3G driving growth in Vietnam while Burma’s growth remains muted

Monday, 29 November 2010 12:19  |  James Barton

Vietnam’s telecommunications sector is witnessing healthy growth with the advent of 3G. Operators are keen to offer the new technology, and increasingly liberalised regulation is attracting foreign firms to the market, according to Pyramid Research. Mobile data services are growing in popularity due to the proliferation of 3G services, and a CAGR of 13.4% is forecast through to 2015.

Until recently, the Vietnam telecom market was monopolistic, with strict controls on foreign ownership of telecom operators, notes Emily Smith, analyst at Pyramid Research. "This year the market has seven MNOs and two MVNOs, and regulation continues to liberalize, allowing foreign firms greater access to the market," Smith says. "Due to the tough competition for market share, rates plunged to the point that it was cheaper this year to subscribe to a 3G service than GPRS."

However, by 2011, the decline in voice revenue will be counterbalanced by the rise in data revenue made possible by the 3G and LTE networks that are being built, allowing transmission of greater traffic volume. "A shift in data traffic away from SMS [is likely] as other data services gain ground," Smith adds.

"Due to low fixed penetration rates in Vietnam and extremely low 3G tariffs, mobile broadband will quickly gain ground in the market as many consumers will rely on mobile phones for Internet access," explains Smith. "Four operators will begin LTE trials this year, but the high costs associated with this nascent technology will severely limit demand through 2015."

Given the gap between PC and Internet penetration, as well as the low broadband penetration rate, there is significant potential for mobile broadband through 3G services. "Mobile operators should ensure that there is enough capacity in the backhaul so that 3G can be effectively leveraged as a mobile broadband service," Smith notes.

The Vietnam telecom market will generate $5.9bn in service revenue in 2010, almost doubling the $3.2bn generated in 2007. Most of this growth has been from the mobile sector, and the bulk of the revenue increase through 2015 will continue to be from the mobile sector.

However, the outlook is not so good for fellow southeast Asian nation, Myanmar (Burma). The country’s telecommunications sector continues to be dominated by the state-owned monopoly telephone service provider, Myanmar Posts and Telecommunications (MPT).

The MPT drafted a 20-year master plan, the period 1990 to 2010, and under this plan a range of different projects have been implemented over the years to improve the underdeveloped network. The expansion has been characterised, however, by a somewhat erratic rate of progress. Nevertheless, the country had managed to move from around 100,000 installed fixed lines to more than one million in 2009. Over the same time period the number of fixed-line subscribers increased from 76,000 to just over 800,000. Despite this more than tenfold increase, however, coming into 2010 the country's fixed-line penetration was still less than 2%.

The dispersion of network infrastructure has been heavily biased towards the cities, with Yangon and Mandalay having estimated telephone penetrations of 6% and 4% respectively. According to the ITU, the official waiting list for telephone services stood at 106,000 by end-2004 and had increased to 250,000 by 2008. No updated figures have since been published.

The installation of new telephone services could often take years. This was despite the fact that MPT said it had been expanding the network by approximately 15% each year. To catch up on demand, it was estimated that MPT would need to install more than 500,000 new telephone lines in a short period of time. This would represent a capital investment of around US$600 million, money that was simply not available.

Foreign investment in the telecom sector continued to stay low, due to the political situation in Myanmar, the structure of the country's telecom industry and the general state of the economy - this also being despite the government's attempts to increase foreign interest. Investment in the telecom sector has been running at less than US$6 million per year. By 2009 most villages in Myanmar were still without a fixed-line telephone service.

However, the State Peace and Development Council (SPDC) has declared via its website that it has been making all-out efforts for the development and improvement in the telecom sector. As regards telephone communications, auto-telephones were already being installed. Now, one can make telephone contact inside and outside Myanmar quite conveniently, the website claimed.

The website did not offer any statistics on the number of telecom (either fixed line or mobile) subscribers in the country. Official, up-to-date statistics continue to be hard to come by – particularly if they do not paint a positive picture of the government's management of the country.

Based on estimated figures and conjecture due to the absence of official government figures, Myanmar's mobile market has been growing at an annual rate in excess of 25% over the last three years or so.

Of course, this mobile subscriber growth was from a low base, and the reported 450,000 mobile subscribers early in 2010 still only constituted a penetration of 9%. Fixed-line subscriber numbers have been growing erratically; after a relatively big surge in 2008, 2009 saw almost zero growth. Penetration remained low, however, still down below 2%. Internet penetration also continues to be disconcertingly low with accurate figures hard to obtain. Certainly, Internet penetration was below one subscriber per 1,000 people in 2010.

While Myanmar still needs to seriously address regulatory reform, there was no evidence that any real progress had been made on this front in the 2008/09 period.

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