vietnam telecommunications report - q4 2008 · vietnam telecommunications report - q4 2008 vietnam...

Vietnam Telecommunications Report - Q4 2008

Vietnam - BMI Industry View - Vietnam - Q4 2008

BMI Industry View - Vietnam - Q4 2008

Vietnam - Telecoms - Oct 22 2008

Executive Summary

BMI estimates that, by the end of June 2008, the number of mobile customers in Vietnam had risen to over 51.6mn. Our estimates are based on the latest data to be published by Vietnam's Ministry of Information and Communications (MIC), which suggested that there were almost 50mn mobile subscribers in Vietnam at the beginning of June. According to MIC figures, Viettel, which is owned by the Vietnamese military, continued to lead the Vietnamese mobile market with a market share of around 38%. Viettel has a clear lead over the next largest mobile operators, MobiFone and VinaPhone, which had market shares of approximately 26% and 24%, respectively.

We have made some further alterations to our forecast for mobile subscriber growth in Vietnam, in order to take account of much stronger growth in the first few months of 2008. We now envisage a growth rate of almost 80% for 2008. By the end of the year, we predict that the subscriber base will have risen to over 64mn, and that the mobile penetration rate will have reached 73%. It should be remembered that the figures for the number of Vietnamese mobile customers are based on the assumption that the market contains a large number of inactive prepaid users.

Competition and growth in Vietnam's mobile sector has been boosted by the recent wave of tariff cuts, which have been introduced by the various operators. Further cuts may follow in the near future, possibly resulting in a price war. Looking ahead, we now predict that Vietnam will surpass the 100% penetration threshold in 2010, instead of 2011 as previously predicted. By the end of 2012, we envisage almost 136mn customers and a penetration rate of almost 147%. Continued customer growth will be supported by a steadily expanding population, as well as the arrival of increased competition and new investment.

Meanwhile, according to Vietnam's Internet Network Information Centre (VNNIC), the number of broadband subscribers rose by 37% in the first eight months of 2008. By the end of August, broadband penetration in Vietnam had risen to 2%, up from 1.5% at the end of 2007. Recent months have seen accelerated efforts to increase the level of investment in broadband technologies and to encourage further take-up. In September 2008, incumbent operator VNPT launched a campaign to promote its 'MegaVNN' ADSL service to fixed-line users. The promotion, which runs from September 16 to October 30, offered free ADSL modem and registration fees for new MegaVNN users and customers who shifted their indirect internet services to MegaVNN on fixed phone lines. BMI continues to believe that broadband subscriber growth will be strong over the next five years. However, we now predict a lower rate of expansion for 2008, envisaging growth of no more than 100% for the year as a whole. By the end of 2008, we forecast a market of almost 2.57mn broadband subscribers (equivalent to a penetration rate of 2.9%).

Vietnam Business Environment Industry SWOT Strengths � An increasingly competitive mobile sector

� Impressive growth in mobile and fixed-line sectors during 2007, with subscribers up by 88.6% and 23%, respectively

� WTO membership in 2007 makes Vietnam a more appealing investment centre -- stronger growth in broadband market could be the result of this

Weaknesses � Fixed-line sector remains largely monopolised, under the control of Vietnam Posts & Telecommunications

� Lack of key strategic investors in the sector's main operators � Although communications are relatively advanced in the larger cities, many rural areas

have little or no access to any telecommunications services

Opportunities � Increase in competition in the mobile sector will lead to a sharp rise in growth � Government approach to liberalisation of the telecoms industry could see entrance of

strategic investors such as NTT DoCoMo, SingTel and Telenor � VNPT is the latest to launch fixed wireless service, tapping into rural market and

therefore joining Viettel and S-Fone

Threats � Pace of deregulation is irregular � Nearly one-third of Vietnam's villages lie in mountainous areas and are without access

to telecommunications services; a delay in network expansion could slow potential growth in fixed-line, mobile and internet sectors

� Number of inactive mobile subscribers is unknown in what is still a market that lacks transparency and reliable data

� Poor quality of ADSL services and high prices are combining to hold up broadband growth

Industry Business Environment Overview - Vietnam - Q4 2008

Top


Business Environment

One year since implementing our revised Business Environment Rankings methodology, BMI reviews the changes occurring across the 16 states covered in our latest overview. From the table it is apparent that the most significant alterations have taken place at the top, impacting the position of the developed markets. This has been attributed to a number of factors including regulatory activities, changes in forecasts since the release of full-year data and the impact of the global credit crunch on local economies.

Singapore is positioned at the head of the table, up from third spot a year earlier. The country has performed exceptionally well in issues regarding regulation. The Infocomm Development Authority (IDA), its regulatory authority, has sought to develop other areas of the industry (with mobile penetration rates second only to Hong Kong in terms of the region's market maturity), namely the deployment of a high-speed broadband network. This forms part of a 10-year plan to turn Singapore into a world-leading information and communications hub.

Japan remains one of a handful of countries not to have seen its position in the ratings change over the course of the year. Standing in second place, the country has witnessed stagnating growth in its mobile sector. The Ministry of Internal Affairs and Communications (MIC) has suggested introducing new competition to the market, with penetration rates yet to reach 100%, through the award of MVNO licenses. This is a strategy that has widely been in use in developed nations across Europe, such as Germany and France, in order to facilitate greater competition and provide choice for customers.

Australia has ricocheted up the ratings table from a lowly ninth position in Q407; the country now stands in third place aided by the significant improvements across its country structure. The Australian economy has defied expectations of a slowdown in Q108, after reporting real GDP growth of 3.6% year-on-year (y-o-y), against the backdrop of global economic uncertainty. Indeed, household consumption rose by 4.3% y-o-y in Q108 period, making the biggest single contribution to overall growth. That said, more recent data is beginning to indicate a slowdown in domestic demand, illustrating that the country is not immune to external factors. Meanwhile, not far off in terms of overall telecoms ratings is Hong Kong, which has jumped up two spots to fourth place. Like the other countries ahead of it in the table, and also fifth placed South Korea, Hong Kong's growth is slowing on account of the saturated nature of the mobile market.

As we reach the mid-section of the table occupied by South Korea, Malaysia and Taiwan, these are markets that, while boasting maturity levels comparable to those at the head of

the table, are held back by the risks to country stability. South Korea and Taiwan face political regional insecurities. North Korea remains the most obvious threat to South Korean politics despite the recent success of the inter-Korean summit in October 2007. The North, despite its ongoing dialogue with the South, remains unpredictable and heavily armed. Similarly, the Chinese government's threat to invade Taiwan in the event of a declaration of independence remains a major concern for the island. Relations between Beijing and Taipei are likely to be strained by the China's continued military build-up, which has increased the gap in military capabilities between the two.

The emerging Asian markets sit at the bottom of the ratings, remaining largely unchanged from a year ago. Indonesia has witnessed a number of new and smaller competitors enter the sector, threatening the market share of larger operators. The lack of growth in the mobile market is a result of high tariffs, beyond the means of most Indonesians. However, with the entrance of smaller operators, and the resulting increase in competition, the Indonesian market is set to grow rapidly in the coming years.

Pakistan and the Philippines both maintained their respective rankings of 11th and 12th place over the year. Pakistan has been spurred on by the market's continued growth potential, the excellent performance of investor operators (Warid Telecom and Telenor) and the encouragement of local regulatory authority, the Pakistan Telecommunications Authority (PTA). As for the Philippines, despite launching next generation network services, there has been a distinct lack of interest from consumers. Customers continue to prefer sending text messages, with over 1bn sent a day. This, together with the Philippines heavy reliance on the US economy, has not helped its overall position in our ratings. The country's troubles have been compounded further with oil and food (particularly rice) prices persisting at record highs, and inflation expected to remain elevated for some time yet. This will continue to push costs higher and constrict consumer spending as disposable incomes suffer. Not surprisingly, both PLDT and Globe Telecom are predicting weak 2008 financial results.

Making its debut in our ratings is Sri Lanka, which enters in 15th place, ahead of Thailand but behind Vietnam and Bangladesh. The country has both a mature fixed-line and mobile market, but continues to suffer from high tariffs. Furthermore, there is an apparent lack of competition in the broadband sector, with penetration rates languishing below 1%. Greater regulatory intervention to encourage competition would be welcome, leading to lower prices and a stronger take-up of services. Meanwhile, Thailand sits at the bottom of the table. Developments in introducing telecoms regulatory policies have taken a back seat to the ongoing political situation occurring in the country. While operators have made efforts to deploy 3G services ahead of licences being awarded, this has been pushed aside by the political tensions that have continued to boil over, and potential investors may hold off from entering in the short term.

Vietnam

Vietnam has moved from 14th to 15th position in our latest set of Business Environment Rankings for Asia. The country now sits behind Bangladesh and the Philippines, but

ahead of Sri Lanka. In this update, Vietnam receives a lower score in the telecoms market category; this has weakened the country's overall placing.

The lower telecoms market score which Vietnam receives in the current update is a refection of increased mobile market penetration and, consequently, reduced opportunity for further growth. Furthermore, much of the recent growth in the mobile sector has been based on the acquisition of prepaid users; in addition to masking high levels of user inactivity, the dependence on prepaid customers has also contributed to weak ARPU growth for the country's mobile operators. Vietnam's telecoms market generally suffers from a lack of foreign investment, with inward investment currently allowed only under certain conditions. Despite the potential for future broadband growth, broadband penetration remains extremely low by regional standards, and investment in alternative technologies such as WiMAX is still in the early stages.

Along with its relatively low telecoms market score, Vietnam has a weak score in the regulatory independence category, which is a reflection of the high level of state control over the sector and its leading operators. The country's accession to the WTO should result in further market liberalisation, and we expect to see this start to happen either later this year, or more likely in 2009, when a 33.3% stake in MobiFone is sold to a strategic investor. Under WTO regulations and in accordance with the government's commitments, foreign investors are allowed to participate in joint ventures with domestic companies. A minimum capital requirement has been set out, with VND1.6trn required for a network infrastructure deal, VND500bn for a project spanning at least two provinces and VND160bn for a project covering a single province.

The more Vietnam opens up to foreign investment, the more it can expect to attract further investment. FDI pledges amounted to US$47bn from January to August, beating the most optimistic projections. According to Phan Huu Thang, director of the Foreign Investment Agency, FDI disbursement also rose to US$7bn in the first eight months of the year and is expected to reach US$11-12bn for the full year. The top five investors in Vietnam were Taiwan, Singapore, Japan, South Korea and Hong Kong, with top ranked Taiwan having 1,700 projects across various sectors and Singapore having the highest registered capital of US$10bn.

Vietnam has attracted high inflows of FDI in spite of its ongoing economic woes. Vietnam's primary attraction is as a base for manufacturing, due to its young -- 50% of the population is under the age of 25 -- and increasingly skilled workforce. Compared to similar developing countries in the region, wages in Vietnam are highly competitive, amounting to just two-thirds of those found in Indonesia, Philippines and China. With a population of 82 million, Vietnam is also becoming an increasingly popular destination for market-based foreign investment due to its booming consumer market, with foreign retail brands seeking an early foothold.

The government has taken extensive steps to attract foreign investment, in particular offering tax breaks and reasonable land rentals in priority areas. Infrastructure has also

been improved with plans to build more highways, industrial parks and export processing zones.

