Bmi vietnam telecommunications_report_q3_2008

Published by BUSINESS MONITOR INTERNATIONAL LTD

Including 5-year industry forecasts

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Vietnam TelecommunicationsReport Q3 2008 ISSN: 1748-4944

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Vietnam Telecommunications Report Q3 2008 Including 5-year industry forecasts by BMI

Part of BMI's Industry Survey & Forecasts Series

Published by: Business Monitor International

Publication Date: July 2008

Vietnam Telecommunications Report Q3 2008

© Business Monitor International Ltd Page 2



CONTENTS

Executive Summary .........................................................................................................................................5

Vietnam Business Environment Industry SWOT .................................................................................................................................................... 6

Business Environment ....................................................................................................................................7

Vietnam.................................................................................................................................................................................................................. 9 Table: Business Environment Rankings ............................................................................................................................................................... 10

Industry Forecast Scenario ...........................................................................................................................11

Mobile....................................................................................................................................................................................................................... 11 Table: Telecoms Sector – Mobile – Historical Data & Forecasts........................................................................................................................ 11

Fixed Line................................................................................................................................................................................................................. 13 Table: Telecoms Sector – Fixed-Line – Historical Data & Forecasts ................................................................................................................. 13

Internet ..................................................................................................................................................................................................................... 14 Table: Telecoms Sector – Internet – Historical Data & Forecasts ...................................................................................................................... 14

Market Data Analysis .....................................................................................................................................16

Mobile.................................................................................................................................................................................................................. 16 Table: Vietnam Mobile Market, 2007 .................................................................................................................................................................. 17 3G........................................................................................................................................................................................................................ 19 Fixed Line............................................................................................................................................................................................................ 20 Fixed Wireless ..................................................................................................................................................................................................... 21 Broadband ........................................................................................................................................................................................................... 21 Table: Vietnam – WIMAX Triallists..................................................................................................................................................................... 23

Macroeconomic Outlook ...............................................................................................................................25

Table: Vietnam – Economic Activity .................................................................................................................................................................... 27 Regulatory Environment..................................................................................................................................................................................... 28 Vietnam: Regulatory Bodies And Their Responsibilities...................................................................................................................................... 28

Regulatory Developments ......................................................................................................................................................................................... 31

Company Monitor...........................................................................................................................................32

Table: Global Mobile Handset Market v. Nokia Mobile Handset Market By Geography (mn units)................................................................... 32 Table: Top Ten Nokia Net Sales Markets............................................................................................................................................................. 33 Table: Nokia And NSN: Major Contracts And Milestones ................................................................................................................................... 35

Selected Profiles – Operators ................................................................................................................................................................................... 36 Vietnam Posts &Telecommunications (VNPT)..................................................................................................................................................... 36 S-Fone (S-Telecom) ............................................................................................................................................................................................. 41 VinaPhone ........................................................................................................................................................................................................... 43 MobiFone ............................................................................................................................................................................................................ 44 Viettel................................................................................................................................................................................................................... 45 EVN Telecom ....................................................................................................................................................................................................... 47 Hanoi Telecom..................................................................................................................................................................................................... 49 FPT Telecom........................................................................................................................................................................................................ 50

Competitive Landscape .................................................................................................................................52

Competitor Analysis.................................................................................................................................................................................................. 52 Table: Key Players – Vietnam Telecoms Sector................................................................................................................................................... 52

Key Players............................................................................................................................................................................................................... 52 Fixed Line............................................................................................................................................................................................................ 52



Table: Regional Fixed-Line Penetration Overview.............................................................................................................................................. 53 Mobile.................................................................................................................................................................................................................. 53 Table: Regional Mobile Penetration Overview.................................................................................................................................................... 54 Broadband ........................................................................................................................................................................................................... 55 Broadband ........................................................................................................................................................................................................... 55 Table: Regional Broadband Penetration Overview ............................................................................................................................................. 55 Table: Glossary Of Terms.................................................................................................................................................................................... 56

BMI Forecast Modelling.................................................................................................................................58

How We Generate Our Industry Forecasts .......................................................................................................................................................... 58 Telecommunications Industry .............................................................................................................................................................................. 59 Sources ................................................................................................................................................................................................................ 59



Executive Summary

Vietnam’s telecoms market remains attractive in terms of its potential growth prospects. Even with

minimal foreign direct investment in the industry, the country’s mobile market has prospered with

penetration reaching in excess of 40%. This is largely due to the prevalence of multiple SIM cards per

subscribers, which in turn is down to the ongoing and competitive promotional battle between Vietnam’s

several mobile operators.

We expect a major step change across the telecoms sector with an increase in overseas strategic

investment. The government’s obligations to the WTO should ensure this and are likely to lead to

liberalisation in the market. This, we should see first with the state looking to sell two-thirds of the mobile

operator MobiFone to domestic investors and foreign investors. Lining up and ready for action are

Singapore Technologies Telemedia (STT), NTT DoCoMo, Telenor and France Telecom. We expect

the process to start in 2009 and that it will be followed up by a similar divestment in VinaPhone.

At the time of writing this report, Vietnam has approximately 50mn mobile subscribers, and BMI projects

6mn more net additions over the next six months. The country’s subscriber base is likely to reach 100% in

early 2012, and we forecast that there will be 99mn subscribers in early 2011.

Viettel remains market leader with a 29% market share, ahead of MobiFone and VinaPhone on 28% and

25%, respectively. All three operators should be concerned at the low ARPU rates of around US$6 per

month; this suggests that the market is not mature with regards to value-added services and that intense

competition is leading to low tariff setting. We note also that approximately 90% of all subscribers are

prepaid customers.

In an attempt to increase ARPU rates, Vietnam’s leading operators are keen to encourage the take-up of

3G mobile services. There is little to suggest that this is imminent, but market leader Viettel has suggested

that, with the cost of 3G equipment falling and the consumer demand in value-added services rising

(video, mobile TV and internet connection), there will soon be a growing 3G market in Vietnam.

However, it is instructive to note that broadband growth remains limited with ADSL technologies

remaining expensive and service quality poor. This leads to slow speeds and unstable connections and

could result in a growing popularity of WiMAX – Vietnam has six WiMAX triallists.

Vietnam’s telecoms sector should witness a significant change over the next five years, with foreign

investment from carriers and vendors alike more common. Such a trend should result in a maturing

market, both in terms of consumer demand and technology take-up.



Vietnam Business Environment Industry SWOT

Strengths ! An increasingly competitive mobile sector ! Impressive growth in mobile and fixed-line sectors during 2007, with

subscribers up by 88.6% and 23%, respectively, in each sector ! WTO membership in 2007 makes Vietnam a more appealing investment

centre – stronger growth in broadband market could be the result of this

Weaknesses ! Fixed-line sector remains largely monopolised, under the control of Vietnam Posts & Telecommunications

! Lack of key strategic investors in the sector’s main operators ! Although communications are relatively advanced in the larger cities, many

rural areas have little or no access to any telecommunications services

Opportunities ! Increase in competition in the mobile sector will lead to a sharp rise in growth

! Government approach to liberalisation of the telecoms industry could see entrance of strategic investors such as NTT DoCoMo, SingTel and Telenor

! VNPT is the latest to launch fixed wireless service, tapping into rural market and therefore joining Viettel and S-Fone

Threats ! Pace of deregulation is irregular ! Nearly one-third of Vietnam's villages lie in mountainous areas and are

without access to telecommunications services; a delay in network expansion could slow potential growth in fixed-line, mobile and internet sectors

! Number of inactive mobile subscribers is unknown in what is still a market that lacks transparency and reliable data

! Poor quality of ADSL services and high prices are combining to hold up broadband growth



Business Environment

Changes in this quarter's Asia Pacific Business Environment Ratings have largely been due to revisions in

our forecasts with the release of full-year figures, but also as a result of the significant alterations in the

scores for country risk. This takes into account short-term external risk, policy continuity, legal

framework and corruption. Just under half of the countries in our table reported a fall in their risk ratings,

with the remainder witnessing small improvements or unchanged over the quarter. This quarter, we have

focused on the economic and political risks to the business environment in Asia Pacific and their

implications for the telecoms industry.

A major factor behind the worsening risk ratings has been in response to the slowdown in the global

economy. Many Asian states are heavily export dependant and retain strong trading ties with the US,

which is experiencing difficulties on account of the subprime crisis and ongoing credit crunch. Here,

international lenders could scale back the funds available to regional companies to cover their losses

elsewhere. This would prevent Asian firms from financing their operations. On account of limited

domestic credit availability, due to immature local bond markets, many companies could find themselves

stretched.

Accompanying this, and perhaps the largest downside risk, is inflation, which is being driven mainly by a

surge in the price of commodities such as oil, metals and, most importantly, food. For the most part, rice

remains the major agricultural output and staple diet for the majority of these Asian economies, but prices

have surged, facilitated by major producers restricting exports. This, not only has an impact on economic

risk, with inflation reducing the value of investments, but has significant political implications as well.

There are existing reports of an illicit rice trade emerging in Asia, while concerns are growing that riots

could occur, as has been the case in countries such as Haiti, Egypt, Mexico, Burkina Faso and Senegal.

Further cause for unrest could be facilitated by a number of elections due to take place in the region. In

the case of Pakistan, where BMI sees the likelihood of political 'cohabitation' between President Pervez

Musharraf, the next prime minister, and the new army chief, General Ashfaq Pervez Kiyani, this could

lead to tensions at the top. This would unnerve investors, potentially causing a drop in FDI inflows, which

had generally been very strong prior to the start of the current political crisis. Indeed, FDI during the first

five months of FY07/08 (July-June) dropped by 19.3% y-o-y.

To return to the overall business ratings, however, the most significant change is that Singapore has

replaced Australia at the top of our table. This has not just been a case of changes in the country risk

category, with both countries suffering from rising risk over the quarter, but of Singapore gaining points

in the telecoms market category to a greater extent than Australia. The small size of the Singapore market

and high penetration rates realise fewer potential returns for the country, although the country is

deploying a SGD1bn (US$725mn) ultra-high speed national broadband network. As for the

announcement that Australia's government had cancelled the AUD958mn (US$871mn) regional



broadband contract it signed with SingTel-backed Opel and Futuris may represent a blow to the

development of the country's national high-speed internet network. However, the federal government is

set to award an AUD4.7bn national broadband contract, and therefore, the cancellation of the regional

agreement can be viewed as positive, as it would have meant the duplication of technology and potential

waste of resources

Further down the table, India leapt up from eighth to fifth place. Once again, this has been due to changes

in score for country risk, but also on account of growing maturity in its mobile market, which remains the

fastest growing in the world. India beat the US last quarter to become the second largest global mobile

market after China. Regulatory transparency and mounting foreign interest will ensure that India's

telecoms market continues to gain in strength. The award of spectrum for 3G licences will further fuel

this. China, on the other hand, maintained its ninth place position, and we are still waiting to hear

information on when 3G licences will be awarded. With the Beijing Olympic games expected in August

this year, only China Mobile appears ready to commercially launch TD-SCDMA services, while no

mention has been made of the two other standards, CDMA2000 and W-CDMA.

As we reach the bottom of the table made up of the Philippines, Vietnam, Bangladesh and Thailand, we

can see that these markets offer high growth returns, but lack the country structure to support greater

developments. The biggest change to this group during the quarter was the switch between the Philippines

and Thailand, with the former in 12th position as opposed to 15th. Although the Philippines has moved

up the table, with its economy in 2007 reporting a 31-year high in growth and fortifying consumer

purchasing power, it remains vulnerable to a slowdown in the US, which is its biggest purchaser of

exports and main source of remittances from overseas workers. Meanwhile, the strength of the peso itself

carries risks, by making Philippine exports less competitive.

At the foot of the table, Thailand continues to suffer from repeated delays to the launch of Thailand's

three UMTS (3G) licences and that of WiMAX. This has damaged the overall development of the sector,

while additional issues, including interconnection charges, access charges and number portability, have

yet to be fully resolved, with a number of lawsuits between operators pending. Furthermore, issues of

network sharing would help to raise overall service coverage where infrastructure is generally weak,

mostly concerning rural areas, where the majority have poorer access to telecommunications services.



Vietnam

Vietnam is in 13th position in our Business Environment Rankings, ahead of Bangladesh and Thailand.

The telecoms sector in Vietnam suffers from a lack of foreign investment – indeed inward investment is

only allowed under certain conditions. Vietnam’s accession to the WTO should mean a liberalisation of

the market, and we expect to see this start to happen either later this year, or more likely in 2009, when a

33.3% stake in MobiFone is sold to a strategic investor. Under WTO regulations and in accordance with

the government’s commitments, foreign investors are allowed to participate in joint ventures with

domestic companies. A minimum capital requirement has been set out, with VND1.6trn required for a

network infrastructure deal, VND500bn for a project spanning at least two provinces and VND160bn for

a project covering a single province.

And so, Vietnam is becoming a more attractive market with greater investment potential. This is

illustrated by the fact that Intel, Japan’s Renesas, Campal and Foxcom of Taiwan and Samsung

Electronics have invested US$10bn between them in Vietnam. France Telecom, China’s ZTE,

Qualcomm, SK Telecom and Alcatel also have ongoing investments in the country.

While there are encouraging signs – and Samsung has pointed to Vietnam’s cheap labour opportunities as

a key factor behind its US$670mn mobile handset plant in northern Vietnam – many foreign investors

remain concerned at the country’s complex licensing regime and fiscal policy. And while labour may be

inexpensive, there are further concerns that there is a shortage of skilled workers and that language skills

are poor.

