Q2 2016
www.bmiresearch.com

VIETNAM
TELECOMMUNICATIONS REPORT
INCLUDES 5-YEAR FORECASTS TO 2020

Published by:BMI Research


Vietnam Telecommunications Report Q2
2016
INCLUDES 5-YEAR FORECASTS TO 2020

Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: March 2016
ISSN: 1748-4944

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Vietnam Telecommunications Report Q2 2016

CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 8
Industry ................................................................................................................................................... 8

Industry Forecast ................................................................................................................ 9
Latest Updates ......................................................................................................................................... 9

Structural Trends ..................................................................................................................................... 9
Table: Telecoms Sector - Historical Data & Forecasts (Vietnam 2013-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Industry Risk/Reward Index ............................................................................................. 15
Asia Telecoms Risk/Reward Index ............................................................................................................... 15
Table: Asia Pacific Telecoms Risk/Reward Index - Q2 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Industry Risk Reward Ratings .................................................................................................................... 18

Market Overview ............................................................................................................... 20
Market Drivers & Trends ......................................................................................................................... 20
Mobile ................................................................................................................................................. 21
Table: Vietnam Mobile Market ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table: Value-Added Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Wireline Voice & Broadband .................................................................................................................... 26
Pay-TV ................................................................................................................................................ 29

Regulatory Development .................................................................................................. 33
Regulatory Overview ................................................................................................................................ 33
Table: Vietnam - Regulatory Bodies And Their Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Legislation And Market Liberalisation ....................................................................................................... 33
Regulation ............................................................................................................................................ 34
Licensing And Spectrum .......................................................................................................................... 34

Competitive Landscape .................................................................................................... 37
Table: Key Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Table: Vietnam Mobile Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37


Company Profile ................................................................................................................ 38
Vietnam Posts & Telecommunications (VNPT) ..............................................................................................
VNPT-VinaPhone ....................................................................................................................................
MobiFone ..............................................................................................................................................
Viettel ...................................................................................................................................................
S-Fone ...................................................................................................................................................
FPT Telecom ..........................................................................................................................................

38
43
47
52
57
60

Demographic Forecast ..................................................................................................... 63

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Vietnam Telecommunications Report Q2 2016
Table: Population Headline Indicators (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table: Key Population Ratios (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table: Population By Age Group (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Table: Population By Age Group % (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Glossary ............................................................................................................................. 68

Table: Glossary Of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Methodology ...................................................................................................................... 70
Industry Forecast Methodology ................................................................................................................ 70
Sources ................................................................................................................................................ 72
Risk/Reward Index Methodology ............................................................................................................... 72
Table: Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

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Vietnam Telecommunications Report Q2 2016

BMI Industry View
BMI View: Vietnam has experienced strong uptake of 3G and fibre broadband in 2015, demonstrating the
rising inclination towards both mobile and fixed data use. We now hold a more positive outlook on the
adoption of premium services and advanced networks, although the government's restrictions on 4G
rollouts could restrict operators' abilities to meet rising data needs in the short term.

4G Rollout Restrictions - A Downside To Technological Infusion
Vietnam Mobile Market Forecsts
150,000

100,000

50,000


0
2014

2015

2016f

2017f

2018f

2019f

2020f

Vietnam - 3G & 4G phone subscribers, '000
Vietnam - Cellular Mobile Phone Subscribers, '000

f = BMI forecast. Source: VNTA, BMI

Latest Updates & Industry Developments
■

We are forecasting 134.12mn mobile subscribers by end-2020, for a 136.64% penetration rate. Out of this
number, 55.91mn will be 3G/ 4G connections. However, we highlight the figure is distorted by inactive
prepaid subscriptions and multiple SIM ownership.

• Viettel has installed approximately 200 LTE-enabled base transmission stations (BTSs) in the residential
area of Vung Tau City, Ba Ria City and Long Dien District after being granted permission by the

government to conduct 4G trials. Rising data consumption could increase subscribers' appetite for faster
data transmission speeds through 4G, and Viettel is keen to be the first operator to move into the area.