Table: Business Environment Rankings

Limits of Potential

Returns Risks To Realisation of Returns

Country Telecoms Market

Country Structure

Independence of Regulator

Country Risk

Telecoms Rating

Rank (Q407 Rank)

Singapore 70.0 96.7 80.0 66.1 77.5 1 (3) Japan 69.8 66.7 90.0 87.2 74.4 2 (2) Australia 57.0 100.0 60.0 77.3 71.0 3 (9) Hong Kong 57.5 76.7 80.0 81.9 69.2 4 (6) South Korea 62.5 70.0 70.0 72.1 66.9 5 (7) Malaysia 55.0 63.3 90.0 74.2 65.2 6 (4) Taiwan 50.0 63.3 90.0 77.2 63.3 7 (5) India 70.0 35.7 80.0 61.6 61.8 8 (1) China 63.3 35.0 40.0 70.6 53.9 9 (8) Indonesia 52.5 42.7 60.0 49.5 50.8 10 (10) Pakistan 60.0 39.3 80.0 10.6 50.5 11 (11) Philippines 45.0 38.7 60.0 57.2 47.0 12 (12) Bangladesh 52.5 30.0 60.0 35.8 45.6 13 (14) Vietnam 45.0 33.3 60.0 51.6 45.4 14 (15) Sri Lanka 31.5 56.7 50.0 58.3 44.5 15 (-) Source: BMI

Industry Forecast - Mobile - Q4 2008

Top

Vietnam - Mobile - Oct 22 2008

Industry Forecast Scenario

Mobile

Table: Telecoms Sector -- Mobile -- Historical Data & Forecasts

2005 2006 2007 2008e 2009f 2010f 2011f 2012f No. of Mobile Phone Subscribers ('000) 9,300 18,980 35,805 64,109 87,533 107,974 123,580 135,793 No. of Mobile Phone Subscribers/100 Inhabitants 11 22 41 73 98 120 135 147 No. of Mobile Phone Subscribers/100 Fixed Line Subscribers 143.5 204.1 313.0 492.1 626.6 729.7 791.1 834.5 No. of 3G Phone Subscribers ('000) 0 0 0 100 700 1,360 2,100 3,050 3G Market As % Of Entire Mobile Market 0.0 0.0 0.0 0.2 0.8 1.3 1.7 2.2 e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI

We have made some further alterations to our forecast for mobile subscriber growth in Vietnam, to take account of much stronger subscriber growth in the first few months of 2008. With over 51mn mobile customers at the end of June 2008 (reflecting a growth rate of over 44% for the first six months of the year), we now believe that, by the end of this year, the market will surpass our previous expectation of 56mn subscribers by a large margin. We now envisage a growth rate of almost 80% for 2008. By the end of the year, we predict that the subscriber base will have risen to over 64mn, and that the mobile penetration rate will have reached 73%.

Competition and growth in 2008 has been boosted by the wave of tariff cuts, which have characterised recent operator strategies. Further cuts may follow in the near future, possibly resulting in a price war. Lower mobile service prices are expected to stimulate the growth of dual SIM ownership, as mobile users increasingly take advantage of special offers. Conversely, lower prices will also likely lead to increased customer churn and a higher number of inactive prepaid users. The investment in network expansion and improvement has also had a positive impact on service quality and coverage.

Looking ahead, we now predict that Vietnam will surpass the 100% penetration threshold in 2010, instead of 2011 as previously predicted. By the end 2012, we envisage a market of almost 136mn customers and a penetration rate of almost 147%. Continued growth over the next few years will be supported by a steadily expanding population, as well as by the arrival of increased competition and new investment. A number of major international investors -- including Japan's NTT DoCoMo, Norway's Telenor, SingTel

Industry Trends -- Mobile Sector

2005-2012

Source: BMI Research

and France Telecom -- have all shown an interest in bidding for a stake in Vietnam's second-largest mobile operator MobiFone. Furthermore, Russia's VimpelCom is also expected to expand its presence in Vietnam, through its 'GTel Mobile' joint venture with the Vietnamese government.

It should be remembered that the figures for the number of Vietnamese mobile customers are based on the assumption that the market contains a certain number of inactive prepaid users. Meanwhile, our forecast for Vietnamese 3G customer growth is based on the assumption that the first commercial deployments of 3G services will occur in 2008. In the early stages of 3G deployment, we do not expect consumer demand to be strong, and envisage just 100,000 subscribers by the end of 2008. The cost and availability of 3G-compatible handsets are expected to be the main obstacles to 3G growth in the early years of our forecast. However, the government has made 3G development a priority, and we believe that this will encourage stronger consumer demand in the latter years of our forecast. We predict over 3mn 3G customers at the end of 2012, which would equate to around 2.2% of Vietnam's mobile user base. It should be noted that these figures are lower than those predicted in our previous update.

Industry Forecast - Fixed Line - Q4 2008

Top

Vietnam - Fixed-Line - Oct 22 2008

Fixed-Line

Table: Telecoms Sector -- Fixed-Line -- Historical Data & Forecasts

2005 2006 2007 2008e 2009f 2010f 2011f 2012f No. of Main Telephone Lines in Service ('000) 6,480 9,300 11,440 13,028 13,970 14,796 15,620 16,272 No. of Main Telephone Lines/100 Inhabitants 7.7 10.9 13.2 14.8 15.7 16.4 17.1 17.6 e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI research.

Our current forecast for the growth of Vietnam's fixed-line market over the next five years is based on an estimate of 11.44mn fixed-lines at the end of 2007. This figure, which is equivalent to a penetration rate of just over 13%, is based on data provided by the country's Ministry of Posts and Telematics (MPT). In this update, we have not

introduced any new changes to our forecast, which predicts that the market will expand by almost 14% during the year, helping to raise penetration to almost 15%.

Continued fixed-line growth in Vietnam has been encouraged by the 15-20% tariff cuts, which were applied to fixed-line and public card phone charges in June 2007. The effects of these cuts are expected to continue being felt in the immediate future. However, towards the end of the decade, we predict a slowdown in fixed-line growth, as increased mobile substitution and the proliferation of VoIP services results in weaker demand for fixed-line services. The slowdown will partly reflect fixed-line saturation in urban areas of Vietnam, while rural parts of the country will be more inclined to take up mobile telephony. Vietnam's fixed-line incumbent, Vietnam Posts and Telecommunications (VNPT), is expected to retain its dominant position in the market. Despite this, traditional PSTN fixed-line subscriptions account for only around 77% of the total market, with the remaining fixed-lines being based on fixed-wireless services. The proliferation of fixed-wireless services, especially in rural districts, should contribute to a loss of market share for VNPT.

Our current five year forecast envisages a significant slowdown in the rate of fixed-line growth, particularly in the latter years of our forecast. We predict that fixed-line penetration will surpass 17% in 2011, and increase only marginally to 17.6% in 2012.

Industry Forecast - Internet - Q4 2008

Top

Vietnam - Broadband - Oct 22 2008

Industry Trends -- Fixed Line Sector

2005-2012


Internet

Table: Telecoms Sector -- Internet -- Historical Data & Forecasts

2005 2006 2007e 2008f 2009f 2010f 2011f 2012f No. of Internet Users ('000) 10,711 14,684 18,551 21,428 24,123 26,385 27,563 28,322 No. of Internet Users/100 Inhabitants 12.7 17.2 21.4 24.4 27.1 29.3 30.2 30.6 No. of Broadband Internet Subscribers ('000) 210 517 1,294 2,569 4,757 8,236 13,037 18,341 No. of Broadband Internet Subscribers/100 Inhabitants 0.2 0.6 1.5 2.9 5.3 9.1 14.3 19.8 e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI

Once again, we have made some minor alterations to our internet user and broadband subscriber forecasts for Vietnam. Our latest adjustments take account of new figures published by Vietnam's Internet Network Information Centre (VNNIC). The VNNIC suggests that there were just over 18.5mn internet users in Vietnam at the end of 2007, which equated to 21.4% of the total population. By the end of August 2008, the VNNIC suggests that the number of internet users had surpassed 20.34mn. According to the VNNIC, the number of internet users increased by over 36% in 2007 and by 9.6% in the first eight months of 2008. Although we continue to believe that internet user growth in Vietnam will remain strong over the next five years, we have nevertheless lowered our growth expectations for 2008 overall. We now predict that the number of internet users will expand by around 15.5% in 2008 and will rise to over 21mn by the end of the year. By the end of our five-year forecast, we anticipate a market of around 28.3mn internet users, equivalent to over 30% of the population.

Meanwhile, the VNNIC has said that the number of broadband subscribers rose by 37% in the first eight months of 2008, reaching 1.773mn. This new growth occurred on the back of the impressive 150% growth recorded in 2007. As with internet user growth, we continue to believe that broadband subscriber growth will be strong over the next five years. However, we now predict a lower rate of growth for 2008, envisaging growth of no more than 100% for the year as a whole. By the end of 2008, we forecast a market of almost 2.57mn broadband subscribers, which is equivalent to a penetration rate of 2.9%.

Industry Trends -- Internet Sector

2005-2012


Although growth in 2008 will be much lower than in 2007, we do not envisage such a steep decline in growth in 2009 and 2010. Indeed, for those two years, growth is expected to remain between 70% and 85%. By the end of our forecast in 2012, we anticipate a market of just over 18mn broadband customers; this is equivalent to a penetration rate of almost 20%.

The strong broadband growth in the latter years of our forecast will be supported by a number of developments, not the least of which is the considerable investment which is currently occurring in the broadband sector. However, increased competition is also expected to increase the affordability of broadband services. The arrival of new broadband service providers, some of them international operators, will help to stimulate competition. Furthermore, the launch of commercial WiMAX services -- expected sometime in the next few months -- should also help to boost broadband take-up.

Market Data Analysis - Mobile - Q4 2008

Top


Market Data Analysis

Mobile

The latest data from Vietnam's Ministry of Information and Communications (MIC) suggests that there were almost 50mn mobile subscribers at the start of June 2008. Of this figure, some 90% are understood to be prepaid customers. This high proportion of prepaid subscribers means that mobile ARPU in Vietnam is about US$6 per month, one of the lowest rates in Asia.

Nevertheless, as BMI has noted in previous reports on the Vietnamese mobile market, obtaining reliable and detailed data on the number of mobile subscribers served by Vietnam's six mobile network operators remains a challenging exercise. None of the operators publish data on their own subscribers, while the MIC only publishes data on an occasional basis.

Vietnam Mobile Market Share,

Q208

According to MIC's figures, Viettel, which is owned by the Vietnamese military, continued to lead the Vietnamese mobile market at the start of June with approximately 19.5mn subscribers and a market share of around 38%. Viettel has a clear lead over the next largest mobile operators, MobiFone and VinaPhone, with 13.4mn and 12.1mn customers, respectively. Both MobiFone and VinaPhone are owned by incumbent operator VNPT. Meanwhile, according to the Ministry, fourth-ranked S-Phone had 3.14mn customers.

BMI estimates that, by the end of June 2008, the number of mobile customers had risen to over 51.6mn. Viettel continued to have a market share of almost 38%, while MobiFone and VinaPhone had 26.2% and 23.6%, respectively. We estimate that S-Phone, with 3.25mn customers, had a 6.3% market share. It should be noted that the estimated market shares of S-Phone and smaller rival VPT Telecom are both smaller than we have suggested in previous updates. This is partly the result of actual subscriber numbers being lower than predicted, however, market leader Viettel has significantly enlarged its subscriber base in recent months, and this led to a loss of market share on the part of the smaller operators. Our YE07 figures show Viettel had a 29% share of the market, ahead of MobiFone and VinaPhone on 28% and 25%, respectively. Together, Vietnam's three GSM operators controlled over 82% of the mobile market at the end of 2007. By the end of June 2008, we estimate that the joint market share of these three operators had risen to nearly 88%. Meanwhile, in our last report, we noted that the number of CDMA subscribers had reached 6mn at the end of 2007, up from just below 2mn at the end of 2006. By the end of June 2008, we estimate that Vietnam had almost 6.4mn mobile CDMA subscribers. Although the CDMA subscriber base is expected to continue growing, growth is predicted to be less rapid than for GSM customers. As a result, the CDMA operators are likely to see a continued loss of market share to the larger operators.

Table: Vietnam Mobile Market, June 2008 Operator No. of Subscribers (mn) Market Share (%) Viettel 19.550 37.8 MobiFone 13.550 26.2 VinaPhone 12.200 23.6 S-Fone 3.250 6.3 VPT Telecom 2.900 5.6 HT Mobile 0.210 0.4 Total 51.660 100.0

Source: BMI

Source: Operators; MIC; BMI

Based on our estimated total of 51.66mn customers at the end of June, Vietnam had a mobile penetration rate of 59%. The market saw rapid growth in H108, having expanded by over 44% since the start of the year. By the end of August 2008, second-largest mobile operator MobiFone reportedly had 21mn mobile customers. MobiFone hopes to take this total to over 25mn by the end of 2008, far exceeding the 20mn customer target set earlier in 2008.

