (Viettel), Vietnam’s largest mobile network operator. Viettel is a state owned enterprise and operated by the Ministry of Defence.

Viettel Global is responsible for investing in foreign markets and currently operates mobile networks in Laos, Cambodia, Timor Leste (Southeast Asia), Mozambique, Cameroon, Tanzania, Burundi (Africa) and Haiti (Latin America).

 
 
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