report on broadband in vietnam

Report on broadband internet in Vietnam

Nguyen Le Anh, Aleksander

Report on broadband internet in Vietnam 2014

Table of Contents

I. Introduction....................................................................................................................................2

Methodology...........................................................................................................2Objective................................................................................................................2Historical context.....................................................................................................2Population..............................................................................................................3Regulating institutions...............................................................................................4Internet in Vietnam...................................................................................................4

II. Market Overview............................................................................................................................5

Broadband in Vietnam...............................................................................................6Fixed broadband.......................................................................................................7Mobile broadband...................................................................................................11Competition landscape.............................................................................................13International presence..............................................................................................16

Foreign investment in Vietnam’s ICT sector...............................................................16Vietnamese ICT expansion abroad...........................................................................17

III. Company profile...........................................................................................................................18

History................................................................................................................ 18Organizational structure...........................................................................................19

CMC Telecommunications Infrastructure JSC:............................................................20SWOT..............................................................................................................21

Asia-Pacific Gateway..............................................................................................22CATV market........................................................................................................22

IV. Conclusion.....................................................................................................................................23

V. Glossary.........................................................................................................................................24

VI. Bibliography..................................................................................................................................26

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I. Introduction

Methodology The research conducted in this report uses numerous official public information sources such as the Vietnam General Statistics Office (GSO), the Vietnam Authority of Telecommunications (VNTA), Vietnam Internet Network Information Center (VNNIC) as well as business data providers and consultancy groups such as Business Monitor International (BMI), the International Telecommunications Union (ITU), infoDev and internal sources based on interviews and information from the CMC database. However, due to different sources used, some figures may vary depending on source, especially between the GSO and VNTA.

Objective The purpose of this report is to provide a general overview of Information and communications technology (ICT) industry in Vietnam, specifically the broadband technologies, its deployment, current situation and prospects on the Vietnamese market. Across the study we will also try to understand the current issues that companies face in the broadband sector in Vietnam, the differences between types of internet access and their different growths.

Historical context Since opening its borders and economy in 1986 as part of the Đổi Mới plan, the Vietnamese economy has experienced a healthy growth, averaging 6.12% from 2000 to 2014 and currently is of 5.25% (Q2 2014). Since opening its borders, Vietnam have joined APEC (Asia-Pacific Economic Cooperation) signed a number of international trade treaties such as BTA with the U.S in 2001. These moves clearly indicate a desire to progressively create a market-driven economy. However, the telecommunications market remains dominated by state-owned enterprises (SOE), foreign investors have to choose a Business Cooperation Contract (BCC) to work with a local partner in order to enter the market. According to the World Bank data, in 2013 the annual GNI per capita was of $1730, an equivalent of VND 36 million ($1700) which is not the most accurate picture of the average wage in Vietnam. Since 2012, Vietnam is boasting a growth of 5% and a GDP of $171,391,820. Since the Đổi Mới, incomes have surged, a variety of western consumer goods and services is now available and a consumer society is emerging. (The World Bank, Vietnam country profile)

Concerning the telecommunications market, in 1997 Viet Nam has also started developing the telecommunications infrastructure in order to provide internet (dial-up). Since the beginning SOEs have retained a dominating position. As of December 2013, the market is dominated by few SOEs and private companies: Vietnam Posts and Telecommunications Company (VNPT), Viettel Telecom, Corporation for Finance and Promoting Technology (FPT Telecom), Saigon Tourist Cable Television (SCTV), CMC Telecom Infrastructure (CMC TI), Saigon Post and Telecommunications Services Corporation (SPT), Netnam Company. Furthermore, the mobile broadband market is dominated by Viettel, MobiFone and Vinaphone.

2


Population

Q2 2013 Q1 2014 Q2 20140

10000

20000

30000

40000

50000

60000

70000

Work force and population

(GSO, Labor Force Survey, Q2 2014)

According to BMI (Business Monitor International) and the VNTA, in 2012 there were over 135 million mobile phone subscribers, some 149% of the Vietnamese population, a result of the popularity of prepaid subscriptions and customers owning multiple phone numbers. (Business Monitor International)

The population of Viet Nam is young, vibrant and eager to adapt new technologies. Computers and mobile phones are nowadays found in most parts of the country, of course mobiles, especially feature phones, are much more common due to more affordable costs. Since incomes have risen, a consumer society emerges in Vietnam and the young generations are communicating more than they ever did before by having access to internet and mobile devices which make the telecommunications sector a very dynamic part of the economy. The most popular services in Vietnam remain voice services, sms and mobile services (search, e-mail, music). (investvine.com)

(GSO, General Statistics Office)

3

2009 2010 2011 20120

5

10

15

20

25

4.8 5.31 5.9 6.983.09 3.37 3.73 4.3

19.8 20.5 21.1 21.3

Desktops/Laptops (in millions)Households with a computer (in millions)Households with a color television (in millions)


Regulating institutions

The telecommunications sector in Viet Nam is regulated by the Ministry of Information and Communications (MIC), responsible for drafting laws regarding telecommunications, managing technology licenses regarding networks. In 2000 the MIC established the Vietnam Internet Network Information Center (VNNIC) to manage the VNIX and in 2011, the Vietnam Telecommunications Authority in order to supervise the operators and the development of the infrastructure. The MIC is also responsible for managing telecommunication resources within the country such as cellular frequency spectrum bands and internet domain names. (MIC)