Despite the continuation of rapid subscriber growth, the high proportion of prepaid customers increases the likelihood that the sector contains a high level of inactivity. Future moves to discount inactive mobile users could result in a significant fall for the penetration rate. Vietnam's MIC recently pledged to conduct an audit of all operators' counting methodologies over deciding whether a SIM card is active or not. Another factor contributing to the relatively high penetration rate is the large number of multiple SIM cardholders which are thought to exist within Vietnam's mobile market. This phenomenon is largely a consequence of the high level of market competition and the plethora of promotional campaigns that exist.

By the end of 2007, MobiFone and VinaPhone, both controlled by VNPT, had a combined subscriber base of 19mn. By the end of June 2008, the two VNPT-controlled operators had expanded their combined subscriber base by nearly 36%. During 2007, MobiFone and VinaPhone deployed 6,000 new base stations. VinaPhone aimed to add a further 5,000 base transceiver stations (BTSs), in order to achieve its target of 9,000 BTS by the end of 2008. In May 2008, VinaPhone awarded a contract to UK vendor Aircom International in order to provide it with network planning and design services.

Furthermore, in December 2007, both MobiFone and VinaPhone began reducing their call charges by as much as 25-28% in order to safeguard and expand their market shares. Accordingly, activation fees for post-paid mobile subscribers fell from VND136,364 to VND109,000, while monthly subscription charges remained the same at VND54,545. Call charges are being reduced by 20% on average for post-paid subscribers, while, for prepaid subscribers, the charges are being cut by nearly 30%.

In December 2007, it was announced that VNPT had entered a partnership with Motorola to expand and enhance VinaPhone's GSM network in major cities, including Hanoi and Ho Chi Minh City. Motorola was contracted to install over 650 cell sites and provide optimisation and maintenance services. Then in June 2008, it was announced that Motorola had signed further contracts worth US$28mn for the expansion of VinaPhone's network in twelve northern provinces of Vietnam. Under the agreement, more than 1,000 cell sites will be deployed. Motorola is also understood to be co-operating with VinaPhone in order to expand GPRS coverage and provide EDGE service in major metropolitan areas.

MobiFone has said that, in 2008, it expects to earn total revenues of VND16trn (US$1bn) and return a profit of VND6.65trn. In order to achieve these goals, the company will

continue to expand its coverage area and increase its service quality in all localities and cities throughout the country. It plans to raise its number of BTS to 10,000 by the end of the year. MobiFone is understood to be preparing for an IPO. It is thought that approximately one-third of the company will be floated, with the government retaining a 33.3% stake with the final third going to a strategic investor. The IPO is expected to be the first of several planned privatisations in Vietnam's telecoms sector.

Norwegian telecom company Telenor has continued to fuel speculation about its possible entry into Vietnam's mobile market. BMI believes that the privatisation of MobiFone is seen as one possible route of entry to the sector for the operator. Telenor has had a representative office in Vietnam since 2005.

If Telenor does make a bid to acquire a stake in MobiFone, it is unlikely to go unchallenged. It is expected that Singapore Technologies Telemedia (STT), which controls 75% of Asia Mobile Holdings, and as such controls a 40% stake in Indonesia's second-ranked mobile operator Indosat will also make a move to acquire MobiFone assets. STT expects the sale of MobiFone's stake, originally slated for 2008, to be delayed until 2009.

Although Viettel, MobiFone and VinaPhone continue to dominate the mobile sector, Vietnam's three CDMA operators have recently enacted policies that are designed to expand their current minority market shares. S-Fone, which has South Korea's SK Telecom as a shareholder, is also said to be considering a cut in tariffs in line with market trends.

In April 2008, the smallest of Vietnam's CDMA operators, HT Mobile, began migrating customers away from its CDMA network towards GSM technology. Those customers staying with HT Mobile will receive a new GSM handset. However, those who choose to retain a CDMA service will be switched to S-Fone's network. HT Mobile decided to implement the transition after failing to reach its target of luring 1mn customers by the end of 2007.

Meanwhile, new operators are poised to enter Vietnam's mobile market in the coming months. In January 2008, it was reported that the MIC was ready to grant a licence to Global Telecom Corporation (GTel) to offer mobile services. GTel is backed by Russian giant VimpelCom, which is said to be prepared to invest up to US$1bn into the GTel mobile network over the next few years. In July 2008, VimpelCom said that it had acquired a 40% stake in GTel-Mobile for US$267mn. State-owned GTel and subsidiary GTel TSC hold the remaining 51% and 9%, respectively, although the Russian operator is considering buying a further 9% from its Vietnamese partners and has pre-emptive rights to do so. An MIC official confirmed that GTel had asked permission to supply GSM-based mobile services and that the Ministry was working on the necessary formalities, adding that GTel will be licensed to use the 1800MHz frequency. Over the next five years, VimpelCom plans to invest US$1.8bn in GTel-Mobile. The new operator aims to have 20mn mobile customers by 2013.

3G

In October 2007, the Vietnamese government granted permission for the MIC to license four 3G mobile network operators. In addition, five mobile operators will be granted permission to undertake mobile WiMAX trials. The decision followed more than a year during which the MIC was understood to be preparing the 3G licensing criteria. Applications for licences from domestic operators are scheduled to be heard in 2008 but, at the time of writing, the process had still not begun.

A number of major foreign operators have expressed an interest in investing in the development and deployment of 3G networks in Vietnam. Japan's NTT DoCoMo, which opened an office in Hanoi (its fourth overseas office) in September 2007, sees the annual 30% growth rate of the Vietnamese telecoms market as a big draw. These sentiments are similar to those expressed by French incumbent France Telecom.

According to reports, both MobiFone and VinaPhone are expected to upgrade their infrastructure to 3G. MobiFone has completed a two-year 3G trial and is in the final stage of submitting a deployment proposal with Ho Chi Minh City and Hanoi, the first cities expected to deploy services in 2008, possibly in partnership with France Telecom. Meanwhile, VinaPhone concluded a similar trial with Nokia in Danang in August 2007. As for Viettel, S-Fone and Hanoi Telecom (HT Mobile), all three are understood to have requested UMTS licences from the Ministry.

It is unlikely that all six of Vietnam's existing mobile operators will win licences. Indeed, the government looking to award four 3G licences at the most. It has been proposed by the Radio Frequency Department that each of the four 3G licences be granted 2x15MHz frequency division duplexing slots in the 1920-1980MHz and 2110-2170MHz bands, and a 5MHz time division duplexing slot in the 1900-1920MHz range. The 2010-2025MHz band is to be reserved for further UMTS applications, and the RFD envisages that each network will be granted a minimum 5MHz block.

A lack of content and the cost and availability of 3G handsets will all present impediments to growth in Vietnam's 3G market, with BMI now estimating no more than 100,000 subscribers in the first year of 3G deployment. However, in spite of 3G, there is a real threat to growth in the Asia Pacific region as a whole, and it comes from WiMAX, which can cover huge distances and which is able to provide wireless internet access in the most remote towns and villages. Five operators are currently trialling WiMAX services; these include VNPT-owned Vietnam Data Communications (VDC), in Lao Cai Province; Vietnam Multimedia Corporation (VTC), in Hanoi and Ho Chi Minh; FPT Telecom; EVN Telecom and Viettel. The latter three are testing both wireline and mobile WiMAX services.

Market Data Analysis - Fixed Line - Q4 2008

Top


Fixed-Line

The latest fixed-line data for Vietnam relates to the end of 2007. Vietnamese fixed-line incumbent, VNPT, had 8.8mn fixed-lines at the end of 2007, out of a total telecoms subscriber base of 27.8m. BMI estimates that traditional fixed-line services provided by VNPT amounted to 77% of the country's total fixed-line subscriber base with 2.64mn customers using fixed wireless services provided by operators such as Viettel and S-Fone. By the end of 2007, we estimate that the fixed-line customer base amounted to 11.44mn, which is equivalent to a penetration rate of 13.2%.

Unusually for telecoms markets in Asia, the Vietnamese fixed-line sector still offers growth opportunities. Vietnam's government is determined to increase the speed with which VNPT's virtual monopoly in the fixed-line sector is broken. In December 2006, the Ministry of Posts & Telematics awarded a national wireline licence to FPT Telecom. FPT's fixed-line service will be based on a next generation network, which will support the provision of IP-based voice telephony, as well as high-speed broadband and IPTV. In mid-2007, FPT reportedly had 200,000 ADSL customers. The operator aimed to attract an additional 50,000 subscribers by the end of 2007, with broadband services offered in 10 provinces.

In addition to controlling the greater part of the local voice telephony market, VNPT was, until 2002, the only body authorised to offer long-distance and international services. However, both Saigon Postel (a privatised former subsidiary of VNPT) and mobile operator Viettel have since begun offering domestic and international VoIP services. VDC also introduced its own prepaid and post-paid VoIP under the brand name FoneVNN in 2003 and, in November of that year, became Vietnam's first provider of virtual private network (VPN) services.

In an effort to expand its fixed-line customer base, VNPT chose Swedish vendor Ericsson to supply equipment to accommodate 200,000 additional fixed-line subscribers in Vietnam's central region. The deal is part of the second phase of a project to expand reach and capacity in the area. The first phase began in August 2006, when Ericsson won a contract to install 600,000 lines.

In August 2008, it was reported that Vietnam Telecom National (VTN), a VNPT subsidiary, planned to deploy Fujitsu's high speed optical WDM as the transmission backbone of its next-generation network. VTN manages the domestic infrastructure of the incumbent state-owned operator VNPT. The company will deploy the WDM in a trunk-

line network traversing approximately 3,000km in Vietnam's southern region, linking 21 provincial capitals. The network is scheduled to be completed by early 2009.

Meanwhile, the Ministry of Posts & Telematics has pledged to develop the country's fixed-line infrastructure, especially in rural areas. Behind the government's plan to invest in fixed-line telephony is its desire to ensure a balanced and sustainable development of traditional voice telephony services alongside mobile telephony. One reason why the government aims to support the funding of telephony in rural areas is the difference in revenue terms between fixed-line connections in urban and rural areas; whereas an urban wireline subscriber will typically generate an average monthly revenue of close to VND50,000, this figure falls to VND30,000 in more remote parts of the country.

Fixed Wireless

With the limited availability of traditional fixed-line infrastructure and around 70% of Vietnam's population living in rural areas, an increasing number of Vietnamese telecoms operators -- including mobile operators -- are introducing fixed wireless services. Facing high levels of saturation in already crowded urban mobile markets, fixed wireless access (FWA) has been seen by Vietnam's mobile operators as a way of supplementing revenue streams. Fixed wireless services can be launched on existing mobile networks and therefore incur few start-up costs. They are seen as a cost-effective way of providing telecoms services to low-income households. Mobile market leader Viettel has around 70% of its subscriber base living in rural areas; this indicates the importance of the operator's fixed wireless business unit. Viettel's post-paid service, HomePhone, was launched in August 2007, a few days after its prepaid service. By offering special discounts, it is expecting to increase the number of customers subscribing to HomePhone. Although press reports have suggested that Viettel had over 13mn customers at the end of 2007, this figure is thought to include both mobile and fixed wireless customers. Discounting its 11.9mn mobile customers, this would leave Viettel with just over 1mn fixed wireless customers at the end of the year.

Vietnam's fixed-line incumbent VNPT also offers a fixed wireless service called GPhone. The service operates over VinaPhone's GSM network and is charged at fixed-line prices, making it affordable for low-income households. GPhone was launched in two phases, with services initially being launched in eight provinces and cities (including Lau Chau, Thai Nguyen, Ha Tay, Quang Nam, Quang Ngai, Can Tho, Hau Giang and An Giang) in June 2007, and the rest of the country during August 2007. VNPT had outlined a target of 100,000 GPhone subscribers by the end of 2007, but raised this to 500,000 new customers by year-end.

