Published by BUSINESS MONITOR INTERNATIONAL LTD                          Vietnam                          Telecommunicatio...
Vietnam                         Telecommunications                         Report Q3 2008                         Includin...
Vietnam Telecommunications Report Q3 2008© Business Monitor International Ltd                                           Pa...
Vietnam Telecommunications Report Q3 2008CONTENTSExecutive Summary ..........................................................
Vietnam Telecommunications Report Q3 2008      Table: Regional Fixed-Line Penetration Overview...............................
Vietnam Telecommunications Report Q3 2008Executive Summary             Vietnam’s telecoms market remains attractive in ter...
Vietnam Telecommunications Report Q3 2008Vietnam Business Environment Industry SWOTStrengths                  !   An incre...
Vietnam Telecommunications Report Q3 2008Business Environment             Changes in this quarters Asia Pacific Business E...
Vietnam Telecommunications Report Q3 2008             broadband contract it signed with SingTel-backed Opel and Futuris ma...
Vietnam Telecommunications Report Q3 2008Vietnam             Vietnam is in 13th position in our Business Environment Ranki...
Vietnam Telecommunications Report Q3 2008Table: Business Environment Rankings                  Limits of Potential Return ...
Vietnam Telecommunications Report Q3 2008Industry Forecast ScenarioMobileTable: Telecoms Sector – Mobile – Historical Data...
Vietnam Telecommunications Report Q3 2008             the main obstacles to 3G growth in these early stages of development...
Vietnam Telecommunications Report Q3 2008Fixed LineTable: Telecoms Sector – Fixed-Line – Historical Data & Forecasts      ...
Vietnam Telecommunications Report Q3 2008InternetTable: Telecoms Sector – Internet – Historical Data & Forecasts          ...
Vietnam Telecommunications Report Q3 2008             equal to 1.4% of the population. Looking ahead, we continue to belie...
Vietnam Telecommunications Report Q3 2008Market Data AnalysisMobile             Obtaining reliable data on the number of m...
Vietnam Telecommunications Report Q3 2008              services. Motorola is also understood to be cooperating with VinaPh...
Vietnam Telecommunications Report Q3 2008             Indonesia’s second-ranked mobile operator Indosat. STT expects the s...
Vietnam Telecommunications Report Q3 20083G             The Vietnamese government has granted permission for the MIC to gr...
Vietnam Telecommunications Report Q3 2008Fixed Line             VNPT reported a total telecoms subscriber base of 27.8mn a...
Vietnam Telecommunications Report Q3 2008Fixed Wireless             Around 70% of Vietnam’s population live in rural areas...
Vietnam Telecommunications Report Q3 2008             Seeing the potential, however, for                                  ...
Vietnam Telecommunications Report Q3 2008Table: Vietnam – WIMAX TriallistsOperator                            WiMAX Licenc...
Vietnam Telecommunications Report Q3 2008             operations there, and employing local staff has boosted incomes. The...
Vietnam Telecommunications Report Q3 2008Macroeconomic Outlook             Short Lapse In Economic Growth Expected        ...
Vietnam Telecommunications Report Q3 2008             Apparel exports to the US, comprising about 10% of total exports, in...
Vietnam Telecommunications Report Q3 2008               It should be kept in mind that Vietnams cost advantage vis-à-vis C...
Vietnam Telecommunications Report Q3 2008Regulatory EnvironmentVietnam: Regulatory Bodies And Their Responsibilities      ...
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Bmi vietnam telecommunications_report_q3_2008
Upcoming SlideShare
Loading in …5
×

Bmi vietnam telecommunications_report_q3_2008

653 views

Published on

0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
653
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
22
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Bmi vietnam telecommunications_report_q3_2008

  1. 1. Published by BUSINESS MONITOR INTERNATIONAL LTD Vietnam Telecommunications Report Q3 2008 ISSN: 1748-4944Including 5-year industry forecasts © 2008 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of BusinessBusiness Monitor International Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the expressMermaid House, 2 Puddle Dock consent of Business Monitor International Ltd.London EC4V 3DS UKTel: +44 (0)20 7248 0468 All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliableFax: +44 (0)20 7248 0467 at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy oremail: subs@businessmonitor.com completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors,web: http://www.businessmonitor.com inaccuracies or omissions affecting any part of the content.
  2. 2. Vietnam Telecommunications Report Q3 2008 Including 5-year industry forecasts by BMIPart of BMIs Industry Survey & Forecasts SeriesPublished by: Business Monitor InternationalPublication Date: July 2008 Business Monitor International © 2008 Business Monitor International. Mermaid House, All rights reserved. 2 Puddle Dock, London, EC4V 3DS, All information contained in this publication is UK copyrighted in the name of Business Monitor Tel: +44 (0) 20 7248 0468 International, and as such no part of this publication Fax: +44 (0) 20 7248 0467 may be reproduced, repackaged, redistributed, resold in email: subs@businessmonitor.com whole or in any part, or used in any form or by any web: http://www.businessmonitor.com means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.
  3. 3. Vietnam Telecommunications Report Q3 2008© Business Monitor International Ltd Page 2
  4. 4. Vietnam Telecommunications Report Q3 2008CONTENTSExecutive Summary .........................................................................................................................................5 Vietnam Business Environment Industry SWOT .................................................................................................................................................... 6Business Environment ....................................................................................................................................7 Vietnam.................................................................................................................................................................................................................. 9 Table: Business Environment Rankings ............................................................................................................................................................... 10Industry Forecast Scenario ...........................................................................................................................11 Mobile....................................................................................................................................................................................................................... 11 Table: Telecoms Sector – Mobile – Historical Data & Forecasts........................................................................................................................ 11 Fixed Line................................................................................................................................................................................................................. 13 Table: Telecoms Sector – Fixed-Line – Historical Data & Forecasts ................................................................................................................. 13 Internet ..................................................................................................................................................................................................................... 14 Table: Telecoms Sector – Internet – Historical Data & Forecasts ...................................................................................................................... 14Market Data Analysis .....................................................................................................................................16 Mobile.................................................................................................................................................................................................................. 16 Table: Vietnam Mobile Market, 2007 .................................................................................................................................................................. 17 3G........................................................................................................................................................................................................................ 19 Fixed Line............................................................................................................................................................................................................ 20 Fixed Wireless ..................................................................................................................................................................................................... 