Global telecoms jockey for position in Viet Nam

The opening of Viet Nam’s telecommunications market following the nation’s accession to the WTO has set off a race among some of the world’s leading players in the sector, many of whom are eager to gain a foothold in the potentially lucrative market.

"A string of foreign corporations operating in the telecommunications field have opened representative offices in Viet Nam in a move to seek investment opportunities with local service providers," said Bui Quoc Viet, director of VNPT’s Telecommunications Centre.

Viet Nam is currently home to six telecom providers, but it is the big three of VNPT-operated VinaPhone and MobiFone and the military-owned Viettel which, after announcing plans to sell shares to international partners, are being most aggressively courted by foreign firms.

France Telecom, Europe’s second leading cellular services provider with 88 million mobile users and 11 million internet subscribers in 220 countries and territories worldwide, has said it intends to be a major player in the MobiFone and VinaPhone auctions as it looks to aggressively expand its presence in Asia.

Norway’s Telenor, the top telecommunications supplier in northern Europe, also laid out its long-term investment plans in Viet Nam at the Mobile Viet Nam conference in Ha Noi in May. The group, which already has more than 40 million customers in Asia, has poured an additional US$350 million into its operations in the continent as it also looks to cement its place in the world’s fastest and most promising cellular market.

Other heavyweights, including the UK’s Vodafone and France’s Lucent, have opened offices in Viet Nam while seeking investment licences enabling them to begin rolling out their country strategies.

With a population of 84 million and pent-up demand, Viet Nam could prove to be a boon to telecoms that establish themselves early on, said Vodafone Asia marketing manager Jonathan Kregel.

Before Viet Nam joined the WTO, foreign telecoms had been restricted to co-operation agreements with local partners. South Korea-backed S-Phone is a player in the market following this model.

Now, foreign firms are permitted to hold up 49 per cent in a joint venture, giving them security and a major say in the management of the operation. WTO commitments will also allow entirely foreign-owned entities to operate in the field starting in 2010.

Meanwhile, analysts say, teaming up with foreign partners would bring some benefits to domestic businesses, allowing them to receive expertise, much-needed capital and quality management to expand their market shares.

Domestic services providers who go it alone would be forced to operate within a highly competitive market in which weaknesses are exploited. They need to move quickly in order to equip themselves with the necessary knowledge and skills required to compete as the country barrels down the path to global economic integration.

Over the past few years, Viet Nam’s telecommunications sector has not only kept pace with national growth but markedly surpassed it. Annual expansion rates of 30 per cent a year continue to be recorded in what is one of the world’s quickest growing markets. By April 2007, the number of telephone subscribers in the country had mushroomed to 33.5 million and registered mobile customers spiked to close to 24 million.

Forecasts on subscription rates over the next five years fluctuate greatly with the UK’s BMI predicting 36 million subscribers by 2010 while Canadian provider Hot Telecom expects over 50 million users to be signed up.

According to a Telecommunications and Internet Development Plan through 2010, recently approved by the Government, Viet Nam has set a target to achieve a fully equipped state-of-the-art system, including broadband service that reaches all provinces and cities nationwide.

A user rate of 45 phones per 100 people, 12 million internet users, and annual revenues of over VND55 trillion ($3.5 billion) are also written into the Government’s strategic goals.

Industry prospects look bright for overseas companies that take advantage of new WTO rules while domestic firms that effectively utilise new capital flows and the management experience of some of the world’s leading communication firms should also expect to flourish on the back of the country’s rapidly developing economy.

Source: VNS