2009 - A Year of Telecom Investment Boom

In 2008, although the global economy entered slowdown and then recession and Vietnam was adversely affected as a result, the overview picture of the Vietnamese telecom market was very bright in the first half of the year. Besides, the mobile and landline telephone service market had a high growth while the demand for internet and broadband transmission robustly increased. Many important events took place together with reliable growth records.

 

The mobile phone subscription market remained hot growth because the service tariffs dropped further in addition to attractive promotion programmes and discounts. According to the statistics released by the Ministry of Information and Communications, the number of mobile phone subscribers rose to nearly 80 million. The first position is now the struggle between MobiFone and Viettel, which both boasted some 26 million subscribers each, followed by VinaPhone with more than 20 million subscribers and S-Fone with more than 6 million subscribers. CDMA networks are at a disadvantage in the competition with GSM-based networks. At the end of 2008, the number of subscribers far exceeded the forecast for the year 2010 at 50 million subscribers.

 

Telephone service operators paid special attention to the wireless fixed line telephone service market because this service was enabled by using mobile phone infrastructure. They target at 70 per cent of population living in rural and mountainous areas. The fixed line telephone market has developed steadily with an average annual growth of 43.5 per cent. Vietnam is forecast to have 13 million subscribers to fixed line telephone service in 2008, raising the tele-density to 15 per cent. Popular wireless fixed line telephone services include HomePhone (Viettel), Gphone (VNPT) and EVN. With promotion programmes and low tariffs, the number of subscribers to this service is soaring.

 

After Vietnam joined the World Trade Organisation (WTO), the internet and broadband market has been booming, especially in urban areas. At present, about 89 per cent of companies in Vietnam have internet connections and use broadband services. Individual users are also the “fertile land” for service providers. Expectedly, the broadband service will have further growth in the coming time after the Ministry of Information and Communications licensed the WiMAX pilot licences to four leading service providers, namely VNPT, Viettel, EVN Telecom and FPT Telecom. VMS - MobiFone Company also completed financial source, technical infrastructure and governance capacity to provide the 3G service expected in a short time to come.

 

The rivalry among telecom service providers has been already very active and is forecast to be increasingly severe with new investment modes - competition in value-added services.

 

Apart from traditional competing aspect, the price, a number of value-added services have been introduced by operators. For instance, MobiFone introduced Live-Info and Mobi365, Vinaphone launched Data-safe and EZmail while Viettel rolled out Yahoo Messenger and i-chat. The service competition will help speed up the network expansion, develop 3G architecture, create a fair competition and minimize unused subscriptions.

 

With the investment in the Trans-Asia undersea fibre optic cable system, EVN will build a connection terminal in Vung Tau City which can directly connect with other terminals in Singapore, Hong Kong and Japan. The initial investment capital of EVN is US$30 million. In 2009, the military-run Viettel will complete an undersea fibre optic cable project.

 

In 2008, Vietnam continued to affirm its potential market position, proven by increasing foreign investment capital in the telecom industry. MobiFone , which planned to go public in the middle of 2008, may receive an investment worth US$1 billion from Japan’s DoCoMo Group.

 

On the other hand, the Vietnamese telecom market has many potentialities for development in the coming time as more international network operators will be licensed to operate in the country in accordance with the international integration commitment. Russia’s VimpelCom signed an agreement with the Vietnamese Government on its plan to invest US$1 billion in a GSM mobile phone service network in several years to come to become the seventh operator in Vietnam. Besides, many other foreign companies are also very keen on 3G field in Vietnam as the Vietnamese Government is preparing to grant 3G and WiMax licences for selective network operators in 2008.

On the other hand, regulations on direct investment in the telecom industry in accordance with the Decree 121 issued by the Prime Minister will encourage the presence of foreign telecom investors in Vietnam.

 

According to economic experts, this decree has more “open” regulations for foreign investors who want to join hands with Vietnamese companies. When foreign investors took part in direct investment in network infrastructure to supply telecom services in Vietnam, the minimum required capital is VND160 billion (US$10 million) for the one-province/city coverage and VND1,600 billion for the country-wide coverage. From January 11, 2012, foreign investors can set up joint ventures with the Vietnamese side with their holding up to over 51 per cent. Or, they can set up wholly foreign-owned entities in Vietnam.