21 Broadband ........................................................................................................................................................................................................... 21 Table: Vietnam – WIMAX Triallists..................................................................................................................................................................... 23Macroeconomic Outlook ...............................................................................................................................25 Table: Vietnam – Economic Activity.................................................................................................................................................................... 27 Regulatory Environment..................................................................................................................................................................................... 28 Vietnam: Regulatory Bodies And Their Responsibilities...................................................................................................................................... 28 Regulatory Developments ......................................................................................................................................................................................... 31Company Monitor...........................................................................................................................................32 Table: Global Mobile Handset Market v. Nokia Mobile Handset Market By Geography (mn units)................................................................... 32 Table: Top Ten Nokia Net Sales Markets............................................................................................................................................................. 33 Table: Nokia And NSN: Major Contracts And Milestones ................................................................................................................................... 35 Selected Profiles – Operators ................................................................................................................................................................................... 36 Vietnam Posts &Telecommunications (VNPT)..................................................................................................................................................... 36 S-Fone (S-Telecom) ............................................................................................................................................................................................. 41 VinaPhone ........................................................................................................................................................................................................... 43 MobiFone ............................................................................................................................................................................................................ 44 Viettel................................................................................................................................................................................................................... 45 EVN Telecom ....................................................................................................................................................................................................... 47 Hanoi Telecom..................................................................................................................................................................................................... 49 FPT Telecom........................................................................................................................................................................................................ 50Competitive Landscape .................................................................................................................................52 Competitor Analysis.................................................................................................................................................................................................. 52 Table: Key Players – Vietnam Telecoms Sector................................................................................................................................................... 52 Key Players............................................................................................................................................................................................................... 52 Fixed Line............................................................................................................................................................................................................ 52© Business Monitor International Ltd Page 3
  5. 5. Vietnam Telecommunications Report Q3 2008 Table: Regional Fixed-Line Penetration Overview.............................................................................................................................................. 53 Mobile.................................................................................................................................................................................................................. 53 Table: Regional Mobile Penetration Overview.................................................................................................................................................... 54 Broadband ........................................................................................................................................................................................................... 55 Broadband ........................................................................................................................................................................................................... 55 Table: Regional Broadband Penetration Overview ............................................................................................................................................. 55 Table: Glossary Of Terms.................................................................................................................................................................................... 56BMI Forecast Modelling .................................................................................................................................58 How We Generate Our Industry Forecasts .......................................................................................................................................................... 58 Telecommunications Industry .............................................................................................................................................................................. 59 Sources ................................................................................................................................................................................................................ 59© Business Monitor International Ltd Page 4
  6. 6. Vietnam Telecommunications Report Q3 2008Executive Summary Vietnam’s telecoms market remains attractive in terms of its potential growth prospects. Even with minimal foreign direct investment in the industry, the country’s mobile market has prospered with penetration reaching in excess of 40%. This is largely due to the prevalence of multiple SIM cards per subscribers, which in turn is down to the ongoing and competitive promotional battle between Vietnam’s several mobile operators. We expect a major step change across the telecoms sector with an increase in overseas strategic investment. The government’s obligations to the WTO should ensure this and are likely to lead to liberalisation in the market. This, we should see first with the state looking to sell two-thirds of the mobile operator MobiFone to domestic investors and foreign investors. Lining up and ready for action are Singapore Technologies Telemedia (STT), NTT DoCoMo, Telenor and France Telecom. We expect the process to start in 2009 and that it will be followed up by a similar divestment in VinaPhone. At the time of writing this report, Vietnam has approximately 50mn mobile subscribers, and BMI projects 6mn more net additions over the next six months. The country’s subscriber base is likely to reach 100% in early 2012, and we forecast that there will be 99mn subscribers in early 2011. Viettel remains market leader with a 29% market share, ahead of MobiFone and VinaPhone on 28% and 25%, respectively. All three operators should be concerned at the low ARPU rates of around US$6 per month; this suggests that the market is not mature with regards to value-added services and that intense competition is leading to low tariff setting. We note also that approximately 90% of all subscribers are prepaid customers. In an attempt to increase ARPU rates, Vietnam’s leading operators are keen to encourage the take-up of 3G mobile services. There is little to suggest that this is imminent, but market leader Viettel has suggested that, with the cost of 3G equipment falling and the consumer demand in value-added services rising (video, mobile TV and internet connection), there will soon be a growing 3G market in Vietnam. However, it is instructive to note that broadband growth remains limited with ADSL technologies remaining expensive and service quality poor. This leads to slow speeds and unstable connections and could result in a growing popularity of WiMAX – Vietnam has six WiMAX triallists. Vietnam’s telecoms sector should witness a significant change over the next five years, with foreign investment from carriers and vendors alike more common. Such a trend should result in a maturing market, both in terms of consumer demand and technology take-up.© Business Monitor International Ltd Page 5