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Vietnam Telecommunications Report Q2 2016

SWOT
Industry
SWOT Analysis

Strengths

■

Highly competitive mobile sector dominated by the state.

■

Fixed-line penetration levels and internet user rates are high in major urban centres
such as Ho Chi Minh City, Hanoi, Danang and Haiphong.

Weaknesses

■

Dependency on prepaid services exerts strong downward pressures on average

revenue per user (ARPU) levels.

■

Broadband growth continues to be highly dependent on DSL.

■

Digital divide: many rural areas have little or no access to telecommunications
services despite advanced networks being rolled out in larger cities.

Opportunities

■

Government approach to liberalise the telecoms industry could see the entrance of
more foreign investors.

■

Divestiture of MobiFone from Viet Nam Posts and Telecommunications (VNPT) , and
the former's subsequent planned Initial Public Offering (IPO) by 2016 should provide
the impetus for operators to launch better quality services

Threats

■

Geographical challenges to network deployments; nearly one-third of Vietnam's
villages lie in mountainous areas without access to telecommunications

services.Number of inactive mobile subscribers is unknown in what is still a market
that lacks transparency and reliable data.

■

The Ministry of Information and Communication (MIC) will hold off 4G licensing until
2017; delayed introduction of 4G could cause Vietnam to trail behind its peers.

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Vietnam Telecommunications Report Q2 2016

Industry Forecast
BMI View: Positive growth rates in 3G and FTTH subscriptions have enabled us to amend our five-year
forecasts upwards. MobiFone's privatisation will bring about more competition in the mobile sector, which
we believe will drive operators to improve the quality of their services - painting an overall positive picture
for the market. However, the government's recent decision to delay the launch of commercial 4G services
till 2017 could mean that Vietnam is unable to exploit the full demand for mobile data over the next couple
of years, and fall behind its regional peers in technological advancement.

Latest Updates
■

We have extended our forecasts to 2020 this quarter, and there have been some revisions to our
forecasted figures after accounting for 2015 historic data; although general trends remain the same. We
forecast wireline telephony subscribers to decline from 11.64mn at end-2015 to 10.76mn by end-2020.
On the other hand, mobile subscribers will continue to grow from 2015's numbers of 120.32mn to

134.12mn.

■

3G subscriber growth picked up over 2015 and has led us to revise our subscription forecasts
upwards this quarter. We believe that 3G subscribers will reach 41.15mn by end-2016, and reach
55.99mn by end-2020 - accounting for 41.7% of all mobile subscriptions.

Structural Trends
Mobile

The VNTA reported that there were 135.99mn mobile subscribers in Vietnam in December 2014, which fell
11.52% to 120.32mn at the end of 2015. The Vietnamese mobile market is highly saturated with about
130% penetration, and 3G adoption has been on the rise, constituting about 40% of the mobile market. In
June 2014, government-owned Vietnam Posts and Telecommunications (VNPT) sold off its mobile unit
MobiFone with a view to entice outside investment. BMI believes MobiFone's impending IPO will boost
competition in the market as well, providing upside to the 3G market.

Strong competition between operators revolves around price, and aggressively low tariff rates have pushed
the Vietnamese mobile industry towards market saturation and declining profitability. Further evidence of a
growth slowdown includes operators such as Viettel and VNPT looking at overseas markets for additional
growth opportunities - VNPT's MobiFone opened a representative office in Myanmar in December 2012.

We do not expect the Vietnamese mobile market to return to double-digit growth. While rural regions
possess growth opportunities, the return on investment is comparatively low due to the need for the highest
capital expenditure and lower purchasing power. Instead, we expect operators to focus on generating higher

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Vietnam Telecommunications Report Q2 2016

revenue from existing subscribers by upgrading customers to more expensive services such as 3G. The
change in emphasis is partially due to market saturation and a competitive landscape that has seen a number
of investors leaving, which leaves the remaining operators with greater market shares. However, we
highlight that the headline figure is distorted by inactive prepaid subscriptions and multiple SIM
ownership.

