The paradox in the telecom market development

Published: 09/06/2011 05:00



VietNamNet Bridge – The number of
mobile phone subscribers is two times higher than the population. Meanwhile,
more investors attempt to join the telecom market and compete fiercely with
each other by reducing charges.

Vietnam’s telecom development unsustainable

The British
market survey firm BMI has released a report which says that in the second
quarter of 2011, the Telecommunications Business Environment Rating of Vietnam
does not show any considerable improvements in the ranking of Vietnam in Asia

Vietnam remains on the 17th position, higher than
Sri Lanka, but lower than Thailand and Cambodia.

to BMI, the average revenue per user ARPU in Vietnam has been decreasing rapidly
in the last time, since service providers have been rushing to run sales
promotion campaigns and slashing charges. The mobile telecom market now heavily
relies on pre-paid subscribers, while the telecom charges dropped sharply by 15
percent in July 2010. Especially, the mobile telecom market has nearly reached
the saturation threshold.

to Thoi bao Kinh te Saigon, in 2009, the ARPU in Vietnam was only five dollars,
decreasing from 5.52 dollars in 2009. Meanwhile, the ARPU indexes in 2008 and
2007 were six dollars and 6.5 dollars. The figures show that ARPU has been
decreasing rapidly, while BMI thinks the ARPU in Vietnam would drop further to 3.51
dollars by 2015.

In 2010,
the Ministry of Information and Communication released a decision on not
allowing telcoms to offer the bonuses valued at higher than 50 percent of the
phone cards’ values. However, Lao dong has reported that telcoms, after a
period of implementing the decision, have ignored the regulations, continuously
running big sales promotion programs. This has led to the boom of “virtual
mobile subscribers”.

The figure
about 3G subscribers also does not show an optimistic situation, even though
the figure released by telecom companies was relatively satisfactory. BMI
believes that by the end of 2010, Vietnam had had 8 million 3G subscribers,
which was much lower than the figure released by telcoms.

Too many mobile networks licensed?

to Lao dong, the biggest problem now is the programming the development of
telcoms. Vietnam has granted licenses to too many mobile networks, but only 3-4
enterprises have been operating effectively, while other small networks have
been narrowed. Dong Duong Telecom many times announced the plans to join the
telecom market, but it is still unclear when it will be able to begin providing

licensing to too many telcoms has put small newly established enterprises into
a dilemma. If the enterprises continue to pour money into investments, they
will have to face high risks, when the telecom market has become nearly
saturated. However, if they withdraw from the markets, they will see their
invested money “gone away”.

The great
difficulties in the telecom market have forced many telcoms to look for other
ways to develop. Buu dien has quoted its sources as saying that S-Fone is
considering replacing CDMA technology with GSM technology after it failed to
provide CDMA based services on the market. Analysts believe that CDMA
technology is the main reason which makes S-Fone unsalable after the withdrawal
of SK Telecom, though CDMA is an advanced technology.

said that FPT once intended to buy S-Fone, but then decided to buy EVN Telecom,
because S-Fone developed CDMA based network. Though EVN Telecom also uses CDMA,
it still has 3G license, which was attractive to FPT. However, finally, FPT
also gave up the deal with EVN Telecom.

Prior to
that, Hanoi Telecom and its partners also had to accept to replace CDMA
technology with GSM, and turned into Vietnamobile.

Thoi bao
Kinh te Saigon quoted Hoang Ngoc Diep, former
General Director of Qualcomm Indochina as saying that if telecom service
providers still focus on expanding networks and competing with low prices, but
not concentrating on quality and services, they will face losses in the future.

C. V

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