  7. 7. Vietnam Telecommunications Report Q3 2008Vietnam Business Environment Industry SWOTStrengths ! An increasingly competitive mobile sector ! Impressive growth in mobile and fixed-line sectors during 2007, with subscribers up by 88.6% and 23%, respectively, in each sector ! WTO membership in 2007 makes Vietnam a more appealing investment centre – stronger growth in broadband market could be the result of thisWeaknesses ! Fixed-line sector remains largely monopolised, under the control of Vietnam Posts & Telecommunications ! Lack of key strategic investors in the sector’s main operators ! Although communications are relatively advanced in the larger cities, many rural areas have little or no access to any telecommunications servicesOpportunities ! Increase in competition in the mobile sector will lead to a sharp rise in growth ! Government approach to liberalisation of the telecoms industry could see entrance of strategic investors such as NTT DoCoMo, SingTel and Telenor ! VNPT is the latest to launch fixed wireless service, tapping into rural market and therefore joining Viettel and S-FoneThreats ! Pace of deregulation is irregular ! Nearly one-third of Vietnams villages lie in mountainous areas and are without access to telecommunications services; a delay in network expansion could slow potential growth in fixed-line, mobile and internet sectors ! Number of inactive mobile subscribers is unknown in what is still a market that lacks transparency and reliable data ! Poor quality of ADSL services and high prices are combining to hold up broadband growth© Business Monitor International Ltd Page 6
  8. 8. Vietnam Telecommunications Report Q3 2008Business Environment Changes in this quarters Asia Pacific Business Environment Ratings have largely been due to revisions in our forecasts with the release of full-year figures, but also as a result of the significant alterations in the scores for country risk. This takes into account short-term external risk, policy continuity, legal framework and corruption. Just under half of the countries in our table reported a fall in their risk ratings, with the remainder witnessing small improvements or unchanged over the quarter. This quarter, we have focused on the economic and political risks to the business environment in Asia Pacific and their implications for the telecoms industry. A major factor behind the worsening risk ratings has been in response to the slowdown in the global economy. Many Asian states are heavily export dependant and retain strong trading ties with the US, which is experiencing difficulties on account of the subprime crisis and ongoing credit crunch. Here, international lenders could scale back the funds available to regional companies to cover their losses elsewhere. This would prevent Asian firms from financing their operations. On account of limited domestic credit availability, due to immature local bond markets, many companies could find themselves stretched. Accompanying this, and perhaps the largest downside risk, is inflation, which is being driven mainly by a surge in the price of commodities such as oil, metals and, most importantly, food. For the most part, rice remains the major agricultural output and staple diet for the majority of these Asian economies, but prices have surged, facilitated by major producers restricting exports. This, not only has an impact on economic risk, with inflation reducing the value of investments, but has significant political implications as well. There are existing reports of an illicit rice trade emerging in Asia, while concerns are growing that riots could occur, as has been the case in countries such as Haiti, Egypt, Mexico, Burkina Faso and Senegal. Further cause for unrest could be facilitated by a number of elections due to take place in the region. In the case of Pakistan, where BMI sees the likelihood of political cohabitation between President Pervez Musharraf, the next prime minister, and the new army chief, General Ashfaq Pervez Kiyani, this could lead to tensions at the top. This would unnerve investors, potentially causing a drop in FDI inflows, which had generally been very strong prior to the start of the current political crisis. Indeed, FDI during the first five months of FY07/08 (July-June) dropped by 19.3% y-o-y. To return to the overall business ratings, however, the most significant change is that Singapore has replaced Australia at the top of our table. This has not just been a case of changes in the country risk category, with both countries suffering from rising risk over the quarter, but of Singapore gaining points in the telecoms market category to a greater extent than Australia. The small size of the Singapore market and high penetration rates realise fewer potential returns for the country, although the country is deploying a SGD1bn (US$725mn) ultra-high speed national broadband network. As for the announcement that Australias government had cancelled the AUD958mn (US$871mn) regional© Business Monitor International Ltd Page 7
  9. 9. Vietnam Telecommunications Report Q3 2008 broadband contract it signed with SingTel-backed Opel and Futuris may represent a blow to the development of the countrys national high-speed internet network. However, the federal government is set to award an AUD4.7bn national broadband contract, and therefore, the cancellation of the regional agreement can be viewed as positive, as it would have meant the duplication of technology and potential waste of resources Further down the table, India leapt up from eighth to fifth place. Once again, this has been due to changes in score for country risk, but also on account of growing maturity in its mobile market, which remains the fastest growing in the world. India beat the US last quarter to become the second largest global mobile market after China. Regulatory transparency and mounting foreign interest will ensure that Indias telecoms market continues to gain in strength. The award of spectrum for 3G licences will further fuel this. China, on the other hand, maintained its ninth place position, and we are still waiting to hear information on when 3G licences will be awarded. With the Beijing Olympic games expected in August this year, only China Mobile appears ready to commercially launch TD-SCDMA services, while no mention has been made of the two other standards, CDMA2000 and W-CDMA. As we reach the bottom of the table made up of the Philippines, Vietnam, Bangladesh and Thailand, we can see that these markets offer high growth returns, but lack the country structure to support greater developments. The biggest change to this group during the quarter was the switch between the Philippines and Thailand, with the former in 12th position as opposed to 15th. Although the Philippines has moved up the table, with its economy in 2007 reporting a 31-year high in growth and fortifying consumer purchasing power, it remains vulnerable to a slowdown in the US, which is its biggest purchaser of exports and main source of remittances from overseas workers. Meanwhile, the strength of the peso itself carries risks, by making Philippine exports less competitive. At the foot of the table, Thailand continues to suffer from repeated delays to the launch of Thailands three UMTS (3G) licences and that of WiMAX. This has damaged the overall development of the sector, while additional issues, including interconnection charges, access charges and number portability, have yet to be fully resolved, with a number of lawsuits between operators pending. Furthermore, issues of network sharing would help to raise overall service coverage where infrastructure is generally weak, mostly concerning rural areas, where the majority have poorer access to telecommunications services.© Business Monitor International Ltd Page 8