Russia's VimpelCom was the only operator in Vietnam to publish its ARPU data. According to the firm, its
Vietnamese operation, GTEL Mobile (Beeline VN) - renamed as Gmobile - had an ARPU of USD0.90 in
the quarter ended March 2012; unchanged from December 2011, but up from USD0.7 in September 2011.
Prior data is unavailable, which makes it difficult to identify a trend, although we believe Beeline VN's low
ARPU reflected the intense competition in Vietnam's mobile market. Further, VimpelCom has since exited
the market by selling its 49% stake in GTEL Mobile to its local partner.

We believe that VNPT and Viettel have significantly higher ARPU given their higher market share.
Nevertheless, we estimate that the average ARPU level for the Vietnamese market was in the region of
USD4.1 at the end of 2012, given the strong level of competition, high dependency on basic 2G services
and the occasional aggressive pricing promotion. Both MobiFone and VinaPhone raised their 3G tariffs by
25% in April, to bring their prices on a par with competitor Viettel, but we do not believe this will have a
significant impact on ARPUs in the long run. We envisage ARPU levels in Vietnam to continue to decline
over the next five years. Local media reports that 3G tariff rates are lower than that of 2G services reaffirms
our view that competition remains intense. Local media reported in January 2013 that MobiFone has
launched a 3G service package that costs only VND15,000 (USD0.7) a month.

We do not anticipate that the launch of 4G services will immediately lead to higher ARPUs in the country.
Both Viettel and VinaPhone, it would appear, will begin offering 4G data services without any additional
cost to the consumer. It is, nevertheless, possible that the demand for data consumption will grow that may

entail a higher ARPU. However, we do not envision this to be significantly strong in the short term especially with the government's plan to withhold 4G licensing and limit network investments during the
service's trial period.

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Vietnam Telecommunications Report Q2 2016

Industry Trends - Mobile
(2013-2020)
150,000

150

145
100,000
140

135
50,000
130

0

125
2013

2014


2015

2016f

2017f

2018f

2019f

2020f

Cellular Mobile Phone Subscribers, '000 (LHS)
3G & 4G phone subscribers, '000 (LHS)
Mobile Phone Subscribers/100 Inhabitants (RHS)

f = BMI forecast. Source: VNTA, BMI

Wireline Voice & Broadband

The fixed-line industry is expected to continue its long-term decline trend driven by mobile substation and
VoIP usage. The latest available data from the General Statistics Office (GSO) registered 14.9mn fixed-line
subscriptions in December 2012, down from the 15.5mn subscriptions in 2011.

Our scenario for Vietnam's fixed-line market is that the major players - VNPT, Viettel and EVN Telecom
(which has since merged with Viettel) - continue their rural expansion projects to sustain their fixed-line
subscriber bases. VNPT is already working to boost subscriber loyalty by offering single billing for both
fixed-line and broadband services. However, we believe that the declining demand is convincing them to
channel their capital to more profitable segments such as mobile and broadband. Further, the traditional

fixed-line voice service is also under threat from cheaper alternatives such as VoIP. The declining
subscriber figures indicate the market's

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Vietnam Telecommunications Report Q2 2016

Conversely, the number of fixed broadband subscribers increased by 27.6% y-o-y from 6.00mn in end-2014
to7.66mn by end-2015. BMI estimates that VNPT and FPT Telecom together account for more than 80% of
the fixed broadband market.

Despite Vietnamese telecoms companies continuing to deploy broadband services such as fibre-to-the-x,
affordability and coverage remain key concerns in the emerging market. Demand for traditional fixed
broadband services is increasingly under threat from mobile alternatives due to a lower cost structure. While
we believe there will be limited growth potential for the fixed broadband industry in Vietnam in the near
future, we retain an optimistic view in light of Vietnam's growing affluence and expanding middle class. In
fact, fibre-to-the-home (FTTH) subscriber numbers have demonstrated three-digit y-o-y growth in
2014/2015, and achieved 3.9% penetration in December 2015; accounting for almost half of all fixed
broadband subscribers in Vietnam. In addition, next-generation mobile technologies LTE and WiMAX
could cannibalise demand for fixed broadband solutions, companies could generate consumer interest by
introducing bandwidth-intensive services, such as IPTV, or target businesses by offering bundled packages,
such as cloud solutions.