Looking at Vietnam’s economy, we suggest that 2008 could be a testing year with a drop in GDP growth

likely, partly due to domestic inflationary pressures and partly due to the slowdown of the US economy,

its largest export market. Consequently, BMI has lowered our GDP growth forecast from 8.2% to 7% for

this year, although we suggest that this will be a short-term blip only. We are concerned, however, as to

whether the stock market will be able to absorb the planned IPOs of state-owned enterprises, with

MobiFone and VinaPhone, two of the higher profiles of such privatisations.



Table: Business Environment Rankings

Limits of Potential Return Risks To Realisation of Potential

Returns

Country Telecoms Market

Country Structure

Independence of Regulator Country Risk

Telecoms Rating

Rank

Singapore 70.0 96.7 80.0 66.1 77.5 1

Japan 62.0 66.7 90.0 87.2 71.1 2

Australia 50.0 100.0 70.0 77.3 69.3 3

Malaysia 57.8 63.3 90.0 74.2 66.4 4

India 75.0 35.7 80.0 61.6 64.1 5

Hong Kong 44.0 76.7 80.0 81.9 63.1 6

South Korea 50.0 99.7 70.0 72.1 60.4 7

Taiwan 40.0 66.7 90.0 77.2 59.6 8

China 74.3 31.7 40.0 70.6 58.1 9

Pakistan 62.5 39.3 80.0 27.6 54.2 10

Indonesia 52.5 42.7 60.0 49.5 50.8 11

Philippines 50.0 36.7 60.0 57.2 49.3 12

Vietnam 50.0 33.3 60.0 51.6 47.7 13

Bangladesh 52.5 30.0 60.0 35.8 45.6 14

Thailand 47.5 32.7 40.0 60.5 44.4 15

Source: BMI



0

20,000

40,000

60,000

80,000

100,000

120,000

2005

2006

2007

e

2008

f

2009

f

2010

f

2011

f

2012

f

0

20

40

60

80

100

120

140

Cellular Mobile Phone Subscribers ('000)No of 3G Phone Subscribers ('000)Mobile Phone Subscribers/100 Inhabitants, RHS

Source: BMI Research

Industry Trends - Mobile Forecast, 2005-2012

Industry Forecast Scenario

Mobile

Table: Telecoms Sector – Mobile – Historical Data & Forecasts

2005 2006 2007 2008e 2009f 2010f 2011f 2012f

No. of Mobile Phone Subscribers ('000) 9,300 18,980 35,805 56,630 69,455 85,280 99,105 110,930

No. of Mobile Phone Subscribers/100 Inhabitants 11.0 22.2 41.4 67.8 78.1 94.6 108.5 119.8

No. of Mobile Phone Subscribers/100 Fixed Line Subscribers 143.5 204.1 313.0 435.9 499.7 580.1 639.4 688.2

No. of 3G Phone Subscribers ('000) 0 0 100 700 1,360 2,100 3,050 4,021

3G Market As % Of Entire Mobile Market 0.0 0.0 0.3 1.2 2.0 2.5 3.1 3.6

e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI

Faster growth in the first half of 2008

means that we have made an amendment

to our short-term forecast, as we suggest

that there should be in excess of 56mn

mobile subscribers by the end of this year,

accounting for a 67.8% penetration rate.

This would equate to just over 20mn net

additions over the last 12 months and 58%

y-o-y growth. Although this still

represents rapid growth, we note that this

would be down on the 88% growth seen in

2007.

Looking ahead, we project that Vietnam

will surpass the 100% penetration threshold in 2011 and will end 2012 with close to 111mn subscribers. It

should be noted that these figures are based on the assumption that the sector contains a certain number of

inactive prepaid users. Meanwhile, we continue to predict that the first commercial deployments of ‘third

generation’ (3G) mobile services will occur in 2008. We do not expect consumer demand for such

services to be strong in the initial stages of deployment and estimate just 700,000 subscribers by the end

of the first full year of operations. The cost and availability of 3G-compatible handsets are expected to be



the main obstacles to 3G growth in these early stages of development. However, with the Vietnamese

government pushing the development of 3G, we believe that stronger consumer demand will be sparked

later in the decade. We predict over 4mn 3G customers at the end of 2012, which would equate to around

7.5% of Vietnam’s mobile user base.

Competition and growth in 2008 will be boosted by the wave of tariff cuts, which have characterised

recent operator strategies. Further cuts may follow in the near future and these have generally been

predicted to encourage a price war within the sector. Lower mobile service prices are expected to

stimulate the growth of dual SIM ownership, as mobile users increasingly take advantage of special

offers. Conversely, lower prices will also likely lead to increased customer churn and a higher number of

inactive prepaid users. Meanwhile, during 2008, Vietnam’s mobile operators will continue to invest in

expanding their network footprints, with these investments having a positive impact on service quality

and coverage.

We also look forward to the presence of new strategic investors in Vietnam’s mobile market, as

companies such as Japan’s NTT DoCoMo, Norway’s Telenor, SingTel and France Telecom all show an

interest in bidding for a stake in MobiFone, through that company’s anticipated initial public offering

(IPO). Furthermore, following its September 2007 agreement with the Vietnamese government for the

creation of a joint venture under the name of GTel Mobile, Russia’s VimpelCom is also expected to

expand its presence in Vietnam. The Russian operator has pledged to spend US$1bn over the next several

years in the development of a GSM mobile network and in the provision of technical and operational

expertise.



Industry Trends - Fixed Line Sector 2005-2012

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

2005

2006

2007

e

2008

f

2009

f

2010

f

2011

f

2012

f

0.0

3.0

6.0

9.0

12.0

15.0

18.0

21.0

Main Telephone Lines in Service ('000) (LHS)

Main Telephone Lines/100 Inhabitants (RHS)


Fixed Line

Table: Telecoms Sector – Fixed-Line – Historical Data & Forecasts

2005 2006 2007 2008e 2009f 2010f 2011f 2012f

No. of Main Telephone Lines in Service ('000) 6,480 9,300 11,440 12,990 13,900 14,700 15,500 16,120

No. of Main Telephone Lines/100 Inhabitants 7.7 10.9 13.2 14.8 15.6 16.3 17.0 17.4

e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI research.

We have held steady our forecast for the

growth of Vietnam’s fixed-line market over

the next five years. This decision has been

based on an examination of year-end fixed-

line data provided by Vietnam’s fixed-line

incumbent operator, Vietnam Posts and

Telecommunications (VNPT). VNPT

gained 1.08mn new fixed-line subscribers in

2007, taking its total customer base to 8.8mn

and reflecting y-o-y growth of 14%.

However, it is important to remember that

traditional fixed-line subscriptions, based on

the public switched telephony network (PSTN), account for only around 77% of the total fixed-line

market, with the remaining fixed lines being based on fixed-wireless services.

We estimate that there were over 11.4mn fixed lines in Vietnam at the end of 2007, which is equivalent to

a penetration rate of just over 13%. These figures are consistent with recent data provided by the

country’s Ministry of Posts and Telematics (MPT). We predict that continued growth in 2008 will result

in around 13mn fixed-line customers by the end of 2008 and a penetration rate of almost 15%. Growth

will be encouraged by the 15-20% tariff cuts, which were applied to fixed-line and public card phone

charges in June 2007. However, towards the end of the decade, we expect that a slowdown in fixed-line

growth will occur as a result of increased mobile substitution and the more widespread use of VoIP

services. The slowdown will partly reflect fixed-line saturation in urban areas of Vietnam, while rural

parts of the country will be more inclined to take up mobile telephony. By the end of 2012, we predict an

almost stagnant rate of fixed-line growth, although, by that time, fixed-line penetration will have

surpassed 17%.



Industry Trends - Internet Sector 2005-2012

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005

2006

2007

e

2008

f

2009

f

2010

f

2011

f

2012

f0

2,000

4,000

6,000

8,000

10,000

12,000

Internet Users ('000)

Broadband Internet Subscribers ('000), RHS


Internet

Table: Telecoms Sector – Internet – Historical Data & Forecasts

2005 2006 2007e 2008f 2009f 2010f 2011f 2012f

No. of Internet Users ('000) 10,711 14,684 18,862 23,400 26,000 28,650 30,250 31,460

No. of Internet Users/100 Inhabitants 12.7 17.2 21.8 26.7 29.2 31.8 33.1 34.0

No. of Broadband Internet Subscribers ('000) 210 517 1,195 2,465 3,935 5,705 7,875 10,131

No. of Broadband Internet Subscribers/100 Inhabitants 0.2 0.6 1.4 2.8 4.4 6.3 8.6 10.9

e/f = BMI estimate/forecast. Source: International Telecommunications Union (ITU), BMI

We have made some alterations to our

figures for internet user and broadband

subscriber growth in Vietnam, in order to

take account of figures published by

Vietnam’s Internet Network Information

Centre (VNNIC) in January 2008. The

VNNIC has suggested that there were

18.9mn internet users in Vietnam at the

end of January 2008, which equated to

22% of the total population. These figures

point to the likelihood of a slightly larger

internet user market than we had estimated

at the end of 2007. Nevertheless, the

differences between our figures and those of the VNNIC are not large, and we continue to believe that

Vietnam’s internet user base is expanding in accordance with our predictions. We have therefore retained

our figures for internet user growth in 2008 and beyond. We predict that the number of internet users will

expand by 24% in 2008 and will rise to over 23mn by the end of the year. By the end of our five-year

forecast, we anticipate a market of almost 31.5mn internet users, equivalent to 34% of the population.

Meanwhile, according to the VNNIC, the number of broadband subscribers rose by an impressive 130%

in 2007 and reached 1.3mn by the end of January 2008; this is equivalent to a penetration rate of 1.5%.

We estimate that there were 1.195mn broadband subscribers in Vietnam at the end of 2007, which is



equal to 1.4% of the population. Looking ahead, we continue to believe that broadband growth will be

strong over the next five years, and we predict a little over 10mn subscribers by the end of 2012

(equivalent to almost 11% penetration). However, we believe that the rate of broadband growth will be

slower in the early part of our forecast and have therefore altered our year-end projected subscriber totals

for 2008 through 2010. Although the government is investing heavily in the development of Vietnam’s

broadband sector (for example, it is doubling capacity over the country’s national fibre-optic network),

we believe that increased competition is required in order to increase the affordability of broadband

services. The arrival of new broadband service providers, some of them international operators, will help

to stimulate competition. The anticipated launch of new WiMAX broadband services over the next few

months should also help to boost broadband take-up. Nevertheless, we believe that it will take time for

some of these new developments to filter through into new subscriber growth, which is one of the reasons

why we have lowered our expectations for broadband subscriber growth in the early part of our forecast.



Market Data Analysis

Mobile

Obtaining reliable data on the number of mobile subscribers served by Vietnam’s six mobile network

operators remains a challenging exercise. Indeed, the Ministry of Information and Communications

(MIC) has pledged to conduct an audit of all operators’ counting methodologies over deciding whether a

SIM card is active or not. To illustrate the confusion, both Viettel and MobiFone claim to be the country’s

leading mobile operator.

The latest data that we feel comfortable publishing is from the end of 2007, but suggestions from the MIC

suggest that there were approximately 50mn mobile subscribers at the end of June 2008, of which some

90% are prepaid subscribers. This high proportion of prepaid subscribers means that ARPU is low at

about US$6 per month, one of the lowest rates in Asia.

According to MIC’s figures, Viettel leads the way with a 38% market share and approximately 19.5mn

subscribers, ahead of MobiFone on 13.4mn and VinaPhone with 12.1mn.

Our end of year figures from 2007 show Viettel, owned by the Vietnamese military, as market leader with

a 29% share of the market, ahead of MobiFone and VinaPhone on 28% and 25%, respectively. Both

MobiFone and VinaPhone are owned by incumbent operator VNPT. Together, Vietnam’s three GSM

operators controlled over 82% of the mobile market at the end of 2007. We note that the number of

CDMA subscribers reached 6mn at the end of 2007, up from just below 2mn at the end of 2006. This

figure is likely to exceed 10mn by the end of 2008, despite HT Mobile’s decision to move from CDMA

to GSM.

Vietnam’s mobile subscriber base exceeded 35mn at the end of 2007, accounting for a 41% penetration

rate. This penetration figure we feel to be artificially high, as many people in Vietnam are multiple SIM

cardholders, a consequence of a very competitive market and a plethora of promotional campaigns.

We note that, by the end of 2007, VNPT had a combined subscriber base of 19mn. BMI believes that the

two operators had some success at the expense of Viettel. This came as MobiFone and VinaPhone

deployed 6,000 new base stations. VinaPhone is aiming to add a further 5,000 base transceiver stations

(BTSs), in order to achieve its target of 9,000 BTS by 2008, and awarded a contract to UK Vendor

Aircom International in May 2008 to provide it with network planning and design services.

In December 2007, it was announced that VNPT had entered a partnership with Motorola to expand and

enhance VinaPhone’s GSM network in major cities, including Hanoi and Ho Chi Minh City. Under the

contract, Motorola will commission over 650 cell sites and provide optimisation and maintenance



services. Motorola is also understood to be cooperating with VinaPhone in order to expand GPRS

coverage and provide EDGE service in major metropolitan areas.