  10. 10. Vietnam Telecommunications Report Q3 2008Vietnam Vietnam is in 13th position in our Business Environment Rankings, ahead of Bangladesh and Thailand. The telecoms sector in Vietnam suffers from a lack of foreign investment – indeed inward investment is only allowed under certain conditions. Vietnam’s accession to the WTO should mean a liberalisation of the market, and we expect to see this start to happen either later this year, or more likely in 2009, when a 33.3% stake in MobiFone is sold to a strategic investor. Under WTO regulations and in accordance with the government’s commitments, foreign investors are allowed to participate in joint ventures with domestic companies. A minimum capital requirement has been set out, with VND1.6trn required for a network infrastructure deal, VND500bn for a project spanning at least two provinces and VND160bn for a project covering a single province. And so, Vietnam is becoming a more attractive market with greater investment potential. This is illustrated by the fact that Intel, Japan’s Renesas, Campal and Foxcom of Taiwan and Samsung Electronics have invested US$10bn between them in Vietnam. France Telecom, China’s ZTE, Qualcomm, SK Telecom and Alcatel also have ongoing investments in the country. While there are encouraging signs – and Samsung has pointed to Vietnam’s cheap labour opportunities as a key factor behind its US$670mn mobile handset plant in northern Vietnam – many foreign investors remain concerned at the country’s complex licensing regime and fiscal policy. And while labour may be inexpensive, there are further concerns that there is a shortage of skilled workers and that language skills are poor. Looking at Vietnam’s economy, we suggest that 2008 could be a testing year with a drop in GDP growth likely, partly due to domestic inflationary pressures and partly due to the slowdown of the US economy, its largest export market. Consequently, BMI has lowered our GDP growth forecast from 8.2% to 7% for this year, although we suggest that this will be a short-term blip only. We are concerned, however, as to whether the stock market will be able to absorb the planned IPOs of state-owned enterprises, with MobiFone and VinaPhone, two of the higher profiles of such privatisations.© Business Monitor International Ltd Page 9
  11. 11. Vietnam Telecommunications Report Q3 2008Table: Business Environment Rankings Limits of Potential Return Risks To Realisation of Potential ReturnsCountry Telecoms Country Independence of Telecoms Rank Market Structure Regulator Country Risk RatingSingapore 70.0 96.7 80.0 66.1 77.5 1Japan 62.0 66.7 90.0 87.2 71.1 2Australia 50.0 100.0 70.0 77.3 69.3 3Malaysia 57.8 63.3 90.0 74.2 66.4 4India 75.0 35.7 80.0 61.6 64.1 5Hong Kong 44.0 76.7 80.0 81.9 63.1 6South Korea 50.0 99.7 70.0 72.1 60.4 7Taiwan 40.0 66.7 90.0 77.2 59.6 8China 74.3 31.7 40.0 70.6 58.1 9Pakistan 62.5 39.3 80.0 27.6 54.2 10Indonesia 52.5 42.7 60.0 49.5 50.8 11Philippines 50.0 36.7 60.0 57.2 49.3 12Vietnam 50.0 33.3 60.0 51.6 47.7 13Bangladesh 52.5 30.0 60.0 35.8 45.6 14Thailand 47.5 32.7 40.0 60.5 44.4 15Source: BMI© Business Monitor International Ltd Page 10
  12. 12. Vietnam Telecommunications Report Q3 2008Industry Forecast ScenarioMobileTable: Telecoms Sector – Mobile – Historical Data & Forecasts 2005 2006 2007 2008e 2009f 2010f 2011f 2012fNo. of Mobile PhoneSubscribers (000) 9,300 18,980 35,805 56,630 69,455 85,280 99,105 110,930No. of Mobile PhoneSubscribers/100Inhabitants 11.0 22.2 41.4 67.8 78.1 94.6 108.5 119.8No. of Mobile PhoneSubscribers/100 FixedLine Subscribers 143.5 204.1 313.0 435.9 499.7 580.1 639.4 688.2No. of 3G PhoneSubscribers (000) 0 0 100 700 1,360 2,100 3,050 4,0213G Market As % OfEntire Mobile Market 0.0 0.0 0.3 1.2 2.0 2.5 3.1 3.6e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI Faster growth in the first half of 2008 Industry Trends - Mobile Forecast, means that we have made an amendment 120,000 2005-2012 140 to our short-term forecast, as we suggest 100,000 120 that there should be in excess of 56mn 100 mobile subscribers by the end of this year, 80,000 80 accounting for a 67.8% penetration rate. 60,000 60 This would equate to just over 20mn net 40,000 40 additions over the last 12 months and 58% 20,000 20 y-o-y growth. Although this still 0 0 2005 2006 2007e 2008f 2009f 2010f 2011f 2012f represents rapid growth, we note that this would be down on the 88% growth seen in Cellular Mobile Phone Subscribers (000) No of 3G Phone Subscribers (000) 2007. Mobile Phone Subscribers/1 Inhabitants, RHS 00 Source: BMI Research Looking ahead, we project that Vietnam will surpass the 100% penetration threshold in 2011 and will end 2012 with close to 111mn subscribers. It should be noted that these figures are based on the assumption that the sector contains a certain number of inactive prepaid users. Meanwhile, we continue to predict that the first commercial deployments of ‘third generation’ (3G) mobile services will occur in 2008. We do not expect consumer demand for such services to be strong in the initial stages of deployment and estimate just 700,000 subscribers by the end of the first full year of operations. The cost and availability of 3G-compatible handsets are expected to be© Business Monitor International Ltd Page 11
  13. 13. Vietnam Telecommunications Report Q3 2008 the main obstacles to 3G growth in these early stages of development. However, with the Vietnamese government pushing the development of 3G, we believe that stronger consumer demand will be sparked later in the decade. We predict over 4mn 3G customers at the end of 2012, which would equate to around 7.5% of Vietnam’s mobile user base. Competition and growth in 2008 will be boosted by the wave of tariff cuts, which have characterised recent operator strategies. Further cuts may follow in the near future and these have generally been predicted to encourage a price war within the sector. Lower mobile service prices are expected to stimulate the growth of dual SIM ownership, as mobile users increasingly take advantage of special offers. Conversely, lower prices will also likely lead to increased customer churn and a higher number of inactive prepaid users. Meanwhile, during 2008, Vietnam’s mobile operators will continue to invest in expanding their network footprints, with these investments having a positive impact on service quality and coverage. We also look forward to the presence of new strategic investors in Vietnam’s mobile market, as companies such as Japan’s NTT DoCoMo, Norway’s Telenor, SingTel and France Telecom all show an interest in bidding for a stake in MobiFone, through that company’s anticipated initial public offering (IPO). Furthermore, following its September 2007 agreement with the Vietnamese government for the creation of a joint venture under the name of GTel Mobile, Russia’s VimpelCom is also expected to expand its presence in Vietnam. The Russian operator has pledged to spend US$1bn over the next several years in the development of a GSM mobile network and in the provision of technical and operational expertise.© Business Monitor International Ltd Page 12
  14. 14. Vietnam Telecommunications Report Q3 2008Fixed LineTable: Telecoms Sector – Fixed-Line – Historical Data & Forecasts 2005 2006 2007 2008e 2009f 2010f 2011f 2012fNo. of Main TelephoneLines in Service (000) 6,480 9,300 11,440 12,990 13,900 14,700 15,500 16,120No. of Main TelephoneLines/100 Inhabitants 7.7 10.9 13.2 14.8 15.6 16.3 17.0 17.4e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI research. We have held steady our forecast for the Industry Trends - Fixed Line growth of Vietnam’s fixed-line market over Sector 2005-2012 the next five years. This decision has been 18,000 21.0 16,000 18.0 based on an examination of year-end fixed- 14,000 15.0 12,000 line data provided by Vietnam’s fixed-line 10,000 12.0 incumbent operator, Vietnam Posts and 8,000 9.0 6,000 6.0 Telecommunications (VNPT). VNPT 4,000 2,000 3.0 gained 1.08mn new fixed-line subscribers in 0 0.0 2005 2006 2007e 2008f 2009f 2010f 2011f 2012f 2007, taking its total customer base to 8.8mn and reflecting y-o-y growth of 14%. Main Telephone Lines in Service (000) (LHS) However, it is important to remember that Main Telephone Lines/1 Inhabitants (RHS) 00 traditional fixed-line subscriptions, based on Source: BMI Research the public switched telephony network (PSTN), account for only around 77% of the total fixed-line market, with the remaining fixed lines being based on fixed-wireless services. We estimate that there were over 11.4mn fixed lines in Vietnam at the end of 2007, which is equivalent to a penetration rate of just over 13%. These figures are consistent with recent data provided by the country’s Ministry of Posts and Telematics (MPT). We predict that continued growth in 2008 will result in around 13mn fixed-line customers by the end of 2008 and a penetration rate of almost 15%. Growth will be encouraged by the 15-20% tariff cuts, which were applied to fixed-line and public card phone charges in June 2007. However, towards the end of the decade, we expect that a slowdown in fixed-line growth will occur as a result of increased mobile substitution and the more widespread use of VoIP services. The slowdown will partly reflect fixed-line saturation in urban areas of Vietnam, while rural parts of the country will be more inclined to take up mobile telephony. By the end of 2012, we predict an almost stagnant rate of fixed-line growth, although, by that time, fixed-line penetration will have surpassed 17%.© Business Monitor International Ltd Page 13