Market Data Analysis - Broadband - Q4 2008

Top


Broadband

According to Vietnam's Internet Network Information Centre (VNNIC), the number of internet users in the country had risen to 20.341mn by the end of August 2008. This is equivalent to 23.4% of the total population. The number of internet users grew by 26% in 2007 and by 9.6% in the first eight months of 2008. Meanwhile, according to the VNNIC, the number of broadband subscribers rose by 150% in 2007 and by 37% in the first eight months of 2008. By the end of August, broadband penetration in Vietnam had risen to 2%, up from 1.5% at the end of 2007. The rapid take-up of broadband services illustrates the growing popularity of such services within the country. However, it is notable that two-thirds of Vietnamese broadband subscribers are from Hanoi and Ho Chi Minh City. Holding back faster growth is the fact that ADSL services remain expensive and service quality remains poor, with slow speeds and unstable connections beyond the largest cities.

The high level of PC ownership in Vietnam means that demand for internet and broadband services is expected to remain strong. According to a survey conducted by Alcatel-Lucent, some 95% of Vietnamese households have access to a desktop PC, of which 16% are planning to purchase a laptop. Furthermore, growth in broadband demand is set to soar, as the Vietnamese government has been investing heavily in developing the broadband sector, announcing its commitment to inject VND100trn (US$6.3bn) in order to raise penetration rates significantly. Also, since joining the WTO, a number of high-profile global companies have relocated their operations to Vietnam, and the employment of local staff has boosted incomes. The result has been that a significant number spend between US$10 and US$20 on their home internet bills, accessing multimedia content including games and downloads. Increased competition is also expected to encourage increased broadband usage.

Vietnam Internet Market

2007-2008

In June 2007, VNPT increased its fixed-line network capacity with the help of Nortel Networks, in order to introduce enhanced broadband services and tap the great potential for further broadband growth. As a result of this investment, VNPT's north-south fibre-optic network capacity was doubled from 20Gbps to 40Gbps. The move formed part of VNPT's plans to cater for 600,000 high-speed internet customers by the end of 2007. VNPT set itself the conservative target of 1.5mn broadband subscribers by the end of 2009, a figure which was, in fact, surpassed in April 2008. In February 2008, VNPT revealed that it planned to invest US$1bn in broadband development in 2008. The investment will be used to raise existing capacity to 200Gbps by mid-2008, rising to 300Gbps at a later date. Furthermore, the investment will fund the expansion of VNPT's broadband network over the next two years, aimed at providing coverage in previously underserved regions. The new investments will also allow VNPT to connect a larger number of public high schools and government offices.

In September 2008, VNPT launched a campaign to promote ADSL MegaVNN and fixed-telephone users. The promotion, which ran from September 16 to October 30, offered free ADSL modem and registration fees for new MegaVNN users and customers who shifted their indirect internet services to MegaVNN on fixed phone lines. Users were also given free internet accounts of VND100,000 (US$6) for two months. Customers using both MegaVNN service and fixed phones received a free service for three months.

Along with its domestic internet services, VNPT provides data networking services to large corporate customers through a partnership with UK operator Cable & Wireless (C&W). In September 2008, VNPT subsidiary, Vietnam Data Communication Company (VDC), announced an extension to its partnership with C&W for the delivery of IP VPN services. According to the agreement, C&W will offer on-net IP-based VPN services to VDC's customers. As part of the deal, C&W has upgraded its point-of-presence (PoP) network node coverage in both Hanoi and Ho Chi Minh City.

In addition to expanding its ADSL network capacity, VNPT has been trialling WiMAX services in the cities of Hanoi and Ho Chi Minh. This follows the operator's earlier success with WiMAX trials in Lao Cai. However, VNPT is not the first operator to test WiMAX, with both Viettel and FPT Telecom having been carrying out similar trials. In addition to developing WiMAX services, Viettel is also a major provider of internet services to business customers. In June 2008, Viettel launched a major sales promotion campaign targeting businesses with leased-line services. The company said it would waive installations fees and user fees for a month for new leased-line subscribers. The

Source: VNNIC

total package would save customers VND60mn (US$3,680). In addition, the firm said it would give new subscribers a free web domain, ten e-mail addresses and a hosting service for one year.

In March 2008, Saigon Postel Corporation (SPT) became the sixth operator to be awarded a WiMAX licence by Vietnam's Ministry of Information and Communication. SPT is affiliated with mobile operator S-Fone. Three of the other five operators to have been awarded similar licences also have links with the country's mobile sector: VNPT is responsible for mobile operators VinaPhone and MobiFone, while Viettel and EVN Telecom also provide mobile services. Meanwhile, the fourth WiMAX licensee, Vietnam Multimedia Corporation (VTC), offers mobile digital TV services among other broadcast services. Finally, FPT Telecom is already licensed to offer fixed-line voice and internet services; so far, however, it has been licensed to only carry out trials of wireline and wireless WiMAX services. The connection between WiMAX licensees and the mobile sector also indicates that WiMAX has become more closely entangled in mobile wireless technology rather than under the guise of a fixed network wireless technology, in which it was originally conceived. SPT has indicated that it will test WiMAX services in the 2.3GHz to 2.4GHz band across Ho Chi Minh City and one of the neighbouring provinces of Tay Ninh, Binh Duong, Dong Nai, Ba Ria-Vung or Long An. The majority of other operators' WiMAX trials are also being conducted in Vietnam's two major cities, Hanoi and Ho Chi Minh City.

Table: Vietnam -- WIMAX Triallists

Operator WiMAX Licence Date Pilot Launch

Vietnam Post and Telecoms (VNPT)

Mar-06 Trials carried out in Hanoi, Ho Chi Minh City and Lao Cai

Vietnam Multimedia Corporation (VTC)

Mar-06 Trials carried out in Hanoi and Ho Chi Minh City

FPT Telecom Mar-06 To carry out trials of both wireless and wireline WiMAX EVN Telecom Jan-07 To carry out trials of both wireless and wireline WiMAX Viettel Mar-06 To carry out trials of wireless WiMAX Saigon Postel Corporation Mar-08 Trials to be carried out in Ho Chi Minh City and one

neighbouring province Source: BMI

In February 2008, the Ministry of Information and Communication awarded a licence to CMC Telecom to provide internet services in Vietnam. The operator, an affiliate of CMC Corporation, will reportedly be the 10th internet service provider in the country. CMC Corporation, which set up CMC Telecom in 2007, will offer its services through its partnership with CDMA operator EVN Telecom. The chairman of CMC Corporation confirmed that, if licensed, CMC would consider launching WiMAX broadband wireless services and stated that US chip manufacturer Intel would support deployment. However, in order to launch services, any WiMAX provider must currently be at least 51% state owned. Given that CMC is less than 51% state owned, it would require a change in regulations for it to be able to offer WiMAX services. Along with its licence to provide internet access, CMC Telecom also gained two further licences -- one for online services

provision and one for internet content provision. However, the operator is not currently allowed to build its own telecoms infrastructure. As part of its partnership with CMC, EVN Telecom is responsible for investing in transmission infrastructure, while CMC is to invest in IT and communications services, which will provide services for the customers of both groups. CMC has stated that its strategy is to focus on large corporate clients and governmental organisations, a strong sector for internet use in Vietnam, as 89% of companies are estimated to have internet connections.

Meanwhile, in March 2008, ISP One-Connection Internet (OCI) launched an online advertising site, something it claims will give companies a chance to take full advantage of video and online advertising. As a concept, online advertising has not yet developed in Vietnam, but it is a potentially large market, and one that OCI thinks will grow by 50% each year from 2008, potentially reaching VND600bn by the end of 2012.

Regulatory Development - Vietnam - Q4 2008

Top


Regulatory Environment

Vietnam: Regulatory Bodies And Their Responsibilities Regulatory Body Responsibilities

Ministry of Information and Communications (MIC) 18 Nguyen Du Street, Hanoi, Vietnam Tel: 00 844 943 5602 Fax: 00 844 826 3477 Web: www.mic.gov.vn

The Ministry of Posts and Telematics of the Socialist Republic of Vietnam is the state administration in charge of policy making and regulatory matters in posts, telecommunications, information technology, electronics, internet, radio transmission and emission techniques, radio-frequency management and national information infrastructure, management of public services, as well as of control over, on behalf of government and as stipulated by laws and regulations, the state capital in posts, telecommunications and information technology enterprises. Its main functions include:

� submitting to the government drafts of laws, ordinances, regulations, strategies and development plans on posts, telecommunications and information technology;

� giving guidance in implementation of laws, ordinances, regulations, as well as development strategies and plans related to posts, telecommunications and information technology;

� regulating the access to and the interconnection between public switched

telephone networks, specialised and private networks;

� regulating the electronics and information technology industry development plan;

� regulating charges and tariffs in the fields of posts, telecommunications and information technology;

� planning, assigning and allocating radio frequency spectrum; controlling and monitoring radio frequency spectrum and radio equipment; organising radio frequency, satellite orbit registration and co-ordination;

� granting licences in posts, telecommunications, radio frequency and internet;

� regulating the quality of posts, telecommunications and information technology networks, plants, products and services;

� regulating numbering resources, codes, domain names and addresses used in the fields of posts, telecommunications and information technology;

� conducting international co-operation activities in posts, telecommunications and information technology; and,

� inspecting all activities and settling all regulatory breaches in the fields of posts, telecommunications and information technology.

Legislation And Market Liberalisation

The government's telecommunications policy is formally set out in a decision of the Prime Minister, Decision No.158/QD-TTg of 18 October 2001, which ratifies Vietnam Post and Telecommunications development strategy until 2010 and Orientation until 2020. The policy Decision provides a comprehensive range of sector development objectives and targets, along with key underlying strategies for their achievement.

The government's telecommunications policy recognised the current weakness of the legal structure governing the telecoms sector. In line with its policy, the Government ratified the Ordinance on Post and Telecommunications (the 'Ordinance') on May 25 2002. The Ordinance took effect on October 1 2002 and has replaced the Decree No.109/1997/ND-CP dated November 12 1997 on network and telecommunications services. The Ordinance is expected to achieve two primary aims: the consolidation of the legal structure into a single law -- which means the repeal of the set of contradicting laws and regulations -- and to modernise the legal structure and address the important issues that arise in a competitive market structure.

The functions of Vietnam Posts and Telecommunications (VNPT) are set out in Decree No. 51 (Decree No. 51/CP ratifying the Statute on VNPT). VNPT is active in all aspects of telecommunications, including infrastructure ownership and operation, and provision of telecommunications services.

Regulation

The regulation of the telecommunications sector in Vietnam falls under the responsibility of the Ministry of Posts and Telematics (MPT), which fulfils the dual role of policy maker and regulatory authority. The key functions and responsibilities of the organization of MPT are outlined in the Government Decree No. 90/2002/ND-CP of November 11 2002. The Decree sets out a wide range of functions and responsibilities under four different groupings. It is noted that MPT exercises regulatory control over both post and telecommunications. The MPT has responsibility for drafting laws, ordinances and policies on telecommunications, issuing decisions, directives, rules and technical standards, managing international treaties on telecommunications and radio frequency and issuing and revoking permits in accordance with regulations.

The direct regulatory body over internet activities in Vietnam is the Vietnam Internet Network Information Centre (VNNIC). The VNNIC is a non-profit affiliation to the Ministry of Posts & Telematics, established under the Decision No. 372/QD-TCBD dated April 28 2000 of the DGPT (which later became the MPT). The purpose of the VNNIC is to carry out the functions of managing, allocating, supervising and promoting the use of internet domain names, addresses and autonomous system numbers (ASN) in Vietnam. VNNIC also provides internet-related guidance and statistics related to international activities on the internet.

Licensing And Spectrum

Vietnam's Ministry of Posts and Telematics (MPT) is responsible for all licensing related to telecommunications services. Prior to Vietnam's entry to the World Trade Organisation (WTO), foreign telecoms operators were prevented from making direct investments in Vietnamese telecoms operations. Instead, Business Co-operation Contracts (BCCs) served as a transitional investment model in the telecoms sector and ensured that the provision of all telecommunications services was based on a system of revenue sharing with local companies. Since joining the WTO, however, Vietnam's MPT has allowed a number of local telecoms companies to enter into joint ventures with foreign partners for the provision of a wide range of communications services, including fixed voice telephony, packet-switched data transmission services, circuit-switched data transmission services, telex services, telegraph services, facsimile services and private leased circuit services. For non-facilities-based services, the foreign capital contribution to these joint ventures must not exceed 51% of legal capital. Despite these continued restrictions which govern the licensing process, it will be permissible for wholly foreign-owned firms to provide registered telecoms services to Vietnamese organisations and individuals once Vietnam has been a WTO member for two years. Furthermore, three years after Vietnam's WTO accession, foreign companies will be allowed to establish local branches and provide telecoms services, under the condition that the chief representatives of the branches reside in Vietnam.

In order to provide fixed or mobile voice telephony services for which no network infrastructure is required, foreign partners will be allowed to participate in joint ventures with Vietnamese telecoms firms, with a capital contribution of up to 51%, within the first three years of Vietnam's WTO membership. Once that initial three-year period has passed,

foreign operators will be authorised to choose their own local partners when establishing joint ventures and will be allowed to raise their capital in the joint venture to 65%. Meanwhile, for virtual private network services and value-added telecom services, some large foreign partners will be permitted to independently provide those services using the network infrastructure of a local operator. Currently, foreign partners wanting to provide such services must select Vietnamese partners and contribute up to 70% of capital in the joint venture.

For satellite services, the Vietnamese government is committed to expanding the number of companies involved in this field, but only once Vietnam has been a WTO member for three years. In addition, the government will allow foreign partners to connect to underwater optical cable networks, of which Vietnam has membership. Licensed companies will be authorised to sell transmission lines to international telecoms service providers, which have network infrastructure (such as VNPT, Viettel, EVN Telecom), and also to virtual personal network and IXB service providers such as FPT, VNPT, Viettel and EVN Telecom four years after the date of Vietnam's WTO membership.

Regulatory Developments

In May 2008, it was reported that Taiwanese incumbent Chunghwa Telecom planned to set up a US$30mn 'internet data joint venture' with Vietnam's military run cellco Viettel. The move forms part of Chunghwa's efforts to expand overseas. Chunghwa is Taiwan's largest operator, leading each of the fixed-line, mobile and broadband markets by number of subscribers. Chunghwa has said that it hopes to expand its business through overseas investments as saturation at home leads to an inevitable slowdown. The operator has said it will use Vietnam as a base from which to enter other countries such as Laos. In the new venture, Viettel will own a 70% stake while Chunghwa will take the remaining 30%.

According to reports published in February 2008, Vietnam's Ministry of Information and Communications (MIC) is to hold an exam to select which networks are most capable of providing 3G services. All seven 2G licensees are eligible to enter. These are MobiFone, VinaPhone, Viettel Mobile, S-Fone, EVN Telecom, HT Mobile and non-operational newcomer GTel. The MIC has said it will grant just four licences. Incumbent VNPT, which runs VinaPhone and MobiFone, and military-owned Viettel, are both said to be worried about failing the test through a simple mistake. An MIC spokesman said that the cellcos will be tested on around 200 standards, which it is currently defining. The MIC has said that it will seek comments before compiling the official examination contents and will deliver the exam documents in March 2008. Competitors will then have two months to complete the exam documents. The ministry will consider the exam documents in May, and it will grant 3G licences in Q208. According to the MIC, winners will be granted 15MHz of frequency division duplex (FDD) spectrum and 4MHz of time division duplex (TDD) spectrum. However, any winner that fails to launch 3G services (presumably by a set date) will be fined and risk having their frequencies withdrawn.

In March 2008, VNPT announced that the country's first commercial telecoms satellite would be launched on April 12 2008. Vinasat-1 is capable of handling more than 10,000

telephone, internet and data transmission channels. People living in remote areas will be among those to benefit most, as the satellite is expected to provide them with access to modern telecoms services for the first time. Speaking at a briefing ceremony in Hanoi on March 12, VNPT Deputy General Director Nguyen Ba Thuoc said the successful launch of the satellite would be of great importance to Vietnam's socio-economic development. Worth more than US$200mn, Vinasat-1 will be positioned at 132 degrees East Longitude in a geostationary orbit and has a design life of 15 years.

Company Profile - Alcatel-Lucent Technologies - Q4 2008

Top


Company Monitor

Case Study: Alcatel-Lucent Technologies

Alcatel-Lucent Technologies was formed in late 2006, merging France's Alcatel and Lucent Technologies of the US. The two companies have a shared history, stemming from their relationship with US fixed-line giant AT&T. Lucent was formerly owned by AT&T, which also owned an extensive telecoms manufacturing business outside the US. This was sold in the 1920s to ITT, which in 1986 sold its European telecoms operations to CGE, Alcatel's parent company.

However, the merger of the two companies has not been easy. With 77,000 employees and operations across 130 countries, combining the two entities is a huge task and one that Alcatel-Lucent appears to be struggling with. Since its merger, the Franco-American company has had to issue two profit warnings, while its shares have tumbled, following a string poor financial results. In Q108, the group announced a net loss of EUR95mn on sales of EUR3.864bn. Revenues from carrier services -- by far its largest business -- were down by 4.9% y-o-y to EUR2.7bn. Overall, revenues were down by 0.5% y-o-y and 26.2% q-o-q. However, market analysts are forecasting revenue rises of 4% to 6% q-o-q for Q208.

Table: Alcatel-Lucent Q108 Financial Breakdown By Business Group (EURmn) Revenues Q108 y-o-y Chg (%) q-o-q Chg (%)

Carriers 2,700 -4.9 -27.7 of which Wireline 1,376 0.2 -26.1 of which Wireless 1,086 -6.5 -25.3 of which Convergence 261 -18.6 -41.9 Enterprises 382 3.0 -12.2 Services 679 8.3 -33.4

Other 103 Total 3,864 -0.5 -26.2 Source: Alcatel-Lucent

Alcatel-Lucent's objective for 2008 will be to continue with its three-year plan, aiming to improve gross margins, reduce operating expenses and turn around underperforming businesses. For the full year, it estimates revenue growth to be in the low to mid-single figure range, on account of the deterioration in the euro-US dollar exchange rate. Approximately half of its revenues are in US dollars or dollar-linked currencies.

Asia Pacific Drives Growth

In terms of its operations, Alcatel-Lucent still derives the majority of its revenues from its two traditional markets, Europe and North America, which accounted for 33% and 35% of sales, respectively, in Q108. Asia Pacific accounts for 17%, with the remainder coming from the rest of the world, namely Latin America, Middle East and Africa. At a time when Alcatel-Lucent's gross margins are being negatively affected by what has previously been described as 'an unfavourable product and geographic mix', Asia Pacific has come through to support growth in the market. The region reported a sales increase of 8% (in local currency terms), on a par with North America and higher than Europe (2%).

Asia Pacific growth comes on the back of a number of contracts in major markets, such as a deal to supply China Mobile with mobile equipment and services at a cost of US$1bn. Under the terms of the agreement, Alcatel-Lucent will provide the operator with mobile core network solutions, wireless network solutions and equipment, including those for China's home-grown 3G mobile service standard TD-SCDMA. The deal significantly dwarfs the US$865mn network expansion contract awarded to rival Nokia

Revenues By Region

( Q108)

Source: Alcatel-Lucent

Siemens Network by China Mobile in mid-July 2008. Further success in China has seen Alcatel-Lucent win a national metro IP network expansion contract from China Telecom worth 'several million euros'. Alcatel-Lucent is also enjoying considerable success in other emerging markets across the region, such as Thailand, with True Corporation awarding two contracts to the vendor during June 2008. The first included trials of wireless broadband using WiMAX technologies, while the second was a US$10mn GSM/EDGE network expansion deal.

Table: Recent Asia Contract Wins Country Date Operator Contract Value

New Zealand

Jul-08

Telecom New Zealand

Deliver an IP national network bringing voice, internet and mobile telephony services onto one integrated technology platform US$130mn

Malaysia Jul-08 Fiberail Network extension with fibre optic na

Indonesia Jun-08 Excelcomindo

Provision of carrier ethernet services in Jakarta's business district na

China Jun-08 China Mobile Supply mobile equipment and services US$1bn

Thailand Jun-08 True Corporation Wireless broadband service trial using WiMAX na

China Jun-08 China Telecom National Metro IP Network Expansion

Several million euros

Thailand Jun-08 True Corporation GSM/EDGE network expansion contract US$10mn

Taiwan Jun-08 Tatung Company Commercial WiMAX Rev-e network na

na = not available. Source: BMI

Pairing Up With Asian Adversaries

After taking a US$3.7bn write-down in Q407 to cover the value of the waning CDMA standard, Alcatel-Lucent has indicated its intentions to strengthen its GSM commitments. CDMA technology is widely used in the US and South Korea. Alcatel-Lucent reported CDMA revenues had declined materially over the year from an especially strong Q107. Its GSM unit, meanwhile, rose over the year, driven by network expansions mainly in China and India, but also across Middle East and Africa. Further, W-CDMA (the 3G platform for GSM) revenues more than doubled over the same period.

As Alcatel-Lucent continues to witness slowing demand for its CDMA equipment, the vendor announced the establishment of a joint venture with Japan's NEC Corp to develop Long-Term Evolution (LTE). This is an advanced mobile broadband technology, which is an extension of the wireless GSM standard. The two companies have agreed to pool their research and development resources and plan to put their platform for LTE on trial in 2008 with deployment scheduled for 2009. Alcatel-Lucent CEO Patricia Russo said the partnership was an 'offensive play, at an early stage, to accelerate our time to market with LTE'. A number of major vendor rivals are developing LTE such as Ericsson, Nortel Networks and Nokia Siemens Networks.

A number of Japanese operators have already expressed an interest in deploying LTE. Market leader NTT DoCoMo had selected NEC to help deploy LTE ahead of the joint venture with Alcatel-Lucent. Similarly, rival operators KDDI and Softbank Mobile are to offer LTE, which would enable Japanese customers to retain their handsets while changing network operators for the first time. This is currently not possible as KDDI operates on CDMA, while NTT DoCoMo and Softbank Mobile are GSM-based networks.

Immediate Future Prospects

While its partnership with the NEC points to a long-term strategic focus, what opportunities can Alcatel-Lucent look forward to in Asia Pacific in the near future? In the region, there are a few new licence tenders available, despite the largely saturated nature of the market. India remains the most active in this regard, with a number of global operators acquiring licences. This has left hundreds of additional applicants without licences, although India's regulatory authority is looking to award 3G licences. Interest in a 3G tender will be high, as is similarly expected for China's auction. In the case of India, the government is looking to award WiMAX licences at the same time as 3G. Broadband is a major growth area in Asia, and over the past year, there have been WiMAX licence tenders across Japan, Malaysia and Taiwan.

Company Profile - Vietnam Posts &Telecommunications (VNPT) - Q4 2008

Top


Selected Profiles -- Operators

Vietnam Posts &Telecommunications

(VNPT) Address

� Vietnam Posts and Telecommunications Corporation (VNPT) 18 Nguyen Du Street Hanoi

SWOT Analysis

Strengths

� Country's leading telecoms operator with presence in fixed-line, mobile and internet sectors

� Dominant player in the fixed-line sector and also serves 53% of mobile subscribers

� A clear investment strategy to invest heavily in mobile and broadband services

Weaknesses

� Services in rural areas is poor or non-existent � Lack of competition in fixed-line sector has

contributed to limited array of services on offer � New mobile price structure under pressure from

competitors

Opportunities

� 3G services, once VinaPhone and MobiFone win licences, will provide substantial source of value-added mobile revenues

� Deployment of broadband and fixed-wireless networks in short and medium term

� Expansion of GPhone fixed wireless service will help presence in rural areas

Threats

� Viettel expected to extend lead over mobile market � Low-cost mobile services from competitors could

result in migration away from fixed services � Timescale for restructuring plan currently uncertain

and could be delayed

Overview

Wholly owned by the government, Vietnam Posts and Telecommunications (VNPT) is the country's main post and telecommunications service provider. VNPT operates the national backbone network that connects the provincial operating companies in 63 cities and provincial areas, and -- indirectly -- controls the country's two leading mobile operators, Vietnam Telecom Company (GPC-VinaPhone) and VMS MobiFone, both operating GSM networks.

Vietnam

� Tel: +84 (49) 434 936 � Fax: +84 (48) 255 851 � Web:

www.vnpt.com.vn

Key Statistics

� Annual Revenues (2003): VND26.51trn





� No. of Fixed-Line Subscribers (December 2005): 6.3mn

� No. of Fixed-Line Subscribers (July 2006): 7.2mn

� No. of Fixed-Line Subscribers (December 2006): 8mn (estimate)

� No. of Fixed-Line Subscribers (December 2007): 8.82mn

� No. of Cellular Subscribers (December 2005): 6.7mn


� No. of Cellular Subscribers (May 2007): 18.7mn


� No. of Cellular Subscribers (June 2008): 25.75mn

At the end of 2007, VNPT served approximately 8.8mn fixed-line telephone subscribers and almost 19mn mobile telephone customers. By the end of June 2008, VNPT's total mobile customer base is thought to have risen to 25.75mn, giving the operator a market share of almost 50%.

In April 2008, VNPT launched Vinasat 1, the country's first telecoms satellite in French Guyana. Vinasat-1 will be controlled from two land stations in Ha Tay province (North Vietnam) and Binh Duong (South Vietnam). The cost of Vinasat-1 has been US$200mn. VNPT worked closely with Lockheed Martin Commercial Systems over the construction and launch of Vinasat 1.

Corporate Structure

VNPT owns eight state-affiliated companies, eight joint ventures (with other state-owned enterprises as well as with private entities) and 13 other subsidiaries. In addition to VinaPhone and MobiFone, the state companies include Vietnam Telecom National (domestic services), Vietnam Telecom International (international long-distance services) and Vietnam Datacommunications Company (data services).

In September 2004, a formal proposal was put forward by VNPT and the Ministry of Post & Telematics to separate the postal and telecommunications activities of the VNPT group. Under the plan, the national network will be run directly by VNPT, instead of through subsidiaries such as Vietnam Telecom International and Vietnam Telecom National, which will be absorbed into the parent. This should create fair competition among local telecom operators, according to VNPT.

Recent Financial Performance

In 2007, VNPT generated a turnover of VND45.3trn (or US$2.8bn), a growth of 14.08% over 2006. Its state budget contribution reached VND6.917trn, which was some 12.78% higher than in 2006. VNPT added 9.88mn new connections to its networks in 2007, of which 8.8mn were mobile phone users. This helped the total subscriber base of VNPT to gross 27.8mn nationwide, including almost 19mn mobile phone users. Also in 2007, VNPT recorded 514,000 new 'Mega VNN' broadband subscribers, raising the total to 740,000.

Strategy

Investing in mobile and broadband services is VNPT's priority in 2008. The operator is currently designing new wireless stations and upgrading existing networks so as to prepare for the implementation of 3G services. Both VinaPhone and MobiFone will also seek to expand the reach of their EDGE services nationwide. VNPT has also pledged to invest US$1bn in its NGN and mobile broadband services as it aims to have one million broadband subscribers at the beginning of 2009.

Fixed-Line Services

In an effort to build on growing broadband interest, VNPT began providing IPTV services in 2007. It aimed to sign up 500,000 new ADSL subscribers during 2007, which would represent an annual increase of over 300%.

In May 2007, VNPT awarded a contract to Nortel to double its national optic backbone capacity and meet growing demands for high-speed video, mobile and broadband services. VNPT has said that it will provide ADSL broadband access to more customers, handle increased mobile traffic for wireless operators and create a platform for its planned migration to a wholly IP-based infrastructure. Instead of running at 20Gbps, this will double to 40Gbps.

VNPT introduced lower fixed-line charging in June 2007; tariffs for fixed-line and public card phone charges were cut by 15-20%.

VNPT's internet and data unit Vietnam Data Communication Company (VDC) has signed an agreement with Motorola to trial mobile WiMAX services. Under the terms of the agreement, Motorola's wi4 WiMAX will be deployed, enabling the delivery of services including VoIP to meet broadband demand. The trial will last a year and cover Hanoi and its surrounding areas in the first phase, extending to Ho Chi Minh City in the second. Meanwhile, VDC is co-operating with Intel in running the second phase of a fixed WiMAX trial in the northern mountainous province of Lao Cai. The test of the mobile internet service will take place with three BTSs and 30-50 access points. The government expects to see WiMAX services commercially launched in 2008.

In November 2007, it was reported that French-US vendor Alcatel-Lucent had signed two contracts with VNPT for the supply and installation of telecoms equipment. The deals are worth a total of US$31.7mn. Alcatel-Lucent will provide two telephone switchboards with respective capacities of 1mn and 272,000 subscriber lines to VNPT. The new switchboards will help VNPT fulfil its plan to upgrade fixed-line services, mobile networks and internet services ready for potential privatisations of the incumbent's various business units, including cellco MobiFone, during 2008.

In January 2008, VNPT chose Ericsson to supply equipment that would accommodate 200,000 more fixed-line subscribers across central Vietnam, forming the second phase of a project to expand reach and capacity for the operator.

In August 2008, VNPT subsidiary, Vietnam Telecom National (VTN) which manages the domestic infrastructure of VNPT, unveiled plans to deploy Fujitsu's high speed optical WDM as the transmission backbone of its next-generation network. The company will deploy the WDM in a trunk-line network traversing approximately 3,000km in Vietnam's southern region, linking 21 provincial capitals. The network is scheduled to be completed by early 2009.

Mobile Services

VNPT indirectly owns both VinaPhone and MobiFone, which had almost 10.2mn subscribers between them at the end of 2006 and almost 19mn customers between them at the end of 2007; the two operators account for 53% of Vietnam's entire mobile subscriber base.

In December 2007, VNPT began to reduce mobile tariffs by up to 25-28%, in a move which is expected to trigger a price war with Vietnam's other operators. Indeed, the move by VNPT followed similar readjustments by Viettel, which reduced its own tariffs by 15% on December 1 2007.

Launching its fixed wireless phone service 'GPhone' in June 2007, VNPT said the new service will operate on VinaPhone's GSM platform. As a result, the service will be provided in all areas covered by VinaPhone's network. VNPT said in local press reports, 'the service is particularly suitable for remote and mountainous areas where installation of a fixed-line telephone service is expensive and in some cases, impossible'. Subscribers of the GPhone service will be charged the same as fixed-line subscribers. The service was introduced in two stages -- initially launched in eight provinces and cities, the service was extended nationally in August 2007. Although VNPT was initially aiming to sign up 100,000 GPhone subscribers by the end of 2007, this target was later increased to 500,000.

VNPT has sought to partially privatise MobiFone, after which it will do the same to VinaPhone. VNPT has short-listed six foreign companies which will bid to advise the operator on its partial privatisation -- including its IPO -- which is expected in 2008. Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Rothschild and UBS are expected to tender bids. VNPT has yet to provide a timeframe for the bidding. The IPO has already attracted some high-profile operator names including NTT DoCoMo, which has announced its interest to acquire a 30% stake at a cost of US$1bn. Other companies to have expressed an interest are Telenor, France Telecom and Singapore Telecommunications.

VNPT awarded a contract to Alcatel-Lucent in October 2007, for the deployment of GSM/GPRS/EDGE base stations across the country to help improve the coverage and capacity of its network. The vendor will provide VNPT with optical nodes to connect base stations and to act as a mobile backhaul system in the northern region. The contract is reported to be worth US$28.5mn. A further contract was awarded to Alcatel-Lucent in November 2007 for the supply and installation of telecoms equipment. The deals are worth a total of US$31.7mn. Under the terms of the agreement, the vendor will provide two telephone switchboards with respective capacities of 1mn and 272,000 subscriber lines. This is expected to help VNPT upgrade its fixed-line service, mobile networks and internet service, as it prepares for the privatisation of its various business units.

Joint Ventures

NTT Communications, the sister unit of NTT DoCoMo is to form a joint venture with VNPT. Operating under the name of Global Data Service (GDS) in Hanoi from 2008, the

company will provide data services and plans to establish data centres in Hanoi by mid-2008 and Ho Chi Minh City in early 2009. NTT Communications will take a 40% stake in GDS, with VNPT occupying the remainder.

In September 2008, VNPT subsidiary, Vietnam Data Communication Company (VDC), announced an extension to its partnership with C&W for the delivery of IP VPN services. According to the agreement, C&W will offer on-net IP-based VPN services to VDC's customers. As part of the deal, C&W has upgraded its point-of-presence (PoP) network node coverage in both Hanoi and Ho Chi Minh City.

International

In June 2007, the Vietnam Economy reported that VNPT had opened an office in the US, providing 'new opportunities for Vietnamese telecom companies in this market'. The operator's decision is based on a need to update strategic information on technology and business to serve the group's operations and integration. VNPT co-operated with six US partners: MCI, Verizon, AT&T and Sprint over IDD services and with VITC and Net Global for voice over IP (VoIP) services. The Vietnamese operator is now said to be looking to boost its internet and communication partnerships with Time Warner, Teleglobe, Fusion, Ipass and Voice2me. Meanwhile, VNPT has shown interest in the US' wholesale and retail markets.

VNPT is to pay 25% of the US$3mn required to repair the broken undersea optical cable linking the country with Thailand and Hong Kong. The TVH system-based cable repairs will mostly be funded by Thailand's CAT (44.5%), while Hong Kong's REACH will pay 20.4% towards the repairs.

Company Profile - S-Fone (S-Telecom) - Q4 2008

Top


SWOT Analysis

S-Fone (S-Telecom) Address

Strengths

� Backed by leading Korean players SK Telecom and LG Electronics

� Licence to offer fixed wireless, mobile and value-added services

� Ended June 2008 with 3.25mn mobile subscribers and 6.3% share of the market

Weaknesses

� SK/LG not permitted to own equity in entity � Coverage currently limited to 13 provinces and cities � Pricing structure already undercut by Viettel

Opportunities

� Continued growth of mobile sector offers opportunity for expansion

� Helped by its nationwide coverage, there is the potential for considerably more mobile growth, especially from next generation services

Threats

� Falling further behind market leader Viettel and VNPT subsidiaries � Influx of new mobile entrants likely to lead to pricing war

Overview

S-Fone is a joint venture between Saigon Postel and SLD, a Singapore-based consortium comprising Korea's SK Telecom, LG Electronics and Dong Ah Elecomm. SLD has no equity in the venture, which is run under a form of build-operate-transfer (BOT) agreement.

S-Fone holds a licence to offer mobile, fixed-wireless and value-added services via CDMA2000 1X technology. The operator launched services in July 2003, and, by the end of 2006, had 1.8mn mobile subscribers. BMI estimates that its mobile customer base had risen to 2.26mn by the end of 2007 and 3.25mn by the end of June 2008; the operator subsequently had a market share of just over 6%. S-Fone delivers its service over the whole of Vietnam through almost 600 BTSs.

SK Telecom has announced that it will invest US$543mn into its joint venture SLD Telecom, which partly owns S-Fone. The investment will go towards helping S-Fone garner a larger share of the mobile market.

� 97 Nguyen Thi Minh Khai, Ben Thanh District 1 Ho Chi Minh City Vietnam

� Tel: +84 (8) 404 0079 � Fax: +84 (8) 925 4287 � Web:

www.stelecom.com.vn

Key Statistics



� No. of Cellular Subscribers (June 2008): 3.25mn

Mobile Services

In October 2006, S-Fone launched several services based on an EVDO network in Hanoi, Ho Chi Minh and Da Nang. The EVDO services consist of real time TV services and are expected to increase ARPU and the operator's subscriber base. At the end of 2007, S-Fone had approximately 400,000 subscribers to its EV-DO service.

In December 2006, Ericsson announced an agreement with S-Fone for the building of a nationwide IMS-based multimedia network across Vietnam. The strategy behind this deal is to remain ahead of its competition in providing high quality IP multimedia services.