Although the internet user penetration rate is expected to be approaching saturation in major cities and
towns, rural Vietnam remains comparatively untapped as a result of consumers' lower purchasing power.
However, expansion into these areas is costly and the return on investment is not as attractive. Mobile
internet services are a more efficient way to capture customers in rural areas.


We expect the growth rate of the Vietnamese broadband market to decline in the next few years as
consumers opt for mobile alternatives. That said, declining prices of products and services should help the
sector to grow by an average of 6.3% between 2016-2020 to bring the total number of fixed broadband
subscribers in Vietnam to 10.34mn by 2020.

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Vietnam Telecommunications Report Q2 2016

Industry Trends - Wireline Sector
(2013-2020)
15,000

10,000

5,000

0
2013

2014e

2015e

2016f


Broadband internet subscribers, '000

2017f

2018f

2019f

2020f

Main telephone lines in service, '000

e/f = BMI estimate/forecast. Source: BMI, VNTA, operators

Table: Telecoms Sector - Historical Data & Forecasts (Vietnam 2013-2020)

2013

2014e

2015e

2016f

2017f

2018f

2019f


2020f

13,100.0

12,183.0

11,634.8

11,402.1

11,196.8

11,017.7

10,863.4

10,754.8

Main Telephone
Lines/100 Inhabitants

14.3

13.2

12.5

12.1

11.7


11.4

11.2

11.0

Cellular Mobile Phone
Subscribers, '000

123,845.4

135,992.7

120,324.1

124,294.7

127,650.7

131,480.2

133,452.4

134,119.7

135.5

147.1


128.8

131.6

133.8

136.5

137.2

136.6

19,795.0

28,575.3

35,782.2

41,149.6

46,087.5

50,235.4

52,747.1

55,912.0

16.0


21.0

29.7

33.1

36.1

38.2

39.5

41.7

5,153.0

6,000.5

7,657.6

8,806.3

9,466.7

9,940.1

10,138.9

10,341.6


Main telephone lines
in service, '000

Mobile Phone
Subscribers/100
Inhabitants
3G & 4G phone
subscribers, '000
3G & 4G market, % of
mobile market
Broadband internet
subscribers, '000

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Vietnam Telecommunications Report Q2 2016

Telecoms Sector - Historical Data & Forecasts (Vietnam 2013-2020) - Continued

Broadband internet
subscribers/100
Inhabitants

2013

2014e


2015e

2016f

2017f

2018f

2019f

2020f

5.6

6.5

8.2

9.3

9.9

10.3

10.4

10.5

e/f = BMI estimate/forecast. Source: National sources, BMI


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Vietnam Telecommunications Report Q2 2016

Industry Risk/Reward Index
Asia Telecoms Risk/Reward Index
BMI View: Asia Pacific's Telecoms Risk/Reward Index has experienced a few changes in rankings this
quarter, with the two most notable shifts being the exchange in positions between Afghanistan and
Thailand. We believe that the decline in the average regional Telecoms score could be a recurring
occurrence in coming quarters on the back of bearish economic growth outlooks for major Asian economies
such as China and Australia.

This quarter, the average Telecoms score for the Asia Pacific region fell by 0.6 points to 50.2, caused by
overall declines in the Industry Rewards and Country Rewards segments by 1.3 and 0.5 points respectively,
and which offset a slight improvement in the Country Risk field (0.3 points). Asia Pacific's average Industry
Risk Scores have been constant for more than a year and were unchanged this quarter at 64.5. Although 19
out of our 28 APAC countries experienced a decline in their Telecoms Scores, as the extension of our
forecast period to 2020 puts a drag on the five-year subscription growth rate, rankings for most countries
remained constant with no shuffling between above- or below-average performers.