MobiFone has said that, in 2008, it expects to earn total revenues of VND16trn (US$1bn) and return a

profit of VND6.65trn. In order to achieve these goals, the company will continue to expand its coverage

area and increase its service quality in all localities and cities throughout the country. It plans to raise its

number of BTS to 10,000 by the end of 2008.

Furthermore, in December 2007, both MobiFone and VinaPhone began reducing their call charges by as

much as 25-28% in order to safeguard and expand their market shares. Accordingly, activation fees for

postpaid mobile subscribers fell from VND136,364 to VND109,000, while monthly subscription charges

remained the same at VND54,545. Call charges are being reduced by 20% on average for postpaid

subscribers, while, for prepaid subscribers, the charges are being cut by nearly 30%.

Table: Vietnam Mobile Market, 2007

Operator No. of Subscribers (mn) Market Share (%)

Viettel 10.4 29.1%

MobiFone 9.9 27.6%

VinaPhone 9.1 25.4%

S-Fone 3.4 9.5%

VPT Telecom 2.8 7.8%

HT Mobile 0.205 0.6%

Total 35.805 100.0

Source: Operators; BMI

Meanwhile, Norwegian telecom company Telenor has continued to fuel speculation about its possible

entrance into Vietnam’s mobile market. It has had a representative office in Vietnam since 2005 and is

hopeful that the Vietnamese government might soon open up the market and allow it, perhaps, to acquire

a stake in MobiFone.

We know that MobiFone is preparing for an IPO of approximately one-third of the company, with the

government retaining a 33.3% stake with the final third going to a strategic investor. This is likely to be

the first of several planned privatisations in Vietnam’s telecoms sector. While Telenor may show its hand,

so, too, could STT, which controls 75% of Asia Mobile Holdings, and as such controls a 40% stake in



Indonesia’s second-ranked mobile operator Indosat. STT expects the sale of MobiFone’s stake, originally

slated for 2008, to be delayed until 2009.

Although Viettel, MobiFone and VinaPhone continue to dominate the mobile sector, Vietnam’s three

CDMA operators have recently enacted policies that are designed to expand their current minority market

shares. S-Fone, which has South Korea’s SK Telecom as a shareholder, is also said to be considering a

cut in tariffs in line with market trends.

However, one of these CDMA operators, HT Mobile, in April 2008, started to migrate customers away

from its CDMA network towards GSM technology (if they elect to stay with CDMA, they will switch to

S-Fone’s network). Those customers staying with HT Mobile will receive a new GSM handset. The

operator made its move after it failed in its target of luring 1mn customers by the end of 2007.

In January 2008, it was reported that the Ministry of Information and Communications (MIC) was ready

to grant a licence to Global Telecom Corporation (GTel) to offer mobile services. GTel is backed by

Russian giant VimpelCom, which is said to be prepared to invest up to US$1bn into the GTel mobile

network over the next few years. An MIC official confirmed that GTel had asked permission to supply

GSM-based mobile services and that the Ministry was working on the necessary formalities, adding that

GTel will be licensed to use the 1800 MHz frequency.

Further demonstrating the current attractiveness of Vietnam’s mobile market is the move by Dutch semi-

conductor manufacturer NXP, which has opened a representative office in the country. It hopes to work

closely with local partners to manufacture mobile handsets costing less than US$30.

Meanwhile, competition among handset manufacturers is also fierce with Nokia, Samsung, Motorola,

Sony Ericsson and BenQ Siemens all fighting it out for market share. Competition is made even fierce

by the downward trend in handset prices, as mobile phones no longer become status symbols. Indeed,

Nokia leads the way by introducing a number of cheaper handsets to the market, especially in rural

Vietnam.



3G

The Vietnamese government has granted permission for the MIC to grant 3G licences to four mobile

operators. In addition, five mobile operators will also be given permission to undertake mobile WiMAX

trials. The decision, which was taken in late October 2007, follows more than a year during which the

MIC was understood to be preparing the 3G licensing criteria. A beauty contest for domestic operators

has been scheduled for 2008, followed by licensing, but, by the time of writing, had not occurred.

There have also been a number of large foreign operators that have expressed an interest in investing in

the development and deployment of 3G networks in the country. NTT DoCoMo, which opened an office

in Hanoi (its fourth overseas office) in September 2007, sees the annual 30% growth rate of the

Vietnamese telecoms market as a big draw. These sentiments are similar to those expressed by French

incumbent France Telecom.

According to reports, both MobiFone and VinaPhone are expected to upgrade their infrastructure to 3G.

MobiFone has completed a two-year 3G trial and is in the final stage of submitting a deployment proposal

with Ho Chi Minh City and Hanoi, the first cities expected to deploy services in 2008, possibly in

partnership with France Telecom. Meanwhile, VinaPhone concluded a similar trial with Nokia in Danang

in August 2007. As for Viettel, S-Fone and Hanoi Telecom (HT Mobile), all three are understood to have

requested UMTS licences from the Ministry.

It is unlikely that all six operators will win licences, with the government looking to award four 3G

licences at the most. It has been proposed by the Radio Frequency Department that each of the four 3G

licences be granted 2x15MHz frequency division duplexing slots in the 1920-1980MHz and 2110-

2170MHz bands, and a 5MHz time division duplexing slot in the 1900-1920MHz range. The 2010-

2025MHz band is to be reserved for further UMTS applications, and the RFD envisages that each

network will be granted a minimum 5MHz block.

A lack of content and the cost and availability of 3G handsets will all present problems to growth in

Vietnam’s 3G market, with BMI estimating no more than 700,000 subscribers in the first year of 3G

deployment. However, in spite of 3G, there is a real threat to growth in the Asia Pacific region as a whole,

and it comes from WiMAX, which can cover huge distances and which is able to provide wireless

internet access in the most remote towns and villages. Five operators are currently trialling WiMAX

services – these include VNPT-owned Vietnam Data Communications (VDC), in Lao Cai Province;

Vietnam Multimedia Corporation (VTC), in Hanoi and Ho Chi Minh; FPT Telecom; EVN Telecom

and Viettel. The latter three are testing both wireline and mobile WiMAX services.



Fixed Line

VNPT reported a total telecoms subscriber base of 27.8mn at the end of 2007. Of this total, the operator’s

fixed-line subscriber base amounted to 8.8mn. BMI estimates that traditional fixed-line services provided

by VNPT amounted to 77% of the country’s total fixed-line subscriber base with 2.64mn customers using

fixed wireless services provided by operators such as Viettel and S-Fone. By the end of 2007, we estimate

that the fixed-line customer base amounted to 11.44mn, which is equivalent to a penetration rate of

13.2%.

Unusually for telecoms markets in Asia, the Vietnamese fixed-line sector still offers growth opportunities.

Vietnam’s government is determined to increase the speed with which VNPT’s virtual monopoly in the

fixed-line sector is broken. In December 2006, the Ministry of Posts & Telematics awarded a national

wireline licence to FPT Telecom. FPT’s fixed-line service will be based on a next generation network,

which will support the provision of IP-based voice telephony, as well as high-speed broadband and IPTV.

In mid-2007, FPT reportedly had 200,000 ADSL customers. The operator aimed to have attracted an

additional 50,000 subscribers by the end of 2007, with broadband services offered in 10 provinces.

In addition to controlling the greater part of the local voice telephony market, VNPT was, until 2002, the

only body authorised to offer long-distance and international services. However, both Saigon Postel (a

privatised former subsidiary of VNPT) and mobile operator Viettel (which is owned by the country’s

armed forces) have since begun offering domestic and international voice over IP (VoIP) services. VDC

also introduced its own prepaid and postpaid VoIP under the brand name FoneVNN in 2003 and, in

November of that year, became Vietnam’s first provider of virtual private network (VPN) services.

In an effort to expand its fixed-line customer base, VNPT chose Swedish vendor Ericsson to supply

equipment to accommodate 200,000 additional fixed-line subscribers in Vietnam’s central region. The

deal is part of the second phase of a project to expand reach and capacity in the area. The first phase

began in August 2006, when Ericsson won a contract to install 600,000 lines.

Meanwhile, the Ministry of Posts & Telematics has pledged to develop the country’s fixed-line

infrastructure, especially in rural areas. Behind the government’s plan to invest in fixed-line telephony is

its desire to ensure a balanced and sustainable development of traditional voice telephony services

alongside mobile telephony. One reason why the government aims to support the funding of telephony in

rural areas is the difference in revenue terms between fixed-line connections in urban and rural areas;

whereas a wireline subscriber will typically generate an average monthly revenue of under VND50,000 in

urban areas, this figure falls to VND30,000 in remoter parts of the country.



Fixed Wireless

Around 70% of Vietnam’s population live in rural areas, and with saturation occurring in the highly

competitive urban mobile markets, an increasing number of operators, including mobile operators, are

launching fixed wireless services to cater to low-income households, helping to boost their revenues.

Fixed wireless services can be launched on existing mobile networks and therefore incur few start-up

costs. For Viettel, with around 70% of its subscriber base in rural areas, this indicates the importance of a

fixed wireless unit. Called HomePhone, Viettel announced a postpaid service in August 2007, having

launched its prepaid service several days earlier. Offering special discounts, it is expecting to raise the

number of customers of this service. Although press reports have suggested that Viettel had over 13mn

customers at the end of 2007, this figure is thought to include both mobile and fixed wireless customers.

Discounting its 11.9mn mobile customers, this would leave Viettel with just over 1mn fixed wireless

customers at the end of the year.

Vietnam’s fixed-line incumbent VNPT also offers a fixed wireless service called GPhone. The service

operates over VinaPhone’s GSM network and is charged at fixed-line prices, making it affordable for

low-income households. GPhone was launched in two phases, with services initially being launched in

eight provinces and cities (including Lau Chau, Thai Nguyen, Ha Tay, Quang Nam, Quang Ngai, Can

Tho, Hau Giang and An Giang) in June 2007, and further service deployments to the rest of the country

during August 2007. VNPT had outlined a target of 100,000 GPhone subscribers by the end of 2007, but

raised this to 500,000 new customers by year-end.

Broadband

Vietnam’s Internet Network Information Centre (VNNIC) suggests that there were 18.9mn internet users

in Vietnam at the end of January 2008, which equated to 22% of the total population. According to the

VNNIC, the number of internet users grew by 33% during 2007, while the number of broadband

subscribers rose by an impressive 130% y-o-y. Despite the number of broadband subscribers topping just

1.3mn in January 2008 for a penetration rate of 1.5%, the rapid take-up of broadband services illustrates

the growing popularity of such services within the country. Of the total number of broadband subscribers

in Vietnam, it is notable that two-thirds of them are from Hanoi and Ho Chi Minh City. Holding back

faster growth is the fact that ADSL services remain expensive and service quality remains poor, with slow

speeds and unstable connections beyond the country’s largest cities.



Seeing the potential, however, for

broadband growth, VNPT increased its

fixed-line network capacity in June 2007

with the help of Nortel Networks, so that

it could offer an enhanced broadband

service. As a result of its investment,

VNPT’s north-south fibre-optic network

capacity was doubled from 20Gbps to

40Gbps, as part of VNPT’s plans to cater

for 600,000 high-speed internet customers

by the end of 2007. VNPT has set itself

what appears to be a rather conservative

target of 1.5mn broadband subscribers by

the end of 2009. In February 2008, VNPT

revealed that it planned to invest US$1bn in broadband development in 2008. The investment will be used

to raise existing capacity to 200Gbps by mid-2008, rising to 300Gbps at a later date. Furthermore, the

investment will fund the expansion of VNPT’s broadband network over the next two years ending 2010,

in order to provide coverage in previously underserved regions, while connecting public high schools and

government offices. VNPT is also trialling WiMAX services in the cities of Hanoi and Ho Chi Minh.

This follows the operator's earlier success with WiMAX trials in Lao Cai. However, VNPT is not the first

to test WiMAX, with both Viettel and FPT Telecom having been carrying out similar trials.

In March 2008, Saigon Postel Corporation (SPT) became the sixth operator to be awarded a WiMAX

licence by Vietnam's Ministry of Information and Communication. SPT is affiliated with the country's

mobile operator S-Fone. Three of the other five operators to have been awarded similar licences also have

links with the country’s mobile sector: VNPT is responsible for mobile operators VinaPhone and

MobiFone, while Viettel and EVN Telecom also provide mobile services. Meanwhile, the fourth WiMAX

licensee, Vietnam Multimedia Corporation (VTC), offers mobile digital TV services among other

broadcast services. Finally, Financially Promoting Technology (FPT) is already licensed to offer fixed-

line voice and internet services; so far, however, it has been licensed to only carry out trials of wireline

and wireless WiMAX services. The connection between WiMAX licensees and the mobile sector also

indicates that WiMAX has become more closely entangled in mobile wireless technology rather than

under the guise of a fixed network wireless technology, in which it was originally conceived. SPT has

indicated that it will test WiMAX services in the 2.3GHz to 2.4GHz band across Ho Chi Minh City and

one of the neighbouring provinces of Tay Ninh, Binh Duong, Dong Nai, Ba Ria-Vung or Long An. The

majority of other WiMAX trials are also being conducted in Vietnam's two major cities of Hanoi and Ho

Chi Minh.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Jan-

07

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

No of Internet Subscribers ('000)No of Broadband Subscribers ('000)

Vietnam Internet Market

Source: VNNIC



Table: Vietnam – WIMAX Triallists

Operator WiMAX Licence Date Pilot Launch

Vietnam Post and Telecoms (VNPT) Mar-06 Trials carried out in Hanoi, Ho Chi Minh City and Lao Cai

Vietnam Multimedia Corporation (VTC) Mar-06 Trials carried out in Hanoi and Ho Chi Minh City

Financially Promoting Technology (FPT) Mar-06 To carry out trials of both wireless and wireline WiMAX

EVN Telecom Jan-07 To carry out trials of both wireless and wireline WiMAX

Viettel Mar-06 To carry out trials of wireless WiMAX

Saigon Postel Corporation Mar-08 Trials to be carried out in Ho Chi Minh City and one

neighbouring province

Source: BMI

In February 2008, the Ministry of Information and Communication awarded a licence to CMC Telecom

to provide internet services in Vietnam. The operator, an affiliate of CMC Corporation, will reportedly

be the 10th internet service provider in the country. CMC Corporation, which set up CMC Telecom in

2007, will offer its services through its partnership with EVN Telecom, a CDMA-based Vietnamese

mobile operator. The chairman of CMC Corporation confirmed that, if licensed, CMC would consider

launching WiMAX broadband wireless services and stated that US chip manufacturer Intel would support

deployment. However, any WiMAX provider must currently be at least 51% state owned in order to

launch services. Given that CMC is less than 51% state owned, it would require a change in regulations

for it to be able to offer WiMAX services. Along with its licence to provide internet access, CMC

Telecom also gained two further licences – one for online services provision and one for internet content

provision. However, the operator is not currently allowed to build its own telecoms infrastructure. As part

of its partnership with CMC, EVN Telecom is responsible for investing in transmission infrastructure,

while CMC is to invest in IT and communications services, which will provide services for the customers

of both groups. CMC has stated that its strategy is to focus on large corporate clients and governmental

organisations, a strong sector for internet use in Vietnam, as 89% of companies are estimated to have

internet connections.