In a deal to attract next generation subscribers, S-Fone signed an agreement with digital entertainment company WiderThan to operate and manage the company's VAS. It will allow S-Fone to offer a broad range of mobile entertainment, including ringtones, music and video on demand, games and news services.

In April 2008, S-Fone announced an agreement with Qualcomm to launch BREW services on the operator's CDMA network, providing it with a hosted data service. It should provide S-Fone with an opportunity to differentiate their offerings from rival competitors.

Company Profile - VinaPhone - Q4 2008

Top


Overview

VinaPhone Address

� Vietnam Telecom Services Company (GPC-VinaPhone) 57A Hyunh Thuc Khang Dong Da Hanoi

A wholly-owned subsidiary of VNPT, GPC-VinaPhone operates a nationwide GSM-based digital cellular telephone network under the VinaPhone brand name. The network was launched in June 1996. At the end of 2007, VinaPhone was estimated to have 9.1mn mobile customers (equivalent to nearly 26% of the market). By the end of June 2008, the number of mobile customers served by VinaPhone is estimated to have risen to 12.2mn (equivalent to almost 24% of the market). In 2005, the government confirmed that GPC-VinaPhone would be publicly listed, probably by year-end 2008.

Network Development

In March 2003, Alcatel of France was contracted to supply and install its Evolium GSM 900 solution to optimise VinaPhone's existing network infrastructure and upgrade its coverage of 18 northern provinces, including Hanoi.

In 2005, VinaPhone announced that it had upgraded some 1,000 base stations and built three new exchanges in Hanoi, Hai Duong Province and Ho Chi Minh City.

In May 2008, UK-based Aircom International won a deal with VinaPhone to provide the operator with network planning, design support and surveying activities for the expansion of its network. This contract forms an important part of the operator's aim to boost subscriber numbers and provide nationwide coverage -- VinaPhone expects to have a total of 9,000 base transmission stations by the end of 2008.

In June 2008, VinaPhone announced that it had signed contracts worth US$28mn with Motorola for the expansion of VinaPhone's network in twelve northern provinces of Vietnam. Under the agreement, more than 1,000 cell sites will be deployed.

Mobile Services

Value-added services offered by VinaPhone include SMS, WAP and data transmission. In September 2005, VinaPhone selected Comverse's Multimedia Messaging Service Centre (MMSC) and Mobile Data Gateway (MDG) to provide expanded multimedia and video messaging services to its customers.

From July 1 2007, VinaPhone prepaid subscribers will be required to register their personal details, following the introduction of similar rules for post-paid subscribers. Subscriber details with deactivated incoming and outgoing calls will not be retained for six months as before, but only for three months. The operator believes this new method will check the growth of subscribers, but in the long term help VinaPhone save its phone number resources. This we believe is largely a side effect of the aggressive promotional activities of all operators, which has led to phone numbers being wasted.

Vietnam

� Tel: +84 (4) 835 8815 � Fax: +84 (4) 835 7502 � Web: www.gpc.vnn.vn

Key Statistics

� No. of Subscribers (2003): 1.3mn





� No. of Subscribers (June 2008): 12.2mn

Company Profile - MobiFone - Q4 2008

Top


Overview

Vietnam Mobile Telecom Services (VMS), a subsidiary of incumbent fixed-line operator VNPT, operates a GSM-based digital cellular telephone network under the MobiFone brand name, serving approximately 10mn customers at the end of 2007 (equivalent to over 27% of the total mobile market). By the end of June 2008, MobiFone is estimated to have had 13.55mn mobile customers, or 26% of the market. By the end of August 2008, MobiFone reportedly had 21mn mobile customers.

MobiFone plans to prepare for an IPO of one-third of the company's shares. The government will still retain a 33.3% stake, while the remaining third of the operator could be acquired by a strategic investor, possibly later in 2008, but more likely in 2009. A number of operators have expressed an interest in MobiFone, but the most likely candidates are Singapore Technologies Telemedia (STT), Telenor, France Telecom or Japan's NTT DoCoMo.

The sale will be important to watch as it will be the first of many privatisations planned by the Vietnamese government for the telecoms sector. Next up for privatisation will be sister company VinaPhone.

Network Development

The operator is pushing for the development of an NGN network. Due to be introduced in two phases, the first phase, carried out between 2008 and 2010, will focus on developing NGN applications and a core 2G network, while gradually putting 3G into application in

MobiFone Address

� Vietnam Mobile Telecom Services (VMS-MobiFone) 811 A Giai Phong Hai Ba Trung Hanoi Vietnam

� Tel: +84 (4) 864 9533 � Fax: +84 (4) 864 8534 � Web:

www.mobifone.com.vn

Key Statistics






� No. of Subscribers (June 2008): 13.55mn

big cities. The second phase, from 2010-2012, will focus on the core NGN IP technology and launching 3G nationwide. MobiFone has set a target of 6,000 3G customers by 2012.

With 9.9mn subscribers at the end of 2007 and 21mn customers at the end of August 2008, MobiFone hopes to take this total to over 25mn by the end of 2008, far exceeding the 20mn customer target set earlier in 2008. The operator also expects to achieve revenues of VND16trn and post a VND6.6trn profit for 2008. Such a result suggests that MobiFone is expecting a slowdown in growth, given that revenues grew by 30% in 2007, and such a rise in revenues would only show 17% growth. To achieve this goal, MobiFone will install 6,000 additional base transceiver stations, raising the total number in service to approximately 10,000 by the end of the year.

Company Profile - Viettel - Q4 2008

Top


SWOT Analysis

Viettel Address

� Viettel 1A Giang Văn Minh Street, Ba ðình, Hanoi. Vietnam

� Tel: +84 (4) 255 6789 � Fax: +84 (4) 846 0486 � Web: www.viettel.vn

Key Statistics

� No. of Mobile Subscribers (2004): 0.16mn

� No. of Mobile Subscribers (2005): 1.7mn

� No. of Mobile

Strengths

� Licence to offer fixed wireless, mobile and value-added services

� Low tariff structure � Nationwide coverage � Mobile market leader

Weaknesses

� Network currently has limited capacity � No distribution service outside urban areas

Opportunities

� Mobile market expected to increase to above 56mn by the end of 2008 � Nationwide coverage should guarantee substantial market share in medium term � Won licence to test WiMAX mobile broadband service

Threats

� Connection difficulties could prompt potential subscribers to opt for alternative networks

� Influx of new mobile entrants likely to lead to pricing war

Overview

Viettel established a radio trunking network in 1998, before launching domestic and international VoIP services in 2001. However, its major breakthrough came in 2003 when it began offering local access and internet services and began rolling out a GSM mobile network.

By the end of 2007, Viettel had in excess of 10mn mobile subscribers and with 29% of the market was Vietnam's No. 1 mobile operator. By the end of June 2008, the operator was estimated to have 19.55mn mobile customers. In addition its mobile operations, Viettel also provides fixed-line services to approximately 1.4mn subscribers. The operator claims revenues of around the US$1bn mark for 2007 and has pledged US$500mn of investment to build a 3G network if it wins a licence. Commenting on 3G take-up in Vietnam, the director of Viettel Telecom claimed that the falling prices of 3G equipment and increased need for value-added services (video streaming, mobile TV, internet connection) should result in a migration from 2G networks to 3G in Vietnam.

Mobile Services

Subscribers (2006): 5mn

� No of Mobile Subscribers (2007): 10.4mn

� No of Mobile Subscribers (June 2008): 19.55mn

� No. of Fixed-line Subscribers (December 2007): 1.4mn (estimate)

In July 2006, Ericsson won a GSM expansion deal from Viettel. Under the terms of the deal, Viettel extended its coverage to rural Vietnam, increasing its capacity in Hanoi, Ho Chi Minh City and Danang.

In December 2006, Viettel started to test its WiMAX mobile broadband service in Hanoi on the back of winning a WiMAX licence in March 2006. Others to win a licence were VNPT, the Vietnam Television Technology Company and FPT Telecom.

The operator is also extending its service provision to the corporate sector, announcing a commercial tie-up with AT&T. Under the terms of the agreement, both companies will provide services initially to multinational companies to include VPN and frame relay. The US vendor has already established an office in Hanoi and a second office in Ho Chi Minh City.

Data Services

Telecoms equipment vendor ECI Telecom was selected by Viettel in late August 2007 for the expansion of the operator's optical and broadband access network. The project is being overseen by ECI Telecom's Vietnam-based business partner Ntegrator and includes the construction of a 2,000km long-haul Dense Wavelength Division Multiplexing network with a capacity of 10Gb/s over 40 channels based on the XDM platform.

In May 2008, Taiwanese incumbent operator Chunghwa Telecom set up a US$30mn internet data joint venture with Viettel, which will take a 70% share of the operation.

In June 2008, Viettel launched a major sales promotion campaign targeting businesses with leased-line services. The company said it would waive installations fees and user fees for a month for new leased-line subscribers. The total package would save customers VND60mn (US$3,680). In addition, the firm said it would give new subscribers a free web domain, ten e-mail addresses and a hosting service for one year.

International

Viettel also offers mobile services in Cambodia. With an existing 25% share of the Cambodian international VoIP market and over 50% share of the international channel leasing market in the country, Viettel has said it will focus on the roll-out of a US$27mn mobile network infrastructure. The operator has also attained a mobile licence to operate in nearby Laos, where it has stated that it will enter the market as part of a joint venture with a Laos-based company.

In May 2008, Taiwanese incumbent Chunghwa Telecom launched a US$30mn 'internet data joint venture' with Viettel. The move forms part of Chunghwa's efforts to expand overseas. Chunghwa is Taiwan's largest operator, leading each of the fixed-line, mobile and broadband markets by subscribers. Chunghwa has said that it hopes to expand its business through overseas investments as saturation at home leads to an inevitable slowdown. The operator has said it will use Vietnam as a base from which to enter other

countries such as Laos. In the new venture, Viettel will own a 70% stake while Chunghwa will take the remaining 30%.

Company Profile - EVN Telecom - Q4 2008

Top


Overview

The telecoms arm of Electricity of Vietnam (EVN) and the country's second CDMA operator, EVN Telecom launched its services at the end of February 2006 -- a move making it the country's sixth commercial operator. By January 2007, EVN Telecom had 700,000 subscribers on its fixed wireless, E-mobile and E-phone networks and, by mid-October 2007, claimed 2mn wireless customers, with a large majority from rural areas. Reports have suggested that E-Mobile was serving 2.8mn mobile customers at the end of 2007 and around 2.9mn customers at the end of June 2008. According to EVN, this makes it the largest CDMA operator using the 450MHz band.

Aside from mobile, EVN Telecom is licensed to provide fixed- and leased-line services, internet, international connectivity and domestic and international VoIP.

Network Development

In January 2007, EVN Telecom became the first operator in Vietnam to secure a spectrum for the deployment of its 3G services, as well as gaining an agreement in principle from the government to develop mobile WiMAX in 2007. The government announced that it would offer spectrum to EVN Telecom over the 1900MHz frequency band for 3G deployment alongside the operator's existing 450MHz spectrum.

EVN Telecom Address

� EVN Telecom 30A Pham Hong Thai St. Ba Dinh Dist., Hanoi Vietnam

� Tel: +84 (4) 2100507 � Fax: +84 (4) 7151109 � Web: www.enet.vn

Key Statistics

� Annual Revenues (2006): VND1trn

� Estimated Annual Revenues* (2007): VND3trn

� No. of Mobile Subscribers (April 2007): 1mn

� No. of Mobile Subscribers (October 2007): 2mn

� No. of Mobile Subscribers (December 2007): 2.5mn

� No. of Mobile Subscribers (June 2008): 2.9mn

� Year established: 2005

* provided by EVN Telecom

A fibre-optic cable is also being constructed, which will reach 80 districts nationwide and raise transmission capacity of the national optic transmission axis to 100Gbps, regional line capacity to 10Gbps and local transmission capacity to 2.5Gbps.

EVN Telecom is also involved in the Intra Asia Optical cable system, using DWMA technology to cover Vietnam, the Philippines, Hong Kong, Taiwan, China, Japan and Guam. EVN Telecom will invest US$30mn into the project.