Economic Headwinds Curb Demand For Advances Services

There has been little change to the scores of the 12 countries that outperform the regional average (up to
India) in terms of Telecoms Score this quarter. However, half of these countries - namely Hong Kong,
Indonesia, Japan, Malaysia, New Zealand and Taiwan - received downgraded Industry Reward scores in
Q216. This highlights the limits to returns correlating to subscriber and ARPU growth in the
aforementioned telecoms markets. Indeed, our Country Risk team's bearish outlook on economic growth for

China and Australia in 2016 will prove especially detrimental to most exposed neighbours such as Hong
Kong, Taiwan and New Zealand, posing further downside risks to the countries' Telecoms scores in coming
quarters.

Japan remains at the top of the list due to its strong performance in all four components of our Asia Pacific
Telecoms Risk/Rewards Index. Japan's high ARPUs reflect a technology-receptive consumer base with high
propensity to spend on bundled and complementary telecoms services. However there has been recent
pressure from the government for operators to reform their mobile phone rate plans so as to reduce the
proportion of household income spent on the consumption of communications services, which poses
downside risk to ARPU levels in 2016. However, we do not expect this to induce a change in ranking, as a
2.6-point gap separates it from second-ranking Singapore.

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Vietnam Telecommunications Report Q2 2016

Slow Improvement For Underperformers

The largest change in ranking this quarter was shared by two countries: Thailand and
Afghanistan. Afghanistan fell nine positions to 23rd place this quarter, owing to a 27.3-point decrease in the
Country Rewards category. The adverse impact of economic headwinds also extended beyond its Country
Rewards score, reflected in the country's low Industry Risk/Reward scores. Conversely, Thailand took
14th place, moving nine places up the table and making it into the middle-tier for the first time. It
experienced the largest improvement in Telecoms Score of 3.9 points this quarter due to upward revisions to
both Industry and Country Rewards categories.

Despite high mobile penetration and strong subscriber growth, ARPUs in developing countries will grow at

a slower rate. Sri Lanka, which replaces Laos at the bottom of our Asia Pacific Telecoms Score ranking due
to a decline its Industry Rewards score, has one of the region's lowest ARPUs. Dialog Axiata, the largest
operator and also the only one that provides operational and financial data, reports blended ARPU of
LKR372 (USD2.60) in Q315.

Even in markets with high growth potential, such as Myanmar, Bangladesh and Vietnam, introducing price
sensitive users to mobile data services will necessitate some form of subsidies from operators. While lower
tariffs will drive take-up of 3G/4G services, until this translates into notable increases in ARPU levels the
rewards for telecoms operators will remain limited. The economic outlook for these emerging markets is
therefore a key indication of opportunity to encourage greater consumer spending on telecoms over the next
five years, and can have an important impact on their RRI score. For example, Bhutan's Country Risks score
improved by 13.3 points this quarter due to the development of closer trade ties which support the country's
economic growth prospects; our Country Risk team forecasts average real GDP growth of 7.3% a year over
the 2016-2025 period.

Underperformers in the Industry Risk component also tend to underperform the regional average Telecoms
Index, and vice versa. Whilst Vietnam and Myanmar tie-in at the bottom for this component, which assesses
the independence of the regulator and liberalisation of the sector, with scores of 30, the establishment of an
independent regulator in Myanmar as mapped out in its Draft Telecommunications Masterplan could incite
a change in placing in coming quarters.

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Vietnam Telecommunications Report Q2 2016