The Communist Party of Vietnam prefers to retain a control over strategic sectors of the economy which explains the dominant position of SOEs in the ICT sector. Through the MIC, the government grants licenses allowing operators to provide networks and telecommunication services. The development of telecommunication infrastructure in Vietnam also requires an MIC license. In order to survey the quality of goods and services provided by the operators, the MIC has established the Directorate of Information and Communications Quality Control (ICTQC). (Russin&Vecchi)

Internet in Vietnam

4/5/2000 7/3/2005 2/7/2007 13/11/2008 3/12/2009 14/02/20120

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

100000000

Internet penetration rate

Internet Users Population

(Internet World Stats Vietnam Country Profile), (VNNIC)

The broadband market in Vietnam is dominated by state-owned companies such as VNPT and Viettel Telecom. Some newcomers on the market are private companies such SCTV and CMC TI. State enterprises have the largest market shares on the most popular ways of providing internet access but the smaller companies are trying to find new methods such as Cable Television broadband internet or leased-line services. The market may be dominated by SOEs but the competition is stiff and

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resulted in low prices of prepaid cards which hinder the sales of subscriptions and create an inflated number of mobile users.

The price war has also led to low customer loyalty and low Average Revenue Per User (ARPU). The Vietnamese government is planning on developing the ICT sector in order to catch up with other countries in the region and around the world. In this logic, the state needs to start implementing internet infrastructure in its institutions as well as expand the network throughout the country, including the remote and rural areas.

The introduction of broadband internet in Vietnam has led to a decrease in growth of dial-up subscriptions, given the slow speed it allows. On the other hand, FTTx services do exist but are not widely used given their price. ADSL seems to be favored fixed broadband technology at the moment given the price and speed. (Business Monitor International)

4/5/2000

7/3/2005

2/7/2007

13/11/2008

3/12/2

009

14/02/20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

percentage of internet users on total population

(Internet World Stats Vietnam Country Profile), (VNNIC)

II. Market Overview

Broadband in Vietnam

0153045

19 17.1

43.9

Internet Access in Vietnam as of 2013

5


(ITU)

The broadband market is developing fast with dial-up being introduced in 1997 and ADSL appearing in 2003. Despite the late introduction of ADSL, it grew quickly in number of subscribers and took over dial-up. Furthermore, Fiber to the Premise services are offered as well but remain limited due to their cost. Since 1997, internet access has quickly spread in Vietnam.

0

20

40

60

80

100

120

140

10.1

130.9

5.618.8

Dial up, Fixed and mobile broadband pen-etration as of 2013

Per 100 inhabitants

(ITU)

FTTx services are already being offered but only a minority of households is able to afford them. ADSL is much more popular due to lower costs. Also, the big cities and major urban areas are showing signs of saturation, as opposed to the countryside where internet access is rare. However, some rural areas and remote locations are difficult to cover with fixed broadband infrastructure and so mobile broadband is more popular in those areas.

Dec-12 Dec-13 Jul-140

1

2

3

4

567

8

9

4.77 5.155.63

2.99 3.312.46

7.778.47 8.09

Fixed broadband internet subscribers Number of 3G capable cards in useTotal number of broadband internet subscribers

(Vietnam Telecommunications Authority )

Fixed broadband

6


Fixed broadband market shares, December 2013

VNPT Group; 56.25%FPT Telecom; 26.80%

Viettel; 9.74%

SCTV; 2.81%CMC Telecom; 2.52% SPT; 0.95%Netnam; 0.37%HTC; 0.30% Others; 0.27%

(Vietnam Telecommunications Authority)

The fixed broadband market is dominated by SOE’s such as VNPT and Viettel. The leading private ISPs are SCTV and CMC.

xDSL market shares, December 2013

VNPT; 60.79%

FPT Telecom; 29.85%

Viettel; 8.04%SPT; 1.02% Netnam; 0.26% VTC; 0.04%


All the major ISPs have a diverse offer of ADSL and FTTx services, they also tend to target similar audiences: individuals, families/households, gamers, educational institutions (schools, universities) as

7


well as businesses/office buildings. Tariffs vary between ISPs, as of 19/08/2014, CMC and Netnam had the highest installation fees ($282) for FTTx packages due to the cost of infrastructure. Monthly bandwidth tariffs vary between a few dozen dollars USD for FTTx packages offered to public institutions and below $940 for office building packages with high speeds. VNPT and Viettel have a generally cheaper offer of FTTx packages than the private companies such as Netnam and CMC. Bandwidth speeds range from 1Mbps to 10Mbps for ADSL packages and from 10 Mbps to 100 Mbps for FTTx packages, depending on the ISP. Most ISPs accept several methods of payment: subscription, pay per use and prepaid. Most operators accept only subscription payments for FTTx packages, VNPT is the exception as they also accept pay-per-use. ISPs are trying to push people towards subscriptions by lowering tariffs and offering long term advantages. Since basic broadband services (ADSL) are becoming more affordable for the population, dial-up has been declining due to its limited speed and ISPs are not considering it their primary service. Nowadays dial-up can only be found in the remote and rural areas.

FTTx market shares, December 2013

Viettel; 46.09%

VNPT; 36.81%

FPT Telecom; 11.81%

CMC Telecom; 3.26% SPT; 1.10% Netnam; 0.70% VTC; 0.13% Others; 0.10%


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Additionally, most ISPs also offer other broadband internet access and value added services such as leased line, VPN, IPTV, company-wide networks, satellite networks, video conferencing.

