Sight texture problem.

I have been having some problems with this texture on a holosight. You see, it is supposed to look like this:

http://vignette4.wikia.nocookie.net/fear/images/c/cd/FEAR2_2014-04-24_00-46-12-81.png/revision/latest?cb=20140424055721[/t]
However I cannot make it become transparent. Despite having a correct alpha channel and appearing transparent when in picture editing software, once loaded into VTFedit it turns solid.
[t]http://i63.tinypic.com/2r47c0l.jpg

A texture sample:

And the vmt file:

If someone knows how to fix this, please tell me.