  15. 15. Vietnam Telecommunications Report Q3 2008InternetTable: Telecoms Sector – Internet – Historical Data & Forecasts 2005 2006 2007e 2008f 2009f 2010f 2011f 2012fNo. of Internet Users(000) 10,711 14,684 18,862 23,400 26,000 28,650 30,250 31,460No. of Internet Users/100Inhabitants 12.7 17.2 21.8 26.7 29.2 31.8 33.1 34.0No. of BroadbandInternet Subscribers(000) 210 517 1,195 2,465 3,935 5,705 7,875 10,131No. of BroadbandInternet Subscribers/100Inhabitants 0.2 0.6 1.4 2.8 4.4 6.3 8.6 10.9e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI We have made some alterations to our Industry Trends - Internet figures for internet user and broadband 35,000 Sector 2005-2012 12,000 subscriber growth in Vietnam, in order to 30,000 10,000 take account of figures published by 25,000 8,000 Vietnam’s Internet Network Information 20,000 6,000 Centre (VNNIC) in January 2008. The 15,000 4,000 VNNIC has suggested that there were 10,000 18.9mn internet users in Vietnam at the 5,000 2,000 end of January 2008, which equated to 0 0 2005 2006 2007e 2008f 2009f 2010f 2011f 2012f 22% of the total population. These figures point to the likelihood of a slightly larger Internet Users (000) Broadband Internet Subscribers (000), RHS internet user market than we had estimated Source: BMI Research at the end of 2007. Nevertheless, the differences between our figures and those of the VNNIC are not large, and we continue to believe that Vietnam’s internet user base is expanding in accordance with our predictions. We have therefore retained our figures for internet user growth in 2008 and beyond. We predict that the number of internet users will expand by 24% in 2008 and will rise to over 23mn by the end of the year. By the end of our five-year forecast, we anticipate a market of almost 31.5mn internet users, equivalent to 34% of the population. Meanwhile, according to the VNNIC, the number of broadband subscribers rose by an impressive 130% in 2007 and reached 1.3mn by the end of January 2008; this is equivalent to a penetration rate of 1.5%. We estimate that there were 1.195mn broadband subscribers in Vietnam at the end of 2007, which is© Business Monitor International Ltd Page 14
  16. 16. Vietnam Telecommunications Report Q3 2008 equal to 1.4% of the population. Looking ahead, we continue to believe that broadband growth will be strong over the next five years, and we predict a little over 10mn subscribers by the end of 2012 (equivalent to almost 11% penetration). However, we believe that the rate of broadband growth will be slower in the early part of our forecast and have therefore altered our year-end projected subscriber totals for 2008 through 2010. Although the government is investing heavily in the development of Vietnam’s broadband sector (for example, it is doubling capacity over the country’s national fibre-optic network), we believe that increased competition is required in order to increase the affordability of broadband services. The arrival of new broadband service providers, some of them international operators, will help to stimulate competition. The anticipated launch of new WiMAX broadband services over the next few months should also help to boost broadband take-up. Nevertheless, we believe that it will take time for some of these new developments to filter through into new subscriber growth, which is one of the reasons why we have lowered our expectations for broadband subscriber growth in the early part of our forecast.© Business Monitor International Ltd Page 15
  17. 17. Vietnam Telecommunications Report Q3 2008Market Data AnalysisMobile Obtaining reliable data on the number of mobile subscribers served by Vietnam’s six mobile network operators remains a challenging exercise. Indeed, the Ministry of Information and Communications (MIC) has pledged to conduct an audit of all operators’ counting methodologies over deciding whether a SIM card is active or not. To illustrate the confusion, both Viettel and MobiFone claim to be the country’s leading mobile operator. The latest data that we feel comfortable publishing is from the end of 2007, but suggestions from the MIC suggest that there were approximately 50mn mobile subscribers at the end of June 2008, of which some 90% are prepaid subscribers. This high proportion of prepaid subscribers means that ARPU is low at about US$6 per month, one of the lowest rates in Asia. According to MIC’s figures, Viettel leads the way with a 38% market share and approximately 19.5mn subscribers, ahead of MobiFone on 13.4mn and VinaPhone with 12.1mn. Our end of year figures from 2007 show Viettel, owned by the Vietnamese military, as market leader with a 29% share of the market, ahead of MobiFone and VinaPhone on 28% and 25%, respectively. Both MobiFone and VinaPhone are owned by incumbent operator VNPT. Together, Vietnam’s three GSM operators controlled over 82% of the mobile market at the end of 2007. We note that the number of CDMA subscribers reached 6mn at the end of 2007, up from just below 2mn at the end of 2006. This figure is likely to exceed 10mn by the end of 2008, despite HT Mobile’s decision to move from CDMA to GSM. Vietnam’s mobile subscriber base exceeded 35mn at the end of 2007, accounting for a 41% penetration rate. This penetration figure we feel to be artificially high, as many people in Vietnam are multiple SIM cardholders, a consequence of a very competitive market and a plethora of promotional campaigns. We note that, by the end of 2007, VNPT had a combined subscriber base of 19mn. BMI believes that the two operators had some success at the expense of Viettel. This came as MobiFone and VinaPhone deployed 6,000 new base stations. VinaPhone is aiming to add a further 5,000 base transceiver stations (BTSs), in order to achieve its target of 9,000 BTS by 2008, and awarded a contract to UK Vendor Aircom International in May 2008 to provide it with network planning and design services. In December 2007, it was announced that VNPT had entered a partnership with Motorola to expand and enhance VinaPhone’s GSM network in major cities, including Hanoi and Ho Chi Minh City. Under the contract, Motorola will commission over 650 cell sites and provide optimisation and maintenance© Business Monitor International Ltd Page 16
  18. 18. Vietnam Telecommunications Report Q3 2008 services. Motorola is also understood to be cooperating with VinaPhone in order to expand GPRS coverage and provide EDGE service in major metropolitan areas. MobiFone has said that, in 2008, it expects to earn total revenues of VND16trn (US$1bn) and return a profit of VND6.65trn. In order to achieve these goals, the company will continue to expand its coverage area and increase its service quality in all localities and cities throughout the country. It plans to raise its number of BTS to 10,000 by the end of 2008. Furthermore, in December 2007, both MobiFone and VinaPhone began reducing their call charges by as much as 25-28% in order to safeguard and expand their market shares. Accordingly, activation fees for postpaid mobile subscribers fell from VND136,364 to VND109,000, while monthly subscription charges remained the same at VND54,545. Call charges are being reduced by 20% on average for postpaid subscribers, while, for prepaid subscribers, the charges are being cut by nearly 30%.Table: Vietnam Mobile Market, 2007Operator No. of Subscribers (mn) Market Share (%)Viettel 10.4 29.1%MobiFone 9.9 27.6%VinaPhone 9.1 25.4%S-Fone 3.4 9.5%VPT Telecom 2.8 7.8%HT Mobile 0.205 0.6%Total 35.805 100.0Source: Operators; BMI Meanwhile, Norwegian telecom company Telenor has continued to fuel speculation about its possible entrance into Vietnam’s mobile market. It has had a representative office in Vietnam since 2005 and is hopeful that the Vietnamese government might soon open up the market and allow it, perhaps, to acquire a stake in MobiFone. We know that MobiFone is preparing for an IPO of approximately one-third of the company, with the government retaining a 33.3% stake with the final third going to a strategic investor. This is likely to be the first of several planned privatisations in Vietnam’s telecoms sector. While Telenor may show its hand, so, too, could STT, which controls 75% of Asia Mobile Holdings, and as such controls a 40% stake in© Business Monitor International Ltd Page 17
