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Having low profit sharing ratios, CPs have one foot in the grave

The draft of a new legal document is believed to “create an equality between content service providers (CPs) and mobile network operators,” which is really the good news for CPs. However, while waiting for the new regulations to take effects, CPs have been trying to do everything they can to survive the current difficulties.

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How much for the involved parties?

CPs have been repeatedly complaining that mobile network operators have been bullying them when they cooperate in providing content services.

Currently, mobile network operators can enjoy the “bigger piece of the cake,” 60-70 percent of the turnover from content services, while CPs can pocket the remaining 30-40 percent.

The Ministry of Information and Communication (MIC) has admitted that CPs have been on a disadvantage in doing business with mobile network operators. Since making modest profits, a lot of CPs have to take extra jobs to earn their living. Especially, many of them still have been found out as delivering spam messages to get additional money.

The draft decree on information technology services compiled by MIC is believed to settle the current problem – the unreasonable profit sharing ratio between CPs and network operators. The draft document clearly stipulates that the profit allocation needs to go in a transparent way, and that CPs would get the higher profit proportions than mobile network operators.

The draft decree also stipulates that MIC would grant or allocate prefix number bands through auctions and competitions directly to CPs, which means that CPs would not have to ask for the number bands from telecom groups as currently said.

The regulations, once taking effect, would create favorable conditions for content service enterprises to develop, because they help CPs earn bigger money and stop the reliance of CPs on mobile network operators in terms of prefix number bands for SMS.

In general, MIC has affirmed that the ministry now tries to set up a reasonable profit sharing profit to remove the discriminatory treatment which has been existing between content service enterprises and telecom groups.

CPs have to take extra jobs to survive

The information proves to be the good news for CPs. However, they still have doubts if this would come true, since the regulations just remain on… paper. Meanwhile, telcos repeatedly say that the profit sharing is the own business of enterprises and involved parties, while the State should not intervene their business deals.

Nguyen Manh Ha, General Director of VMG, said that while waiting for the new regulations to take effects, CPs have to do everything they can to live to wait for better things.

He said that CPs have to cut down the budget for the media campaigns to introduce new services, while they have been living on old services (the services through SMS like lottery, music downloading, ring ton downloading, games…) on the basis of the existing clients and distribution channels, even though the markets have become nearly saturated.

“We get only 25 percent of the profit for the new services, which is even lower than the profit ratio for old services,” Ha said.

As such, CPs have been falling into dilemma. The more they try to develop new services, the bigger losses they would incur, because they have no budget for communication campaigns to develop subscribers.

CPs have been advised to focus on developing apps for smart phones instead of the basic services on mobile networks. However, Ha said this is just an idea, not an effective solution to CPs, because most of the apps for smart phones have short life circles, while the investment rates are very high.

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