Agreements

EVN Telecom has leased lines to FPT Telecom, in a deal worth US$20mn. The three-year contract is the largest of its kind in Vietnam in terms of value and will double FPT Telecom's bandwidth to 5Gb/s. (See FPT Telecom profile)

Fixed Wireless Services

Using a CDMA2000 1x network, the operator offers its fixed wireless service E-Com, capable of supporting EV-DO and providing 3G service users. The number of E-Com subscribers was targeted to rise from 650,000 in April 2007, to 2mn subscribers by the end of 2007 (no further information has been made available). Further, the operator plans to provide EV-DO services across 64 cities and provinces in 2007.

Expenditure Plans

Between 2007 and 2010, EVN Telecom plans to invest nearly VND24bn (US$1.5bn) to expand its operations. This will be spent on expanding its mobile network coverage and broadband upgrades as well as building a fibre-optic cable system.

Company Profile - Hanoi Telecom - Q4 2008

Top


Overview

Hanoi Telecom Address

Established in 2001, Hanoi Telecom was awarded licences to provide national and international services including wireless local loop, fixed-line, internet and ISP, broadband data and VoIP services.

The majority of shares of Hanoi Telecom are owned by the Vietnamese government through two entities, Hanel (belonging to the Hanoi People's Committee) and HTI (Vietnam Science Institute). These two entities have been involved in a wide range of businesses in Vietnam for over 20 and 50 years, respectively, including telecom software, manufacturing and integration of electric and electronic appliances, PCs and consumer products.

Network Development

Hanoi Telecom launched its CDMA network in November 2006 and started deploying its services in January 2007. The operator has installed about 800 base stations throughout the country and has invested US$656mn towards its platform, making it one of the largest telecoms projects in Vietnam. By the end of 2007, Hanoi Telecom's mobile service, HT Mobile, was reported to have just fewer than 200,000 customers.

Disappointed with its progress, Hanoi Telecom started to migrate its subscribers to a GSM network offering from April 2008. Customers choosing to stay with HT Mobile will receive a new GSM handset. However, those who choose to retain a CDMA service will be switched to the CDMA network of mobile operator S-Fone. HT Mobile decided to implement the transition after failing to reach its target of 1mn customers by the end of 2007.

Company Profile - FPT Telecom - Q4 2008

Top


Overview

� Hanoi Telecom 811 Giai Phong Road Hoang Mai Dist., Hanoi Vietnam

� Tel: +84 (4) 664 3724 � Fax: +84 (4) 664 3720 � Web:

www.hanoitelecom.vn

� No. of Mobile Subscribers (December 2007): 195,000

� Year Established: 2001

FPT Telecom Address

FPT Telecom has been offering internet services since 1999, and by H105 the operator had the largest share of the internet market at 38%, with some 60,000 ADSL subscribers. By December 2006, the operator had received a licence to provide fixed-line services, and in February of that year, FPT Telecom added to its service portfolio mobile and other wireless services.

Private equity company Texas Pacific Group (TPG) sold part of its stake in FPT in August 2007, although the company continues to retain shares in the operator. TPG and Intel Capital originally paid US$36.5mn for a combined 10% stake in FPT in 2006. Reuters commented that FPT had lost more than 40% of the value of its shares since it debuted on the Ho Chi Minh stock Exchange on December 2006. According to FPT's CEO Truong Gia Binh, the falling share price was due to a combination of factors, namely pre-existing rumours surrounding the company combined with the announcement by TPG that it was registering to sell a large volume of shares and two members of FPT's management board also registering to sell a number of shares.

Recent Financial Developments

For the financial year ending December 31 2007, FPT Telecom reported revenues of VND27.3trn and a net profit of VND877bn. Fourth quarter revenues amounted to VND9.4trn, while net profit in the fourth quarter totalled VND312.7bn.

Network Development

The operator was responsible for completing the country's first-ever metro Ethernet and Optical network, with the help of Cisco Systems. The 10Gb/s NGN is equipped with a total metro Ethernet, broadband and IP/MPLS solution. The network provides FPT with a platform to deliver a wide variety of data, voice and video services over high-speed broadband connections. Cisco's solution will enable FPT to provide new value-added services, including triple-play (data, voice and video) and IPTV.

Fixed-Line Services

The operator was targeting 100,000 fixed-line subscribers by June 2007 and 250,000 subscribers by YE07. The first locations to receive access to its fixed-line network were Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong, Can Tho, Hai Phong, Quang Ninh and Hai Duong. The operator's existing ADSL subscribers will be the first to be offered fixed-line services, its CEO stating that FPT Telecom would provide each fixed-line subscriber 'with two phone numbers on the same line... FPT wants to provide each member in a

� FPT Telecom 48 Van Bao, Kim Ma Street Ba Dinh Dist., Hanoi Vietnam

� Tel: +84 (4) 760 1060 � Fax: +84 (4) 822 3111 � Web: www.fpt.vn

Key Statistics

� Revenues (H107): VND5.9trn

� Revenues (M907): VND17.97trn

� Revenues (2007): VND27.3trn

� Net Profit (H107): VND436bn

� Net Profit (M907): VND564.46bn

� Net Profit (2007): VND877bn

family with one different phone number, not one number for the whole family.' By December 2006, the operator had installed cables for 180,000 ADSL subscribers.

The operator acquired a licence in October 2007 to provide domestic and international land-line networks and, over the coming 12-18 months, will build a network linking Hanoi to Ho Chi Minh City, with another from Ho Chi Minh City and the southern city of Vung Tau to connect to a regional submarine cable project. A third network would also link Hanoi with the northern provinces of Lang Son and Quang Ninh (bordering China), with international calls routed through gateways in Hong Kong and Shanghai. Until now, the operator has been reliant on the networks of others.

Just a month before, FPT Telecom had inked a deal with EVN Telecom to lease a 2.5Gb/s international ADSL line. The three-year contract is the largest of its kind, valued at VND20mn, and will enable FPT Telecom to double its bandwidth to 5Gb/s. EVN Telecom plans to work with FPT Telecom as part of an agreement between their parent companies on opportunities in IT products and services. Further, FPT Telecom, having bought a new switchboard from Cisco Systems, will be able it to provide a triple-play service of internet, telephone and TV over a single cable.

Internet Services

In March 2006, FPT Telecom launched its IPTV service. Further long-term goals now include expanding its internet-based value-added services, including establishing an e-solution website for corporations in Vietnam.

By June 2007, FPT Telecom announced that it had established free internet access via its Wi-Fi systems to 5,000 locations throughout Hanoi and Ho Chi Minh City. The US$1.5bn Wi-Fi project will benefit universities, colleges, cafes, restaurants, banks and securities companies in the two main cities. By the end of 2007, it was expected that there would be 8,000 Wi-Fi locations across Hanoi and Ho Chi Minh City (no recent data has been made available).

In August 2008, FPT Telecom announced that it had signed an agreement with PCCW Global to link their networks. The strategic alliance with PCCW Global is designed to enable more comprehensive network management between Vietnam and other countries covered by PCCW's network. The partnership will allow value-added services, such as on-demand bandwidth and IP multicasts, to be offered to FPT Telecom's customers.

Market Overview - Mobile - Q4 2008

Top


Mobile

Until mid-2003, the mobile market was nominally a duopoly. Both incumbent operators -- MobiFone and VinaPhone -- are indirect wholly-owned subsidiaries of VNPT. MobiFone introduced services at 900MHz in 1993, following a Business Co-operation Contracts (BCC) agreement with Comvik of Sweden, while VinaPhone launched its own GSM 900 network in 1996.

During H203, Saigon Postel subsidiary S-Fone launched CDMA-based services, although it is only since the end of H104 that S-Fone has begun to acquire significant numbers of subscribers. Meanwhile, Ministry of Defence-run Viettel launched a very successful GSM network in 2004 and has already overtaken S-Fone to become the country's second largest mobile operator (after the two VNPT-owned operators). Since then, Vietnam has also welcomed the entrance of newcomers EVN Telecom (which operates under the E Mobile brand) and latterly Hanoi Telecom (which operates under the HT Mobile brand). E-Mobile and HT Mobile, which began commercial operations in February 2006 and January 2007, respectively, both offer CDMA-based services (although from April 2008 HT Mobile started to shift its customers to a GSM network offering). With a penetration rate of just over 40%, Vietnam continues to move up the regional rankings, and is now ahead of China and Indonesia.

Table: Regional Mobile Penetration Overview Country Mobile Penetration 2007 (%) Regional Rank 2007 (2006 Rank) Hong Kong 140.9 1 (1) Singapore 121.9 2 (2) Taiwan 104.6 3 (4) Australia 99.6 4 (3) South Korea 90.4 5 (6) Malaysia 87.8 6 (5) Thailand 84.9 7 (9) Japan 81.9 8 (7) Philippines 64.0 9 (8) Pakistan 49.2 10 (12) Vietnam 41.4 11 (13) Indonesia 41.2 12 (11) China 39.4 13 (10) Sri Lanka 39.3 14 (-) Bangladesh 24.5 15 (-) India 20.2 16 (14)

Source: BMI

Market Overview - Fixed Line - Q4 2008

Top


Fixed-Line

The provision of traditional PSTN-based telecoms services is still effectively under the monopoly of Vietnam's state-owned operator VNPT, which became responsible for the country's telecommunications services in 1995. Its fixed-line services are run through a network of 61 local push-to-talks (PTTs), while the country's two mobile operators are both subsidiaries of VNPT's telecommunications business, Vietnam Telecoms Services (GPC). Vietnam does not have an independent regulatory body -- regulation and policy development now fall under the aegis of the MPT.

BMI estimates that the Vietnam fixed-line user base grew by around 23% in 2007, compared with growth of 43.5% in 2006. There were thought to be over 11.4mn fixed-lines at the end of 2007, which is equal to a penetration rate of 13.2%. The country continues to have one of the lowest rates in the region, although ahead of Indonesia, Pakistan, the Philippines and India.

Table: Regional Fixed-Line Penetration Overview Country Fixed-line Penetration 2007 (%) Regional Rank 2007 (2006 Rank) Taiwan 58.6 1 (1) Hong Kong 54.0 2 (2) Australia 46.5 3 (3) South Korea 46.2 4 (4) Japan 41.6 5 (5) Singapore 41.5 6 (6) China 28.2 7 (7) Malaysia 16.3 8 (8) Sri Lanka 13.5 9 (-) Vietnam 13.2 10 (10) Thailand 10.9 11 (9) Indonesia 7.0 12 (11)

Philippines 4.4 13 (13) Pakistan 4.1 14 (12) India 3.4 15 (12) Bangladesh 0.8 16 (-) Source: BMI

Market Overview - Broadband - Q4 2008

Top


Broadband

Vietnam's internet user base more than doubled during 2003 and 2004 and, at the end of 2004, was estimated at nearly 5.87mn, representing penetration in excess of 7%. Indeed, during the course of the year Vietnam leapfrogged both the Philippines and China in terms of internet take-up. There are now nine licensed internet service providers (ISPs) in Vietnam and six internet exchange providers. By the end of 2007, internet user penetration had increased to 21.8%. In July 2003, VNPT subsidiary Vietnam Datacommunications Company (VDC) launched the country's first ADSL service in Hanoi, Ho Chi Minh City and Haiphong. Broadband figures, according to the Vietnam Internet Network Information Centre (VNNIC), are thought to have surpassed 1.2mn subscribers by the end of 2007, which is equivalent to a penetration rate of 1.5%.

Table: Regional Broadband Penetration Overview Country Broadband Penetration 2007 (%) Regional Rank 2007 South Korea 31.1 1 Australia 29.4 2 Hong Kong 26.4 3 Taiwan 23.6 4 Japan 22.3 5 Singapore 21.5 6 Malaysia 6.3 7 China 5.3 8 Thailand 4.0 9 Vietnam 1.5 10 Philippines 1.1 11

Bangladesh 0.5 12 Indonesia 0.4 13 India 0.3 14= Sri Lanka 0.3 14= Pakistan 0.2 16

vietnam telecommunications report - q4 2008 · vietnam telecommunications report - q4 2008 vietnam...

Documents