Strong demand for internet and broadband services in Vietnam is expected to continue, given that levels

of PC ownership remain high. According to a survey conducted by Alcatel-Lucent, some 95% of

Vietnamese households have access to a desktop PC, of which 16% are planning to purchase a laptop.

Furthermore, growth in broadband demand is set to soar, as the Vietnamese government has been

investing heavily in developing the broadband sector, announcing its commitment to inject VND100trn

(US$6.3bn) in order to raise penetration rates significantly. Also, since Vietnam joined the World Trade

Organisation (WTO), the country has seen a number of high-profile global companies locate their



operations there, and employing local staff has boosted incomes. The result has been that a significant

number spend between US$10 and US$20 on their home internet bills, accessing multimedia content

including games and downloads. Increased competition is also expected to encourage increased

broadband usage.

Meanwhile, in March 2008, ISP One-Connection Internet (OCI) launched an online advertising site,

something it claims will give companies a chance to take full advantage of video and online advertising.

As a concept, online advertising has not yet developed in Vietnam, but it is a potentially large market, and

one that OCI thinks will grow by 50% each year from 2008, potentially reaching VND600bn by the end

of 2012.



Macroeconomic Outlook

Short Lapse In Economic Growth Expected

BMI View: We believe Vietnam will experience a brief slowdown in economic growth in 2008 and 2009,

but should remain one of the world's fastest growing economies over our five-year forecast period. We

have therefore lowered our GDP forecasts for 2008 and 2009 to 7.0% and 7.5%, respectively, while

keeping our 2010 forecast at 8.5%. The notable risk is that short-term concerns about macroeconomic

stability will delay economic reform needed to maintain high economic growth.

The present surge in inflation and ballooning trade deficit are, in our view, primarily the consequences of

years of heavy investment and loose monetary policy, which have left the Vietnamese economy awash

with liquidity. The government belatedly tightened monetary policy in H108, and we believe this will

contribute to lowering growth in 2008 and 2009, as consumers and firms feel the pinch of tighter lending

conditions. Yet with robust macroeconomic fundamentals still in place, we expect GDP growth to return

to around 8% once inflation has been brought back under control.

Q108 Data Indicates Lower Growth In 2008

The General Statistics Office (GSO) released a Q108 GDP growth estimate of 7.52% y-o-y growth in late

March. Vietnamese GDP statistics are less reliable than those of other more advanced countries in the

region and tend to overload economic activity in the second half of the year, especially in construction

and manufacturing activity. This makes the analysis of quarterly GDP data somewhat spurious, but we

still see some evidence of slowing growth in the Q108 GDP data.

Firstly, the headline growth figure was slightly lower than the 7.66% y-o-y recorded in Q107, which we

see as an indication that growth this year will fall short of last year's estimated 8.5% expansion. The

slowdown was particularly marked in the construction sector where growth slowed to 3.3% y-o-y from a

pace of 7.6% in Q107. The important manufacturing component, which accounts for roughly a quarter of

GDP, also recorded a slowdown from 11.7% y-o-y in Q107 to 10.3% in Q108, which we see as indicative

that slackening global demand is now starting to affect Vietnam's industrial expansion.

We believe the slowdown in the manufacturing sector is primarily due to weaker orders from overseas

markets, as little of Vietnam's industrial production is aimed for the home market. External demand has

so far held up fairly well, with export growth coming in at an average of 27.9% in the first four months of

the year. Shipments to the US rose 23% y-o-y to US$2.38bn in Q108, a somewhat lower expansion rate

than the 26% y-o-y recorded in Q107. March sales data suggest that export growth to the US may slow

more markedly in Q208 as US consumers start tightening their belts. Anecdotal evidence suggest that

manufacturers are attempting to shift their business to Europe, the Middle East and Asia, but we believe

Vietnam's high exposure to the US retail market will take its toll on GDP growth this year.



Apparel exports to the US, comprising about 10% of total exports, increased by 30% y-o-y to US$1.16bn

in Q108, but this still constitutes a slowdown compared to previous expansion levels of 35-40% (y-o-y)

recorded over 2007. Vietnam can take some comfort from the continued strong overseas sales of coffee,

rice, rubber and seafood, which should give the country's exports some leverage on higher global food

and commodities prices. The government's temporary ban on rice exports is, however, likely to decrease

the impact on the trade account from the more than doubling of the global rice price on the trade account.

While export growth was robust in Q108, we believe a slowdown in overseas sales is still on the cards.

We are forecasting export growth to drop from 22.3% in 2007 to 18.0% in 2008 as US demand falters.

We have pencilled in import growth staying flat at 35% this year, but acknowledge upside risks to this

target after the 75% y-o-y jump in imports in the first four months of 2008. The growing trade deficit

entails that much of the increase in domestic spending will benefit foreign exporters rather than domestic

producers. The sharp increase in imports implies that Vietnam will have to strive to source more of the

steel, machinery and fertiliser it needs domestically.

Domestic Momentum Likely To Feel The Pinch

The Q108 GDP estimate showed few signs of weakening domestic demand, with the service sector

expanding at a rate of 8.3% y-o-y compared to 7.8% in Q107, buoyed by strong growth in the hospitality

and transport sectors. We find it likely that the Q208 GDP estimate, which should be released at the end

of June, will show the domestic economy being harder hit by high inflation and monetary tightening. The

rapid increase in the price of rice to levels of VND16,000-20,000/kg (US$1.00-1.20/kg) has reduced the

spending power of many Vietnamese and is thus likely to affect private consumption going forward.

Retail sales, the most readily available proxy for private consumption, increased by 29.5% y-o-y in

January to April, but this masks a deceleration in real terms.

We expect the slowdown in both domestic and external demand to be more pronounced in the coming

quarters, bringing annual GDP growth down towards the 7.0% target we set in January. In fact, we do not

preclude that GDP growth will actually undershoot 7.0%, which is now also the government target for

2008, if the export sector were to be impacted by a severe slowdown in US demand and monetary and

fiscal tightening takes a deeper bite into domestic demand.

Our core scenario is, however, a less pronounced slowdown as the government readjusts its monetary

policy to achieve a more balanced growth path. We thus believe that the current monetary tightening

measures will remain in place over both 2008 and 2009 until inflation has returned to single digits by the

end of 2009. With the government having shown that it has recovered its grip on price growth, and

infrastructure investment progressing at a steady pace, we believe that foreign direct investment will

continue to be forthcoming over our five-year forecast period.



It should be kept in mind that Vietnam's cost advantage vis-à-vis China remains largely intact as inflation

and a new labour law have pushed up wages in the Chinese manufacturing industry. Vietnam should thus

continue to receive high investment inflows from Singapore, South Korea, Taiwan and other Asian

countries where firms are looking to cut costs by outsourcing assembly, testing and packaging functions

to plants in lower income countries like Vietnam.

We therefore believe that GDP growth will recover to 7.5% in 2009 before trending higher to 8.5% in

2010. Bearing in mind that Vietnam is an emerging economy and thus prone to be exhibit more volatility

in economic growth, we still see GDP growth continuing to expand at an annual rate of approximately 8%

over the next ten years. As such, it will contribute to shifting the weight of the world economy towards

the Pacific Rim, but Vietnam will still lag behind most of its neighbours in GDP per capita.

Table: Vietnam – Economic Activity

2005 2006 2007 2008f 2009f 2010f 2011f 2012f

Nominal GDP, VNDbn 2 839211.

0 973790.

0 1143442

.0 1337827

.1 1558568

.6 1815732

.4 2115328

.3 2458011

.5

Nominal GDP, US$bn 3 53.05 60.99 71.38 85.21 101.21 121.05 146.90 175.57

Real GDP growth, % change y-o-y 1,4 8.4 8.2 8.5 7.0 7.5 8.5 8.5 8.2

GDP per capita, US$ 3 638 714 825 971 1138 1342 1607 1894

Population, mn 5 84.24 85.40 86.58 87.77 88.97 90.19 91.42 92.70

Industrial production index, % y-o-y, ave 2 17.2 17.0 17.1 15.2 16.9 16.4 15.7 14.9

Unemployment, % of labour force, eop 2 5.3 4.8 4.5 5.0 4.8 4.4 4.3 4.3

Note: f = BMI forecast. 1 Constant 1994 prices; Source: 2 General Statistics Office. 3 BMI calculation; 4 General Statistics Office, BMI calculation; 5 Asian Development Bank. As of July 1.



Regulatory Environment

Vietnam: Regulatory Bodies And Their Responsibilities

Regulatory Body Responsibilities

Ministry of Information and

Communications (MIC)

18 Nguyen Du Street,

Hanoi,

Vietnam

Tel: 00 844 943 5602

Fax: 00 844 826 3477

Web: www.mic.gov.vn

The Ministry of Posts and Telematics of the Socialist Republic of Viet Nam is the state

administration in charge of policy making and regulatory matters in posts,

telecommunications, information technology, electronics, internet, radio transmission and

emission techniques, radio-frequency management and national information infrastructure,

management of public services, as well as of control over, on behalf of Government and as

stipulated by laws and regulations, the state capital in posts, telecommunications and

information technology enterprises. Its main functions include:

! Submit to Government drafts of laws, ordinances, regulations, strategies and

development plans on posts, telecommunications and information technology;

! Give guidance in implementation of laws, ordinances, regulations, as well as

development strategies and plans related to posts, telecommunications and

information technology;

! Regulate the access to and the interconnection between public switched

telephone networks, specialised and private networks;

! Regulate the electronics and information technology industry development plan;

! Regulate charges and tariffs in the fields of posts, telecommunications and


! Plan, assign and allocate radio frequency spectrum; control and monitor radio

frequency spectrum and radio equipment; organise radio frequency, satellite orbit

registration and coordination;

! Grant licenses in posts, telecommunications, radio frequency and Internet;

! Regulate the quality of posts, telecommunications and information technology

networks, plants, products and services;

! Regulate numbering resources, codes, domain names and addresses used in

the fields of posts, telecommunications and information technology;

! Conduct international cooperation activities in posts, telecommunications and


! Inspect all activities and settle all regulatory breaches in the fields of posts,

telecommunications and information technology.



Legislation And Market Liberalisation

The government’s telecommunications policy is formally set out in a decision of the Prime Minister,

Decision No.158/QD-TTg of 18 October 2001, which ratifies Vietnam Post and Telecommunications

development strategy until 2010 and Orientation until 2020. The policy Decision provides a

comprehensive range of sector development objectives and targets, along with key underlying strategies

for their achievement.

The government’s telecommunications policy recognised the current weakness of the legal structure

governing the telecoms sector. In line with its policy, the Government ratified the Ordinance on Post and

Telecommunications (the ‘Ordinance’) on May 25 2002. The Ordinance took effect on October 1 2002

and has replaced the Decree No.109/1997/ND-CP dated November 12 1997 on network and

telecommunications services. The Ordinance is expected to achieve the primary aims as follows. First is

the consolidation of the legal structure into a single law, which means the repeal of the set of

contradicting laws and regulations. Second, the Ordinance shall modernize the legal structure and address

the important issues that arise in a competitive market structure.

The functions of Vietnam Posts and Telecommunications (VNPT) are set out in Decree No. 51 (Decree

No. 51/CP ratifying the Statute on VNPT). VNPT is active in all aspects of telecommunications,

including infrastructure ownership and operation, and provision of telecommunications services.

Regulation

The regulation of the telecommunications sector in Vietnam falls under the responsibility of the Ministry

of Posts and Telematics (MPT), which fulfils the dual role of policy maker and regulatory authority. The

key functions and responsibilities of the organization of MPT are outlined in the Government Decree No.

