Vietnam's mobile phone networks see increase in subscribers
HANOI - Vietnam's two mobile phone networks, Vinaphone and Mobifone,
have
registered 180,000 new subscribers so far this year, about 1.7 times
more
than the number of new subscribers for fixed lines in the same period.
It is also the first time the number of new mobile phones subscribers
has
exceeded the number of new fixed phone subscribers.
Of the figure, Vinaphone, a subsidiary of State giant Vietnam Post and
Telecommunication Corporation (VNPT), accounted for about 140,000 units.
The
Swedish-Vietnamese joint venture Vietnam Mobile Service Company (VMS),
operator of the Mobifone network, comprised the remainder.
According to market watchers, mobile phones have become popular as
market
reforms and increasing economic opportunities have put more people on
the
move. Moreover, in a country where there are only five telephones per
100
inhabitants, the mobile phone is becoming a fully fledged fashion trend.
This is especially true of the younger generation, which considers a
mobile
phone as much a fashion accessory as a communications device.
As many as 323,200 new phone subscribers (both fixed and mobile) have
been
registered so far this year, among whom fixed phone subscribers
accounted
for 69 per cent; post-paid mobile phones, 7 per cent; and prepaid mobile
phones, 23 per cent. The figure accounted for 28.8 per cent of the
annual
target, bringing the total number of phone subscribers in the country to
4,511,000.
Vietnam has 1.5 million mobile phone subscribers, with Vinaphone
accounting
for 800,000 subscribers and Mobifone the remainder.
Vietnam News Agency - April 29, 2002
Vietnam's telecoms industry is growing fast
HANOI & HO CHI MINH CITY - There's a new buzz in Vietnam's telecoms
industry. Phone charges are tumbling. Mobile services are expanding. And
fresh competition has cropped up between three carriers offering low-cost
domestic and overseas calls through Voice Over Internet Protocol, or VOIP.
But potential investors should take a good look behind the scenes, where a
state-owned giant is fighting fiercely to defend its interests.
On the surface, the changes send a positive signal. More competition and
lower costs will spur overall economic development and help unleash the
potential of Vietnam's budding software industry. Interest is also perking
up because more reforms are mandated by the United States-Vietnam bilateral
trade agreement. That pact, which took effect last December, sets a
timetable of two to six years down the road for joint-ventures in a variety
of telecoms services.
But monopolistic practices still linger. The dominant player-state-owned
Vietnam Posts and Telecommunications, or VNPT-squeezes potential competitors
through interconnection fees and lease lines that cost 30% more than the
regional average. Mysterious delays still plague contracts. Citing national
security concerns, VNPT maintains sole control over the international
gateway for direct-dial calls, imposing firewalls that impede Internet
access. Change in the industry is likely to be incremental, not radical.
In fact, VNPT remains far more powerful than the state agency that
ostensibly regulates the telecoms industry: the Department General of Posts
and Telecommunications. "I would like to see DGPT exercise more authority,"
says Simon Perkins, chief executive at Swedish-owned Comvik International
Vietnam, which works with VNPT to provide cellular phone services under the
brand name MobiFone. Perkins notes that VNPT's moves are "typical of an
incumbent trying to protect its revenue streams."
VNPT's revenues are more like a torrent. Last year the company generated
revenues of 19 trillion dong ($1.25 billion), and funnelled 2.9 trillion
($190 million) to the national budget, making it the second-largest
corporate contributor to state coffers after oil giant PetroVietnam. Power
follows money. VNPT's chairman sits on the Communist Party's central
committee-outranking everyone at the regulatory agency.
But other powerful interests are also at work. To date, the most interesting
challenge to VNPT's supremacy comes from the Vietnamese military, which is
moving to commercialize infrastructure once used exclusively for defence.
The Defence Ministry owns the Military Electronics Telecommunications
Company, or Vietel, which has an optical-fibre network connecting 50 of the
country's 61 provinces and cities.
The military's clout was reflected in the government's permitting Vietel to
become the first carrier to offer a domestic VOIP service in October 2000.
