Vietnam’s telecom industry has experienced tremendous growth over the last two years, but the tempo has slowed down now that the market has reached its saturation point, which forces companies to refresh business for continued development, the accounting firm PwC said.

In a publication titled Making Waves released on Thursday, PwC said the saturation now brings added challenges to an already competitive telco market. This publication takes a look at the state of the telecom industry across Southeast Asia, with a special focus on Vietnam.

According to the publication, the local telecom industry has grown on the fast track between 2008 and 2010 when the revenue and mobile subscriptions more than doubled to US$10.3 billion and 155.5 million respectively. However, the growth rate currently is slowing down.

Vietnam has one of the lowest mobile tariff rates and highest mobile penetration rates in Southeast Asia. Generic telecom product offerings have led to further price pressures as telcos seek to protect and grow market shares through price.

Johnathan Ooi, director of Advisory Services of PwC Vietnam, said in his statement that competing on price alone is not enough to generate additional revenue and returns as the market reaches saturation.

“Vietnamese telcos need to change their business and organizational models to differentiate, add value, provide new revenue streams and reduce costs - all at the same time. This can be achieved through a combination of customer focus, streamlined operations and collaboration with other communications providers,” he said.

By understanding customers’ changing communication patterns and lifestyles, telecom operators can then strive to provide more personalized experiences, according to Johnathan. This will lead to product differentiation and also open up new revenue streams.

To save on capital expenditure, telcos can hire the third party resources. For example, by partnering with application and multimedia content providers to develop innovative 3G content, they can gain new content without investing too much up front.

“Collaborations make it more feasible and less risky for operators to roll out 3G services and network infrastructure in rural areas,” he added.

Like PwC, recently the UK-based marketing research firm BMI has warned about the unsustainable development in the local telecom industry. In its report on Vietnam’s telecom market in the second quarter of 2011, the company said that “this quarter sees no further changes to Vietnam’s Telecom Business Environment Ratings when the nation remains in the 17th position in the researcher ratings table for the Asia Pacific region.”

Although Vietnam fares better than Sri Lanka, which ranks last in the region, the country continues to rank below regional neighbors, such as Thailand and Cambodia.

To explain why Vietnam’s telecom business environment rating is low, BMI blamed this on the country’s low average revenue per user (ARPU) rates. According to the researcher, last year the ARPU was US$5, down from US$5.52 in 2009. Mobile ARPU reached US$6 in 2008, having fallen from US$6.5 in the previous year.

Other factors which contribute to the low score include Vietnam’s relatively low fixed broadband penetration rate, a fixed broadband dependency on DSL (Digital Subscriber Line), and a fixed-line sector which now appears to be declining.

Commenting on these unsustainable elements, expert Hoang Ngoc Diep, former president of Qualcom in Indochina market, told the Daily that telecom companies have not paid due attention to quality improvement.

If telecom providers continue to expand networks, ignore new service and quality improvement, and heat up competition by lowering prices, they will face the risk of losing profits, he said.

Source: SGT