Int’l telecoms jockey for position in VN market

17/07/2007 -- 1:13 PM

Ha Noi (VNA) - Viet Nam’s opening up of its telecommunications industry has sparked a race amongst some of the world’s premier players that are eager to gain a foothold in the country’s potentially rich communications market.

With a population of more than 84 million and pent-up demands for telecommunications services, Viet Nam will prove to be a boon for companies that establish themselves early on, said Jonathan Kregel, Marketing Manager of Vodafone Asia.

A big play ground with few players

To date Viet Nam is home to six telecom providers, but it is the big three of MobiFone, VinaPhone and Viettel Mobile that after announcing plans to auction off stocks to international bidders, are being the most aggressively courted by foreign firms.

France Telecom, Europe’s second biggest cellular services provider with 88 million mobile users and 11 million Internet subscribers in 220 countries and territories world-wide 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 biggest mobile information and television 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, poured an additional 350 million USD into its operations in the continent as it too looks to cement its place in the world’s fastest and most promising cellular market.

“A string of foreign corporations operating in the field of telecommunications have opened representative offices in Viet Nam in a move to seek investment opportunities with local services operators,” said Bui Quoc Viet, Director of the Telecommunications Centre of the Viet Nam Post and Telecommunications Corporation (VNPT).

Heavyweights, VodaPhone from the UK and France’s Lucent are two such companies that have opened offices in Viet Nam while they await a change in their legal entity status from government officials in order to begin country strategy rollouts.

Previously, foreign telecom firms had been restricted to cooperation agreements with local partners, permitted to share in profits with their Vietnamese firms but without the protection of being able to hold a stake in the legal status of the parent company.

All of this changed however after Viet Nam joined the World Trade Organisation (WTO) last year, foreign investors are now permitted to hold a maximum stake of 49 percent of any joint venture, giving them security and a major say in the operational management of the company. The country’s WTO commitments now allow for joint-ventures to be established by 2008 and wholly owned entities to come into being by 2010.

However, teaming up with foreign partners will bring both benefits and pitfalls for local businesses, analysts have said. On the one hand, local companies will be provided with expertise, much needed capital and quality management from world heavyweights in which to expand their markets.

On the other, domestic services providers will be forced to operate within a highly competitive market where weaknesses will be exploited. Local firms will be required 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 Southeast Asia’s second fastest growing economy but has markedly surpassed it in terms of growth. Annual expansion rates of 30 percent 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 had spiked to close to 24 million.

Forecasts on subscription rates over the next five years do 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 to run till 2010 that was recently approved by the government, Viet Nam has set a target of a fully equipped state-of-the-art system that will see all provinces and cities nationwide hooked up to a broadband network.

A user rate of 45 phones per 100 people, 12 million Internet users per 100 people and annual revenues of over 55 trillion VND (3.5 billion USD) are also written into the government’s strategic market goals.

Pundits have said that 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.