90/2002/ND-CP of November 11 2002. The Decree sets out a wide range of functions and responsibilities

under four different groupings. It is noted that MPT exercises regulatory control over both post and

telecommunications. The MPT has responsibility for drafting laws, ordinances and policies on

telecommunications, issuing decisions, directives, rules and technical standards, managing international

treaties on telecommunications and radio frequency and issuing and revoking permits in accordance with

regulations.

The direct regulatory body over internet activities in Vietnam is the Vietnam Internet Network

Information Centre (VNNIC). The VNNIC is a non-profit affiliation to the Ministry of Posts &

Telematics, established under the Decision No. 372/QD-TCBD dated April 28 2000 of the DGPT (which

later became the MPT). The purpose of the VNNIC is to carry out the functions of managing, allocating,

supervising and promoting the use of internet domain names, addresses and autonomous system numbers



(ASN) in Vietnam, VNNIC also provides Internet-related guidance and statistics related to international

activities on internet.

Licensing And Spectrum

Vietnam’s Ministry of Posts and Telematics (MPT) is responsible for all licensing related to

telecommunications services. Prior to Vietnam’s entry to the World Trade Organisation (WTO), foreign

telecoms operators were prevented from making direct investments in Vietnamese telecoms operations.

Instead, Business Cooperation Contracts (BCCs) served as a transitional investment model in the

telecoms sector and ensured that the provision of all telecommunications services was based on a system

of revenue sharing with local companies. Since joining the WTO, however, Vietnam’s MPT has allowed

a number of local telecoms companies to enter into joint ventures with foreign partners for the provision

of a wide range of communications services, including fixed voice telephony, packet-switched data

transmission services, circuit-switched data transmission services, telex services, telegraph services,

facsimile services and private leased circuit services. For non-facilities-based services, the foreign capital

contribution to these joint ventures must not exceed 51% of legal capital. Despite these continued

restrictions which govern the licensing process, it will be permissible for wholly foreign-owned firms to

provide registered telecoms services to Vietnamese organisations and individuals once Vietnam has been

a WTO member for two years. Furthermore, three years after Vietnam’s WTO accession, foreign

companies will be allowed to establish local branches and provide telecoms services, under the condition

that the chief representatives of the branches reside in Vietnam.

In order to provide fixed or mobile voice telephony services for which no network infrastructure is

required, foreign partners will be allowed to participate in joint ventures with Vietnamese telecoms firms,

with a capital contribution of up to 51%, within the first three years of Vietnam’s WTO membership.

Once that initial three-year period has passed, foreign operators will be authorised to choose their own

local partners when establishing joint ventures and will be allowed to raise their capital in the joint

venture to 65%. Meanwhile, for virtual private network services and value-added telecom services, some

large foreign partners will be permitted to independently provide those services using the network

infrastructure of a local operator. Currently, foreign partners wanting to provide such services must select

Vietnamese partners and contribute up to 70% of capital in the joint venture.

For satellite services, the Vietnamese government is committed to expanding the number of companies

involved in this field, but only once Vietnam has been a WTO member for three years. In addition, the

government will allow foreign partners to connect to underwater optical cable networks, of which

Vietnam has membership. Licensed companies will be authorised to sell transmission lines to

international telecoms service providers, which have network infrastructure (such as VNPT, Viettel, EVN

Telecom), and also to virtual personal network and IXB service providers such as FPT, VNPT, Viettel

and EVN Telecom four years after the date of Vietnam’s WTO membership.



Regulatory Developments

According to reports published in February 2008, Vietnam’s Ministry of Information and

Communications (MIC) is to hold an exam to select which networks are most capable of providing 3G

services. All seven 2G licensees are eligible to enter. These are MobiFone, VinaPhone, Viettel Mobile, S-

Fone, EVN Telecom, HT Mobile and non-operational newcomer GTel. The MIC has said it will grant just

four licences. Incumbent VNPT, which runs VinaPhone and MobiFone, and military-owned Viettel, are

both said to be worried about failing the test through a simple mistake. An MIC spokesman said that the

cellcos will be tested on around 200 standards, which it is currently defining. The MIC has said that it will

seek comments before compiling the official examination contents and will deliver the exam documents

in March 2008. Competitors will then have two months to complete the exam documents. The ministry

will consider the exam documents in May, and it will grant 3G licences in the second quarter of 2008.

According to the MIC, winners will be granted 15MHz of frequency division duplex (FDD) spectrum and

4MHz of time division duplex (TDD) spectrum. However, any winner that fails to launch 3G services

(presumably by a set date) will be fined and risk having their frequencies withdrawn.

In March 2008, VNPT announced that the country’s first commercial telecoms satellite launched on April

12 2008. Vinasat-1 will be capable of handling more than 10,000 telephone, internet and data

transmission channels. People living in remote areas will be among those to benefit most, as the satellite

is expected to provide them with access to modern telecoms services for the first time. Speaking at a

briefing ceremony in Hanoi on March 12, VNPT Deputy General Director Nguyen Ba Thuoc said the

successful launch of the satellite will be of great importance to Vietnam’s socio-economic development.

Worth more than US$200mn, Vinasat-1 will be positioned at 132 degrees East Longitude in a

geostationary orbit and has a design life of 15 years.



Company Monitor

Nokia Reports On Strengthened Investments In Asia's Emerging Markets

There were 1.137mn mobile handsets in the global market at the end of 2007, an increase of 16% over the

year. Of this total, the largest rise in mobile handset units occurred in Asia Pacific and China, both up by

34% y-o-y to 254mn and 173mn units, respectively. Middle East & Africa reported an increase of 19%,

followed by Latin America (10%), North America (6%) and Europe (3%). The reason behind the level of

handset growth witnessed in the worldwide market during the year was on account of a vibrant

replacement market and greater number of new subscribers from the emerging markets, according to

Nokia Group. If we consider that Asia Pacific, not only houses both developed markets interested in

device features, such as cameras, e-mail, music players and 3G, but also the largest developing markets –

India and China – it becomes easy to understand why this region should experience high demand levels

for handsets.

Table: Global Mobile Handset Market v. Nokia Mobile Handset Market By Geography (mn units)

Global ow Nokia Global ow Nokia Global Nokia

Region YE07 YE07 YE06 YE06 Y-o-Y Chg

% Y-o-Y Chg

%

Europe 284 117.2 276 99.6 2.9 17.7

Middle East & Africa 126 75.6 106 53.2 18.9 42.1

China 173 70.7 129 51 34.1 38.6

Asia-Pacific 254 112.9 189 79.8 34.4 41.5

North America 170 19.4 160 25.3 6.3 -23.3

Latin America 130 41.3 118 38.6 10.2 7.0

Source: Nokia; ow = of which

Nokia Conquers China And India

Taking Asia Pacific and China into isolation, the largest mobile handset provider in these two markets

was Nokia. The Finland-based telecoms equipment vendor had a 44.4% share of the Asia Pacific market

and 40.9% share of the Chinese mobile handset market. Early entry into the emerging markets combined

with affordable entry-level handsets priced at under EUR50 has ensured Nokia's success. According to

the vendor's estimates, the entry-level handset market made up over 35% of the industry's total handset

volume, while Nokia's share in the entry-level market was in excess of 50%. Of Nokia's top 10 net sales

generating markets in 2007, China and India were No.1 and No2, respectively, with Indonesia in ninth

place. Although it was a step up for India in the rankings by one spot over the year, China remained in



first position. Nokia's ability to gain market share in China was due to its 'extensive distribution system,

broad product portfolio, brand and strong market share in the entry level.'

Table: Top Ten Nokia Net Sales Markets

Country 2007 (2006) Ranking

China 1 (1)

India 2 (3)

Germany 3 (5)

UK 4 (4)

US 5 (2)

Russia 6 (6)

Spain 7 (8)

Italy 8 (7)

Indonesia 9 (9)

Brazil 10 (10)

Source: Nokia

Mobile handsets continue to be the largest revenue contributor of Nokia's total net sales. In 2007, mobile

handset sales stood at EYR25.083bn to account for 49.2% of the total at EUR51.058bn, up by 24% y-o-y.

However, the increase in mobile handset revenues has remained less than impressive at 1% over the year,

the reason for this being that volume growth was offset by a significant decline in the average selling

price (ASP) of handsets. Nokia's ASP in Q407 stood at EUR83, down from EUR89 in the fourth quarter

of the previous year. This decline was also partially attributed to a weaker US dollar on Nokia net sales.

On a q-o-q basis, ASP increased by 1.2%, reflecting a greater percentage of sales recently launched at the

mid- to high-end and offsetting robust sales of entry-level units.

Investments Satisfy Greater Demand For Capacity

Of Nokia's 10 mobile handset production facilities, the majority were based in Asia Pacific: China

(Beijing and Dongguan), India (Chennai) and Republic of Korea (Masan). The importance of these

facilities to Nokia was highlighted by the announcement made in December 2007, of the decision to

invest a further US$75mn into its Chennai plant. Collectively, these four handset plants had a production

capacity totalling 101,885m² (productive capacity equals the total area allotted to manufacturing and to

the storage of manufacturing-related materials). However, Asia Pacific's handset plants were not the only

facilities to receive additional funds during 2007. The region's network unit, Nokia Siemens Network

(NSN), also with 10 network equipment plants, again of which four were based in Asia Pacific, received

further investment. Three were based in China (Beijing, Shanghai and Suzhou) and a fourth in India



Middle EastAnd Africa

11.3%

China10.1%

Latin America

9.0%

NorthAmerica

4.6%Asia-Pacific25.0%

Europe40.0%

NSN Net Sales By Geography (%)

Source: BMI

(Calcutta). The low cost of production and a highly skilled labour force have made these two countries an

ideal location for NSN facilities, while logistically they allow for efficient distribution to Asia's two

largest markets. NSN demonstrated its commitment to the emerging markets by announcing that it would

expand its R&D capacity in China and invest US$100mn to strengthen its operations in India.

Greater investment in these emerging markets, with rapid subscriber growth, resulting in capacity

increases and network build-outs, has led

Asia Pacific to become the second largest

revenue contributor to NSN at EUR3.35bn,

up by 90.6% y-o-y. Europe, with its

revenues of EUR5.359bn, accounted for

40% of the total, managing a 98% y-o-y

increase. The degree of growth in Asia

Pacific is hardly surprising, with low

penetration rates, increased competition and

greater liberalization leading to strong

subscriber take-up. India has on average

8mn new subscribers per month, while the

number of competing mobile operators in Indonesia has grown rapidly in the last year leading to

downward pressures on price, long held as the major obstacle to growth. As for China, NSN sales rose by

53% during the year to EUR1.35bn, not far off from Middle East & African revenues of EUR1.515bn.

A number of network expansion contracts awarded to NSN during 2007 have highlighted the growing

need for capacity. During the year, the company signed a US$500mn network expansion contract with

India's Idea Cellular and a US$900mn end-to-end network expansion contract with Bharti Airtel.

Furthermore, Telenor Pakistan contracted NSN to a network expansion and managed services frame

agreement with NSN in February 2007, while NSN was also awarded a EUR180mn contract with China's

Henan Mobile Communications Company for the expansion of its GSM network.



Table: Nokia And NSN: Major Contracts And Milestones

March 7 2008 Nokia Strategic Cooperation with China Postel strengthened

December 5 2007 US$75mn investment in Chennai, India manufacturing plant

November 29 2007 Telenor Pakistan selects Nikia Intellisync Wireless E-mail

November 6 2007 AIS Thailand standardising on Nokia Mobility Platform

August 23 2007 India emerges as Nokia's second largest market

August 1 2007 Opens first design studio in India

June 18 2007 MiTV and Nokia announce live DVB-H mobile TV services for Malaysia

June 5 2007 Power mobile e-mail solution for PCCW Mobile

February 28 2007 Telenor Pakistan and Nokia sign network expansion and managed services framework

agreement

Source: Nokia

Pushing The Boundaries Of NGN Technology

At the other end of the spectrum, Japan's NTT DoCoMo, faced with growing competition from KDDI

and Softbank Mobile and with 3G subscribers already accounting for over 80% of the total market, has

led to development efforts on super 3G or LTE network deployments. Together with Panasonic, NSN

was selected by NTT DoCoMo to carry out an LTE base station project. Similarly, other data-rich

applications have been the subject of focus for Asian operators, including the launch of live DVB-H

mobile TV services in Malaysia together with MiTV and an e-mail solution for Hong Kong's PCCW

Mobile during 2007.

At the end of 2007, NSN net sales stood at EUR13.393bn to account for 26.2% of Nokia Group's total

sales and only second to mobile handset devices. A direct y-o-y comparison has not been possible, with

the inclusion of NSN results commencing in April 1 2007, and, therefore, 2006 network sales report those

of only Nokia. According to its original timeframe, NSN had been targeted to achieve annual cost

synergies of EUR2bn in order to maintain a competitive cost structure. This year should see continuing

subscriber growth resulting in greater minutes of use and maturity of the services market.



Selected Profiles – Operators

Vietnam Posts &Telecommunications (VNPT)

SWOT Analysis

Strengths

! Country's leading telecoms operator with presence in fixed-line, mobile and internet sectors

! Dominant player in the fixed-line sector and also serves 53% of mobile subscribers

! A clear investment strategy to invest heavily in mobile and broadband services

Weaknesses

! Services in rural areas is poor or non-existent

! Lack of competition in fixed-line sector has contributed to limited array of services on offer

! New mobile price structure under pressure from competitors

Opportunities

! 3G services, once VinaPhone and MobiFone win licences, will provide substantial source of value-added mobile revenues

! Deployment of broadband and fixed-wireless networks in short and medium term

! Expansion of GPhone fixed wireless service will help presence in rural areas

Threats

! Viettel expected to extend lead over mobile market

! Low-cost mobile services from competitors could result in migration away from fixed services

! Timescale for restructuring plan currently uncertain and could be delayed

Overview

Wholly owned by the government, Vietnam Posts and Telecommunications (VNPT) is

the country’s main post and telecommunications service provider. VNPT operates the

national backbone network that connects the provincial operating companies in 63

cities and provincial areas, and – indirectly – controls the country’s two leading

mobile operators, Vietnam Telecom Company (GPC-VinaPhone) and VMS

MobiFone, both operating GSM networks.

At the end of 2007, VNPT served approximately 8.8mn fixed-line telephone

subscribers and almost 19mn mobile telephone customers.

In April 2008, VNPT launched Vinasat 1, the country’s first telecoms satellite in

French Guyana. Vinasat-1 will be controlled from two land stations in Ha Tay

province (north Vietnam) and Binh Duong (South Vietnam). The cost of Vinasat-1 has

been US$200mn. VNPT worked closely with Lockheed Martin Commercial Systems

over the construction and launch of Vinasat 1.

Address

! Vietnam Posts and Telecommunications Corporation (VNPT) 18 Nguyen Du Street Hanoi Vietnam

! Tel: +84 (49) 434 936

! Fax: +84 (48) 255 851

! Web: www.vnpt.com.vn

Key Statistics

! Annual Revenues (2003): VND26.51trn



! Annual Revenues (2006):



Corporate Structure

VNPT owns eight state-affiliated companies, eight joint ventures (with other state-

owned enterprises as well as with private entities) and 13 other subsidiaries. In

addition to VinaPhone and MobiFone, the state companies include Vietnam Telecom

National (domestic services), Vietnam Telecom International (international long-

distance services) and Vietnam Datacommunications Company (data services).

In September 2004, a formal proposal was put forward by VNPT and the Ministry of

Post & Telematics to separate the postal and telecommunications activities of the

VNPT group. Under the plan, the national network will be run directly by VNPT,

instead of through subsidiaries such as Vietnam Telecom International and Vietnam

Telecom National, which will be absorbed into the parent. This should create fair

competition among local telecom operators, according to VNPT.

Recent Financial Performance

In 2007, VNPT generated a turnover of VND45.3trn (or US$2.8bn), a growth of

14.08% over 2006. Its state budget contribution reached VND6.917trn, which was

some 12.78% higher than in 2006. VNPT added 9.88mn new connections to its

networks in 2007, of which 8.8mn were mobile phone users. This helped the total

subscriber base of VNPT to gross 27.8mn nationwide, including almost 19mn mobile

phone users. Also in 2007, VNPT recorded 514,000 new ‘Mega VNN’ broadband

subscribers, raising the total to 740,000.

Strategy

Investing in mobile and broadband services are VNPT’s priorities in 2008. The

operator is currently designing new wireless stations and upgrading existing networks

so as to prepare for the implementation of 3G services. Both VinaPhone and

MobiFone will also seek to expand the reach of their EDGE services nationwide.

VNPT has also pledged to invest US$1bn in its NGN and mobile broadband services

as it aims to have one million broadband subscribers at the beginning of 2009.

Fixed-Line Services

In an effort to build on growing broadband interest, VNPT began providing IPTV

services in 2007. It aimed to sign up 500,000 new ADSL subscribers during 2007,

which would represent an annual increase of over 300%.

In May 2007, VNPT awarded a contract to Nortel to double its national optic

backbone capacity and meet growing demands for high-speed video, mobile and

broadband services. VNPT has said that it will provide ADSL broadband access to

more customers, handle increased mobile traffic for wireless operators and create a

platform for its planned migration to a wholly IP-based infrastructure. Instead of

VND38.3trn


! No. of Fixed-Line Subscribers (December 2005): 6.3mn

! No. of Fixed-Line Subscribers (July 2006): 7.2mn

! No. of Fixed-Line Subscribers (December 2006): 8mn (estimate)

! No. of Fixed-Line Subscribers (December 2007): 8.82mn

! No. of Cellular Subscribers (December 2005): 6.7mn


! No. of Cellular Subscribers (May 2007): 18.7mn




running at 20Gbps, this will double to 40Gbps.

VNPT introduced lower fixed-line charging in June 2007; tariffs for fixed-line and

public card phone charges were cut by 15-20%.

VNPT’s internet and data unit Vietnam Data Communication Company (VDC) has

signed an agreement with Motorola to trial mobile WiMAX services. Under the terms

of the agreement, Motorola’s wi4 WiMAX will be deployed, enabling the delivery of

services including VoIP to meet broadband demand. The trial will last a year and

cover Hanoi and its surrounding areas in the first phase, extending to HCM City in the

second. Meanwhile, VDC is cooperating with Intel in running the second phase of a

fixed WiMAX trial in the northern mountainous province of Lao Cai. The test of the

mobile internet service will take place with three BTSs and 30-50 access points. The

government expects to see WiMAX services commercially launched in 2008.

In November 2007, it was reported that French-US vendor Alcatel-Lucent had signed

two contracts with VNPT for the supply and installation of telecoms equipment. The

deals are worth a total of US$31.7mn. Alcatel-Lucent will provide two telephone

switchboards with respective capacities of 1mn and 272,000 subscriber lines to VNPT.

The new switchboards will help VNPT fulfil its plan to upgrade fixed line services,

mobile networks and internet services ready for potential privatisations of the

incumbent’s various business units, including cellco MobiFone, during 2008.

In January 2008, VNPT chose Ericsson to supply equipment that would accommodate

200,000 more fixed-line subscribers across central Vietnam, forming the second phase

of a project to expand reach and capacity for the operator.

Mobile Services

VNPT indirectly owns both VinaPhone and MobiFone, which had almost 10.2mn

subscribers between them at the end of 2006 and almost 19mn customers between

them at the end of 2007; the two operators account for 53% of Vietnam’s entire

mobile subscriber base.

In December 2007, VNPT began to reduce mobile tariffs by up to 25-28%, in a move

which is expected to trigger a price war with Vietnam’s other operators. Indeed, the

move by VNPT followed similar readjustments by Viettel, which reduced its own

tariffs by 15% on December 1 2007.

Launching its fixed wireless phone service ‘GPhone’ in June 2007, VNPT said the

new service will operate on VinaPhone’s GSM platform. As a result, the service will

be provided in all areas covered by VinaPhone’s network. VNPT said in local press

reports, ‘the service is particularly suitable for remote and mountainous areas where



installation of a fixed-line telephone service is expensive and in some cases,

impossible’. Subscribers of the GPhone service will be charged the same as fixed-line

subscribers. The service was introduced in two stages – initially launched in eight

provinces and cities, the service was extended nationally in August 2007. Although

VNPT was initially aiming to sign up 100,000 GPhone subscribers by the end of 2007,

this target was later increased to 500,000.

VNPT has sought to partially privatise MobiFone, after which it will do the same to

VinaPhone. VNPT has short listed some six foreign companies, which will bid to

advise the operator on its partial privatisation including its IPO expected in 2008.

Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Rothschild and UBS

are expected to bid to become an adviser for the operator. VNPT has yet to provide a

timeframe for the bidding. The IPO has already attracted some high profile operator

names including NTT DoCoMo, which has announced its interest to acquire a 30%

stake at a cost of US$1bn. Other companies to have expressed an interest are Telenor,

France Telecom and Singapore Telecommunications.

VNPT awarded a contract to Alcatel-Lucent in October 2007, for the deployment of

GSM/GPRS/EDGE base stations across the country to help improve the coverage and

capacity of its network. The vendor will provide VNPT with optical nodes to connect

base stations and to act as a mobile backhaul system in the northern region. The

contract is reported to be worth US$28.5mn.

A further contract was awarded to Alcatel-Lucent in November 2007, by VNPT for

the supply and installation of telecoms equipment. The deals are worth a total of

US$31.7mn. Under the terms of the agreement, the vendor will provide two telephone

switchboards with respective capacities of 1mn and 272,000 subscriber lines. This is

expected to help VNPT upgrade its fixed-line service, mobile networks and internet

service, as it prepares for the privatisation of its various business units.

Joint Ventures

NTT Communications, the sister unit of NTT DoCoMo is to form a joint venture with

VNPT. Operating under the name of Global Data Service (GDS) in Hanoi from 2008,

the company will provide data services and plans to establish data centres in Hanoi by

mid-2008 and Ho Chi Minh City in early 2009. NTT Communications will take a 40%

stake in GDS, with VNPT occupying the remainder.

International

In June 2007, the Vietnam Economy reported that VNPT had opened an office in the

US, providing ‘new opportunities for Vietnamese telecom companies in this market’.

The operator’s decision is based on a need to update strategic information on

technology and business to serve the group’s operations and integration. VNPT co-

operated with six US partners: MCI, Verizon, AT&T and Sprint over IDD services



and with VITC and Net Global for voice over IP (VoIP) services. The Vietnamese

operator is now said to be looking to boost its internet and communication

partnerships with Time Warner, Teleglobe, Fusion, Ipass and Voice2me. Meanwhile,

VNPT has shown interest in the US’ wholesale and retail markets.

VNPT is to pay 25% of the US$3mn required to repair the broken undersea optical

cable linking the country with Thailand and Hong Kong. The TVH system-based cable

repairs will mostly be funded by Thailand’s CAT (44.5%), while Hong Kong’s

REACH will pay 20.4% towards the repairs.



S-Fone (S-Telecom)

SWOT Analysis

Strengths

! Backed by leading Korean players SK Telecom and LG Electronics

! Licence to offer fixed-wireless, mobile and value-added services

! Ended 2007 with 3.4mn mobile subscribers and 9.5% share of the market

Weaknesses

! SK/LG not permitted to own equity in entity

! Coverage currently limited to 13 provinces and cities

! Pricing structure already undercut by Viettel

Opportunities

! Continued growth of mobile sector offers opportunity for expansion

! Helped by its nationwide coverage, there is the potential for considerably more mobile growth, especially from next generation services

Threats

! Falling further behind market leader Viettel and VNPT subsidiaries

! Influx of new mobile entrants likely to lead to pricing war

Overview

S-Fone is a joint venture between Saigon Postel and SLD, a Singapore-based

consortium comprising Korea’s SK Telecom, LG Electronics and Dong Ah Elecomm.

SLD has no equity in the venture, which is run under a form of build-operate-transfer

(BOT) agreement.

S-Fone holds a licence to offer mobile, fixed-wireless and value-added services via

CDMA2000 1X technology. The operator launched services in July 2003, and, by the

end of 2006, had 1.8mn mobile subscribers. BMI estimates that its mobile customer

base had risen to 3.4mn by the end of 2007. The operator delivers its service over the

whole of Vietnam through almost 600 BTSs.

SK Telecom has announced that it will invest US$543mn into its joint venture SLD

Telecom, which partly owns S-Fone. The investment will go towards helping S-Fone

garner a larger share of the mobile market.

Mobile Services

In October 2006, S-Fone launched several services based on an EVDO network in

Hanoi, Ho Chi Minh and Da Nang. The EVDO services consist of real time TV

services and are expected to increase ARPU and the operator’s subscriber base. At the

Address

! 97 Nguyen Thi Minh Khai, Ben Thanh District 1 Ho Chi Minh City Vietnam

! Tel: +84 (8) 404 0079

! Fax: +84 (8) 925 4287

! Web: www.stelecom.com.vn

Key Statistics





end of 2007, S-Fone had approximately 400,000 subscribers to its EV-DO service.

In December 2006, Ericsson announced an agreement with S-Fone for the building of

a nationwide IMS-based multimedia network across Vietnam. The strategy behind this

deal is to remain ahead of its competition in providing high quality IP multimedia

services.

In a deal to attract next generation subscribers, S-Fone signed an agreement with

digital entertainment company WiderThan to operate and manage the company’s

VAS. It will allow S-Fone to offer a broad range of mobile entertainment, including

ringbones, music and video on demand, games and news services.

In April 2008, S-Fone announced an agreement with Qualcomm to launch BREW

services on the operator’s CDMA network, providing it with a hosted data service. It

should provide S-Fone with an opportunity to differentiate their offerings from rival

competitors.



VinaPhone

Overview

A wholly-owned subsidiary of VNPT, GPC-VinaPhone operates a nationwide GSM-

based digital cellular telephone network under the VinaPhone brand name. The

network was launched in June 1996. By the end of 2007, VinaPhone was estimated to

have 9.1mn mobile customers, which is equivalent to nearly 26% of the market.

In 2005, the government confirmed that GPC-VinaPhone would be publicly listed,

probably by year-end 2008.

Network Development In March 2003, Alcatel of France was contracted to supply and install its Evolium

GSM 900 solution to optimise VinaPhone’s existing network infrastructure and

upgrade its coverage of 18 northern provinces, including Hanoi.

In 2005, VinaPhone announced that it had upgraded some 1,000 base stations and built

three new exchanges in Hanoi, Hai Duong Province and Ho Chi Minh City.

In May 2008, UK-based Aircom International won a deal with Vinaphone to provide

the operator with network planning, design support and surveying activities for the

expansion of its network. This contract forms an important part of the operator’s aim

to boost subscriber numbers and provide nationwide coverage – Vinaphone expects to

have a total of 9,000 base transmission stations by the end of 2008.

