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Vietnam 8

Vietnam

Telecoms and technology report
(Forecast closing date: December 11th 2009)

Total IT spend, international comparison
(US$ bn)
2005 a 2006 a 2007 a 2008 a 2009 b 2010 c 2011 c 2012 c 2013 c 2014 c
Vietnam 1.2 1.5 2.0 2.2 2.1 2.3 2.7 3.1 3.5 4.0
US 419.2 455.6 493.2 503.6 493.0 505.6 527.3 550.3 574.8 600.5
Japan 101.7 106.9 108.5 124.1 125.7 127.2 128.5 131.2 135.1 139.1
China 42.9 48.7 60.6 68.4 74.5 83.6 97.3 112.0 129.5 149.8
Germany 78.8 74.8 85.0 92.9 82.7 84.8 89.9 95.6 101.5 107.8
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Source: Economist Intelligence Unit.

Overview Vietnam"s telecommunications industry has experienced rapid growth in recent
years, and this is particularly true in the case of the mobile-phone and Internet
sectors. Vietnam"s membership of the World Trade Organisation (WTO), which
took effect in January 2007, will open up the industry to greater private
competition from both foreign and domestic firms in the forecast period. This
will serve to make telecoms and technology services cheaper and more
accessible. However, the country’s position in the Economist Intelligence Unit"s
e-readiness rankings is poor, at 64th out of the 70 countries surveyed in 2009.
This is largely an indication of the country"s inadequate technology infra-
structure and its low broadband penetration rate.
The government plans to facilitate the upgrade of the country"s information
and communications technology infrastructure and is intent on opening up the
industry to greater competition. The right to invest in the sector will gradually
be extended to foreign firms under the terms of Vietnam"s membership of the
WTO. At present foreign firms may own up to 51% of the shares in Vietnamese
telecoms firms (up from 49% before WTO accession), but this limit will rise to
65% in 2010. The government has agreed to fully liberalise the sector to foreign
investment and ownership by 2012.

Income and demographics
2005 a 2006 a 2007 a 2008 a 2009 a 2010 b 2011 b 2012 b 2013 b 2014 b
Nominal GDP (US$ bn) 52.9 c 61.0 c 71.1 c 89.9 c 91.9 94.1 104.2 116.8 131.6 149.1
Population (m) 83.5 c 84.4 85.3 86.1 87.0 87.8 88.7 89.5 90.4 91.3
GDP per head (US$ at PPP) 2,132 2,358 2,604 2,796 2,940 3,131 3,355 3,605 3,893 4,227
Private consumption per head (US$) 402 c 458 540 702 699 755 853 970 1,101 1,248
No. of households ('000) 25,154 25,595 26,335 27,114 27,935 28,780 29,651 30,548 31,472 32,425
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
Source: Economist Intelligence Unit.

Telecoms The mobile-phone sector will grow significantly in 2010-14. There were an
estimated 86 mobile subscriptions per 100 population in 2009. The number of
total subscribers will continue to rise in the forecast period, although the pace

Industry Report: Telecoms and technology December 2009 www.eiu.com/viewswire © The Economist Intelligence Unit Limited 2009