Table: Asia Pacific Telecoms Risk/Reward Index - Q2 2016


Industry
Rewards

Country
Rewards

Industry
Risk

Country
Risk

Telecoms
Index

Rank

Previous
Rank

Japan

62.5

73.3

80.0

69.2


68.8

1

1

Singapore

47.5

80.0

90.0

76.3

66.2

2

2

South Korea

60.0

60.0

80.0


70.8

64.6

3

=6

Australia

52.3

80.0

70.0

61.7

63.1

4

4

Hong Kong

42.5

76.7


90.0

69.8

62.1

5

3

New Zealand

42.5

72.0

90.0

68.8

60.8

6

5

Taiwan

52.5


57.0

80.0

70.6

60.4

=7

=6

Macau

42.5

80.0

70.0

73.2

60.4

=7

8

China


60.5

33.3

70.0

80.8

58.3

9

9

Malaysia

42.5

57.0

70.0

68.1

54.0

10

10


Indonesia

52.5

45.0

60.0

58.3

52.7

11

11

India

52.5

32.1

65.0

71.2

52.2

12


12

Philippines

42.5

41.7

60.0

65.1

48.3

13

13

Thailand

44.0

40.0

50.0

58.0

46.0


14

23

Vietnam

52.3

30.0

30.0

68.3

45.9

15

18

Brunei

20.0

76.7

65.0

52.7


45.5

=16

16

Mongolia

30.0

51.0

65.0

64.2

45.5

=16

15

Pakistan

40.5

42.0

60.0


49.2

45.1

18

17

East Timor

25.0

46.7

80.0

63.8

44.4

19

19

Bangladesh

50.0

36.7


60.0

21.9

44.0

20

22

Fiji

32.5

53.3

65.0

41.4

43.8

21

=20

Myanmar

52.5


32.7

30.0

46.2

43.3

22

=20

Afghanistan

35.0

39.3

45.0

54.5

40.5

23

14

Nepal


33.3

33.3

60.0

44.5

39.8

24

24

Bhutan

22.0

36.0

80.0

59.3

39.7

25

25


Cambodia

35.0

41.7

40.0

49.2

39.5

26

26

Laos

27.5

41.3

40.0

49.8

36.1

27


28

Sri Lanka

32.5

30.0

60.0

28.0

35.3

28

27

Average

41.9

50.7

64.5

59.1

50.2


-

-

Scores out of 100, with 100 highest. The Telecoms Risk/Reward Index comprises two sub-indices 'Rewards' and 'Risks'.
Scores are weighted as follows: 'Rewards': 70%, of which industry rewards 65% and country rewards 35%; 'Risks': 30%,
of which industry risks 40% and country risks 60%. The 'Rewards' Index evaluates the size and growth potential of a
telecoms market in any given state, and country's broader economic/socio-demographic characteristics that impact the
industry's development; the 'Risks' Index evaluates industry specific dangers and those emanating from the state's

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Vietnam Telecommunications Report Q2 2016

Asia Pacific Telecoms Risk/Reward Index - Q2 2016 - Continued

Industry
Country
Industry
Country
Telecoms
Previous
Rewards
Rewards
Risk
Risk
Index

Rank
Rank
political/economic profile, based on BMI's proprietary Country Risk Index that could affect the realisation of anticipated
returns. Source: BMI Research

Industry Risk Reward Ratings
Rewards
■

Leveraging the Vietnam Telecommunications Authority (VNTA)'s subscriber numbers and BMI's
population figures, we believe mobile penetration was 129.6% in 2015 while 3G penetration stood at
38.5%. The government decided to postpone the launch of 4G to 2017 on the basis that there was still
excess capacity on 3G networks.

■

Vietnam is one of our regional bright spots, and we forecast GDP growth to come in at 6.6% in 2016.
This will provide the impetus for takeup of more advanced telecoms services in the longer term.

Risks
■

Currency depreciation of the Vietnamese dong could weigh on consumers' purchasing power, while
operational and legal risks faced by investors are still relatively high.

■

Vietnam's low Industry Risk score of 30 is attributable to the large presence of state-owned operators Viettel, MobiFone and VNPT-Vinaphone - that collectively occupy more than 90% of the market.
MobiFone is headed towards an IPO this year, which could attract a foreign investor and stir up the
mobile market; although the government's plans to privatise the operator have been repeatedly postponed

and we envisage that the state will continue to retain a share in the company.

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Vietnam Telecommunications Report Q2 2016

Vietnam Vs Regional Risk/Reward Profile
Q2 2016

Source: BMI Research

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Vietnam Telecommunications Report Q2 2016

Market Overview
Market Drivers & Trends
As an emerging market, Vietnam has a mobile penetration rate higher than its regional peers. This is due to
the aggressive price competition among operators in the domestic mobile market. Consequently, there has
been significant downward pressure on the sector's average revenue per user (ARPU), which only accounts
for about 25% of the regional average.

