Virtual network developers face big Vietnam task

Virtual network developers face big Vietnam task

More than a year since the launch of the first mobile virtual network operator (MVNO) ITelecom, the local telecommunications industry last week welcomed the second such service provider named Reddi, operated by Mobicast JSC and some of its partners, including VNPT.

At the launching ceremony, Reddi shared that its goals are to target developing and providing telecommunications solutions and digital services for young customers through mobile applications. Reddi expects to grow through capturing new trends such as 5G, the Internet of Things, e-sim, and mobile money.

An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers. This form of operation is very popular in the European market but is still a new beast in Vietnam.

To develop an MVNO, developers enter into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, then sets retail prices independently. Thus, in comparison with mobile network operators (MNOs) such as Viettel, MobiFone, and VNPT, MVNOs do not have to spend on developing network infrastructure. On the other hand, this new mobile network form comes with significant risks.

Le Dang Dung, chairman of Viettel, told local media that MVNOs are only successful in markets with a relatively high expenditure on mobile services. However, expenses in Vietnam average only VND70,000-90,000 ($3-3.90) a month, a modest sum against Singapore’s $25-72.

As the market has only two MVNOs with small sales networks, their risks are enlarged. Despite not having to set up network infrastructure, if they cannot sell the entirety of the services purchased from their respective MNOs, they will likely encounter losses.

“MNOs with extensive sales networks still face difficulties in acquiring new subscribers, which means opportunities for MVNOs are limited,” said Dung.

On the other hand, as the local telecommunications market is firmly in the hands of the three giants VNPT, Viettel, and MobiFone, targeting a niche market like MVNOs would be a good strategy for newcomers.

Previously, in addition to ITelecom, VTC and FPT also filed documents for a MVNO licence but have yet to be approved. According to the Ministry of Information and Communications, an enterprise has also been negotiating with MobiFone to rent its wireless network infrastructure to operate as an MVNO in Vietnam.

Dung said that the rapidly flourishing technology sector will benefit latecomers like MVNOs. “Their survival depends on finding suitable strategies and business plans. MVNOs that only sell the same services as MNOs will not survive for long,” said Dung.

The first MVNO was launched in the UK in 1999 in the form of Virgin Mobile. But after years of attempts to get MVNOs off the ground in Vietnam, with MNOs seemingly reluctant to switch focus to wholesale services, there is now real hope that the model could take off in a big way over the coming years.