Low income levels and high prices have suppressed demand for telecoms services until recently. Demand for telecoms services in rural areas will depend largely on service provision.805 3.9 2.877 a Economist Intelligence Unit estimates.7 14.9 3.4 79. Telecoms expenditure 2005 a 2006 a 2007 a 2008 a 2009 a 2010 b 2011 b 2012 b 2013 b 2014 b Telecoms investment (% of GDP) 1.139 2.8 82.9 41.9 2. particularly in rural areas.7 11. as the provision of services improves.3 90.9 1.3 68.5 14.7 102. Demand.505 4. demand in rural areas is set to rise rapidly. before slowing declining.763 1.7 9.486 4. drives demand.397 2. There were an estimated 13. b Economist Intelligence Unit forecasts.015 3. However. The majority of Vietnamese living in such areas do not have the sort of access to goods and services as their compatriots have in the major cities.094 Telephone main lines (per 100 people) 7.0 93.831 5.com/viewswire © The Economist Intelligence Unit Limited 2009 .8 in 2012.715 3.0 1.8 14.091 4. owing to inefficiency and waning demand for such services.1 108. Source: Economist Intelligence Unit. This trend is expected to continue. c Economist Intelligence Unit forecasts.761 13.846 2.0 74.813 2.126 1.752 Mobile telecoms revenue (US$ m) 587 820 1.773 11.111 13.186 9.2 2.9 main lines per 100 people in 2009.6 per 100 people in 2004.5 2.8 103. b Economist Intelligence Unit estimates.5 96.6 121.eiu.2 Fixed telecoms revenue (US$ m) 1.7 1. Internet service provision will also see strong growth in 2010-14 as personal computer usage increases and improvements in infrastructure. This means that customer loyalty in the market is weak.535 5.9 1. However.107 12. Industry Report: Telecoms and technology December 2009 www.253 13. Source: Economist Intelligence Unit. the growth in average personal disposable income and the rapid expansion of the private sector have sharply increased demand for telecoms and technology services in urban areas.6 19. This number is expected to peak at 14.0 86.3 Mobile subscriptions (m) 9.9 14.3 35. Growth in fixed-line services is likely to be weak in the forecast period.838 2. up from just 5.5 12.5 22.282 13. As the vast majority of mobile-phone subscriptions are pre-paid. Telecoms penetration 2005 a 2006 a 2007 a 2008 a 2009 b 2010 c 2011 c 2012 c 2013 c 2014 c Telephone main lines ('000) 6.9 Mobile subscriptions (per 100 people) 11.6 110.8 14.129 2.8 13.456 8.2 114.9 Vietnam of expansion will slacken as the market is already becoming saturated. customers can easily switch networks in order to receive the latest discount or new services.5 a Actual.009 12. particularly as providers offer more services on expanded networks and costs fall.

given the fact that around 50% of mobile- phone accounts are inactive. The government has a strong interest in the telecoms sector. b Economist Intelligence Unit estimates.0 8. almost all of the country’s communes now have at least limited access to the fixed-line network. and it is also the parent company of two mobile-phone operators. Viettel.8 9. as a result.43 0.05 0.Vietnam 10 Telecoms costs (US$) 2005 a 2006 a 2007 a 2008 a 2009 b Fixed-line call (peak) 0. compared with less than 60% a decade ago. This reflects the fact that Vietnamese often take advantage of free SIM cards with a set number of minutes or texts offered by mobile carriers as promotions. After the minutes and texts are used.1 – – – a Actual. Determining the exact number of mobile phone subscribers is difficult. VietnamMobile. according to the MIC. according to the MIC.com/viewswire © The Economist Intelligence Unit Limited 2009 . GTEL Mobile and Hanoi Telecom. VinaPhone and MobiFone. Over 70% of subscriptions are pre-paid. The state- owned Vietnam National Post and Telecommunications (VNPT) holds the largest market share in both fixed-line and mobile networks.05 0. Other domestic service providers include S-Fone.6 11. Following a period of fairly rapid growth in telecoms. which has a market share of around 33%. The government has indicated that it intends to equitise both VinaPhone and MobiFone.43 – – – Mobile call (off peak) 0. City Phone. Supply. EVN Telecom.05 0. There is good access to telecoms services in the major cities and access in rural areas is expected to improve in the forecast period.5 10. VNPT also operates a low-cost mobile-phone service. they may struggle to raise sufficient Industry Report: Telecoms and technology December 2009 www.06 0. the SIM cards are usually discarded.05 Fixed-line rental (monthly) 11. Rising demand for telecoms services. Thus the country"s reported mobile penetration rate can be greatly misleading. Moreover. although a timeframe has not been given.31 0. The government plans to improve the quality of access through a rural telecoms development project that will make use of the existing Code Division Multiple Access (CDMA) network. but are still counted as mobile accounts.2 3. and particularly for mobile-phone services. the military operates the country"s second-largest telecoms firm in terms of market share. mobile- phone service providers have been cutting tariffs and subscription fees in the face of rising competition and. which is expected to come on line in early 2010. Moreover. according to the Ministry of Information and Communications (MIC). A licence has recently been granted to Indochina Mobile to operate a mobile-phone service. However. Source: Economist Intelligence Unit. has raised concerns about the capacity of networks.30 – – – Mobile connection charge 3.4 Mobile call (peak) 0.eiu. the government has taken steps to break the virtual monopoly of VNPT by licensing other state-owned and joint- stock telecoms firms and equitising (part-privatising) a number of VNPT’s subsidiaries. MobiFone follows closely with a market share of around 31% and VinaPhone is the third-largest player. The largest mobile service provider is Viettel.