The difficulty in establishing a reliable infrastructure in numerous areas in Viet Nam made mobile a more preferable option for a large number of people due to the limited fixed line reliability and price of acquiring a PC or laptop compared to the price of a mobile phone.

Another issue with infrastructure is the high cost of development and construction which affects area coverage which is a significant entry barrier on the market. Apart from dominant companies such as VNPT or Viettel, operators are unwilling or unable to invest in infrastructure, the two former companies cover the entire costs of maintenance and construction which makes infrastructure sharing the next logical step. However, these two companies are resistant towards infrastructure sharing as they perceive it as a threat to their market domination. (Business Monitor International), (NNMT Advisor) ( Broadbandtoolkit)

VNPT43%

CMC Telecom24%

HTC9%

Viettel 7%

FPT Telecom7%

GDS5%

Netnam3%

CCVN1%

Others1%

Leased line market shares, in Vietnam as of December 2013


The leased line market is dominated by VNPT, CMC TI and HTC closely followed by Viettel and FPT. VNPT owns close to half of the market shares but the other SOE, Viettel is the 4th provider. CMC Telecom has taken the 2nd place with almost ¼ of the market. The development of the private business sector and government institutions pushes the demand for more leased line services.

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Mobile broadband

Jan-13 Jun-13 Jan-14 Jun-140

20000

40000

60000

80000

100000

120000

140000

160000

Mobile broadband subscribers

Subs

crib

ers (

in th

ousa

nds)


10


44%

31%

16%

4% 4%

2G market shares, December 2013Viettel MobiFone (VNPT Group)VinaPhone (VNPT Group) Hanoi Telecom (Vietnamobile)Gmobile


In 2009, when the 2G market was close to saturation, the 3G network was introduced in Vietnam. 2G spectrum bands are being re-used as 3G spectrum, due to a lack of available spectrum. Spectrum recycling allows operators to open up new networks at lower costs as the infrastructure doesn’t need to be built again. Vinaphone was the first company to offer 3G services to its customers, after finalizing a contract with Motorola and upgrading it infrastructure to EDGE technology.

63%

23%

12%2%

3G market shares, December 2013

ViettelMobiFone (VNPT Group)VinaPhone (VNPT Group)Hanoi Telecom (Viet-namobile)


As of April 2013, there were 7 licensed 2G operators and 5 licensed 3G operators. Viettel, MobiFone, Vinaphone, Gtel Mobile, EVN Telecom and Vietnamobile were allowed to operate 2G networks. Among the aforementioned companies, Gtel Mobile and SPT failed to obtain a 3G network license from the MIC. The 2G market, having been deployed some time before, is more penetrated than the 3G market, so operators are attempting to convert 2G users onto using 3G. High degree of competition has reduced the cost of 3G prepaid cards, below the cost of a 2G prepaid card. Cheaper 3G alternatives and the 2G market close to saturation resulted in a slower growth within the sector.

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3G was first introduced in Vietnam by Vinaphone in October, 2009 and other companies soon followed. According to the BMI and VNTA, in Q2 2013, the market was dominated by Viettel (30.7%), MobiFone (38.1%), VinaPhone (28.5%), and Vietnamobile (2.6%). There were 18 million 3G subscribers as of July 2013, more than twice as much as in 2011 when there were 8.4 million which amounts to some 20% and 9% of the population, respectively. (MIC)

The operators are facing issues with customer loyalty: high competition between operators created a diverse offer of services on the market. Users frequently change operators which makes it hard to gain subscribers. Also, the lowering amount of subscribers is often due to users not renewing their subscriptions. As can be seen on the graph, 2G subscriptions are declining while 3G subscriptions are on the rise.

The lack of 3G subscribers has led the government and Significant Market Powers (SMP) to postpone the introduction of a 4G network at least until 2015, hoping to develop and generalize 3G services in the country. In April and October 2013 major mobile operators were under suspicion of fixing 3G prices as the 3 dominating companies (Viettel, MobiFone and Vinaphone) raised their monthly 3G tariffs by 25% and 40% percent respectively. However, in January 2014 Vietnam’s Competition Authority has ruled out any wrongdoing. The price rise could be a sign of operators trying to calm down the competition in order to make 3G less costly. It could also be their response to increased OTT use in Vietnam which, according to operators, is diminishing their profits. (Business Monitor International)

The dominant 3G operators are offering a dozen of 3G packages which tariffs range from 5 000đ to 200 000đ. The data limits vary from 50 MB to 5 GB and some subscriber packages have no data limits. Once the limit is reached, the data tariffs are between 0.5đ/Kb and 75đ/50Kb. The bandwidth speeds vary between 7.5 Mbps and 21 Mbps. The operators are often offering prepaid SIM cards that expire after one day, they also feature special offers for students.

Licenses to operate a 4G network has been given out since April 2012 to several operators which are scheduled to conduct trial periods until the 4G will finally be introduced. According to the MIC, both LTE and WiMAX as well as wireline technologies will be available. (MIC)

Competition landscape

Broadband Internet (fixed and mobile) market shares in Vietnam as of December, 2013

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VNPT; 55.82%

Viettel; 23.46%

FPT; 16.30%

SCTV; 1.71% CMC Telecom; 1.53% SPT; 0.58% Netnam; 0.23% HTC; 0.21% Others; 0.16%


Concerning Internet Service Providers (ISPs), the country has 5 dominating companies: VNPT, Viettel, Telecom, SCTV, CMC TI, SPT and Netnam Company.

