Telecoms and Technology Report

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.
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
9 Vietnam
of expansion will slacken as the market is already becoming saturated. Internet

service provision will also see strong growth in 2010-14 as personal computer
usage increases and improvements in infrastructure, particularly in rural areas,
drives demand.
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) 6,456 8,186 9,773 11,009 12,107 12,761 13,111 13,282 13,253 13,094
Telephone main lines (per 100 people) 7.7 9.7 11.5 12.8 13.9 14.5 14.8 14.8 14.7 14.3
Mobile subscriptions (m) 9.6 19.3 35.3 68.0 74.8 82.3 90.5 96.8 103.6 110.9
Mobile subscriptions (per 100 people) 11.5 22.9 41.4 79.0 86.0 93.7 102.1 108.2 114.6 121.5
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) 1.9 1.9 2.0 1.9 1.7 1.9 2.2 2.5 2.9 3.2
Fixed telecoms revenue (US$ m) 1,846 2,129 2,397 2,838 2,805 3,015 3,486 4,091 4,831 5,752
Mobile telecoms revenue (US$ m) 587 820 1,126 1,763 1,813 2,139 2,715 3,505 4,535 5,877
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
Demand. Low income levels and high prices have suppressed demand for
telecoms services until recently. However, 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. This
trend is expected to continue, particularly as providers offer more services on
expanded networks and costs fall. As the vast majority of mobile-phone
subscriptions are pre-paid, customers can easily switch networks in order to
receive the latest discount or new services. This means that customer loyalty in
the market is weak.
Demand for telecoms services in rural areas will depend largely on service
provision. 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.
However, as the provision of services improves, demand in rural areas is set to
rise rapidly.
Growth in fixed-line services is likely to be weak in the forecast period, owing
to inefficiency and waning demand for such services. There were an estimated
13.9 main lines per 100 people in 2009, up from just 5.6 per 100 people in 2004.
This number is expected to peak at 14.8 in 2012, before slowing declining.
Vietnam 10
Telecoms costs
(US$)
2005 a 2006 a 2007 a 2008 a 2009 b
Fixed-line call (peak) 0.05 0.05 0.06 0.05 0.05
Fixed-line rental (monthly) 11.6 11.5 10.8 9.0 8.4
Mobile call (peak) 0.43 0.43 – – –
Mobile call (off peak) 0.31 0.30 – – –
Mobile connection charge 3.2 3.1 – – –
a Actual. b Economist Intelligence Unit estimates.
Supply. The government has a strong interest in the telecoms sector. The state-
owned Vietnam National Post and Telecommunications (VNPT) holds the
largest market share in both fixed-line and mobile networks, and it is also the
parent company of two mobile-phone operators, VinaPhone and MobiFone.
Moreover, the military operates the country"s second-largest telecoms firm in
terms of market share, Viettel. However, 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. The government has indicated that it intends to equitise both
VinaPhone and MobiFone, although a timeframe has not been given.
There is good access to telecoms services in the major cities and access in rural
areas is expected to improve in the forecast period. Following a period of fairly
rapid growth in telecoms, almost all of the country’s communes now have at
least limited access to the fixed-line network, compared with less than 60% a
decade ago, according to the Ministry of Information and Communications
(MIC). 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.
The largest mobile service provider is Viettel, which has a market share of
around 33%, according to the MIC. MobiFone follows closely with a market
share of around 31% and VinaPhone is the third-largest player. VNPT also
operates a low-cost mobile-phone service, City Phone. Other domestic service
providers include S-Fone, EVN Telecom, VietnamMobile, GTEL Mobile and
Hanoi Telecom. A licence has recently been granted to Indochina Mobile to
operate a mobile-phone service, which is expected to come on line in early
2010. Over 70% of subscriptions are pre-paid. Determining the exact number of
mobile phone subscribers is difficult, given the fact that around 50% of mobile-
phone accounts are inactive, according to the MIC. 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, the SIM cards are usually discarded, but are still counted as
mobile accounts. Thus the country"s reported mobile penetration rate can be
greatly misleading.
Rising demand for telecoms services, and particularly for mobile-phone
services, has raised concerns about the capacity of networks. Moreover, mobile-
phone service providers have been cutting tariffs and subscription fees in the
face of rising competition and, as a result, they may struggle to raise sufficient
11 Vietnam
funds to develop their networks. The three leading operators are upgrading their
networks to Enhanced Data GSM Environment (EDGE) technology, which
provides greater bandwidth than GSM. (GSM stands for Global System for
Mobile Communications.) Three smaller operators, S-Fone, Hanoi Telecom and
EVN Telecom, offer services using CDMA technology, which is also faster than
GSM. However, demand for the data services that CDMA can support has been
fairly flat.
The MIC, which regulates the telecoms industry, has awarded four licences for
third-generation (3G) services (3G technology allows mobile phones to connect
to the Internet, send and receive video clips, and download and send e-mail).
Viettel, VinaPhone and MobiFone received individual licences, while a joint
licence was issued to EVN Telecom and Hanoi Telecom. VinaPhone rolled out
its 3G network in October 2009 in 13 of the country"s largest cities and
provinces. The network will be extended across the country in the next three
years. Meanwhile, Viettel has committed to offering its new 3G services by April
2010, and EVN Telecom and Hanoi Telecom are expected to unveil their
network by mid-2010. MobiFone will lag behind, rolling out its 3G network in
December 2010. Owing to strong competition between the network providers,
there is a chance that they will attempt to roll out their 3G networks sooner
than expected.
Vietnam National Post and Telecommunications: www.vnpt.com.vn
Vietnam Telecoms Services (GPC): www.gpc.vnn.vn
Ministry of Information and Communications: www.mic.gov.vn
Viettel: www.viettelmobile.com.vn
Vinaphone: www.vinaphone.com.vn
MobiFone: www.mobifone.com.vn
Internet Internet use is expanding rapidly: the number of users has almost doubled
since 2006. There were an estimated 26.9m Internet users in 2009, which was
equivalent to 31 out of every 100 people. Internet cafes, which are now
common in most urban areas, are popular access points, although the number
of people accessing the Internet at home is rising dramatically. 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), but the number of Internet users will continue to grow
in the forecast period. The government hopes to increase Internet penetration
rates to 35% by 2010, largely through improving telecoms infrastructure. This
target is in line with the Economist Intelligence Unit"s forecast for an Internet
penetration rate of 36.8% in 2010.
Earlier this year the government introduced new restrictions on blogging,
banning people from engaging in political discussions and restricting their posts
to personal matters. 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. A social networking site, Facebook, which has
more than 300m active users worldwide, appears to have come under very
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.
The Internet is a potential thorn in the side of Vietnam"s leaders. The govern-
ment is increasingly concerned that the Internet could become a hotbed of
political dissent that threatens political stability.
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) 10,711 14,684 17,872 21,920 26,866 32,328 38,490 45,739 54,297 64,486
Internet penetration (per 100 people) 12.8 17.4 21.0 25.5 30.9 36.8 43.4 51.1 60.1 70.7
Broadband subscriptions ('000) 210 517 1,294 2,258 3,643 5,494 7,713 10,271 13,152 16,407
Broadband subscriptions (per 100 people) 0.3 0.6 1.5 2.6 4.2 6.3 8.7 11.5 14.6 18.0
E-readiness
2005 a 2006 a 2007 a 2008 a 2009 a
Economist Intelligence Unit e-business readiness
rating (10=high) 3.06 3.12 3.73 4.03 3.80
a Index score.
E-commerce in Vietnam is still at a modest level, but has made huge strides in
recent years, and this trend is likely to continue throughout the forecast period.
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.
In addition, a new e-commerce law was passed that provides a legal framework
for the regulation of online commercial activities. However, the government
has said that network security is still a major hindrance to the development of
e-commerce.
The banking sector has begun to offer a range of e-commerce services.
Available services include online account management and payment of certain
types of utility and insurance bills, and a number of these services are also
available via mobile phones. The enthusiasm for these services suggests that
e-commerce will develop further in the forecast period, despite the various
impediments that exist. These include the relatively small percentage of the
population who have bank accounts (around 10%), the cash culture that still
prevails in the country, the new and largely untested legal framework for the
protection of consumers and Vietnam"s poor infrastructure, which could hinder
goods delivery. However, as young people are keen users of mobile phones,
mobile banking should take off in the medium term and this could eventually
transform the cash culture in the country"s major cities.
13 Vietnam
Internet costs
2005 a 2006 a 2007 a 2008 a 2009
DSL connection costs (US$; businesses) 143.3 143.3 142.8 141.4 –
DSL annual rental costs (US$; businesses) 750.0 750.0 68.7 68.1 –
VoIP call costs (US$) 1.0 1.0 1.0 1.0 –
a Actual.
Supply. The government is planning to invest heavily in telecoms infrastructure

