The decision by Vietnamese telecom operator Viettel Group to eliminate roaming charges on cross-border calls made between its networks in Vietnam, Cambodia and Laos could cost the company over $1 million a day in lost revenue. However, it could also result in more subscribers using roaming, generating additional revenue.

Viettel announced last Thursday that on January 1 subscribers of Viettel-owned telecom networks in Vietnam, Cambodia and Laos will be able to phone each other at domestic call rates.

“Users of Metfone in Cambodia, Unitel in Laos and Viettel in Vietnam will be charged at the local mobile fee when they make cross-border calls to each other,” Viettel managing director Nguyen Manh Hung said, according to Vietnamese media sources.

Vietnamese daily newspaper Vietnam News cited Hung as saying the decision to drop roaming charges, which run as high as $2 per minute, could cost Viettel’s networks in the three countries about two percent of turnover.

“At first, Viettel will suffer a loss of $1 million each day. However, we hope our customers will increase their calling time and internet access,” it said.

“Regardless, the policy will definitely promote trade and business among the three nations.”

Military-run Viettel operates in Vietnam and nine overseas markets with a total subscriber base of 90 million customers. The company posted revenue of $10.8 billion in 2015 with 20.8 percent year-on-year growth.

Metfone, Viettel’s Cambodian subsidiary launched in 2009, generated $256 million in revenue last year and remains the company’s most profitable overseas operation.

Im Vutha, spokesman of the Telecommunication Regulator of Cambodia (TRC), said yesterday that Metfone did not require the TRC’s permission to drop roaming fees, however, the strategy would likely result in lower revenues for both the company and the government as Metfone pays an annual licence fee as well as a tax on net profit.

Vutha suggested Viettel’s decision to drop roaming charges was likely a response to fierce competition from over-the-top (OTT) communications services such as Line and WhatsApp that bypass the traditional voice and messaging business of telecom operators.

“It is a new strategy of the company to attract more customers and to compete with OTT,” he said. “They could be facing a loss of revenue now and are trying balance the quality and service with the aim of gaining profit in the future.”

Marc Einstein, director of mobile and wireless communications Asia Pacific at Frost & Sullivan, said the rise of OTT communications platforms has been the “nail in the coffin” for international roaming. As Viettel could not stop its subscribers from using these platforms, by dropping roaming charges it could hope to encourage them to increase their usage of its standard voice and data services while abroad.

“Roaming is going down to zero anyways, so it makes sense for Viettel to try to skim some revenue from it,” he said.

Einstein said while international roaming has never been a big contributor to the revenue of mobile network operators, it is a highly profitable service as the physical costs of roaming are “minute”.

He said in the case of Viettel, connecting a subscriber on its network in one country with one of its networks in another has almost no actual cost. It is only when a mobile operator does not have a network partner in another country that it must pay charges.

Viettel stands to be among the first mobile network operators to scrap roaming fees for subscribers of its networks abroad.

In 2007, the European Union enacted legislation that forced European mobile service providers to lower their roaming charges for across the 27-member bloc. After considerable debate, members of the European parliament finally voted in October 2015 to eliminate mobile roaming charges altogether effective mid-2017.

ASEAN information and telecommunications ministers have also discussed abolishing roaming fees within the 10-member bloc. The issue was raised last month at the Cambodia, Laos, Vietnam (CLV) regional summit in Siem Reap, though no timeline was set.

Viettel and Metfone representatives did not respond to inquiries yesterday.

Additional reporting by Cheng Sokhorng