send and receive video clips. The authorities appear to have no qualms about blocking user access to websites in a bid to prevent criticism of the party or its politics from appearing on the Internet. MobiFone will lag behind. which was equivalent to 31 out of every 100 people.vnpt. Meanwhile. are popular access points.vn Vinaphone: www.com/viewswire © The Economist Intelligence Unit Limited 2009 . there is a chance that they will attempt to roll out their 3G networks sooner than expected. Internet cafes. Owing to strong competition between the network providers. S-Fone.vn Viettel: www. demand for the data services that CDMA can support has been fairly flat. Hanoi Telecom and EVN Telecom. which are now common in most urban areas. largely through improving telecoms infrastructure. appears to have come under very Industry Report: Telecoms and technology December 2009 www. Viettel has committed to offering its new 3G services by April 2010. VinaPhone and MobiFone received individual licences. and download and send e-mail). Facebook.9m Internet users in 2009.vnn. The MIC.vn Internet Internet use is expanding rapidly: the number of users has almost doubled since 2006.com.eiu. There were an estimated 26.gov. The three leading operators are upgrading their networks to Enhanced Data GSM Environment (EDGE) technology. and EVN Telecom and Hanoi Telecom are expected to unveil their network by mid-2010. but the number of Internet users will continue to grow in the forecast period.com. (GSM stands for Global System for Mobile Communications. This target is in line with the Economist Intelligence Unit"s forecast for an Internet penetration rate of 36. However.com.vn Vietnam Telecoms Services (GPC): www.vn Ministry of Information and Communications: www. Viettel.11 Vietnam funds to develop their networks. offer services using CDMA technology. Government control over Internet use may curtail demand if users are prevented from fully exploiting Internet technology (a proportion of websites are blocked by government firewalls).8% in 2010. VinaPhone rolled out its 3G network in October 2009 in 13 of the country"s largest cities and provinces. has awarded four licences for third-generation (3G) services (3G technology allows mobile phones to connect to the Internet.vn MobiFone: www. Vietnam National Post and Telecommunications: www. The network will be extended across the country in the next three years. A social networking site.com. which regulates the telecoms industry. although the number of people accessing the Internet at home is rising dramatically. Earlier this year the government introduced new restrictions on blogging.gpc. while a joint licence was issued to EVN Telecom and Hanoi Telecom.) Three smaller operators. banning people from engaging in political discussions and restricting their posts to personal matters.vinaphone. The government hopes to increase Internet penetration rates to 35% by 2010.viettelmobile. which provides greater bandwidth than GSM. which is also faster than GSM. rolling out its 3G network in December 2010.mic. which has more than 300m active users worldwide.mobifone.