Despite an overwhelming presence of SOEs, the broadband market and the ICT market in general, are highly competitive sectors. The dominating companies receive substantial government backing in forms of licenses and funds.

Fixed broadband market competition:

- VNPT is the leading ISP. The company is one of the largest in Vietnam and has been dominating the telecommunications market since its creation in 1995. The SOE has a near-monopoly on telecommunication infrastructure in Vietnam.From 2005 to 2011 VNPT spent $5bn on a fiber optic cable expansion in Vietnam. This, as well as its international operations suggests it could be looking to compensate its loss of revenue due to government restructuration. VNPT is also forced to hand over the Institute of Posts and Telecommunications Technology and the Central Postal Office. (Vietnam News) The company is rumored to undergo further re-organization, and has been ordered by the government to divest its stakes in numerous companies and subsidiaries such as Sacom Investment and Development Corporation. VNPT would divest its 31% of the Sacom shares. (Intellasia.net)

- Viettel , a company owned by the Ministry of Defense (MOD) has enjoyed the support of the military and the government in its infrastructure development. However, Viettel is also subject

13


to government restructuration plan and will be divided into several smaller companies. Viettel focuses on offering low-priced services which makes it attractive on the domestic market and in recent years, the company started manufacturing its own low-priced phones. Viettel has confirmed it will later try to manufacture low-priced smartphones and tablets. Furthermore, Viettel tries to improve its mobile services by introducing a mobile banking service. Also, the company has begun developing social projects for the government such as providing internet access in schools and institutional buildings. Owned by the MoD, Viettel has also announced it has started developing communications equipment and unmanned aerial vehicles for Vietnam’s Peoples’ Army. In 2013, Viettel Global registered a net profit of VND 2.4 Tn. (113 million USD)(Vietstock)

- FPT : subsidiary of the Financing and Promoting Technology Group provides a diversified offer of internet, including broadband (adsl, adsl 2+, leased line, WiMax) and dial-up. 3rd largest ISP after VNPT and Viettel. Currently, FPT Corporation has announced it will increase its shares in FPT Telecom. Currently it owns 42.51 % of FPT Telecom. In June 2014, FPT announced it would improve the speed of the offered subscription plans without charging additional fees to its customers. In August, 2014, FPT introduced the FPT Life 4.5 and Life 5 smartphones, illustrating the general industry trend followed by established telecoms in developing their own devices. In Q2 2014 the Financing and Promoting Technology Corporation has registered a gross profit of over VND 1.2 trillion ( 56.6 million USD)

Mobile broadband market competition:

- Viettel is dominating the mobile broadband market, especially in 2G and 3G subscriptions.In 2012, Viettel acquired EVN Telecom, another leading company on the market. EVN planned on focusing on deploying 3G networks in major urban centers in Vietnam, however, Viettel’s takeover of EVN resulted in spectrum being returned to the MIC and many EVN’s customers had their mobile numbers taken back by Viettel. In many remote areas of Vietnam, Viettel remains the only available operator with enough coverage, giving it considerable advantage over the competition; however, deploying infrastructure to some of those remote areas is costly and has a low return on investment. According to telegeography.com, Viettel is improving its deployed 3G infrastructure with DC-HSPA+ technology in order to allow faster download speeds (up to 42Mbps), the company announced they would introduce the new service in early 2015 and that they will keep improving the transfer rate to 84Mbps, which suggests that the 3G market is far from saturation as 4G is also expected in 2015. (Telegeography.com, news, Vietnam).

- VNPT also has a firm hold on the mobile broadband market as two leading operators (MobiFone and Vinaphone) belong to VNPT. The company was recently forced by the government to divest its shares in MobiFone which will be sold on an IPO as part of a restructuration plan. VNPT plans to retain a limited amount of shares within MobiFone (20%) According to news outlets, the company could be worth over $4 billion.

- MobiFone remains a dominating provider of mobile and 3G services. Recently the company announced it will start providing roaming services aboard local and international flights on

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several airlines. MobiFone also plans on expanding its 2G/3G network in Vietnam as well as on improving their organizational structure (centralization) and their services. Being separated from VNPT, its parent company means a loss of free access to their extensive infrastructure, which will prompt them to invest in that direction as well as in services. MobiFone is expected to finish its privatization by end-2015. Meanwhile, the company has been put under the authority of the MIC. According to telegeography.com, the Swedish company, Comvik international plans to re-invest in MobiFone during the privatization. Comvik International used to co-own MobiFone with VNPT under a BCC until 2005. (Telegeography.com, news, Vietnam)

- Vinaphone is the third GSM network operator on the market, also owned by VNPT. The GSM operator is expected to expand its 3G offer. VNPT planned to merge VinaPhone and MobiFone but that option was rejected by the MIC. The company seems to plan to expand the array of its 3G services and to offer roaming services aboard local and international flights.

According to the VNTA as of July 2014, there were over 8 million broadband internet subscribers among which, 5.6 million were fixed broadband subscribers.

The general overview of the broadband situation in Viet Nam suggests that mobile penetration will keep progressing while dial-up services will decline. However, fixed broadband remains mostly dominated by ADSL and it is expected to follow this trend as it suits an emerging middle-class society. Faster services such as Fiber optics or FTTx (Fiber to the Premise) are being deployed but only a very small percentage of people are able to afford them.