This is the result of a predominantly prepaid market, which can be attributed to low consumer spending
power. Vietnam's mobile operators have been forced to compete aggressively with price and various

promotions in order to win customers and maintain market share, while the regulator has done little to
prevent further escalation in competition or balance the skewed competitive landscape, which is dominated
by state-owned companies. Instead, the regulator was reported to believe that domestic players are
financially strong enough to support growth in the market. We believe this has led to complacency and
unwillingness to invest in new products and services.

3G adoption in Vietnam has been lukewarm thus far, accounting for 21% of the total mobile market in
2014. Underpinning this is the poor network infrastructure in the country. In terms of the competitive
landscape, the Vietnamese government has started to drive out weaker players with its latest effort seeing
Vietnam Posts and Telecommunications Group (VNPT) to divest of MobiFone, transferring its
ownership to the Ministry of Information and Communications. Strong competition and aggressively low
tariff rates have also pushed the Vietnamese mobile industry towards greater market saturation and
declining profitability. However, MobiFone's initial public offering (IPO) could provide a major upside for
the sector by encouraging investment into improving services.

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Vietnam Telecommunications Report Q2 2016

Mobile
Vietnam Mobile Market Growth
2012-2015

Source: BMI, VNTA

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Vietnam Telecommunications Report Q2 2016

Vietnam Mobile Market Shares (%)
2011-2014

Source: BMI, VNTA, Operators

Table: Vietnam Mobile Market ('000)

2015
Viettel Telecom

55,500

MobiFone

40,000

VNPT-Vinaphone

29,700

Vietnamobile

11,000

e=BMI estimate. Source: BMI Research


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Vietnam Telecommunications Report Q2 2016

Vietnam 3G Subscribers (000)
2013-2015

Source: VNTA

By the end of 2015, the 3G subscriber base in Vietnam had increased to 35.78mn, accounting for 29.7% of
total mobile customers. Despite strong growth it looks as if mobile data is slower to follow as only 3.364mn
of 3G customers were also using data. The initial growth in the 3G sector was attributed to the introduction
of several value-added services including music, news, mobile games and multimedia. However, operators
failed to grow 3G services significantly thereafter, due to poor 3G network quality.

In April 2013, both MobiFone and VinaPhone raised their 3G tariffs by 25% to match Viettel's prices. The
move has been driven by subscribers increasingly opting for over-the-top (OTT) alternatives, which channel
revenues away from operators with alternative applications for messaging, talking and sharing data. We do
not believe that this rise in prices will deter subscribers from using OTT applications, and that operators and
OTT providers can coexist and develop mutually beneficially arrangements.

Vietnam's regulator has again delayed 4G licensing till 2017, and limited the rollout of trial 4G services to
selected cities, owing to low 3G network quality and consequently, uptake, in the country. The Ministry of
Information and Communications permitted operators to run trials of their 4G services in Q415 and leading

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Vietnam Telecommunications Report Q2 2016

operators Viettel and Vinaphone have been keen to rollout trials services. Given the lower costs for
transmitting mobile data over 4G, we believe that this restriction by the government might pose downside
risks to operators' ability to tap rising data demand for revenue growth.

As at end-2014, the top three 3G players were Viettel, MobiFone and VinaPhone, with market shares of
52.2%, 23.4% and 21.9% respectively.

Vietnam 3G Market Share (%)
Q414

Source: VNTA

Mobile broadband is attractive as Vietnam has a weak and unreliable fixed-line infrastructure, which makes
connecting to the internet difficult. According to VNTA, Viettel and VNPT had 3.06mn mobile broadband
subscribers at end-2014; mostly dedicated 3G data cards.