  19. 19. Vietnam Telecommunications Report Q3 2008 Indonesia’s second-ranked mobile operator Indosat. STT expects the sale of MobiFone’s stake, originally slated for 2008, to be delayed until 2009. Although Viettel, MobiFone and VinaPhone continue to dominate the mobile sector, Vietnam’s three CDMA operators have recently enacted policies that are designed to expand their current minority market shares. S-Fone, which has South Korea’s SK Telecom as a shareholder, is also said to be considering a cut in tariffs in line with market trends. However, one of these CDMA operators, HT Mobile, in April 2008, started to migrate customers away from its CDMA network towards GSM technology (if they elect to stay with CDMA, they will switch to S-Fone’s network). Those customers staying with HT Mobile will receive a new GSM handset. The operator made its move after it failed in its target of luring 1mn customers by the end of 2007. In January 2008, it was reported that the Ministry of Information and Communications (MIC) was ready to grant a licence to Global Telecom Corporation (GTel) to offer mobile services. GTel is backed by Russian giant VimpelCom, which is said to be prepared to invest up to US$1bn into the GTel mobile network over the next few years. An MIC official confirmed that GTel had asked permission to supply GSM-based mobile services and that the Ministry was working on the necessary formalities, adding that GTel will be licensed to use the 1800 MHz frequency. Further demonstrating the current attractiveness of Vietnam’s mobile market is the move by Dutch semi- conductor manufacturer NXP, which has opened a representative office in the country. It hopes to work closely with local partners to manufacture mobile handsets costing less than US$30. Meanwhile, competition among handset manufacturers is also fierce with Nokia, Samsung, Motorola, Sony Ericsson and BenQ Siemens all fighting it out for market share. Competition is made even fierce by the downward trend in handset prices, as mobile phones no longer become status symbols. Indeed, Nokia leads the way by introducing a number of cheaper handsets to the market, especially in rural Vietnam.© Business Monitor International Ltd Page 18
  20. 20. Vietnam Telecommunications Report Q3 20083G The Vietnamese government has granted permission for the MIC to grant 3G licences to four mobile operators. In addition, five mobile operators will also be given permission to undertake mobile WiMAX trials. The decision, which was taken in late October 2007, follows more than a year during which the MIC was understood to be preparing the 3G licensing criteria. A beauty contest for domestic operators has been scheduled for 2008, followed by licensing, but, by the time of writing, had not occurred. There have also been a number of large foreign operators that have expressed an interest in investing in the development and deployment of 3G networks in the country. NTT DoCoMo, which opened an office in Hanoi (its fourth overseas office) in September 2007, sees the annual 30% growth rate of the Vietnamese telecoms market as a big draw. These sentiments are similar to those expressed by French incumbent France Telecom. According to reports, both MobiFone and VinaPhone are expected to upgrade their infrastructure to 3G. MobiFone has completed a two-year 3G trial and is in the final stage of submitting a deployment proposal with Ho Chi Minh City and Hanoi, the first cities expected to deploy services in 2008, possibly in partnership with France Telecom. Meanwhile, VinaPhone concluded a similar trial with Nokia in Danang in August 2007. As for Viettel, S-Fone and Hanoi Telecom (HT Mobile), all three are understood to have requested UMTS licences from the Ministry. It is unlikely that all six operators will win licences, with the government looking to award four 3G licences at the most. It has been proposed by the Radio Frequency Department that each of the four 3G licences be granted 2x15MHz frequency division duplexing slots in the 1920-1980MHz and 2110- 2170MHz bands, and a 5MHz time division duplexing slot in the 1900-1920MHz range. The 2010- 2025MHz band is to be reserved for further UMTS applications, and the RFD envisages that each network will be granted a minimum 5MHz block. A lack of content and the cost and availability of 3G handsets will all present problems to growth in Vietnam’s 3G market, with BMI estimating no more than 700,000 subscribers in the first year of 3G deployment. However, in spite of 3G, there is a real threat to growth in the Asia Pacific region as a whole, and it comes from WiMAX, which can cover huge distances and which is able to provide wireless internet access in the most remote towns and villages. Five operators are currently trialling WiMAX services – these include VNPT-owned Vietnam Data Communications (VDC), in Lao Cai Province; Vietnam Multimedia Corporation (VTC), in Hanoi and Ho Chi Minh; FPT Telecom; EVN Telecom and Viettel. The latter three are testing both wireline and mobile WiMAX services.© Business Monitor International Ltd Page 19
  21. 21. Vietnam Telecommunications Report Q3 2008Fixed Line VNPT reported a total telecoms subscriber base of 27.8mn at the end of 2007. Of this total, the operator’s fixed-line subscriber base amounted to 8.8mn. BMI estimates that traditional fixed-line services provided by VNPT amounted to 77% of the country’s total fixed-line subscriber base with 2.64mn customers using fixed wireless services provided by operators such as Viettel and S-Fone. By the end of 2007, we estimate that the fixed-line customer base amounted to 11.44mn, which is equivalent to a penetration rate of 13.2%. Unusually for telecoms markets in Asia, the Vietnamese fixed-line sector still offers growth opportunities. Vietnam’s government is determined to increase the speed with which VNPT’s virtual monopoly in the fixed-line sector is broken. In December 2006, the Ministry of Posts & Telematics awarded a national wireline licence to FPT Telecom. FPT’s fixed-line service will be based on a next generation network, which will support the provision of IP-based voice telephony, as well as high-speed broadband and IPTV. In mid-2007, FPT reportedly had 200,000 ADSL customers. The operator aimed to have attracted an additional 50,000 subscribers by the end of 2007, with broadband services offered in 10 provinces. In addition to controlling the greater part of the local voice telephony market, VNPT was, until 2002, the only body authorised to offer long-distance and international services. However, both Saigon Postel (a privatised former subsidiary of VNPT) and mobile operator Viettel (which is owned by the country’s armed forces) have since begun offering domestic and international voice over IP (VoIP) services. VDC also introduced its own prepaid and postpaid VoIP under the brand name FoneVNN in 2003 and, in November of that year, became Vietnam’s first provider of virtual private network (VPN) services. In an effort to expand its fixed-line customer base, VNPT chose Swedish vendor Ericsson to supply equipment to accommodate 200,000 additional fixed-line subscribers in Vietnam’s central region. The deal is part of the second phase of a project to expand reach and capacity in the area. The first phase began in August 2006, when Ericsson won a contract to install 600,000 lines. Meanwhile, the Ministry of Posts & Telematics has pledged to develop the country’s fixed-line infrastructure, especially in rural areas. Behind the government’s plan to invest in fixed-line telephony is its desire to ensure a balanced and sustainable development of traditional voice telephony services alongside mobile telephony. One reason why the government aims to support the funding of telephony in rural areas is the difference in revenue terms between fixed-line connections in urban and rural areas; whereas a wireline subscriber will typically generate an average monthly revenue of under VND50,000 in urban areas, this figure falls to VND30,000 in remoter parts of the country.© Business Monitor International Ltd Page 20
  22. 22. Vietnam Telecommunications Report Q3 2008Fixed Wireless Around 70% of Vietnam’s population live in rural areas, and with saturation occurring in the highly competitive urban mobile markets, an increasing number of operators, including mobile operators, are launching fixed wireless services to cater to low-income households, helping to boost their revenues. Fixed wireless services can be launched on existing mobile networks and therefore incur few start-up costs. For Viettel, with around 70% of its subscriber base in rural areas, this indicates the importance of a fixed wireless unit. Called HomePhone, Viettel announced a postpaid service in August 2007, having launched its prepaid service several days earlier. Offering special discounts, it is expecting to raise the number of customers of this service. Although press reports have suggested that Viettel had over 13mn customers at the end of 2007, this figure is thought to include both mobile and fixed wireless customers. Discounting its 11.9mn mobile customers, this would leave Viettel with just over 1mn fixed wireless customers at the end of the year. Vietnam’s fixed-line incumbent VNPT also offers a fixed wireless service called GPhone. The service operates over VinaPhone’s GSM network and is charged at fixed-line prices, making it affordable for low-income households. GPhone was launched in two phases, with services initially being launched in eight provinces and cities (including Lau Chau, Thai Nguyen, Ha Tay, Quang Nam, Quang Ngai, Can Tho, Hau Giang and An Giang) in June 2007, and further service deployments to the rest of the country during August 2007. VNPT had outlined a target of 100,000 GPhone subscribers by the end of 2007, but raised this to 500,000 new customers by year-end.Broadband Vietnam’s Internet Network Information Centre (VNNIC) suggests that there were 18.9mn internet users in Vietnam at the end of January 2008, which equated to 22% of the total population. According to the VNNIC, the number of internet users grew by 33% during 2007, while the number of broadband subscribers rose by an impressive 130% y-o-y. Despite the number of broadband subscribers topping just 1.3mn in January 2008 for a penetration rate of 1.5%, the rapid take-up of broadband services illustrates the growing popularity of such services within the country. Of the total number of broadband subscribers in Vietnam, it is notable that two-thirds of them are from Hanoi and Ho Chi Minh City. Holding back faster growth is the fact that ADSL services remain expensive and service quality remains poor, with slow speeds and unstable connections beyond the country’s largest cities.© Business Monitor International Ltd Page 21
