Vietnam Airlines’ IPO: Financial Communications in Action

As part of a move toward a more market-oriented economy, the Vietnamese government is in the process of privatizing a number of state-owned enterprises (SOEs). Last week, it was announced that Vietnam Airlines would move ahead with an initial public offering (IPO) of stock this September, perhaps the company with the highest international profile. As this move has been contemplated for years, expectations – and some level of anxiety – are high. The handling and success of this IPO carries huge implications, not just for the company, but the government’s privatization efforts as a whole.

First a caveat: we do not work with Vietnam Airlines and have no knowledge of the situation beyond what has been publicly reported in the media and elsewhere.

The IPO, which is a selling of stock to the public, illustrates the importance of and the need for specialized financial communications. What it comes down to is the company needs to sell its business model and strategy to a variety of stakeholders, including:

• Potential shareholders, be they individual investors or financial service companies such as banks and private equity funds, in Vietnam and abroad;
• Analysts, who will follow the company and provide commentary on their views of it as an investment;
• Employees, who may not understand what this process could mean to them.

Those are just a few of the audiences the company will have to consider as they develop their communications strategy. These stakeholders will likely have many questions about the offering and the company’s operations. A few examples include:

• Given that just 20-30 percent of the company will be sold to the public (with the government retaining the balance), will shareholders really have a say in the company?
• Does the government/company have any timeline for reducing state ownership?
• As an employee, will I be able to buy stock? And if I can, what does that mean?
• Will company management be provided stock options as part of their compensation?
• How will the company compete in what is becoming a crowded market? How does it plan to compete with low cost carrier VietJet Air, which has a very ambitious expansion under way?

The Company needs to be ready for greater transparency into its operations and finances, which may require new policies and procedures. It will also need to establish an investor relations program to handle investor and analyst inquiries.

A comprehensive financial communications strategy would address these and many more issues. It may seem straightforward, but such a plan has to be coordinated closely with the banks and lawyers handling the listing. How the company says things is just as important as what is said, as there are strict laws and regulations about what a company can say as it undertakes such a process.

What is “Strategic Communications”?

C2 is a public relations agency, but we specialize in strategic communications. It’s not a new concept in developed countries, but it is just taking root in developing ones. A key challenge we face in Vietnam is explaining the concept to local contacts who are unfamiliar with what “strategic communications” entails – and how it contributes to the bottom line.

Public relations is still a rather immature industry Vietnam, with companies looking to agencies to introduce new brands and products to consumers, to generate press clippings, organize events and other consumer-facing tasks. Of course, these are extraordinarily important in a developing economy and a growing middle class with increasing levels of discretionary income to spend.

Vietnam has a number of PR firms that do all of that, and do them quite well. But when it comes to more sensitive and/or sophisticated issues, there seems to be a void. It’s no fault of the agencies; local clients have rarely required such services and when they have, they’ve typically turned to regional agencies/offices in Singapore or elsewhere.

To view “strategic communications” simply through the lens of crises or financial communications is somewhat short sighted. There’s a lot more to it. To get a better idea of what strategic communications IS, it makes sense to first look at what it is NOT:

• Party planning (although an event could be a part of a broader strategy)
• Promotion Girls/Boys standing in the supermarket passing out samples of a new flavor of energy drink
• One-off media events designed to generate as many articles as possible in a short amount of time
• Signing up a local celebrity to endorse and promote a new mobile phone

We’re by no means denigrating the above — all of these tactics have important roles in this market, and require a lot of work and a high degree of expertise to be successfully implemented.

Strategic communications is more than consumer-facing tactics. It takes into account a range of stakeholders, including employees, vendors, regulators, shareholders and partners. What are the issues important to them? What is the right messaging? How to best reach them? What are the questions a client will face, and how should they answer them? Here are a few examples of “strategic communications” scenarios:

• A foreign company opens a new factory
• An investment fund takes a stake in a local company
• Goods being sold by a global retailer’s local partner are found to be counterfeit
• Baby formula is found to be contaminated
• An airline increases service to/from the country

While the above examples may involve elements of “traditional PR” and have consumer-facing angles, strategic communications encompasses much more. It considers business, financial, and legal issues, HR and other areas. It combines all of the current important buzzwords such as “engagement”, “trust”, “content” and “digital”. There’s an online element, of course, and sometimes advertising comes into play; strategic communications is agnostic when it comes to the type of platform or tactics used. Really, one might say that it was the original “integrated communications” model.

When we meet prospective clients and explain the above, they tend to get it. The challenge then becomes convincing their bosses, i.e., the ones who spend, of the benefits of such services. It’s a never-ending cycle! But most clients come to find that once they commit, the investment is well worth it.