in order to improve Internet services and increase Internet penetration rates.
Vietnam Datacommunications, the dominant Internet service provider (ISP) in
the country, is a subsidiary of the state-owned telecoms company, Vietnam
National Post and Telecommunications. Vietnam Datacommunications controls
around 40% of the market. It faces keen competition from three local firms: FPT,
which controls around 25% of the market, Viettel, with around 15%, and EVN
Telecom, which has around 10%.
Hardware After bearing the brunt of the business spending cuts that were introduced after
the global financial crisis of late 2008, Vietnam"s hardware sector is now seeing
signs of a recovery. Shipments of personal computers (PCs) have been higher
than expected, and chipmakers are becoming more optimistic. Even so, the
Economist Intelligence Unit expects global hardware spending to contract by
nearly 13% in 2009, after growing by more than 4% in 2008, thanks to the
economic pain that continues to be felt around the world and a stronger US
dollar. However, we are forecasting a recovery in 2010, with spending up by
3.3%. Expenditure will return to its 2008 level in 2011.
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) 6,200 8,100 10,300 12,625 15,051 17,923 20,220 22,195 24,142 26,261
Stock of PCs (per 100 people) 7.4 9.6 12.1 14.7 17.3 20.4 22.8 24.8 26.7 28.8
Stock of PCs (% growth) 61.5 29.3 25.9 21.4 18.0 17.9 11.7 8.7 7.7 7.7
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) 1,018 1,304 1,743 1,885 1,807 1,982 2,300 2,660 2,989 3,360
IT hardware spend (D m) 16,141 20,841 28,026 30,997 32,134 37,221 43,773 50,732 57,222 64,569
IT hardware spend (D; % growth) 17.1 29.1 34.5 10.6 3.7 15.8 17.6 15.9 12.8 12.8
IT hardware spend (% of GDP) 1.9 2.1 2.5 2.1 2.0 2.1 2.2 2.3 2.3 2.3
Demand. In the long term, sales volumes of PCs and notebook computers will
rise in line with Internet usage, greater incomes and improvements in Internet
service provision. PC ownership is forecast to rise to around 29 per 100 people
in 2014, from an estimated 17 in 2009, and the number of Internet users is set to
increase to 71 per 100 people in 2014, from an estimated 31 in 2009. Interest in
Vietnam 14
technology that integrates the functionality of televisions and PCs is also

