November 16, 2013
Coupled with Viettel’s entry into the telecommunication market in 2004, the monopoly of Vietnam Post and Telecommunications Group (VNPT), the mother company of Vinaphone and Mobifone,was eventually broken. Since 2005, the telecom market has rallied, boosted by many foreign investors. Yet the ghost of the monopoly time is making a comeback as competition declines.
That the three mobile operators Viettel, Mobifone and Vinaphone hiked their 3G charges by 40% on October 16 deals a very powerful blow to consumers’ confidence in the telecom market. These service providers increased charges at the same time, by an average of 40%, and replaced the 10KB-10KB block charging with the 50KB+50KB one.
As the three mobile carriers now apply the same charging method, impose evenly high charges, and offer identical packages, consumers have virtually no choice. There is no wonder why they do not rule out a secret deal between these three mobile network operators.
Experts believe the 3G charge hikes in chorus is synonymous with a return of monopoly to the telecom market. The latest Vietnam 2013 ICT White Book reports Viettel currently accounts for the largest share of the mobile service market (40.05%), followed by Mobifone with 21.4% and Vinaphone 19.88%. among the remaining mobile carriers, Vietnamobile is holding a 10.74 market share, GMobile 3.93% and S-Fone 0.0%.
In the early 2000s, only two players were operational in the telecom market, namely Vinaphone and Mobifone, both of which are run by VNPT. Back then, mobile phone charges were very high as they were fixed by these two only players.
Viettel’s entry into the telecom market in 2004 gradually put an end to this monopolistic status. Backed by the Ministry of Defense, Viettel prioritized infrastructure development and network expansion. The firm has introduced drastic charging policies and always played the leading role in service fee cut.
Not only was the monopoly in the telecom market broken, the market has also been bustling since 2005, with the presence of many foreign investors. Comvik of Sweden has poured cash into MobiFone. SK Telecom of South Korea has joined hands with Saigon Postel to invest in S-Fone. VimpelCom of Russia has partnered with Gtel to operate Beeline. Hutchison of Hong Kong has cooperated wih Hanoi Telecom to launch Vietnamobile.
However, in 2012, several foreign investors such as SK Telecom and Vimpelcom had to pull out the local market.
A three-horse race
Reasons abound as to why foreign investors have exited, such as S-Fone’s devasting choice of CDMA technology and late market entry of Beeline. However, the underlying cause is that the State policies do not really support newcomers.
In 2004, S-Fone expressed its desire to connect to Vinaphone and MobiFone, but VNPT turned it down, using the technical problems of GSM and CFMA networks as an excuse. Meanwhile, Cityphone, also a CDMA network and a VNPT’s subsidiary, was connected immediately. Citing the same pretext, VNPT did not allow S-Fone to directly connect to the tandem switching exchange. Instead, S-Fone had to use an intermediate exchange run by VNPT at a cost of VNND250 per minute. So every month, S-Fone had to pay nearly VND2 billion for the service.
Similarly, Vietnamobile, currently the only mobile network with a foreign investor, Hutchison, is facing sheer difficulties. At present, for each phone call between subscribers of two different mobile networks, the operator of the network whose subscriber makes the call has to pay the other operator half of the charge. Therefore, as phone calls made by Vietnamobile subscribers outnumber those they receive from subscribers of other networks, Vietnamobile has to pay other mobile carriers a considerable sum. When EVN Telecom was struggling with its losses and needed to change hands, Hanoi Telecom sought to acquire this company aiming to merge it with Vietnamobile, but the Government rejected its proposal and decided to transfer EVN Telecom and Viettel instead.
What’s happening in the telecom market signifies a backward move in terms of competition. In addition, the monopoly in the market is reinforced now that the market with previously seven players has seen only three players – Vinaphone, MobiFone and Viettel – that clinch an overwhelming market share of 95%.
(By Hien Nguyen)