7 Broadband subscriptions ('000) 210 517 1. Source: Economist Intelligence Unit. and this trend is likely to continue throughout the forecast period. The govern- ment is increasingly concerned that the Internet could become a hotbed of political dissent that threatens political stability.684 17. c Economist Intelligence Unit forecasts.643 5. despite the various impediments that exist.5 30. but has made huge strides in recent years.271 13. The enthusiasm for these services suggests that e-commerce will develop further in the forecast period.872 21.6 4.5 2.0 a Actual.920 26.4 21.5 14. However.486 Internet penetration (per 100 people) 12.4 51.0 25. In addition.713 10. E-commerce in Vietnam is still at a modest level.9 36. b Economist Intelligence Unit estimates. Source: Economist Intelligence Unit. the cash culture that still prevails in the country.2 6. and a number of these services are also available via mobile phones. The banking sector has begun to offer a range of e-commerce services. the government has said that network security is still a major hindrance to the development of e-commerce.Vietnam 12 close scrutiny after the site"s owners introduced a Vietnamese-language service that was designed to add to the 1m people who already use the site in Vietnam.1 70. Online payment systems were launched in Vietnam in 2007 and online retailers offered their services in the country for the first time in the same year.7 11. the new and largely untested legal framework for the protection of consumers and Vietnam"s poor infrastructure.866 32.80 a Index score.06 3.1 60. These include the relatively small percentage of the population who have bank accounts (around 10%).8 43.494 7.73 4.739 54. a new e-commerce law was passed that provides a legal framework for the regulation of online commercial activities.6 1.294 2. Industry Report: Telecoms and technology December 2009 www. which could hinder goods delivery.152 16.297 64.6 18.3 8. Available services include online account management and payment of certain types of utility and insurance bills.03 3.258 3.490 45.12 3. Internet penetration 2005 a 2006 a 2007 a 2008 b 2009 b 2010 c 2011 c 2012 c 2013 c 2014 c Internet users ('000) 10.8 17.328 38. The Internet is a potential thorn in the side of Vietnam"s leaders.com/viewswire © The Economist Intelligence Unit Limited 2009 . E-readiness 2005 a 2006 a 2007 a 2008 a 2009 a Economist Intelligence Unit e-business readiness rating (10=high) 3. However.407 Broadband subscriptions (per 100 people) 0. mobile banking should take off in the medium term and this could eventually transform the cash culture in the country"s major cities.eiu.3 0. as young people are keen users of mobile phones.711 14.

9 21.4 22.989 3.8 26.1 2. Vietnam Datacommunications controls around 40% of the market.4 18. Vietnam"s hardware sector is now seeing signs of a recovery.4 – DSL annual rental costs (US$. Hardware expenditure 2005 a 2006 a 2007 a 2008 a 2009 b 2010 c 2011 c 2012 c 2013 c 2014 c IT hardware spend (US$ m) 1.3 a Actual.841 28. Viettel. The government is planning to invest heavily in telecoms infrastructure in order to improve Internet services and increase Internet penetration rates. Demand. sales volumes of PCs and notebook computers will rise in line with Internet usage.7 a Actual. after growing by more than 4% in 2008.7 7. Hardware penetration 2005 a 2006 a 2007 a 2008 a 2009 b 2010 c 2011 c 2012 c 2013 c 2014 c Stock of personal computers ('000) 6.134 37. greater incomes and improvements in Internet service provision.625 15. which controls around 25% of the market.7 68. Expenditure will return to its 2008 level in 2011.221 43. Vietnam National Post and Telecommunications.6 15.8 141.018 1.7 15.1 34.360 IT hardware spend (D m) 16.923 20.6 3.660 2.3 143.304 1.142 26.8 24.8 12. Source: Economist Intelligence Unit.220 22. businesses) 143. c Economist Intelligence Unit forecasts. % growth) 17.9 11.13 Vietnam Internet costs 2005 a 2006 a 2007 a 2008 a 2009 DSL connection costs (US$.0 1.3 142.3%.1 14.195 24. from an estimated 31 in 2009. Supply. PC ownership is forecast to rise to around 29 per 100 people in 2014.1 2.9 2.6 12.7 8. Shipments of personal computers (PCs) have been higher than expected.3 25.5 29. with spending up by 3. the Economist Intelligence Unit expects global hardware spending to contract by nearly 13% in 2009.0 68. Even so.569 IT hardware spend (D.4 9.1 2.eiu.3 20.2 2. Source: Economist Intelligence Unit.261 Stock of PCs (per 100 people) 7. with around 15%.300 2. the dominant Internet service provider (ISP) in the country.982 2. Source: Economist Intelligence Unit. is a subsidiary of the state-owned telecoms company.732 57. and the number of Internet users is set to increase to 71 per 100 people in 2014.5 2.8 IT hardware spend (% of GDP) 1. It faces keen competition from three local firms: FPT.1 – VoIP call costs (US$) 1.997 32.222 64. Hardware After bearing the brunt of the business spending cuts that were introduced after the global financial crisis of late 2008.885 1. which has around 10%.051 17. Vietnam Datacommunications.200 8.100 10.7 28. from an estimated 17 in 2009.7 17.3 2.0 17.1 29. and EVN Telecom.0 1.026 30.com/viewswire © The Economist Intelligence Unit Limited 2009 .300 12. businesses) 750.773 50. and chipmakers are becoming more optimistic.7 7.3 2. c Economist Intelligence Unit forecasts.0 1.141 20.8 Stock of PCs (% growth) 61. However.0 – a Actual. thanks to the economic pain that continues to be felt around the world and a stronger US dollar. In the long term. Interest in Industry Report: Telecoms and technology December 2009 www.8 17.5 10.9 12. we are forecasting a recovery in 2010.0 2.0 750. b Economist Intelligence Unit estimates. b Economist Intelligence Unit estimates.807 1.743 1.

