Pivotal year for Vietnam’s telecoms

State-run Vietnam Post and Telecommunication Group (VNPT) wrapped up 2023 with a slight on-year rise of 2.14 per cent in total revenue of nearly $2.32 billion. Its total profit rose 0.7 per cent on-year to nearly $190 million.

Vietnam’s big tech names are diversifying into more digital applications

General director Huynh Quang Liem said that in a difficult market, core services such as traditional mobile, broadband, and MyTV are the services that face the most challenges, but VNPT was still able to maintain market share.

“Among them, broadband services and television services occupy the top position. In the field of services for digital businesses and a digital government, VNPT continues to receive wide-ranging trust. Many VNPT products launched in 2022 create market influence in 2023.”

Facing challenges in traditional services, and new opportunities in the digital age, VNPT has been transforming from a traditional telecommunications entity to the country’s premier service provider by joining the government’s major digital transformation projects, with the latest being the national population database system.

Other moves include the national database on civil servants and public employees, and the opening of an eighth data centre in Hoa Lac High-Tech Park, the largest in Vietnam today.

VNPT has also been focusing on developing infrastructure and a portfolio of special digital services through promoting cooperation with major international partners in the IT industry. In 2023, VNPT signed cooperation agreements with large telecoms and tech corporations to seek new business development opportunities.

Gains and remains

Last year was also a challenging year for other major network operators like MobiFone, Viettel. and others.

MobiFone made total revenues of just over $1 billion in 2023, meeting 91 per cent of the yearly target, while pre-tax profit reached the target of $64.55 million.

In early 2023, after seeing a strong fall in 2022 due to saturation of the traditional telecommunications market, MobiFone had to lower its profit target for the whole year to the pre-tax profit target of $91.56 million, an annual decrease of over $21 million.

Also in 2023, MobiFone implemented a strategy to promote business in new fields such as digital finance, health, and education. It is also now focusing on developing data centres. MobiFone operates four data centres in Vietnam, with the target of increasing the number to seven this year.

Similarly, Viettel reported consolidated revenue of $7.27 billion, surpassing the yearly target by 2 per cent. Its pre-tax profit reached $1.9 billion, surpassing the yearly target by the same rate.

Like VNPT, Viettel focused on strengthening cooperation with major partners during 2023. In December, it cooperated with India’s QuadGen Wireless Solutions to jointly host the handover ceremony of Private 5G, which was researched, manufactured, and supplied by Viettel. Also last month, Viettel worked with the US-based Nvidia Group on the possibility of cooperating in supercomputer infrastructure and human resource training.

According to the Ministry of Information and Communications (MIC), the growth of network operators has been lower in recent years. Viettel’s domestic telecommunications increased from 2-5 per cent, and VNPT from 2-3 per cent, while MobiFone decreased from 4-10 per cent each year. A new-generation telecoms network with good growth must be around 10 per cent.

MIC Minister Nguyen Manh Hung said, “Key network operators, including VNPT, have not invested ahead in building infrastructure to create a foundation for national and digital economic development. And for that reason, we have not found new growth space yet, while the room for traditional development space has run out, and even seen decline.”

Traditional voice and SMS services, which once accounted for nearly all of the network’s mobile revenue, will decrease to less than 10 per cent, he warned. “These traditional services of VNPT still account for 40 per cent, so it needs to prepare for a drop of below 10 per cent. If VNPT does not open up new space soon, it will be a dangerous future.”

Opportunities and challenges

According to the MIC, the industry’s 2024 focus is to popularise innovative digital infrastructure and applications to develop the economy. It is also hoped that 2024 will see the commercialisation of the 5G nationwide, as well as the development of AI and the Internet of Things.

Minister Hung estimates that successfully deploying 5G and related business will create growth for the network by at least 5-10 per cent. The estimation is similar to AI deployment. “A network operator that wants to develop sustainably must invest 15-20 per cent of revenue into the network every year,” he said.

China’s China Mobile network spends up to $4 billion a year, about 3-4 per cent of revenue to develop applications and use cases for industries, especially industrial sectors, while the threshold for Vietnamese carriers is at 0.1 per cent.

The global 5G applications market is forecast to reach $670 billion by 2025, which means network operators’ revenue will increase by half compared to 2020, or an average annual increase of 10 per cent. This year will also be the first for Vietnam to implement the national strategy on semiconductor industry development. It is projected to enable network operators to grow at least 5-10 per cent a year if they succeed in tapping the market.

“The next 15 years will be important shifts in the second innovation process, from telecoms infrastructure to digital infrastructure, from IT application to digital transformation. Therefore, the MIC will issue a document recommending to authorities at all levels not to use individual software, and to switch from processing and assembling to making Vietnamese products,” Minister Hung said.

Anticipating new opportunities in its restructuring plan towards 2025, MobiFone aims to become a tech enterprise with a comprehensive digital ecosystem, focusing on the business areas of digital infrastructure, platforms, and content services. Elsewhere, VNPT will optimise resources, use innovation, and apply more tech to create new digital products, helping the company increase its competitiveness.

In its development strategy towards 2030, Viettel plans to concentrate on telecoms, IT solutions, research on high-tech industrial production, and logistics and trade. This will not only consolidate traditional businesses, but also explore new development growth space.

“New opportunities are opening, but the key thing is to grasp them by having appropriate business strategies for new growth space and investments in digital infrastructure,” said Tien Hoang from the Vietnam Digital Communications Association.

International businesses are also eyeing new opportunities. According to Pavel Poskakukhin, co-chair of the European Chamber of Commerce in Vietnam’s Digital Sector Committee, the upcoming regulations for three new services signifies a significant step for fairness and competition in Vietnam’s telecommunications sector. As the digital landscape continues to evolve, these regulations aim to provide a level playing field, encouraging innovation, and fostering healthy competition.

“The removal of limits on foreign capital is a significant shift for companies in this field. The amended Law on Telecommunications opens doors to unrestricted foreign investment in telecoms, offering our members a more extensive and flexible playing field,” he said.