Having experienced six years of booming, the Vietnamese telecom market still doesn’t show any sign of a down trend. Experts said that it could continue to grow well for at least two years more.

Fiercer competition, stronger development

As of August 15, 2006, the Vietnam Post and Telecommunications Group (VNPT) started to calculate charges in the mode 6 seconds + one for inter-provincial fixed phone service and cut charges up to 30% for calls made from 11pm to 6am, during holidays and Sundays.

The geographic areas zoned for calculating charges has also been reduced from three to two regions, with charges of VND909/minute and VND1,636/minute. At the same time, the Ministry of Post and Telematics (MPT) has given the green light to the VNPT to cut charges by up to 20% compared to the above charge levels.

The move of Vietnam’s largest telecom service provider and the programme to raise funds for the public interest fund, which is being carried out by MPT to develop the fixed phone network in remote and isolated areas, promises to pave the way for the strong development of the Vietnamese telecom market, especially in rural areas.

The opening of the telecom market for many local companies to gradually break down the monopoly of VNPT is considered the main motive force promoting the growth of this market in Vietnam.

For the past six years, the telecom market has seen an annual growth rate of more than 30%, and over 50% in the past two years, turning Vietnam into the country with the highest growth rate for the telecom industry in the world.

In the past eight months, the number of new telephone subscribers in the country has nearly doubled the total subscribers in the 1975-2000 period. 2004 and 2005 were the years that saw the most severe competition in the history of the Vietnamese telecom sector, with the participation of four service providers, through which breakthrough changes were made in terms of charge policy and service-accession costs.

Though recording such impressive growth rates, Vietnam’s rate of phones per 100 residents is just 24.42, lower than many Southeast Asian countries. This means that the potential of the Vietnamese telecom market is still great. The MPT forecast that by 2010, Vietnam may reach a ratio of 42 phones per 100 residents, two-thirds of whom will be mobile subscribers.

The ministry’s official statistics also show that in the January – July period of 2006, Vietnam had an additional nearly 4.6 million new subscribers, raising the total number to 20.44 million, including over 11 million mobile subscribers. Two mobile networks, MobiFone and Vinaphone of VNPT, accounted for the largest market shares with over 8 million subscribers, followed by Viettel, S-Fone and EVN Telecom.

According to RJB Consultants, a consulting firm in the field of telecom, the number of mobile phones in Vietnam will rise to 20 million by 2008 and exceed 25 million by 2010. In the next five years, the structure of the country’s mobile phone market will be almost unchanged: Hanoi and HCM City will still be the largest markets, accounting for half of total subscribers.

Both RJB Consultants and GFK Asia Market Research Company predict that the growth rate of mobile phone subscribers in Vietnam will decline after 2008 and remain at a little over 10% for a period of time.

However, with the programme to develop telecom infrastructure in rural areas that is being performed by the MPT through public interest funds, Vietnam may surprise market researchers, like it has the past two years.

Out of phone numbers

The boom of telecom services in rural areas has begun in the market for fixed phone services. That’s why VNPT decided to change fixed phone numbers in the provinces of Dong Nai, Hai Phong and Nghe An from six to seven digits as of October 1, 2006.

In addition, since the beginning of the year, VNPT has received many reports from local post offices that their stock of phone numbers was exhausted and investment in developing phone networks was behind real demand.

For example, northern Ha Tay Province has up to 27,000 families and organisations wanting to use telephone services but the provincial post office can’t meet their demand because it lacks cable and switchboards. In Hai Phong City, more than 10,000 customers are waiting their turn to receive phone services. The situation is similar in Thai Nguyen, Hung Yen and some central provinces.

In this circumstance, VNPT will urgently invest $26 million to increase the capacity of the switchboards of eight central provinces by an additional 300,000 phone lines and this task will be completed in early 2007.

Besides telephone services, the Internet market is also developing very fast with the number of Internet subscribers doubling year after year.

There are nine companies offering Internet services in Vietnam at present, of which, VNPT accounts for 42.63% of the market, followed by FPT with 23.86% and Viettel with18.02%.

By the end of July 2006, the country had over 3.688 million Internet subscribers, up by nearly 800,000 compared to the end of 2005. The number of Internet users is around 13.4 million, equivalent to 16% of the population, reaching the world average.

The MPT predicts that the number of Internet users in Vietnam can reach 35% of the population by 2010. The demand for broadband Internet services is growing very fast and service providers can’t meet the real need.

Along with fierce competition among telecom service providers, connection fees and charges for telecom services have also fallen, which has also increased demand. In addition, the development of online games and online entertainment services has greatly contributed to increasing demand for broadband Internet services.

Source: TBKTSG