  23. 23. Vietnam Telecommunications Report Q3 2008 Seeing the potential, however, for Vietnam Internet Market broadband growth, VNPT increased its 20,000 18,000 fixed-line network capacity in June 2007 16,000 with the help of Nortel Networks, so that 14,000 it could offer an enhanced broadband 12,000 10,000 service. As a result of its investment, 8,000 VNPT’s north-south fibre-optic network 6,000 capacity was doubled from 20Gbps to 4,000 40Gbps, as part of VNPT’s plans to cater 2,000 0 for 600,000 high-speed internet customers Jan-07 Mar-07 May-07 Jul-07 Nov-07 Jan-08 Sep-07 by the end of 2007. VNPT has set itself what appears to be a rather conservative No of Internet Subscribers (000) No of Broadband Subscribers (000) target of 1.5mn broadband subscribers by Source: VNNIC the end of 2009. In February 2008, VNPT revealed that it planned to invest US$1bn in broadband development in 2008. The investment will be used to raise existing capacity to 200Gbps by mid-2008, rising to 300Gbps at a later date. Furthermore, the investment will fund the expansion of VNPT’s broadband network over the next two years ending 2010, in order to provide coverage in previously underserved regions, while connecting public high schools and government offices. VNPT is also trialling WiMAX services in the cities of Hanoi and Ho Chi Minh. This follows the operators earlier success with WiMAX trials in Lao Cai. However, VNPT is not the first to test WiMAX, with both Viettel and FPT Telecom having been carrying out similar trials. In March 2008, Saigon Postel Corporation (SPT) became the sixth operator to be awarded a WiMAX licence by Vietnams Ministry of Information and Communication. SPT is affiliated with the countrys mobile operator S-Fone. Three of the other five operators to have been awarded similar licences also have links with the country’s mobile sector: VNPT is responsible for mobile operators VinaPhone and MobiFone, while Viettel and EVN Telecom also provide mobile services. Meanwhile, the fourth WiMAX licensee, Vietnam Multimedia Corporation (VTC), offers mobile digital TV services among other broadcast services. Finally, Financially Promoting Technology (FPT) is already licensed to offer fixed- line voice and internet services; so far, however, it has been licensed to only carry out trials of wireline and wireless WiMAX services. The connection between WiMAX licensees and the mobile sector also indicates that WiMAX has become more closely entangled in mobile wireless technology rather than under the guise of a fixed network wireless technology, in which it was originally conceived. SPT has indicated that it will test WiMAX services in the 2.3GHz to 2.4GHz band across Ho Chi Minh City and one of the neighbouring provinces of Tay Ninh, Binh Duong, Dong Nai, Ba Ria-Vung or Long An. The majority of other WiMAX trials are also being conducted in Vietnams two major cities of Hanoi and Ho Chi Minh.© Business Monitor International Ltd Page 22
  24. 24. Vietnam Telecommunications Report Q3 2008Table: Vietnam – WIMAX TriallistsOperator WiMAX Licence Date Pilot LaunchVietnam Post and Telecoms(VNPT) Mar-06 Trials carried out in Hanoi, Ho Chi Minh City and Lao CaiVietnam MultimediaCorporation (VTC) Mar-06 Trials carried out in Hanoi and Ho Chi Minh CityFinancially PromotingTechnology (FPT) Mar-06 To carry out trials of both wireless and wireline WiMAXEVN Telecom Jan-07 To carry out trials of both wireless and wireline WiMAXViettel Mar-06 To carry out trials of wireless WiMAX Trials to be carried out in Ho Chi Minh City and oneSaigon Postel Corporation Mar-08 neighbouring provinceSource: BMI In February 2008, the Ministry of Information and Communication awarded a licence to CMC Telecom to provide internet services in Vietnam. The operator, an affiliate of CMC Corporation, will reportedly be the 10th internet service provider in the country. CMC Corporation, which set up CMC Telecom in 2007, will offer its services through its partnership with EVN Telecom, a CDMA-based Vietnamese mobile operator. The chairman of CMC Corporation confirmed that, if licensed, CMC would consider launching WiMAX broadband wireless services and stated that US chip manufacturer Intel would support deployment. However, any WiMAX provider must currently be at least 51% state owned in order to launch services. Given that CMC is less than 51% state owned, it would require a change in regulations for it to be able to offer WiMAX services. Along with its licence to provide internet access, CMC Telecom also gained two further licences – one for online services provision and one for internet content provision. However, the operator is not currently allowed to build its own telecoms infrastructure. As part of its partnership with CMC, EVN Telecom is responsible for investing in transmission infrastructure, while CMC is to invest in IT and communications services, which will provide services for the customers of both groups. CMC has stated that its strategy is to focus on large corporate clients and governmental organisations, a strong sector for internet use in Vietnam, as 89% of companies are estimated to have internet connections. Strong demand for internet and broadband services in Vietnam is expected to continue, given that levels of PC ownership remain high. According to a survey conducted by Alcatel-Lucent, some 95% of Vietnamese households have access to a desktop PC, of which 16% are planning to purchase a laptop. Furthermore, growth in broadband demand is set to soar, as the Vietnamese government has been investing heavily in developing the broadband sector, announcing its commitment to inject VND100trn (US$6.3bn) in order to raise penetration rates significantly. Also, since Vietnam joined the World Trade Organisation (WTO), the country has seen a number of high-profile global companies locate their© Business Monitor International Ltd Page 23
  25. 25. Vietnam Telecommunications Report Q3 2008 operations there, and employing local staff has boosted incomes. The result has been that a significant number spend between US$10 and US$20 on their home internet bills, accessing multimedia content including games and downloads. Increased competition is also expected to encourage increased broadband usage. Meanwhile, in March 2008, ISP One-Connection Internet (OCI) launched an online advertising site, something it claims will give companies a chance to take full advantage of video and online advertising. As a concept, online advertising has not yet developed in Vietnam, but it is a potentially large market, and one that OCI thinks will grow by 50% each year from 2008, potentially reaching VND600bn by the end of 2012.© Business Monitor International Ltd Page 24
