Search

 

Cablegate: Can You Hear Me Now? Vietnam's Mobile Phone Sector

VZCZCXRO5663
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0573/01 1370020
ZNR UUUUU ZZH
R 160020Z MAY 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7837
INFO RUEHHM/AMCONSUL HO CHI MINH 4730
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 HANOI 000573

STATE FOR EAP/MLS and EEB/CIP WWITTEMAN
DEPT PASS TO USTR DAVID BISBEE AND JONATHAN MCHALE
COMMERCE FOR OTEC/ITA CDICKSON

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECPS ETRD ECON KPRV VM
SUBJECT: CAN YOU HEAR ME NOW? VIETNAM'S MOBILE PHONE SECTOR
CONTINUES TO GROW RAPIDLY

REF: A) 06 Hanoi 3096 (Mobile Phone Sector's Strong Growth);
B) 07 Hanoi 2098 ("Vietnam's Young and Richer Population")

HANOI 00000573 001.2 OF 003


1. (SBU) Summary: Vietnam's telecommunication market continues its
rapid development, underpinned by the strong performance of the
mobile phone sector, which surpassed 35 million subscribers in 2007.
New market entrants and more flexible government regulations helped
to drive down costs and increase investment in the sector. The race
to get official go-ahead to provide new technologies (3G and WiMAX)
has begun, with the losers facing the threat of marginalization.
Privatization of the state-owned mobile companies remains a
Government of Vietnam (GVN) objective and makes the sector a
promising one for U.S. investors, but the process continues to hit
bureaucratic delays and may run up against powerful entrenched
interests. End summary.

PLUGGING IN
-----------

2. (U) Vietnam's telecommunications market, ranked as the world's
second-fastest growing in 2006 by the International
Telecommunication Union (ITU), continues to develop rapidly on the
strength of its mobile phone sector. According to the Ministry of
Information and Communications (MIC), Vietnam's seven mobile phone
networks had more than 35.44 million subscribers by the end of 2007
- a 61 percent increase over 2006. Fierce competition among
providers led to lower fees and improved service quality, which
attracted nearly 14 million new mobile subscribers in 2007, more
than double the number of new customers in 2006. The telecom market
is among the fastest growing sectors of Vietnam's economy, and is
attracting increasing attention from foreign investors, particularly
after Vietnam's 2007 accession to the World Trade Organization
(WTO).

LIKE SHARKS TO CHUM...
----------------------

3. (U) The potential for future profits in this sector, driven by
Vietnam's young, tech-savvy population, continues to fuel
competition among Vietnam's seven service providers, all of which
are wholly or majority state-owned. Former telecom monopoly Vietnam
Posts and Telecommunications Group (VNPT) owns two of the three
largest networks - Mobifone and Vinaphone - and has 54 percent of
the market share with a combined 19 million customers. The third
major player, military-owned Viettel Corporation, is the largest
single operator in Vietnam with a reported 15 million subscribers at
the end of 2007. These three major players all use GSM technology.


4. (U) The three CDMA technology-based providers, S-Phone, EVN
Telecom (run by state-owned Electricity of Vietnam) and HT Mobile, a
joint venture between Hanoi Telecom and Luxembourg's Hutchison
Telecom, have been unable to keep pace with the competition in the
race for new subscribers. The three providers have a total of 1.5
million customers. Local experts cite the lower initial quality of
service of CDMA technology in Vietnam and consumers' desire to
frequently change their handsets (which GSM technology makes
possible) as the main reasons for CDMA's relatively limited success.
HT Mobile sought and received approval from MIC to switch from
CDMA2000 to GSM based mobile services in 2007, citing its
lower-than-expected sales and the limited popularity of CDMA.

5. (SBU) Joining the fray in 2007 was new market entrant G-Tel, a
joint venture between the Ministry of Public Security (MPS),
Russia's second biggest telecom operator Vimpelcom and U.S.-based
Millennium Global Solutions Group. G-Tel is expected to begin
providing services by the end of 2008. G-Tel's emergence presents a
new competitive challenge for the incumbent carriers; combining the
forces of a powerful MPS which holds a significant voice in
government policy-making and the resources and technical know-how of
a multi-national like Vimpelcom.