Mobile Services Value-added services offered by VinaPhone include SMS, WAP and data

transmission. In September 2005, VinaPhone selected Comverse’s Multimedia

Messaging Service Centre (MMSC) and Mobile Data Gateway (MDG) to provide

expanded multimedia and video messaging services to its customers.

From July 1 2007, VinaPhone prepaid subscribers will be required to register their

personal details, following the introduction of similar rules for postpaid subscribers.

Subscriber details with deactivated incoming and outgoing calls will not be retained

for six months as before, but only for three months. The operator believes this new

method will help check the growth of subscribers, but will in the long term help

VinaPhone save its phone number resources. This we believe is largely a side effect of

the aggressive promotional activities of all operators, which has led to phone numbers

being wasted.

Address

! Vietnam Telecom Services Company (GPC-VinaPhone) 57A Hyunh Thuc Khang Dong Da Hanoi Vietnam

! Tel: +84 (4) 835 8815

! Fax: +84 (4) 835 7502

! Web: www.gpc.vnn.vn

Key Statistics

! No. of Subscribers (2003): 1.3mn







MobiFone

Overview

Vietnam Mobile Telecom Services (VMS), a subsidiary of incumbent fixed-line

operator VNPT, operates a GSM-based digital cellular telephone network under the

MobiFone brand name, serving approximately 10mn customers at the end of 2007;

this is equivalent to over 27% of the total mobile market.

MobiFone plans to prepare for an IPO of one-third of the company’s shares. The

government will still retain a 33.3% stake, while the remaining third of the operator

could be acquired by a strategic investor, possibly later in 2008, but more likely in

2009. A number of operators have expressed an interest in MobiFone, but the most

likely candidates are Singapore Technologies Telemedia (STT), Telenor, France

Telecom or Japan’s NTT DoCoMo.

The sale will be important to watch as it will be the first of many privatisations

planned by the Vietnamese government for the telecoms sector. Next up for

privatisation will be sister company Vinaphone.

Network Development

The operator is pushing for the development of an NGN network. Due to be

introduced in two phases, the first phase, carried out between 2008 and 2010, will

focus on developing NGN applications and a core 2G network, while gradually putting

3G into application in big cities. The second phase, from 2010-2012, will focus on the

core NGN IP technology and launching 3G nationwide. MobiFone has set a target of

6,000 3G customers by 2012.

With 9.9mn subscribers at the end of 2007, MobiFone hopes to take this total to over

20mn by the end of 2008. The operator also expects to achieve revenues of VND16trn

and post a VND6.6trn profit for 2008. (Such a result suggests that MobiFone is

expecting a slowdown in growth, given that revenues grew by 30% in 2007, and such

a rise in revenues would only show 17% growth). So as to succeed in this aim,

MobiFone will install 6,000 additional base transceiver stations raising the total

number to approximately 10,000 by the end of the year.

Address

! Vietnam Mobile Telecom Services (VMS-MobiFone) 811 A Giai Phong Hai Ba Trung Hanoi Vietnam

! Tel: +84 (4) 864 9533

! Fax: +84 (4) 864 8534

! Web: www.mobifone.com.vn

Key Statistics




! No. of Subscribers (2006): 5mn




Viettel

SWOT Analysis

Strengths

! Licence to offer fixed-wireless, mobile and value-added services

! Low tariff structure

! Nationwide coverage

! Market leader

Weaknesses

! Network currently has limited capacity

! No distribution service outside urban areas

! No international partner

Opportunities

! Mobile market expected to increase to above 56mn by the end of 2008

! Nationwide coverage should guarantee substantial market share in medium term

! Won licence to test WiMAX mobile broadband service

Threats

! Connection difficulties could prompt potential subscribers to opt for alternative networks

! Influx of new mobile entrants likely to lead to pricing war

Overview

Viettel established a radio trunking network in 1998, before launching domestic and

international VoIP services in 2001. However, its major breakthrough came in 2003

when it began offering local access and internet services and began rolling out a GSM

mobile network.

By the end of 2007, Viettel had in excess of 10mn mobile subscribers and with 29% of

the market was Vietnam’s No. 1 mobile operator. In addition, Viettel also provides

fixed-line services to approximately 1.4mn subscribers. The operator claims revenues

of around the US$1bn mark for 2007 and has pledged US$500mn of investment to

build a 3G network if it wins a licence. Commenting on 3G take-up in Vietnam,

director of Viettel Telecom claimed that the falling prices of 3G equipment and

increased need for value-added services (video streaming, mobile TV, internet

connection) should result in a migration from 2G networks to 3G in Vietnam.

Mobile Services

In July 2006, Ericsson won a GSM expansion deal from Viettel. Under the terms of

the deal, Viettel extended its coverage to rural Vietnam, increasing its capacity in

Address

! Viettel 1A Giang Văn Minh Street, Ba Đình, Hanoi. Vietnam

! Tel: +84 (4) 255 6789

! Fax: +84 (4) 846 0486

! Web: www.viettel.vn

Key Statistics

! No. of Mobile Subscribers (2004): 0.16mn

! No. of Mobile Subscribers (2005): 1.7mn

! No. of Mobile Subscribers (2006): 5mn

! No of Mobile Subscribers (2007): 10.4mn

! No. of Fixed-line Subscribers (December 2007): 1.4mn



Hanoi, Ho Chi Minh City and Danang.

In December 2006, Viettel started to test its WiMAX mobile broadband service in

Hanoi on the back of Viettel winning a WiMAX licence in March 2006. Others to win

a licence were VNPT, the Vietnam Television Technology Company and FPT

Telecom.

The operator is also extending its service provision to the corporate sector, announcing

a commercial tie-up with AT&T. Under the terms of the agreement, both companies

will provide services initially to multinational companies to include VPN and frame

relay. The US vendor has already established an office in Hanoi, with a second office

built in Ho Chi Minh City by YE07.

Data Services

Telecoms equipment vendor ECI Telecom was selected by Viettel in late August

2007 for the expansion of the operator’s optical and broadband access network. The

project is being overseen by ECI Telecom’s Vietnam-based business partner Ntegrator

and includes the construction of a 2,000km long-haul Dense Wavelength Division

Multiplexing network with a capacity of 10Gb/s over 40 channels based on the XDM

platform.

In May 2008, Taiwanese incumbent operator Chunghwa Telecom set up a US$30mn

internet data joint venture with Viettel, which will take a 70% share of the operation.

International

Viettel launched mobile services in Cambodia. With an existing 25% share of the

Cambodian international VoIP market and over 50% share of the international channel

leasing market in the country, Viettel has said it will focus on the roll-out of a

US$27mn mobile network infrastructure.

The operator has attained a mobile licence to operate in nearby Laos. Unlike its plans

for Cambodia, the operator has stated that it will enter the market as part of a joint

venture with a Laos-based company in order to provide telecoms services in the

country.

(estimate)



EVN Telecom

Overview

The telecoms arm of Electricity of Vietnam (EVN) and the country’s second CDMA

operator, EVN Telecom launched its services at the end of February 2006 – a move

making it the country’s sixth commercial operator. By January 2007, EVN Telecom

had 700,000 subscribers on its networks comprising of fixed wireless, E-mobile and E-

phone customers and, by mid-October 2007, claimed 2mn wireless customers, a large

majority deriving from the rural areas. Reports have suggested that E-Mobile was

serving 2.8mn mobile customers at the end of 2007. According to EVN, this places it

as the largest CDMA operator using the 450MHz band.

Aside from mobile, EVN Telecom is licensed to provide fixed-line services, lease line,

internet, international connectivity and domestic and international VoIP.

Network Development

In January 2007, EVN Telecom became the first operator in Vietnam to secure a

spectrum for the deployment of its 3G services, as well as gaining an agreement in

principle from the government to develop mobile WiMAX in 2007. The government

announced that it would offer spectrum to EVN Telecom over the 1900MHz

frequency band for 3G deployment alongside the operator’s existing 450MHz

spectrum.

EVN Telecom plans to increase its BTSs to 5,000-6,000 from its existing 1,000 BTSs,

in a bid to secure capacity for up to 8mn mobile subscribers. In 2007 alone, some

1,500 BTSs were to be established at a cost of VND3.7trn, providing it with the

capacity to serve some 5mn customers.

Meanwhile, the operator had been ordered by the government to complete its mobile

WiMAX trial in the first quarter of 2007, as the state gets ready to offer the mobile

WiMAX licences following the expiry of the country’s existing four fixed WiMAX

licences. These services were expected to be launched in cities by Q407.

A fibre-optic cable is also being constructed, which will reach 80 districts nationwide

and raise transmission capacity of the national optic transmission axis to 100Gbps,

regional line capacity to 10Gbps and local transmission capacity to 2.5Gbps.

EVN Telecom is also involved in the Intra Asia Optical cable system, using DWMA

technology to cover Vietnam, the Philippines, Hong Kong, Taiwan, China, Japan and

Guam. EVN Telecom will invest US$30mn into the project.

Address

! EVN Telecom

30A Pham Hong Thai St.

Ba Dinh Dist., Hanoi

Vietnam

! Tel: +84 (4) 2100507

! Fax: +84 (4) 7151109

! Web: www.enet.vn

Key Statistics

! Annual Revenues (2006): VND1trn

! Estimated Annual Revenues* (2007): VND3trn

! No. of Mobile Subscribers (April 2007): 1mn

! No. of Mobile Subscribers (October 2007): 2mn

! No. of Mobile Subscribers (December 2007): 2.5mn

! Year established: 2005

* provided by EVN Telecom



Agreements

EVN Telecom has leased lines to FPT Telecom, in a deal worth US$20mn. The three-

year contract is the largest of its kind in Vietnam in terms of value and will double

FPT Telecom’s bandwidth to 5Gb/s. (See FPT Telecom profile)

Fixed Wireless Services

Using a CDMA2000 1x network, the operator offers its fixed wireless service E-Com,

capable of supporting EV-DO and providing 3G service users. The number of E-Com

subscribers was targeted to rise from 650,000 in April 2007, to 2mn subscribers by the

end of 2007 (no further information has been made available). Further, the operator

plans to provide EV-DO services across 64 cities and provinces in 2007.

Expenditure Plans

Between 2007 and 2010, EVN Telecom plans to invest nearly VND24bn (US$1.5bn)

to expand its operations. This will be spent on expanding its mobile network coverage

and broadband upgrades as well as building a fibre-optic cable system.



Hanoi Telecom

Overview

Established in 2001, Hanoi Telecom was awarded licences to provide national and

international services including wireless local loop, fixed-line, internet and ISP,

broadband data and VoIP services.

The majority of shares of Hanoi Telecom are owned by the Vietnamese government

through two entities, Hanel (belonging to the Hanoi People’s Committee) and HTI

(Vietnam Science Institute). These two entities have been involved in a wide range of

businesses in Vietnam for over 20 and 50 years, respectively, including telecom

software, manufacturing and integration of electric and electronic appliances, PCs and

consumer products.

Network Development

Hanoi Telecom launched its CDMA network in November 2006 and started deploying

its services in January 2007. The operator has installed about 800 base stations

throughout the country and has invested US$656mn towards its platform, making it

one of the largest telecoms projects in Vietnam. By the end of 2007, Hanoi Telecom’s

mobile service, HT Mobile, was reported to have just less than 200,000 customers.

Disappointed with its progress, Hanoi Telecom started to migrate its subscribers to a

GSM network offering from April 2008.

Address

! Hanoi Telecom

811 Giai Phong Road

Hoang Mai Dist., Hanoi

Vietnam

! Tel: +84 (4) 664 3724

! Fax: +84 (4) 664 3720

! Web: www.hanoitelecoms.com.vn

! No. of Mobile Subscribers (December 2007): 195,000

! Year Established: 2001



FPT Telecom

Overview

FPT was granted licences for the provision of internet services by the government.

Since 1999, it has commercially been offering services, and by H105, the operator had

the largest share of the internet market at 38%, with some 60,000 ADSL subscribers.

By December 2006, the operator had received a licence to provide fixed line services,

and in February of that year, FPT Telecom added to its service portfolio mobile and

other wireless services.

Private equity company Texas Pacific Group (TPG) sold part of its stake in FPT in

mid-August 2007, although the company continues to retain a stake in the operator.

TPG and Intel Capital paid US$36.5mn for a combined 10% stake in 2006 in FPT;

however, the dilution of TPG’s stake is more to do with a fall in FPT’s shares. Reuters

commented that FPT had lost more than 40% of the value of its shares since it debuted

on the Ho Chi Minh stock Exchange on December 2006. According to FPT’s CEO

Truong Gia Binh, the reason for the fall in share price was due to rumours surrounding

the company not being timed correctly, the announcement by TPG that it was

registering to sell a large volume of shares and finally two members of the FPT’s

management board also registered to sell a number of shares.

Recent Financial Developments

For the financial year ending December 31 2007, FPT Telecom reported revenues of

VND27.3trn and a net profit of VND877bn. Fourth quarter revenues amounted to

VND9.4trn, while net profit in the fourth quarter totalled VND312.7bn.

Network Development The operator was responsible for completing the country’s first-ever metro Ethernet

and Optical network, with the help of Cisco Systems. The 10Gb/s NGN is equipped

with a total metro Ethernet, broadband and IP/MPLS solution. The network provides

FPT with a platform to deliver a wide variety of data, voice and video services over

high-speed broadband connections. Cisco’s solution will enable FPT to provide new

value-added services (VAS) services, including triple-play (data, voice and video), as

well as IPTV services.