expected to rise, although the market for these items will remain small.
Pricing
% of monthly personal Affordability
Item Price (US$) disposable income rank
Desktop PC, 512MB RAM (av) 1,000 2,701 57 out of 59
Note. Affordability rank: for each country the price of an item as a percentage of monthly personal
disposable income is calculated. Countries are ranked according to these percentages. The most
affordable country will have the lowest percentage and be ranked first.
Supply. The PC market is dominated by locally assembled non-branded

models, which have accounted for around 70% of sales in recent years.
Imported brand-name PCs include models made by Hewlett-Packard (HP) and
IBM (both of the US) and Acer (of Taiwan).
There are a number of competitive local manufacturers of IT hardware. The
Corporation for Financing and Promoting Technology (FPT) is a leading
domestic supplier of a range of technology services and products. It produces
computer hardware and software, some of which are exported. It also runs
training centres for software experts, distributes hardware and provides services
for multinational companies. Trung Computer Manufacturing and Services
produces the leading Vietnamese-assembled PC brand, CMS. Both CMS and
FPT hold original equipment manufacturer status. Another notable player in
the local-branded PC assembly sector is Mekong Green.
Software Software companies have suffered less than their hardware counterparts in the
economic downturn, but global sales will still shrink by an estimated 3.7% in
2009. However, both IT services and packaged software will bounce back in
2010, with global growth rising by 5% and 5.3% respectively. There are important
reasons why software is holding up better than hardware. 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, which amount to around 20% of original licensing costs. 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. There are also other pressure points.
More software will be offered to customers over the Internet, some of which
will be free. The most famous example already offered is a suite of applications
by a US firm, Google, which imitates the Office suite produced by another US
company, Microsoft. The use of "cloud computing" will be one of the most
significant IT developments in coming years.
Vietnam"s software industry has developed strongly in recent years, and this
trend will continue in the forecast period as the local industry matures. From
only a handful of firms in 1998, the sector has grown to comprise more than
700, according to the Vietnam Software Association. The government is
spending heavily to boost the development of the software segment. The
investment is an explicit acknowledgement of the segment"s importance to the
development of the country"s burgeoning information and communications
technology sector.
15 Vietnam
Business-process outsourcing has major growth potential, and the sector has
been growing rapidly in recent years. The government aims to make Vietnam
an attractive outsourcing location for foreign firms. A number of major global
players, including IBM, Cisco Systems, HP and Compaq (all of the US), Nortel of
Canada, and Sony and Fuji of Japan, are already outsourcing work to Vietnam.
Much to the chagrin of a US-based lobbying organisation, the Business Software
Alliance, Vietnam is the world’s tenth worst offender in terms of the level of
software piracy. An estimated 85% of software used in Vietnam in 2008 was
pirated, resulting in losses estimated at US$257m. This compares with an
average of 61% in Asia as a whole. The director of the Copyright Office of
Vietnam, Vu Manh Chu, blames “lax enforcement, ignorance and disrespect for
copyright laws” for the high levels of piracy.
©2009 The Economist Intelligence Unit Ltd. All rights reserved. Copyright of Telecoms Industry Report:
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Vietnam 8

Telecoms and technology report

Total IT spend, international comparison

Overview Vietnam"s telecommunications industry has experienced rapid growth in recent

Income and demographics

of expansion will slacken as the market is already becoming saturated. Internet

close scrutiny after the site"s owners introduced a Vietnamese-language service

Supply. The government is planning to invest heavily in telecoms infrastructure

technology that integrates the functionality of televisions and PCs is also

Supply. The PC market is dominated by locally assembled non-branded

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