Providers are developing fixed broadband services by improving and diversifying their offers (bandwidth speed), others prefer to expand their subscriber bases by lowering their tariffs. The growth of the fixed broadband sector is much slower than the growth of the mobile broadband which is more affordable. (infoDev)

Since 2003, the MIC has decided to deploy the Vietnam National Internet Exchange (VNIX) which allowed better interconnectivity between ISPs, thus allowing a faster and more stable internet in Vietnam for the consumers. VNIX has grown over the years and so has its number of participating ISPs (17) and the amount of internet traffic that it enables (130 GBps). (VNNIC)

Also, a geographical gap exists between connectivity in major urban centers such as Ha Noi, HCMC, Da Nang and Can Tho and smaller villages or communes where infrastructure and area coverage remain undeveloped. This creates an opportunity as 70% of the population lives in rural areas. Meanwhile, the urban zones enjoy better internet connectivity and bandwidth speeds thanks to better infrastructure and competition between ISPs. At the same time, rural areas are harder to access due to the low investment return associated with developing infrastructure. The market is almost saturated in urban areas and remains undeveloped in the countryside.

Recently, the press is covering the government’s concern about over the top apps (OTT) that allow users to communicate through the internet as some mobile operators complain of lost revenue in core services. A ban of OTTs is being considered by the government but it’s also possible the OTTs will sign contracts with operators and providers. (Telegeography.com, news, Vietnam)

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International presence

Since 1995, Vietnam has signed a number of treaties and agreements towards a liberalization of several sectors of the economy, including telecommunications. However, the sector remains heavily regulated as those measures take time to be put in reality. As the result of these agreements, a number of foreign companies have invested in projects in Vietnam. (Russin&Vecchi)

Foreign investment in Vietnam’s ICT sector Accessing the Vietnamese market can be complicated for foreign corporations as it remains heavily regulated. The law allows foreign investors to enter into a limited number of contracts. The most common form of partnership is the Business Cooperation Contract.

- Business Cooperation Contract : contract between a foreign corporation and a state-owned enterprise (SOE). The foreign company will provide capital, technology and infrastructure, while the SOE will provide staff and management. Both parties share revenues and costs of the BCC under an unlimited debt liability.

- Joint venture : business agreement between parties to develop a new legal entity (the joint venture) and contribute new assets. Both parties share control over the joint venture, revenues, expenses and assets. This seems to be the most desirable way of entering the market for foreign investors as they maintain a significant control over the company.

Several foreign companies have already entered the Vietnamese ICT market, by signing contracts with local companies, however the market remains risky to enter.

Examples of foreign investment in Vietnam’s telecommunications sector:

- 2007: Hanoi Telecom and Hutchison Telecommunications International form a joint venture – Vietnamobile (previously HT Mobile). The operator was granted a 3G license and started providing 3G services in 2011.

- 2010: The Korean SK Telecom ends its ownership of S-Fone of the joint venture S-Telecom with SPT (Saigon Postel Group).

- 2012: The Russian Vimpelcom withdraws from Vietnam and ends its ownership of Beeline, a partnership with the Vietnamese GTel Communications. Beeline becomes G-Mobile owned by GTel Corp. Vimpelcom cited low ARPU as one of the reasons for its withdrawal.

Vietnamese ICT expansion abroad During recent years, Vietnamese telecom companies have started investing abroad, primarily targeting developing countries in SE Asia, Africa and South America. The companies that already invest abroad are mostly SOEs given their financial capacity and government backing. Vietnamese operators seem to target countries of similar or lower level of development with a significant growth potential and cheap labor costs, in order to provide services and infrastructure.

Examples of Vietnamese ICT companies’ overseas operations:

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- In 2008, VNPT launched the Vinasat-1 Satellite. The equipment was provided by U.S Lockheed Martin and the launch mission was carried by the French Arianespace. The objective of the satellite is to provide independent satellite communications in Vietnam to enhance national security and to avoid leasing satellite transponders from other countries. In 2012, VNPT launched another satellite project, the Vinasat-2, also built by Lockheed Martin and launched by Arianespace. Vinasat-2’s objective is to extend the network coverage to some remote maritime areas, deliver weather forecasts and serve national defense security. Both satellites are expected to serve for at least 15 years after their respective launches. (infoDev)

- 2009: CMC Group creates CMC Blue France as a branch to provide CMC services and products in France and Europe. CMC Blue France was awarded the “2009 Best Foreign Investor” by the French Government. However, the subsidiary was shut down at the end of 2013.

- April 2012: VNPT inaugurates the Vietnam Telecom International (VTI) – Telecom Cambodia high speed transmission line providing services such as international private leases circuit, transit and VPN in the region.

- September 2012: VNPT and China Mobile announce an optical cable network between Vietnam and China planning to allow transfers of 10Gbps and later 40Gbps.

- December 2012: MobiFone joins the Bridge Alliance. Organization comprises Bharti Airtel (India), Advanced Info Service (Thailand), CSL (Hong Kong), CTM (Macau), Globe Telecom (Philippines), Maxis (Malaysia), Singapore Telecommunications, Optus (Australia), SK Telecom (South Korea), Taiwan Mobile and Telekomunikasi Selular (Indonesia). The alliance aims to promote value-added services integration and roaming between the operators.

