Telecommunication Industry in Vietnam
Both foreign investors and local companies in the information and communication technology (ICT) field are closely observing the Vietnamese government’s moves after it promised to open the door to the market prior to joining WTO. While already established foreign groups, such as Siemens, Alcatel, and SK Telecom, are anxious to shedding their business cooperation contract status to participate with full force, other foreign investors are more than eager to snatch a share in this lucrative ICT market.
Two current events, Intel’s investment project in Ho Chi Minh City and Microsoft’s plan to expand its influence in the software realm, only heat up the already blazing market. In News Online-Vietnam Economy issued in April 24, 2006, Microsoft Vietnam General Director Christophe Desriac forecasted that “Vietnam has the ability to become the country with the highest ICT growth in the region (Southeast Asia),” supporting his opinion by pointing to a large potential market with young promising ICT workers.
VNPT popular booth in one of Vietnam's Exhibitions
Until recently, the telecommunication market in Vietnam was highly regulated, with the Vietnam Posts & Telecommunication Corporation (VNPT, recently transformed to the Post & Telecom Group) acting as a virtual monopoly. Feeling the urge for action before being overridden by foreign forces and domestic competition, VNPT has changed its price scheming for both cellular phone calls and international call rates. A new player in the field, EVN Telecom, plans on undergoing the competition by partnering up with a foreign company to develop its own network, the Vietnam Economic Times reported in June 20, 2006. Since the Ministry of Posts & Telematics relaxed the regulation and let other local companies join the market for cellular phone services, the price has plunged significantly, benefiting both the users and the market in the eyes of foreign investors. Vietnamese users are looking forward to a similar trend in the telecommunication market, hoping to avoid the current highest rate in the region. Such a change is long overdue as Vietnam’s higher telecom costs have long been a drain on business by increasing the costs for foreign and local businesses alike in communicating with overseas. By way of example, an internet telephone call from the U.S. to Thailand can be only cents while in Vietnam it is nearly 6-7 times more expensive.
Despite its fast growth, the Vietnamese ICT market is still considered fledgling and lowly penetrated, leaving ample room for development and competition among local and foreign groups. While the Vietnamese government’s pledge entails up to only 49% ownership of shares controlled by a foreign partner, most foreign investors are eager and prompt to take advantage of this 83-million-potential-customer market.
According to Posts and Telematics Minister Do Trung Ta in a recent interview (June 29, 2006) with Saigon Today:
“Viet Nam will allow foreign investment in four areas of the telecom market: public telecom services (fixed-line and mobile telephone service), internal data service, satellite transmission service, and submarine optical cable service.”
Minister Do further noted: “As for public telecom services provision, foreign investors are required to lease main transmission lines from local companies.
There are four important matters that we should focus on. The first is an investment model for foreign firms after Viet Nam joins the WTO. Foreign telecom companies had been restricted to co-operating with local partners, much like the BBC operates.
This means they contribute capital and share profits with local partners, but do not have legal status in the parent company.
Once Viet Nam joins the organization, foreign investors will be permitted to hold a maximum 49 per cent share of joint venture companies, giving them a say in operational management.
Secondly, national telecom services will have to conform with WTO guidelines. Depending on evaluations of how well specific areas are developed, some sectors will have up to four years to conform, while others will have to do so immediately.
Also, according to Minister Do in the same interview: “Both State-owned and private telecom firms will be allowed to co-operate with foreign partners to provide telecom services. Viet Nam will also open network infrastructure services, including allowing diplomatic organizations to connect directly to satellite networks.”
Copyright, 2006 © Runckel & Associates
