Making 3G work

Marc Einstein, Frost & Sullivan

Vietnam has been one of the fastest-growing markets in Asia for some time, and given the level of market development today it is hard to fathom that the country's mobile penetration rate stood at less than 20% only five years ago.  The market has increased from 2.6 million subs in 2005 to 90.7 million last year, and revenues jumped fourfold to $4.4 billion over the same period.

The attractive growth spurred new local players such as Viettel and EVN Telecom as well as foreign investors from Hong Kong, South Korea and Russia to compete with the incumbents Mobifone and Vinaphone.  This ultra-competitive environment led to cut-throat price competition, which eventually overheated the market and significantly increased voice traffic volumes.  

Vietnam was also one of the later markets in the region to auction 3G licenses, finally doing so at the end of 2009.  3G services were largely heralded as the answer to the oversaturated market and were launched with much fanfare, and while 3G will eventually play a huge role in the development of the sector and of the country as a whole, so far 3G subscriber numbers have been largely disappointing compared to the massive growth seen in regional peers such as Malaysia and Indonesia.  

The Ministry of Information and Communications announced in July that after 18 months of commercial 3G service, the country had eight million subscribers and they had generated $173 million. Comparing this with other countries in the region, Vietnam is on the lower side of 3G usage - it is roughly on par with neighboring Cambodia but far behind other markets in the region. 

In fairness Vietnam is still a less developed economy than most Southeast Asian markets as in 2010 the nominal GDP per capita was $1,174 compared to $4,992 in Thailand, $2,946 in Indonesia and $2,140 in the Philippines, according to the World Bank.

Slower usage is to be expected to some extent.  Inflation is also rampant in the country and has recently topped 23%, making it one of the highest rates in the world. 

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