VNPT followed suit nine months later. Last December, Vietel teamed up with
US-based ITXC to offer an overseas VOIP service. "They're aggressive, eager
to expand, and very open to new ways of doing things," ITXC chairman Tom
Evslin told the REVIEW.
Indeed, Vietel has snapped up a 60% market share in domestic and overseas
VOIP, apparently causing VNPT some concern. Initially, VNPT tried to slow
down Vietel's growth by limiting its leased lines, thereby frustrating
customers, who encountered constant busy signals. Vietel successfully
lobbied for some additional lines, but it's still waiting for VNPT to give
it a line to Khanh Hoa province, and complains of high costs, according to
industry sources.
The problem is even more acute in Ho Chi Minh City, where another telecoms
firm, Saigon Postel, jumped into VOIP last September. Although VNPT owns 18%
of Saigon Postel (whose shares are also held by 10 other state companies),
the telecoms giant perceives the southern firm as an upstart competitor with
virtually no infrastructure of its own. In March, Saigon Postel sought to
double its lease lines from VNPT, but the answer was "wait and see," says
general director Trinh Dinh Khuong.
Without more lines, the money he's spending on media promotions will just go
down the drain. "Our traffic is limited by the policy of allowing us a
market share of 10%-15%," says Khuong. "It's not good for business."
Sharing comes with strings attached, insist VNPT's top leaders. They pledge
their commitment to the state's new policy of allotting competitors an
overall market share of 25%-30% by 2005. However, "in the competitive
environment, each company must prove itself," says VNPT president Dang Dinh
Lam. That means competitors should not just skim easy profits off VOIP --
which requires minimal investment in infrastructure -- but move on to more
capital-intensive activities like fixed lines and cellular services. After
all, Lam argues, VNPT is duty-bound to extend services to more remote and
less profitable areas in the countryside, budgeting 30 trillion dong from
2001-05 to expand infrastructure.
True, Vietnam does have pressing infrastructure needs. But other companies
are still in a catch-22 situation. The long reign of monopoly means that
Vietel and Saigon Postel don't have much cash at their disposal. They need
foreign back-up. Yet many overseas companies hesitate because they are not
yet allowed to become fully fledged joint-venture partners. At present,
they're only eligible for so-called "business-cooperation contracts," which
require massive investment and training commitments without any operational
powers in return. That's why the joint-venture provisions in the bilateral
trade agreement are so important as a stimulus for investment.
But in any corporate marriage, VNPT looms as a jealous lover. SLD Telecoms,
a Singapore company owned by three South Korean shareholders, found that out
the hard way. SLD had hoped to sign a contract with Saigon Postel in January
2001, for a third mobile network down south, the only one excluding VNPT.
But the $230 million deal was delayed for 11 months after VNPT "suggested"
to the state regulatory agency that profits be split 50-50 rather than 75-25
in favour of SLD. SLD acquiesced, only to wait another eight months for the
state to approve the selection of the supplier, South Korean firm LG
Electronics. SLD has persisted because it was promised that no more cellular
contracts would be awarded in the Ho Chi Minh City area. Under those
conditions, the firm reckoned it could still break even within nine years.
But in early April, the local press reported that a VNPT subsidiary would
probably be given a licence to launch a fixed wireless service in Ho Chi
Minh City. (In a fixed wireless system, customers can't use their phones in
rapidly moving vehicles.) The Review has learned that prices would be
dirt-cheap: 280 dong per minute, compared to the usual cellular rate of
1,800 dong per minute.
The move is widely seen as an anti-competitive strategy, aimed at
undercutting the service to be launched by Saigon Postel and SLD by the
year's end. "This is a breach of promise," says Eeejay Kim, SLD's manager of
strategic planning. Meanwhile, VNPT is planning an identical move into the
fixed wireless business in Hanoi, where there are rumours that a politically
well-connected, private Vietnamese firm is trying to get into the cellular
business in the capital.
Some experts hope that legal remedies can curb VNPT's power. A draft
ordinance, recently submitted to a parliamentary committee, mandates
"transparent and objective and reasonable rules" that would bar monopolistic
practices. But until such laws can be passed and enforced, deal makers might
think twice before reaching for their phones.
By Margot Cohen - Far Eastern Economic Review - April 25, 2002
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