Vietnam telecom market remains unsustainable

The UK-based Business Monitor International (BMI) said Vietnam’s telecom market is still in the 17th place in the Asia Pacific Telecom Business Environment Ratings and the future is looking increasingly bleak.

Although Vietnam fares better than Sri Lanka, ranked last in the region, it continues to sit below regional neighbors Thailand and Cambodia.

To explain why Vietnam’s telecom business environment rating is so low, BMI blamed the country’s low ARPU (average revenue per user) rate.

Other factors include Vietnam’s relatively low fixed broadband penetration rate, a fixed broadband dependency on DSL and a landline sector which now appears to be declining.

According to BMI, last year the ARPU in Vietnam averaged at US$5, down from US$5.52 in 2009. Mobile ARPU reached US$6 in 2008, having fallen from US$6.5.

The steady decline of ARPU levels is the result of intense competition between the country’s network operators.

In a market which is dominated by prepaid users, Vietnam’s mobile operators have been forced to compete aggressively with price and various promotions in order to win customers and maintain market share.

The regulator, the Ministry of Information and Communications, has done little to prevent further escalation in competition. Instead, in July 2010, the regulator approved a tariff-reduction proposal submitted by Viettel, MobiFone and Vinaphone, which will see rates being cut by 15 percent.

Thus, BMI said mobile ARPU levels in Vietnam will continue to decline over the next five years. It predicts the ARPU will fall to US$4.49 in 2011 before decreasing to US$3.51 by 2015.

Along with low ARPU, the mobile market has reached saturation and tariffs have fallen significantly as a result of steep competition, although the ministry has urged operators to diversify their business operations and focus on delivering a better quality of service.

Vietnam 3G subscribers have also not increased by as much as expected, even though the service was launched nearly two years ago.

BMI said estimates that there had been eight million 3G subscribers by end-2010 and it believes that the sector is far smaller than what Vinaphone and MobiFone claimed in March 2010. Vinaphone and MobiFone said they had 7 million and 6 million 3G subscribers respectively at the time.

Posted by VBN on May 16 2011. Filed under Telecommunication. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry