Mobile Virtual Network: Hard-to-Eat Pie

Vietnam now has two mobile virtual networks but these players are envisaged to encounter numerous challenges amid the presence of powerful mobile network operators.

Market penetration in late 2010

On June 22, 2010, the Ministry of Information and Communications granted a mobile virtual network operator (MVNO) license to the Vietnam Multimedia Corporation (VTC). Mr Nguyen Hoang Phong, Director of VTC Digicom – an affiliate of VTC, said: VTC will offer mobile services based on EVN Telecom’s 3G facilities. “We only use the EVN Telecom’s 3G infrastructure because the 2G network of this partner uses the 450 MHz band. This is a challenge for available terminals. Apart from EVN Telecom, we will also negotiate with other mobile networks for roaming services in the areas where EVN Telecom’s network doesn’t cover yet,” said Mr Phong.

Mr Chu Tien Dat, Deputy Director of VTC Digicom, said this network operator will provide products and services using 3G technology for customers. “3G is not successful in Vietnam largely because there have been no socially appropriate applications,” said Mr Dat. “For VTC, 3G is a tool, not the target.”

Under the license, VTC will provide mobile information services on EVN Telecom’s 3G facilities and roam with other 2G networks in the country. However, VTC may have to use 11-digit phone numbers. Mr Dat pointed out that the cooperation between VTC Digicom and EVN Telecom is the combination of a strong content provider and a powerful infrastructure operator. VTC expects to formally launch its mobile communication services nationwide by the end of 2010. Currently, VTC has not made a final decision on what the brand of the new mobile virtual network is but many forecast it will be VTC Mobile.

MVNO in a very narrow slot

To date, Vietnam is home two mobile virtual network operators, namely Indochina Telecom and VTC. On August 19, 2009, the Ministry of Information and Communications formally handed a MVMO license to Indochina Telecom which used to announce the service debut in the first quarter of 2010 but it has not been true.

A ministry official said the two companies have not negotiated with each other to provide services. Previously, Mr Pham Thanh Tu, Chairman of the Board of Directors of Indochina Telecom, admitted that this was a challenge for Indochina Telecom because it made the market presence much later than other competitors of deep-rooted foothold, rich experience and powerful resources.

According to analysts, although VTC holds the advantage of content services, it hardly makes a success easily. Among four licensed 3G service providers, EVN Telecom has a very narrow coverage. Mr Vo Quang Lam, Deputy Director for EVN Telecom, said: EVN Telecom will focus on providing 3G services in five most populated cities of Hanoi, Ho Chi Minh City, Hai Phong, Da Nang and Can Tho in the first phase. For the time being, the network operator has kicked off the second phase with the intention of installing another 5,000 base transceiver stations (BTS) in order to expand the 3G coverage.

Thus, the coverage will be a major obstacle for VTC to attract customers. The importance of the network coverage in Vietnam remains a vivid lesson of attracting users for any market players. Meanwhile, it is never simple to negotiate with the Big Three, namely Viettel Mobile, VinaPhone and MobiFone, to expand the coverage. In reality, large mobile network operators have never adopted this model. Moreover, they also do not want to get hassled about the cooperation with mobile virtual networks unless they have very high rates of returns.

“There is a ridicule that mobile network operators announced to roam with many international partners, not domestic networks,” said Mr Nguyen Hoang Phong.

Recently, largest mobile network operators have complained to the ministry about slowing rates of returns, which are reportedly nearing an alarming level. As a result, they cannot allow mobile virtual networks to use at “soft prices”. In the service charge rivalry, the network infrastructure still plays the leading role.

Targeting niche market

In fact, it is much more difficult to sign up new subscribers and the market is reaching the level of saturation. In the meantime, mobile virtual networks may not have effective weapons to lure new users. People who have not registered mobile services mainly have low incomes.

Under the agreements, both Indochina Telecom and VTC Telecom provide services on 3G infrastructures of other networks. Hence, customers must have 3G-supported phones – a luxury item for low-income customers – to use the service. Recently, the Ministry of Information and Communications announced that Viettel was the largest 3G network with only 1.5 million users. This means it is very hard for mobile virtual networks to lure subscribers.

According to analysts, to have subscribers, mobile virtual networks will have to target at niche markets where big players do not have strong influence on. The size of these markets is very small, with several dozen thousands to several hundred thousands of subscribers. As a result, a virtual network will hardly witness a boom in subscribers.

A mobile network pointed out that a network operator will save up to 90 % of costs if it only invests in core networks but to operate a mobile virtual network it must spend millions of US dollars on the core network and sales network. Without proper calculation, a mobile virtual network will hardly recover its investment capital.

Currently, the average revenue per subscriber (ARPU) in Vietnam is only about US$3-4. According to leading companies in the world, a market with a low APRU rate is not the heaven for mobile virtual networks. – VCCI

Tags: Vietnam Telecom, Vietnam telecom maket