- Viettel has a significant international presence in Cambodia, Laos, Mozambique, Haiti, Peru and it has announced plans to boost its operation abroad to another 10-15 countries by 2015 aiming mostly at developing countries in Asia, Africa and South America. According to the Vietnam Chamber of Commerce and Industry News, Viettel’s strategy is to expand its potential customer population by entering foreign markets. The company is encouraged by the government to expand its activities overseas.

- FPT has expressed desire to invest VND 200bn (9.4 million USD) to expand its operations in Cambodia, Myanmar and Laos (Telegeography.com, news, Vietnam)

III. Company profile

History Established in May 1993, the CMC Group was a company initially focused on software integration and development. Through years of expansion and creation of subsidiary companies, CMC diversified its scope of activities. Apart from system integration, the

17


company specializes today in software service, telecommunications, providing internet, manufacturing and distribution of ICT products as well as e-trade. Nowadays, CMC is a major private company in Vietnam and 85.17% of the company shares are voting shares.

Nowadays, the CMC Corporation is a leading company on Vietnam’s technology market and CMC TI is a major private ISP.

Until recently, the corporation focused on manufacturing and distributing ICT products for major companies of the sector such as Acer, Sony Ericsson or Toshiba but in January 2011, CMC unveiled its first trademark ICT product – Bluefone. However, distribution remains an important activity for the company and its relationship with foreign manufacturers has developed.

According to Vietstock.vn, CMC Group’s net profit after tax in Q1 2014 was over VND 12 billion (over $577000)

The CMC Group shareholders include a number of investment companies and bank as well as the founders of CMC Group who serve on the board of directors.

- My Linh Investment Co.,Ltd.

18


- MVI Investment Co.,Ltd.- Geleximco, Import/Export Company of Hanoi- Bao Vietnam- Bank of Agriculture and Rural Development- Board of directors

Organizational structure Over the years, CMC Group has created multiple subsidiaries in order to diversify its activities, it also has merged others to centralize functions within the corporation.

CMC subsidiaries and joint ventures:

- CMC Production & Trading: ICT distribution of laptops, PCs, and mobile phones.

- Ciber-CMC: In 2008, CMC established a joint venture with Ciber Inc. – Ciber-CMC software and enterprise resource plan consultancy group.

- CMS Computer: Production and assembly of Vietnamese-made CMS trademark computers and IT distribution.

- CMC SI: System Integration, software services for financial, government and education institutions.

- CMC InfoSec: Information security

- CMC Software: Software R&D, software services.

- Netnam Corporation: Established in 1994, is an ISP co-owned by CMC (43.8% shares held by CMC), focused on ICT products distribution and later,providing dedicated and broadband internet access in Vietnam. In 2010 Netnam Corp. registered a capital of VND 4.2bn (almost 200 000 USD) . In Q3 2013, Netnam was the 6th largest provider of xDSL services with 0.27% of the market, 7th largest leased line provider (256 kbps) with 2.92 %of the market and 6th largest provider of FTTx with 0.75% of the market.

CMC Telecommunications Infrastructure JSC:

In 2007, CMC Telecommunications Company was established as a subsidiary of CMC Group and in 2009, the company was granted permission to start developing its own network infrastructure as well as provide telecommunication services by the Prime Minister and by the Ministry of Information and Communication. Among the primary objectives of the company, is to provide telecommunication and network services for other businesses. Furthermore, CMC Telecom also provides data hosting services for mail services, websites, and servers. Leased line and FTTx services are primarily directed at B2B customers and institutions.

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In 2009, CMC Telecommunications also signed a number of agreements with existing companies on the market to start providing services: sharing infrastructure and providing TV content in Hanoi with Hanoi Broadcasting and Television Service, deploying infrastructure and underground cables with Hacisco JSC, sharing infrastructure and providing internet services with Netnam and deploying office building telecommunications networks with EVN Hanoi. Under the agreement with EVN Telecom, CMC TI would provide customer services while EVN would provide and maintain infrastructure.

Also in 2009, CMC TI has agreed with Alcatel-Lucent concerning the development of infrastructure. Alactel-Lucent would provide Gigabit Passive Optical Network (GPON) infrastructure for CMC TI in Vietnam. CMC TI would use this infrastructure to deliver FTTx services to customers. This would be the first GPON infrastructure installed in Vietnam.

In 2010, the company started offering FTTx services based on FTTx/GPON technology.In September 2010, CMC along with 4 other major network operators have been given licenses to conduct 4G LTE trials over a period of 12 months. Although the trial period is over, the 4G network will most likely not be introduced before 2015. (Business Monitor International)

In 2013, CMC Corp has merged CMC Telecommunications and CMC Telecommunications Infrastructure to form the CMC Telecommunications Infrastructure JSC in order to centralize its internet and telecommunication activities.

As of Q3 2013, CMC was the 2nd largest provider of leased line services (256 kbps) with 22.06% of the market, behind VNPT with 42.29% and 4th largest provider of FTTx services with 3.42% of the market. The leased line market is a significant opportunity for CMC TI, as it has the 2nd largest market share (24%, as of December 2013) and directs its services towards the private business sector customers.