NEW TECHNOLOGIES
----------------

6. (SBU) MIC approved G-Tel's business license in "near record
speed," according to an industry contact involved with the deal.
The approval came as MIC prepares to issue a limited number of third
generation network (3G) trial licenses. 3G is seen by many as the
future of Vietnam's mobile market. The same contact noted that the
timing of G-Tel's licensing approval was "not coincidental" and is
"very telling" of G-Tel's potential to secure one of the four highly
sought-after licenses (it is limited to four due to limited
frequency availability). Recipients will be determined by a
technical "exam" MIC will administer. Administration of the exam

HANOI 00000573 002.2 OF 003


has been delayed several months (it is now slated to occur in May),
enabling GTel time to participate.

7. (U) In addition to 3G technology, Vietnam is also testing WiMAX
(Wireless Interoperability for Microwave Access) as a means to
provide wireless data connections nationwide, which would hook up
many of Vietnam's rural communities and more closely draw them into
the country's economic development. In early March, 2008, the
ministry granted EVN Telecom, Viettel, VinaPhone, and MobiFone
permission to test WiMAX, on a trial basis, in selected localities
nationwide.

LOWER PRICES
------------

8. (U) In 2007, MIC also relaxed its tight grip over the mobile
phone sector by giving service providers greater leeway to determine
their own prices. Phone rates, which once used to be completely set
by the government, can now vary within a given price range. Phone
operators must still get MIC to approve their pricing. This move
has led to lower prices for consumers, and has spurred the telecom
companies to redouble their investments in network expansion to
capture new subscribers - with Viettel doubling the number of its
base transceiver stations (BTS) in 2007, while Vinaphone and
Mobiphone increased the number of their BTS by 50 percent.

BLASTING INTO THE NEXT FRONTIER
-------------------------------

9. (U) Vietnam launched its first Satellite, VINASAT-1, in French
Guyana on April 19 2008, bringing to fruition a long-standing plan
for Vietnam to establish itself in space. VNPT signed a $200
million contract with Lockheed Martin in May 2006 to manufacture and
launch the satellite. VINASAT-1 will improve telecommunications in
Vietnam by transmitting radio, television and telephone
communications to all corners of the country. The satellite will
enable Vietnamese to use new services such as mobile broadcasting,
direct-to-home television, video conferencing and data transmission.
In addition, VINASAT-1 will improve the nation's communication
infrastructure by removing dependence on ground networks and
equipping 100% of Vietnam's rural communities with telephones and
televisions. Vietnam now joins fellow ASEAN nations Thailand,
Malaysia, Indonesia, Singapore and the Philippines in space.

EQUITIZATION
------------
10. (SBU) One of the most closely watched developments in Vietnam's
mobile market is the planned "equitization" (partial privatization)
of leading operators Vinaphone, Mobifone and Viettel. This
long-awaited process has been delayed numerous times due to unclear
technical regulations and difficulties in valuing the companies'
assets (REF A). MIC is urging Mobifone to avoid further delays and
accelerate its planning in order to equitize before the end of 2008.
Mobifone's Director of Planning and Sales, Mr. Nguyen Dinh Chien,
told Econoff that the company will equitize in two phases - first
selling approximately 20 percent via a domestic initial public
offering, and then selling up to 30 percent to a single "strategic
partner" of their choosing. Mobifone claims that it has more than
10 foreign companies interested in becoming the strategic investor.

11. (SBU) Vinaphone is also expected to equitize, although some
quarters of its parent company VNPT remain hesitant to sell off
significant ownership. VNPT brass recently told MIC Minister Le
Doan Hop that they would like to retain total control of Vinaphone
to use it as the firm's "technology incubator." They also appear
loath to let go because mobile services provide the lion's share of
VNPT's revenues. Viettel's Deputy Director General Mr. Le Dang
Dung told Econoff that Viettel will likewise wait to see how
Mobifone's equitization goes before it begins to sell off its own
shares.
COMMENT
-------

12. (SBU) Vietnam has a young, numerous (85 million) and
increasingly affluent population (REF B) -- all signs pointing to
continuing growth in the telecom sector. With such rapid growth in
recent years, mobile services have filled the coffers of companies
like VNPT and Viettel, and senior officials in these companies do
not appear to be in any hurry to relinquish control over those
revenue streams. The GVN's commitment to equitize the sector
offers opportunities to U.S. investors, if only it can overcome the
reluctance of entrenched interests. The emergence of G-Tel and the
rush for approval of new technologies may leave several of the
service providers in the cold, thereby limiting the potential
domestic partners for foreign investors, and increasing the stakes

HANOI 00000573 003.2 OF 003


for the equitization of the "big three."

MICHALAK

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC