Market challenges
Vietnam's unprecedented growth will also bring new challenges to operators in the wireless space as market strategies will shift toward catering to low ARPU users.
Viettel has been able to take a commanding lead of the local market largely due to its attention to mobile coverage. Despite launching mobile service only in 2003, Viettel quickly became the operator with the most base stations, which allowed it to reach out to previously uncovered subscribers and boast of better signal quality in zones that already had mobile access. We expect Viettel to maintain this leadership into next year and not only reinforce its market position but also pose a severe challenge to other operators.
The low-ARPU challenge is also an impending issue in the country, especially given that many operators are already reporting aggregate ARPUs below $5, with a fall below the $3 threshold within the forecast period. The fact that the market has so many operators vying for subscribers complicates matters.
Operators are increasingly being goaded into promotions to lure new subscribers and price is usually the weapon of choice to compete. HT Mobile, for example, jumped into the market by offering free in-network calling and messaging until September and giving any subscriber who brings in a new customer free 500 voice minutes, 100 text messages and 10 ringtones.
With a seven-player field forcing such intense competition, maintaining low operational and capital expenditures will be very difficult, which we believe will force market consolidation in the near future.
With privatization looming, Vietnam's mobile market is still very much in a state of flux. The industry will continue to add large numbers of subscribers, but the market is facing several uncertainties regarding future levels of competition, operator profitability and technological deployments.
Despite these, all three of the companies that are slated to be privatized are in good position in terms of scale and familiarity in the market and are likely to outlive the newer market entrant, which shields them from some market conditions to some extent. Stakes in the Vietnamese operators will provide excellent growth avenues for investors. And while caution needs to be taken in dealing with a low ARPU environment, both the capital investment and operational experience will greatly hasten the speed of maturity of Vietnam's mobile sector.
Marc Einstein is senior industry analyst at Frost & Sullivan