SWOTStrengths

- Vietnam’s leading private ISP- Diverse sectors of activity (informatics, distribution, internet service etc)- Strong presence on CATV market with 35% of market shares.- Strong presence on leased line market with 24% shares.- Long development history (CMC Group)- CMC Group’s partnerships with major software firms (IBM, Microsoft)

Weaknesses- Weak brand awareness.- Weak non-core services (VAS)- Weak Customer service- Low broadband market shares (1.53% as of December 2013)- Low FTTx market shares (3.26% as of December 2013)

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Opportunities- Future 4G launch, 4G license obtained- Joined Asia-Pacific Gateway in 2012- Sector privatization (VNPT re-organization) and government project towards increasing

competition on the telecommunications market.- Expansion on CATV market

Threats- Low ARPU - Viettel enters the CATV market with its ViettelTV package. Viettel focuses on low cost

services and owns a developed infrastructure network. (Businesstimes.com)

Asia-Pacific Gateway The Asia-Pacific Gateway (APG) project begun in May 2009. The project reunites multiple telecommunication companies from East and South East Asia regions:

- Malaysia: Telekom Malaysia, Time dotCom- Japan: NTT Communications- South Korea: KT Corp, LG Uplus- Vietnam: VNPT, Viettel, FPT, CMC Telecom- Philippines: PLDT- Singapore: StarHub- Hong Kong- Taiwan: Chungwa Telecom- Mainland china: China Unicom, China Telecom- Facebook

The objective of this cooperation is to deploy a 10 000 km network of submarine cables that will enhance the bandwidth speeds between those countries. The cable network will connect those countries with several landing points and is expected to be launched in Q3 2014. The maximum capacity of the APG will be 54.8 Tbps. APG is not the only network cooperation of its kind in the region, a number of other submarine cable networks have already been deployed such as TGN-IA or the SJC. The construction of the APG infrastructure is expected to require $450 million. (Submarine Networks.com)

The new submarine cable network should improve inter-connectivity between the countries, bandwidth speeds and should decrease the costs. Furthermore, it would open new markets abroad for the companies involved in its development.

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CATV market

SCTV65%

CMC Telecom35%

CATV market shares, December 2013


On April 6th 2012, CMC TI began to introduce Giganet Home, a CATV internet subscription package.

In 2013, CMC Telecom signed a cooperation deal with VCTV to offer their services on cable TV infrastructure. This would allow CMC Telecom to provide broadband internet access through VTVcab cable TV network – the VTVnet. The service offered will provide up to 40Mbps of bandwidth. The monthly service fees range from VND 200.000 ($9.4) to VND 400.000 ($18.8)

Providing broadband internet through cable television is an effective way to spread higher speed internet access in Vietnam. The VTVnet service allows much higher speeds than standard ADSL and is much cheaper than FTTx services. Furthermore, customers do not need computers or mobile phones, only a television to be connected to internet, which are more common and more affordable for the majority of the population. The popularity of the CATV broadband internet access has been mentioned as potential threat to ADSL packages in Vietnam, given the price and bandwidth offered. Unlike the companies dominating xDSL and FTTx markets, newcomers CMC and SCTV have been trying to find other niche markets such as CATV and leased line services to avoid a well-established competition. In Q3 2013, CMC Telecom was the second provider of CATV internet services in Vietnam with 33.83% market shares, behind SCTV (65.17%).

IV. Conclusion

The economy of Vietnam is still emerging with a consumer society along with it, which will fuel the demand for more and better broadband services. The rising disposable income and cheaper computers as well as mobiles will contribute to the growing number of subscribers. The competition on the market is fierce, resulting in

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very low prices of prepaid subscription cards among dominant operator of the mobile market. That led the operators to complain about low ARPU in Vietnam.

The market is dynamic and the competition is high even though the SOEs dominate the market. Foreign companies still have to rely on a local partner to enter the sector but there is potential for more international presence.Currently, the government is dismantling the oligarchy of state enterprises by forcing VNPT to divest their stakes in MobiFone which will make those companies consider other activities to diversify their sources of income, by investing in infrastructure, value-added services or perhaps even abroad.

ADSL, FTTx and mobile broadband services are expected to continue growing as dial-up will decline. As the incomes keep rising, the demand for fixed broadband services should keep growing, especially as the government starts equipping schools and public institutions with Wi-Fi. 3G networks are progressing but as there is still a potential for future growth, 4G will be introduced in 2015 at the earliest.

Among the numerous issues of the telecommunications market, we can list aggressive competition, low customer loyalty, and low average revenue per user (ARPU). Furthermore, the market is still heavily regulated by the government, forcing foreign companies to partner up with local ones in order to enter the market. The broadband market still shows potential for further growth as the most connected areas are major cities and urban areas, but the majority of the population lives in rural areas where internet access is less common. This growth will be primarily driven by mobile broadband subscriptions, as this seems the most dynamic type of internet access in terms of growth. Mobile broadband is expected to be expanded with 4G network in 2015, although the 3G market is still under full capacity which might push operators to keep developing it.

Foreign presence on the domestic market is scarce as the telecommunications sector remains heavily regulated, and foreign companies have few options of setting up a business relationship in order to gain entry on the market. The most attractive form is the joint-venture which allows them the most control over the agreement. One remaining issue is the low ARPU in Vietnam which makes foreign investors wary of entering the Vietnamese mobile market. Additionally in a BCC, the local partner has ore poFurthermore, Vietnamese operators are starting to develop abroad, as some of the state-owned monopolies are being privatized which pushes the companies to look elsewhere for sources of revenue to compensate the costs of restructuration.

