7/29/2019 Viettel on the Offensive

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46 December 2011 SeaGLOBe SeaGLOBe Dec

By Philippe Beco

How a military enterprise is growing into a global telecoms playerOn the Offensive

VIETTEL

Photo:HoangDinhNham/AFP

ECONOMY

The ormation o new South-

South trading routes linking

Asia with the Middle East,

Arica and Latin America is

set to revolutionise the global economy,

touted HSBC earlier this year. And one

need look no urther than Vietnam to see

this trading evolution in process.

Military-run telecom giant Viettel has

expanded massively in its 12 years o

operations, and it is increasingly betting

on oreign markets to garner business

clout. Holding a signifcant market sharein Vietnams telecom industry, Viettel,

which was created out o the Vietnamese

Ministry o Deences telecoms division,

is now the 19th-largest mobile com-

munication player in the word in terms

o subscribers, according to Wireless

Intelligence, a London-based research

frm. Within three years o its frst oray

into oreign markets, the company has

expanded to operations in fve oreign

countries, which have a collective poten-

tial market o 83 million, a fgure roughly

equal to Vietnams population.

Viettels frst international venture

began in 2009, with the launch o a

mobile network in Cambodia, under

the Metone brand name, and in Laoswith Unitel. In January, Viettel was

awarded Perus ourth mobile phone

licence, which will lead to an investment

o $400m over the coming decade. In

September, it launched services in Haiti

with Natcom, ollowing a joint venture

with the countrys Central Bank, while

in Mozambique, the telecom company

joined orces with local investors to

launch mobile services in October ol-

lowing a successul bid or the countrys

third licence.

And by all accounts, it appears this

is only the beginning o Viettels bold

internationalisation strategy. It plans

to invest in a total o 15 countries and

aims to become one o the worlds top

ten telecom companies with the largest

overseas investment by 2015. Ambition

and necessity are driving actors behind

the companys aggressive plans.Mobile penetration in Vietnam has

reached a very high level, so they have to

look at oreign markets to expand, says

Lam Nguyen, country director at IDC

Vietnam, a market intelligence company.

Ater years o rapid growth, the number

o Vietnamese mobile phone subscribers

started to stagnate in early 2011.

As Viettels original market is nownearing saturation, it is tapping into the

young populations o developing coun-

tries to take advantage o longer-term

opportunities. The groups network

frst, business later policy appears to

be working. When Viettel moved into

Cambodia and Laos, it tapped into

the countries large rural populations

by establishing wide geograp

erage. This strategy provid

market share access (Metone

claim a leading position in th

tive markets), yet due to lo

revenue per user, returns rem

than in other countries. Acc

Vietnam News Agency, reven

ated by the two companies in 2

$161m in Cambodia and $61

small contributions to the gr

billion total revenue o that y

Viettels ventures into Indonot be the cash cow it had h

the experience gained operatin

bodia and Laos has given i

when bidding or licences abr

They ocus their attention

and emerging markets, where

ture isnt too developed and c

marginal, says Lam Nguyen.

panys main strength lies in itquickly deploy a mobile net

does the same job as more

Western competitors but or

o the price. Last month its e

honoured when Metone wa

the best operator in a developi

at the World Communications A

event held in London.

Mobile penetration in Vietnam is high,so Viettel has to look at foreign markets

to expandLam Nguyen, IDC Vietnam

7/29/2019 Viettel on the Offensive

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ECONOMY

48 December 2011 SeaGLOBe

Viettel is also well-equipped in man-

power. Operating rom its substantial

and stable business base in Vietnam, the

company has access to an increasingly

well-trained workorce that provides

very capable managers, engineers and

technicians, says Peter Evans, a senior

researcher or Asia at BuddeComm, a

telecommunications consultancy.

In Vietnam, the company has taken

advantage o the military manpower todevelop its network and go to market

quickly, says Lam Nguyen. They may

be able to do the same abroad as well

but it will depend on the local partner.

A state-owned enterprise, Viettel can

cash in on Vietnams long-standing

diplomatic ties with ormer politi-

cal allies. It is easier or them to

penetrate markets in countries where

members o the companys executive

management have built a positive rela-

tionship. That was certainly the case

in Cambodia and Mozambique, says

Lam Nguyen.

When Peter Simonenko, the frst sec-

retary o the Ukranian Party, visited

Vietnam recently, Vietnams prime

minister Nguyen Tan Dung stressed

his country has not orgotten Ukrainessupport and assistance, especially during

Vietnams struggle or independence.

Just fve months ater the visit, Viettel

announced it would install a $600m

broadband cable network in the ormer

Soviet state.

Global expansion is also expected

to help the company on home soil.

Economies o scale dictate that with

larger placement orders, Viettel will

have greater bargaining power with sup-

pliers, says BuddeComms Evans.

The telecoms group has also recently

expanded into electronic device manu-

acture with the launch o its frst produc-

tion line o telecom devices a move that

could prove ruitul in oreign markets.

According to several Vietnamese

media, Viettel is also the avourite inthe race to acquire the assets and inra-

structure acilities o its struggling local

competitor, EVN Telecom, a subsidiary

o the state utility Vietnam Electricity.

The companys management team is

operating a proessional outft and they

continue to adopt a very aggressive

approach to the market, says Evans. Photo:EstabanFelix

As a consequence, they dont seem

likely to be challenged by any o the

competitors in the Vietnam market in

the short term.

This optimistic outlook, however,

doesnt mean the companys uture is

completely risk-ree. Observing the

company, the strategy seems to be: move

quickly, roll out 100% coverage and

oer competitive pricing, says Evans.

But moving quickly does not allow

time or it to consolidate its overall

business. Combine this with moves into

diverse markets and the company may

over reach.

Generating increased revenues in the

now-mature Vietnam mobile phone

market will also be a challenge. Viettel

will have to improve in the service area,

says Lam Nguyen. To do that, they will

have to look or partnerships that will

allow them to leverage on better services

and more advanced technology.

Another element that may impact Viet-

tels uture is the privatisation o some

state-owned enterprises. Whilst the

Ministry o Deence currently wholly

owns the company, 49% o its equity

is slated or uture privatisation. This

process may introduce some uncertainty

into the companys business growth

strategy, says Evans.

However, Nguyen doesnt think this is

likely to happen any time soon. As a

member o the World Trade

tion, Vietnam has to open t

and allow oreign companies

equity shares in local players,

Nguyen. The government i

encourage telecoms to priva

more expertise come in, but th

remains in the hands o the

board, which is waiting or t

priate time. They are not i

because they have been succes

they hold strong brands and d

resh capital.

Main line: Vietnamese engineers at Haitis state-run Teleco before it was privatised in 2010 and renamed Natcom, of which Viettel has a 60% share

The company's management teamcontinue to adopt a very aggressive

approach to the market"Peter Evans, BuddeComm

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