7% in 2009. The most famous example already offered is a suite of applications by a US firm.3% respectively. Trung Computer Manufacturing and Services produces the leading Vietnamese-assembled PC brand. There are important reasons why software is holding up better than hardware. It also runs training centres for software experts. The most affordable country will have the lowest percentage and be ranked first. distributes hardware and provides services for multinational companies.com/viewswire © The Economist Intelligence Unit Limited 2009 . The PC market is dominated by locally assembled non-branded models. Industry Report: Telecoms and technology December 2009 www. some of which are exported. which amount to around 20% of original licensing costs. according to the Vietnam Software Association. although the market for these items will remain small. but global sales will still shrink by an estimated 3. The Corporation for Financing and Promoting Technology (FPT) is a leading domestic supplier of a range of technology services and products.000 2. More software will be offered to customers over the Internet. The government is spending heavily to boost the development of the software segment. The use of "cloud computing" will be one of the most significant IT developments in coming years. It produces computer hardware and software. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Another notable player in the local-branded PC assembly sector is Mekong Green. From only a handful of firms in 1998. 512MB RAM (av) 1. which imitates the Office suite produced by another US company.eiu. Vietnam"s software industry has developed strongly in recent years. In the enterprise sector software systems now underpin the business processes of the world"s biggest corporations. Software vendors also enjoy the safety net of their annual maintenance fees. The investment is an explicit acknowledgement of the segment"s importance to the development of the country"s burgeoning information and communications technology sector. which have accounted for around 70% of sales in recent years. Google. Yet sales of new software by the biggest providers have fallen this year and customers have been signing contracts that do not require them to make main- tenance payments over such a long period. and this trend will continue in the forecast period as the local industry matures. Imported brand-name PCs include models made by Hewlett-Packard (HP) and IBM (both of the US) and Acer (of Taiwan).Vietnam 14 technology that integrates the functionality of televisions and PCs is also expected to rise. CMS. the sector has grown to comprise more than 700. Software Software companies have suffered less than their hardware counterparts in the economic downturn. Microsoft. with global growth rising by 5% and 5. Both CMS and FPT hold original equipment manufacturer status. Pricing % of monthly personal Affordability Item Price (US$) disposable income rank Desktop PC.701 57 out of 59 Note. Countries are ranked according to these percentages. some of which will be free. However. both IT services and packaged software will bounce back in 2010. There are a number of competitive local manufacturers of IT hardware. Supply. There are also other pressure points.

A number of major global players.eiu. The government aims to make Vietnam an attractive outsourcing location for foreign firms. This compares with an average of 61% in Asia as a whole. The director of the Copyright Office of Vietnam. ignorance and disrespect for copyright laws” for the high levels of piracy. Much to the chagrin of a US-based lobbying organisation. the Business Software Alliance. Cisco Systems. including IBM. Industry Report: Telecoms and technology December 2009 www.15 Vietnam Business-process outsourcing has major growth potential. HP and Compaq (all of the US). Vietnam is the world’s tenth worst offender in terms of the level of software piracy.com/viewswire © The Economist Intelligence Unit Limited 2009 . resulting in losses estimated at US$257m. Nortel of Canada. blames “lax enforcement. An estimated 85% of software used in Vietnam in 2008 was pirated. and Sony and Fuji of Japan. Vu Manh Chu. are already outsourcing work to Vietnam. and the sector has been growing rapidly in recent years.

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