V. Glossary2G: Second generation wireless telephone technology, launched in 1991 in Finland

3G: Third generation of mobile telecommunications technology, based on standards defined in the International Mobile Telecommunications 2000 (IMT 2000).

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4G: Fourth Generation of mobile telecommunications technology. In addition to voice and non-core services provided by the 3G, it also allows mobile ultra-broadband internet access for laptops equipped with USB wireless modems and to mobile devices.

ADSL: Asymmetric Digital Subscriber Line – Type of DSL technology capable of transmitting data through copper lines faster than dial-up.

ARPU: Average Revenue per User: measure used by ICT companies to define the total revenue divided by the number of subscribers.

BCC: Business Cooperation contract – Mode of foreign investment, foreign company sets up a BCC with a local state-owned company. The former provides funding and helps in developing infrastructure; the Vietnamese company retains control over the choice of staff and services provided. Both signatories to the contract perceive their respective shares but there are restrictions regarding owning shares for foreign investors.

Broadband: bandwidth characteristics of a communication device able to transmit multiple signals and types of traffic simultaneously with speed exceeding 256 kbit/s It can be coaxial cables, optical fiber, DSL, networks or wireless. Systems able to transmit signals only on 1 channel are known as baseband. Most popular forms of broadband are ADSL

CATV – Cable Television: system of distributing television channels to subscribers via radio frequency signals through coaxial cable or light pulses through fiber-optic cables.

Dial-Up: Early form of internet connection that relies on telephone lines to transmit data. Connection had to be reestablished through the modem and took up to 10 minutes to connect. In decline due to slow speed (56 Kbps) and infrastructure issues.

Fiber Optics: new form of cable connectivity relying on fibers rather than copper wire. It presents numerous advantages over the former as it is immune to electrical interference or electromagnetic pulses and radiation. Most importantly it allows much faster bandwidth and a better quality of data transmission.

FTTx (Fiber to the X, Fiber to the premise): Generic term for a mode of deployment of fiber optic cables towards the consumer, depending on how and where it connects (neighborhood, building/house, desktop, zone etc.)

GSM: Global System for Mobile Communications – Standard developed by the European Telecommunication Standards Institute (ETSI) to set protocols for 2G networks.

HSPA+: Evolved High Speed Access Packet – wireless broadband technology standard, enhances WCDMA-based networks to speeds comparable with those of LTE.

ICT: Information and Communication Technologies – Acronym designating information technologies (IT) but also unified communications and integrated telecommunications.

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IPO – Initial Public Offering – Type of public offering where company shares are being sold to the general public.

Leased Line (256 Kbps)/ IPLC: International Private Line Circuit: The provider delivers a direct symmetric communication line connection two or more locations or to between a location and a network (telephone/internet). It offers the advantage of constant connection and is not publicly shared. Often used by businesses to connect distant offices. More expensive than xDSL or FTTx and the distance between connected locations can be calculated into the monthly fee.

LTE: Long Term Evolution, standard of wireless communication and speed data for mobile devices and data terminals. Uses digital signal processing (DSP), simplification of network architecture to an IP based system which makes it incompatible with 2G or 3G networks, only 4G.

MoU: Memorandum of Understanding – Bilateral or Multilateral agreement that expresses convergence of will between the parties that indicates their common line of action.

OTT: Over-The-Top applications – popular smartphone apps that allow users to communicate with each other by using Wi-Fi or mobile internet services and so allow users to avoid for international calls. Examples include Whatsapp and Viber.

SOE: State-Owned Enterprise – Company where the government owns the majority of actions. As such, other shareholders can invest in the company but the government keeps the ultimate control over decisions.

Spectrum band: cellular frequency that allows the transmission of data over mobile networks.

VAS: Value Added Services: all non-core services, beyond standard voice/fax transmissions.

VPN: Virtual Private Network – extends the private network over a public network. Enables the computer to send/receive data over a public network while maintaining privacy, security and anonymity.

WiMAX: Worldwide Interoperability for Microwave Process, wireless communication, 30-40 mb/s data rates, 1 Gbit/s for fixed stations. Interoperable implementations of IEEE 802.16 wireless networks.

W-CDMA: air interface standard of 3G networks. Supports core mobile services (Voice, SMS, and MMS) but is also capable of high speed data transmission.

VI. BibliographyBroadbandtoolkit. 2010. http://broadbandtoolkit.org/Case/vn.

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Vietnam News. Vietnamnews VNPT restructurized. 14 August 2014. http://vietnamnews.vn/economy/talking-shop/258788/vnpt-official-outlines-restructuring-strategy.html. 26 August 2014.

Vietnam Telecommunications Authority . VNTA. July 2014. http://vnta.gov.vn/Trang/thongke-internet.aspx?m=7&y=2014&f=7. 26 August 2014.

Vietnam Telecommunications Authority. Vietnam Telecommunications Authority. 06 2014. http://www.vnta.gov.vn/Trang/thongkevienthong.aspx?m=6&y=2014&f=6. 27 08 2014.

—. VNTA. 12 2013. http://vnta.gov.vn/Trang/thiphan.aspx?tp=10&m=12&y=2013&f=7. 26 08 2014.

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—. Vietstock Viettel. December 2013. http://finance.vietstock.vn/ViettelGlobal/financials.htm. 28 August 2014.

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VNNIC. VNIX. n.d. http://www.vnnic.vn/vnix.

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