  26. 26. Vietnam Telecommunications Report Q3 2008Macroeconomic Outlook Short Lapse In Economic Growth Expected BMI View: We believe Vietnam will experience a brief slowdown in economic growth in 2008 and 2009, but should remain one of the worlds fastest growing economies over our five-year forecast period. We have therefore lowered our GDP forecasts for 2008 and 2009 to 7.0% and 7.5%, respectively, while keeping our 2010 forecast at 8.5%. The notable risk is that short-term concerns about macroeconomic stability will delay economic reform needed to maintain high economic growth. The present surge in inflation and ballooning trade deficit are, in our view, primarily the consequences of years of heavy investment and loose monetary policy, which have left the Vietnamese economy awash with liquidity. The government belatedly tightened monetary policy in H108, and we believe this will contribute to lowering growth in 2008 and 2009, as consumers and firms feel the pinch of tighter lending conditions. Yet with robust macroeconomic fundamentals still in place, we expect GDP growth to return to around 8% once inflation has been brought back under control. Q108 Data Indicates Lower Growth In 2008 The General Statistics Office (GSO) released a Q108 GDP growth estimate of 7.52% y-o-y growth in late March. Vietnamese GDP statistics are less reliable than those of other more advanced countries in the region and tend to overload economic activity in the second half of the year, especially in construction and manufacturing activity. This makes the analysis of quarterly GDP data somewhat spurious, but we still see some evidence of slowing growth in the Q108 GDP data. Firstly, the headline growth figure was slightly lower than the 7.66% y-o-y recorded in Q107, which we see as an indication that growth this year will fall short of last years estimated 8.5% expansion. The slowdown was particularly marked in the construction sector where growth slowed to 3.3% y-o-y from a pace of 7.6% in Q107. The important manufacturing component, which accounts for roughly a quarter of GDP, also recorded a slowdown from 11.7% y-o-y in Q107 to 10.3% in Q108, which we see as indicative that slackening global demand is now starting to affect Vietnams industrial expansion. We believe the slowdown in the manufacturing sector is primarily due to weaker orders from overseas markets, as little of Vietnams industrial production is aimed for the home market. External demand has so far held up fairly well, with export growth coming in at an average of 27.9% in the first four months of the year. Shipments to the US rose 23% y-o-y to US$2.38bn in Q108, a somewhat lower expansion rate than the 26% y-o-y recorded in Q107. March sales data suggest that export growth to the US may slow more markedly in Q208 as US consumers start tightening their belts. Anecdotal evidence suggest that manufacturers are attempting to shift their business to Europe, the Middle East and Asia, but we believe Vietnams high exposure to the US retail market will take its toll on GDP growth this year.© Business Monitor International Ltd Page 25
  27. 27. Vietnam Telecommunications Report Q3 2008 Apparel exports to the US, comprising about 10% of total exports, increased by 30% y-o-y to US$1.16bn in Q108, but this still constitutes a slowdown compared to previous expansion levels of 35-40% (y-o-y) recorded over 2007. Vietnam can take some comfort from the continued strong overseas sales of coffee, rice, rubber and seafood, which should give the countrys exports some leverage on higher global food and commodities prices. The governments temporary ban on rice exports is, however, likely to decrease the impact on the trade account from the more than doubling of the global rice price on the trade account. While export growth was robust in Q108, we believe a slowdown in overseas sales is still on the cards. We are forecasting export growth to drop from 22.3% in 2007 to 18.0% in 2008 as US demand falters. We have pencilled in import growth staying flat at 35% this year, but acknowledge upside risks to this target after the 75% y-o-y jump in imports in the first four months of 2008. The growing trade deficit entails that much of the increase in domestic spending will benefit foreign exporters rather than domestic producers. The sharp increase in imports implies that Vietnam will have to strive to source more of the steel, machinery and fertiliser it needs domestically. Domestic Momentum Likely To Feel The Pinch The Q108 GDP estimate showed few signs of weakening domestic demand, with the service sector expanding at a rate of 8.3% y-o-y compared to 7.8% in Q107, buoyed by strong growth in the hospitality and transport sectors. We find it likely that the Q208 GDP estimate, which should be released at the end of June, will show the domestic economy being harder hit by high inflation and monetary tightening. The rapid increase in the price of rice to levels of VND16,000-20,000/kg (US$1.00-1.20/kg) has reduced the spending power of many Vietnamese and is thus likely to affect private consumption going forward. Retail sales, the most readily available proxy for private consumption, increased by 29.5% y-o-y in January to April, but this masks a deceleration in real terms. We expect the slowdown in both domestic and external demand to be more pronounced in the coming quarters, bringing annual GDP growth down towards the 7.0% target we set in January. In fact, we do not preclude that GDP growth will actually undershoot 7.0%, which is now also the government target for 2008, if the export sector were to be impacted by a severe slowdown in US demand and monetary and fiscal tightening takes a deeper bite into domestic demand. Our core scenario is, however, a less pronounced slowdown as the government readjusts its monetary policy to achieve a more balanced growth path. We thus believe that the current monetary tightening measures will remain in place over both 2008 and 2009 until inflation has returned to single digits by the end of 2009. With the government having shown that it has recovered its grip on price growth, and infrastructure investment progressing at a steady pace, we believe that foreign direct investment will continue to be forthcoming over our five-year forecast period.© Business Monitor International Ltd Page 26
  28. 28. Vietnam Telecommunications Report Q3 2008 It should be kept in mind that Vietnams cost advantage vis-à-vis China remains largely intact as inflation and a new labour law have pushed up wages in the Chinese manufacturing industry. Vietnam should thus continue to receive high investment inflows from Singapore, South Korea, Taiwan and other Asian countries where firms are looking to cut costs by outsourcing assembly, testing and packaging functions to plants in lower income countries like Vietnam. We therefore believe that GDP growth will recover to 7.5% in 2009 before trending higher to 8.5% in 2010. Bearing in mind that Vietnam is an emerging economy and thus prone to be exhibit more volatility in economic growth, we still see GDP growth continuing to expand at an annual rate of approximately 8% over the next ten years. As such, it will contribute to shifting the weight of the world economy towards the Pacific Rim, but Vietnam will still lag behind most of its neighbours in GDP per capita.Table: Vietnam – Economic Activity 2005 2006 2007 2008f 2009f 2010f 2011f 2012f 839211. 973790. 1143442 1337827 1558568 1815732 2115328 2458011 2Nominal GDP, VNDbn 0 0 .0 .1 .6 .4 .3 .5 3Nominal GDP, US$bn 53.05 60.99 71.38 85.21 101.21 121.05 146.90 175.57Real GDP growth, %change y-o-y 1,4 8.4 8.2 8.5 7.0 7.5 8.5 8.5 8.2 3GDP per capita, US$ 638 714 825 971 1138 1342 1607 1894 5Population, mn 84.24 85.40 86.58 87.77 88.97 90.19 91.42 92.70Industrial production 2index, % y-o-y, ave 17.2 17.0 17.1 15.2 16.9 16.4 15.7 14.9Unemployment, % oflabour force, eop 2 5.3 4.8 4.5 5.0 4.8 4.4 4.3 4.3Note: f = BMI forecast. 1 Constant 1994 prices; Source: 2 General Statistics Office. 3 BMI calculation; 4 GeneralStatistics Office, BMI calculation; 5 Asian Development Bank. As of July 1.© Business Monitor International Ltd Page 27
  29. 29. Vietnam Telecommunications Report Q3 2008Regulatory EnvironmentVietnam: Regulatory Bodies And Their Responsibilities Regulatory Body Responsibilities Ministry of Information and The Ministry of Posts and Telematics of the Socialist Republic of Viet Nam is the state Communications (MIC) administration in charge of policy making and regulatory matters in posts, 18 Nguyen Du Street, telecommunications, information technology, electronics, internet, radio transmission and Hanoi, emission techniques, radio-frequency management and national information infrastructure, Vietnam management of public services, as well as of control over, on behalf of Government and as stipulated by laws and regulations, the state capital in posts, telecommunications and Tel: 00 844 943 5602 information technology enterprises. Its main functions include: Fax: 00 844 826 3477 Web: www.mic.gov.vn ! Submit to Government drafts of laws, ordinances, regulations, strategies and development plans on posts, telecommunications and information technology; ! Give guidance in implementation of laws, ordinances, regulations, as well as development strategies and plans related to posts, telecommunications and information technology; ! Regulate the access to and the interconnection between public switched telephone networks, specialised and private networks; ! Regulate the electronics and information technology industry development plan; ! Regulate charges and tariffs in the fields of posts, telecommunications and information technology; ! Plan, assign and allocate radio frequency spectrum; control and monitor radio frequency spectrum and radio equipment; organise radio frequency, satellite orbit registration and coordination; ! Grant licenses in posts, telecommunications, radio frequency and Internet; ! Regulate the quality of posts, telecommunications and information technology networks, plants, products and services; ! Regulate numbering resources, codes, domain names and addresses used in the fields of posts, telecommunications and information technology; ! Conduct international cooperation activities in posts, telecommunications and information technology; ! Inspect all activities and settle all regulatory breaches in the fields of posts, telecommunications and information technology.© Business Monitor International Ltd Page 28

×