The relatively low level of fixed network infrastructure in Vietnam has meant that wireless technologies are
developing as an important platform for delivering fixed broadband services. The two most important
technologies are WiMAX or LTE, both of which will be used to offer 4G mobile broadband services. This

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Vietnam Telecommunications Report Q2 2016

means that the government's decision to delay the launch of 4G services to 2015 at the earliest will
effectively put the brakes on network development over the short term.

Table: Value-Added Services

Date

Details

Jan-15

Vietnam's government has approved plans to split state-owned Vietnam Posts and Telecommunications
(VNPT) into three entities

Jul-14

Vinaphone introduced a new third-generation mobile telecommunications standard, called DC-HSDPA.

May-13

VinaPhone launched a Busy SMS services, which helps subscribers decline calls in busy periods and
manage their time better.

Apr-13

MobiFone launched a prepaid pack, Q-Kids, aimed at the under-15s.


Feb-13

Viettel rolled out an array of mobile phone packages and features targeted at the country's ethnic
minorities. The operator designed a variety of products for these ethnic minority customers, along with a
switchboard that offers free inquiry services in Thai, Tay-Nung, Hmong, Dao, Gia Rai, Khmer and Ede in a
bid to tap into this underserved market segment. The operator is also providing services such as farming
guidance, navigation services, storytelling and music, in minority languages.

Jan-13

Viettel launched a mobile banking service, BankPlus, in collaboration with An Binh Commercial Joint
Stock Bank (ABBANK). The services will allow customers to carry out banking transactions on their mobile
phones. Once the service is activated, a maximum VND200mn can be transferred to other ABBANK
accounts on daily basis by phone users. The service does not require additional application installation
and is available on all models of mobile phones.

Jan-13

MobiFone launched mFilm, which allows subscribers to search, download and view videos and movies.
MobiFone announced that it will work with content providers to expand its portfolio.

Dec-12

VinaPhone introduced social ZOOTA, which has features such as photo sharing, chat and games, to its
subscribers.

Oct-12

MobiFone announced that international roaming service is now available on certain flights. From October
22 2012, outgoing and incoming calls on flights are charged at VND69,900 per minute and outgoing text

at VND15,000 per text while incoming texts are free. From November 16 2012, postpaid customers are
able to access the internet via data service at VND49,000 per 100KB and VND4,900 per
subsequently10KB. The same service will be delivered to prepaid customers from January 1t 2013.

Sep-12

Viettel launched an e-book store with about 2,000 books. Prices range from VND2,000 to VND15,000, and
can be deducted directly from the subscriber's mobile account.

Jul-12

VinaPhone has started to offer in-flight mobile-phone services on domestic and international air routes,
thereby making it the first mobile operator to offer such service in Vietnam. The operator will charge
USD4.3 and USD4.7 for outgoing and incoming calls respectively. The subscribers can also send SMS by
paying USD0.8 for each SMS, while subscribers will not be charged any fee for receiving messages. The
service is available on several domestic and international flights, including Emirates, Malaysia Airlines and
Hong Kong Airlines. The operator is also in discussions to offer its services to more airlines.

Jun-12

Vietnamobile has introduced a promotional offer for the Euro 2012 football tournament. The operator is
offering Euro 2012 content packages priced at VND500 to VND2,000 per day or VND20,000 for the whole
season. The packages will allow subscribers to access images, videos, updates and advice from football
experts through SMS. The promotion also features a quiz with weekly prizes and a grand prize of
VND200mn in cash.

May-12

Viettel announced an international roaming service for its prepaid subscribers. Subscribers travelling to
Cambodia, Laos, Haiti and Mozambique also enjoy a preferential package due to the operator's global

presence.

Feb-12

MobiFone, in association with media firm Zing, introduced Zing.vn service packages in the country,
reported Viet Nam News. The packages enable subscribers to listen to music, download MP3s and watch
news. Subscribers can also access the Zing Me social network for a monthly tariff of VND15,000.

Jan-12

Viettel and Vietcombank introduced Mobile BankPlus, enabling the operator's mobile subscribers to bank
with Vietcombank through mobile devices since January. The service allows Viettel's subscribers to
transfer money from one account to another within Vietcombank, as well as pay phone bills and access

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