Fixed-Line Services

The operator was targeting 100,000 fixed-line subscribers by June 2007 and 250,000

subscribers by YE07. The first locations to receive access to its fixed line network are

in 10 cities and provinces, including Hanoi, HCM City, Dong Nai, Binh Duong, Can

Tho, Hai Phong, Quang Ninh and Hai Duong. The operator’s existing ADSL

subscribers will be the first to be offered the fixed-line services, its CEO stating that

FPT Telecom would differ as ‘each (fixed-line) subscriber will be provided with two

Address

! FPT Telecom

48 Van Bao, Kim Ma Street

Ba Dinh Dist., Hanoi

Vietnam

! Tel: +84 (4) 760 1060

! Fax: +84 (4) 822 3111

! Web: www.fpt.vn

Key Statistics

! Revenues (H107): VND5.9trn

! Revenues (M907): VND17.97trn

! Revenues (2007): VND27.3trn

! Net Profit (H107): VND436bn

! Net Profit (M907): VND564.46bn

! Net Profit (2007): VND877bn



phone numbers on the same line. FPT wants to provide each member in a family with

one different phone number, not one number for the whole family,’ By December

2006, the operator had installed cables for 180,000 ADSL subscribers.

The operator acquired a licence in October 2007 to provide domestic and international

land line networks and, over the coming 12-18 months, will build a network linking

Hanoi to HCM City, with another from HCM and the southern city of Vung Tau to

connect to a regional submarine cable project. A third network would also link Hanoi

with the northern provinces of Lang Son and Quang Ninh, bordering China with

international calls routed through gateways in Hong Kong and Shanghai. Until now,

the operator has been reliant on the networks of others.

Just a month before, FPT Telecom had inked a deal with EVN Telecom to lease a

2.5Gb/s international ADSL line. The three-year contract is the largest of its kind,

valued at VND20mn, and will enable FPT Telecom to double its bandwidth to 5Gb/s.

EVN Telecom plans to work with FPT Telecom as part of an agreement between their

parent companies on opportunities in IT products and services. Further, FPT Telecom,

having bought a new switchboard from Cisco Systems, will be able it to provide triple-

play services of internet, telephone and TV over a single cable.

Internet Services

In March 2006, FPT Telecom launched its IPTV service. Further long-term goals now

include expanding its internet-based VAS services, including establishing an e-

solution and website for corporations in Vietnam.

By June 2007, FPT Telecom announced that it had established free internet access via

its Wi-Fi systems to 5,000 locations throughout Hanoi and HCM City. The US$1.5bn

Wi-Fi project will benefit universities, colleges, cafes, restaurants, banks and securities

companies in the two main cities. By the end of 2007, it was expected that there would

be 8,000 Wi-Fi locations across Hanoi and Ho Chi Minh (no recent data has been

made available).



Competitive Landscape

Competitor Analysis

Table: Key Players – Vietnam Telecoms Sector

Company Name Ownership Market

Vietnam Posts and Telecommunications (VNPT) Government (100%)

Local, long-distance and international telephony, data, internet

VinaPhone Vietnam Telecom Services (100%) Mobile

MobiFone Vietnam Telecom Services (100%) Mobile

Viettel Ministry of Defence Mobile, local telephony

S-Fone

Joint Venture: Saigon Postel and SLD (consortium comprising SK Telecom, LG

Electronics and Dong Ah Elecomm) Mobile

Electricity of Vietnam (EVN Telecom) Electricity of Vietnam (100%)

Local, long-distance and international telephony, data, internet and mobile

Hanoi Telecom Joint Venture: Hanoi Telecom, Hutchison Telecommunications International (HTIL) Mobile

Source: BMI

Key Players

Fixed Line

The provision of traditional PSTN-based telecoms services is still effectively under the monopoly of

Vietnam’s state-owned operator VNPT, which became responsible for the country’s telecommunications

services in 1995. Its fixed-line services are run through a network of 61 local push-to-talks (PTTs), while

the country’s two mobile operators are both subsidiaries of VNPT’s telecommunications business,

Vietnam Telecoms Services (GPC). Vietnam does not have an independent regulatory body – regulation

and policy development now fall under the aegis of the MPT.

BMI estimates that the Vietnam fixed-line user base grew by around 23% in 2007, compared with growth

of 43.5% in 2006. There were thought to be over 11.4mn fixed-lines at the end of 2007, which is equal to

a penetration rate of 13.2%. The country continues to have one of the lowest rates in the region, although

ahead of Indonesia, Pakistan, the Philippines and India.



Table: Regional Fixed-Line Penetration Overview

Country Fixed-line Penetration 2007 (%) Regional Rank 2007 (2006 Rank)

Taiwan 58.6 1 (1)

Hong Kong 54.0 2 (2)

Australia 46.5 3 (3)

South Korea 46.2 4 (4)

Japan 41.6 5 (5)

Singapore 41.5 6 (6)

China 28.2 7 (7)

Malaysia 16.3 8 (8)

Sri Lanka 13.5 9 (-)

Vietnam 13.2 10 (10)

Thailand 10.9 11 (9)

Indonesia 7.0 12 (11)

Philippines 4.4 13 (13)

Pakistan 4.1 14 (12)

India 3.4 15 (12)

Bangladesh 0.8 16 (-)

Source: BMI

Mobile

Until mid-2003, the mobile market was nominally a duopoly. Both incumbent operators – MobiFone and

VinaPhone – are indirect wholly-owned subsidiaries of VNPT. MobiFone introduced services at 900MHz

in 1993, following a Business Co-operation Contracts (BCC) agreement with Comvik of Sweden, while

VinaPhone launched its own GSM 900 network in 1996.

During the second half of 2003, Saigon Postel subsidiary S-Fone launched CDMA-based services,

although it is only since the end of H104 that S-Fone has begun to acquire significant numbers of

subscribers. Meanwhile, Ministry of Defence-run Viettel launched a very successful GSM network in

2004 and has already overtaken S-Fone to become the country’s second largest mobile operator (after the

two VNPT-owned operators). Since then, Vietnam has also welcomed the entrance of newcomers EVN

Telecom (which operates under the E Mobile brand) and latterly Hanoi Telecom (which operates under

the HT Mobile brand). E-Mobile and HT Mobile, which began commercial operations in February 2006

and January 2007, respectively, both offer CDMA-based services (although from April 2008 HT Mobile



started to shift its customers to a GSM network offering). With a penetration rate of just over 40%,

Vietnam continues to move up the below table, now ahead of China and Indonesia.

Table: Regional Mobile Penetration Overview

Country Mobile Penetration 2007 (%) Regional Rank 2007 (2006 Rank)

Hong Kong 140.9 1 (1)

Singapore 121.9 2 (2)

Taiwan 104.6 3 (4)

Australia 99.6 4 (3)

South Korea 90.4 5 (6)

Malaysia 87.8 6 (5)

Thailand 84.9 7 (9)

Japan 81.9 8 (7)

Philippines 64.0 9 (8)

Pakistan 49.2 10 (12)

Vietnam 41.4 11 (13)

Indonesia 41.2 12 (11)

China 39.4 13 (10)

Sri Lanka 39.3 14 (-)

Bangladesh 24.5 15 (-)

India 20.2 16 (14)

Source: BMI



Broadband

Vietnam’s internet user base more than doubled during 2003 and 2004 and, at the end of 2004, was

estimated at nearly 5.87mn, representing penetration in excess of 7%. Indeed, during the course of the

year Vietnam leapfrogged both the Philippines and China in terms of internet take-up. There are now nine

licensed internet service providers (ISPs) in Vietnam and six internet exchange providers. By the end of

2007, internet user penetration had increased to 21.8%. In July 2003, VNPT subsidiary Vietnam

Datacommunications Company (VDC) launched the country’s first ADSL service in Hanoi, Ho Chi Minh

City and Haiphong. Broadband figures, according to the Vietnam Internet Network Information Centre

(VNNIC), are thought to have reached almost 1.2mn subscribers by the end of 2007, which is equivalent

to a penetration rate of 1.4%.

Table: Regional Broadband Penetration Overview

Country Broadband Penetration 2007 (%) Regional Rank 2007

South Korea 31.1 1

Australia 29.4 2

Hong Kong 26.4 3

Taiwan 23.6 4

Japan 22.3 5

Singapore 21.5 6

Malaysia 6.3 7

China 5.3 8

Thailand 4.0 9

Vietnam 1.4 10

Philippines 1.1 11

Bangladesh 0.5 12

Indonesia 0.4 13

India 0.3 14=

Sri Lanka 0.3 14=

Pakistan 0.2 16

Source: BMI



Table: Glossary Of Terms

2G second generation ISP Internet Service Provider

3G third generation IT Information Technology

ADSL Asymmetric Digital Subscriber Line ITU International Telecommunications Union

AMOU Average Minutes of Use JV joint venture

ARPU Average Revenue per User Kbps kilobits per second

ASP Average Selling Price KHz kilohertz

bn billion km kilometres

BTS Base Transceiver Stations LANs Local Area Networks

CDMA Code Division Multiple Access LEC Local Exchange Carrier

CEO Chief Executive Officer LTE Long-Term Evolution

CRM Customer Relationship Management m metres

D-AMPS Digital-Advanced Mobile Phone Service mn million

DLD Domestic Long-Distance MEA Middle East & Africa

DMB Digital Multimedia Broadcasting NGN Next Generation Network

DSL Digital Subscriber Line Mbps megabits per second

DSLAM Digital Subscriber Line Access Multiplexer MHz megahertz

DSU Digital Subscriber Unit MNP Mobile Number Portability

DTH Direct-To-Home m-o-m month-on-month

DVB-H Digital Video Broadcasting-Handheld MoU Memorandum of Understanding

DVB-SH Digital Video Broadcasting-Satellite

Handheld MPLS Multiprotocol Label Switching

e/f estimate/forecast MSC Mobile Switching Centre

EBITDA Earnings before Interest, Taxes,

Depreciation and Amortization MVNO Mobile Virtual Network Operator

EC European Commission na not available

EMEA Europe, Middle East & Africa OIBDA Operating Income before Depreciation

and Amortization

EV-DO Evolution-Data Optimised POP Point of Presence

FDI Foreign Direct Investment q-o-q quarter-on-quarter

FTTB Fibre-To-The-Building R&D research and development

FTTH Fibre-To-The-Home SDSL Symmetric Digital Subscriber Line

FTP File Transfer Protocol SIM Subscriber Identity Module



Table: Glossary Of Terms

Gbps gigabits per second SMS Short Messaging Service

GDP Gross Domestic Product TDMA Time Division Multiple Access

GPRS Global Packet Radio Service TD-

SCDMA Time Division-Synchronous Code Division

Multiple Access

GSM Global System for Mobile Communications trn trillion

HDSL High-bit-rate Digital Subscriber Line UMTS Universal Mobile Telecommunications

System

HSDPA High-Speed Downlink Packet Access VOD Video On Demand

HPSA High-Speed Packet Access VoIP Voice over Internet Protocol

HSUPA High-Speed Uplink Packet Access VLAN Virtual Local Area Network

HTML HyperText Markup Language WAP Wireless Application Protocol

Hz Hertz W-CDMA Wideband CDMA

IDD International Direct Dialling WiBro Wireless Broadband

ILD International Long-Distance WiMAX Worldwide Interoperability for Microwave

Access

IPO Initial Public Offering WLL Wireless Local Loop

IP Internet Protocol WTO World Trade Organisation

IPTV Internet Protocol TV y-o-y year-on-year

ISDN Integrated Services Digital Networks



BMI Forecast Modelling

How We Generate Our Industry Forecasts

BMI's industry forecasts are generated using the best-practice techniques of time-series modelling. The

precise form of time-series model we use varies from industry to industry, in each case being determined,

as per standard practice, by the prevailing features of the industry data being examined. For example, data

for some industries may be particularly prone to seasonality, meaning seasonal trends. In other industries,

there may be pronounced non-linearity, whereby large recessions, for example, may occur more

frequently than cyclical booms.

Our approach varies from industry to industry. Common to our analysis of every industry, however, is the

use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the

variable's own history as explanatory information. For example, when forecasting oil prices, we can

include information about oil consumption, supply and capacity.

When forecasting for some of our industry sub-component variables, however, using a variable's own

history is often the most desirable method of analysis. Such single-variable analysis is called univariate

modelling. We use the most common and versatile form of univariate models: the autoregressive moving

average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data

quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a

basis for analysis and forecasting.

It must be remembered that human intervention plays a necessary and desirable part of all our industry

forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks,

anomalous data, turning points and seasonal features where a purely mechanical forecasting process

would not.



Telecommunications Industry

There are a number of principal criteria which drive our forecasts for each telecoms variable:

Subscriber Numbers

Subscriber data are derived in the majority of instances from individual operators and/or national

regulators. Subscriber forecasts are then based on a range of variables including:

! stated network roll-out and capex plans;

! level of maturity of a given market;

! competition from alternative technologies (i.e. ADSL/wireless vs PSTN);

! potential regulatory developments (increased liberalisation, etc.);

! cost of technology in relation to GDP/capita; and

! political/economic factors.

Expenditure per capita/% of GDP/% of fiscal budget is calculated using BMI’s own macroeconomic and

demographic forecasts.

Sources

Sources used in telecoms reports include national ministries and media/telecoms regulatory bodies,

officially released company results and figures, national and international industry organisations (such as

the CTIA, the GSM Association and the ITU) and international and national news agencies.

Documents

Bmi vietnam telecommunications_report_q3_2008