HO CHI MINH CITY, Vietnam-While other countries in the region continue to liberalize their mobile phone markets, Vietnam will return to a status of near-monopoly by year-end.
The merger of the two GSM (Global System for Mobile communications) providers, Mobiphone and Vinaphone, will tighten the grip of national carrier Vietnam Post & Telecommunications (VNPT) on the GSM market, while an alternative AMPS/D-AMPS (Advanced Mobile Phone Service/digital-AMPS) system remains stalled in negotiations to expand its operation.
The government now has stated that Mobiphone, run by VNPT’s Mobile Services division in cooperation with Swedish company Comvik International A.B., will integrate its operations with Vinaphone, run by VNPT alone. It is unclear at this point how Comvik will participate in the merged company.
VNPT said the integration project is designed to “fully utilize their equipment, improve services, and expand coverage.” Mobiphone is regarded as the better operator in towns and cities, while Vinaphone has concentrated on providing service to all of Vietnam’s 61 provinces.
The merger of the two operations brings an end to any chance of price competition or handset subsidies in the GSM market. Currently, calls cost between 1,800 dong (13 U.S. cents) and 4,600 dong (33 U.S. cents) per minute, on top of a monthly service fee of 250,000 dong (US$18). Handsets cost upwards of 3 million dong (US$220).
The combined GSM operation will have more than 180,000 subscribers-132,000 from the Comvik/VNPT Mobiphone operation and 52,000 from Vinaphone.
The only current alternative for consumers is the AMPS/D-AMPS Call-Link system run by Saigon Post & Telecommunications (Saigon Postel) and Singapore Telecommunications International (STI). This project has been running on a trial basis since 1992 in Ho Chi Minh City and surrounding provinces, but never has achieved formal commercial status.
According to company officials, STI currently is negotiating with the Vietnamese authorities to be allowed to upgrade its network-possibly to CDMA (Code Division Multiple Access) technology. STI officials said negotiations were continuing over the technology direction and business plan for a network upgrade, and that they did not expect to have an agreement any time within the next three months.
In the meantime, Call-Link has cut its prices by as much as 50 percent since July and now operates as the budget network, with calls costing as little as 700 dong (5 U.S. cents) a minute and handsets starting at 1.4 million dong (US$100). Call-Link currently has 13,000 subscribers in Ho Chi Minh City, the nearby industrial town of Bien Hoa and the coastal oil industry center of Vung Tau.
The other alternative to the merged GSM system is a proposed nationwide CDMA network scheduled to be developed under a US$1.5 billion contract with U.S. company Airtel USA Corp. Vietnam’s Department General of Post and Telecommunications, which oversees VNPT, will enter into a business cooperation contract with Airtel to develop the CDMA network, which will include both mobile phones and wireless local loop (WLL) systems.
The initial phase of the project, up to 2000, will have a capacity of 250,000 mobile users and 785,000 WLL subscribers. The government said the second phase of the project will increase capacity to 615,000 mobile users and 1.5 million wireless local loop subscribers.
The system will be developed to integrate with the existing GSM-based services in Vietnam and provide other value-added services such as video conferencing and voice mailboxes. A US$30 million trial network is scheduled to be built in Hanoi, Ho Chi Minh City, and the central coast city of Da Nang under the contract.
The CDMA project will not open the market to serious competition, observers say, as it will be operated under a business cooperation contract rather than as a fully fledged joint venture, thereby limiting the leverage of the foreign partner. Joint ventures in the telecoms field are not allowed in Vietnam as telecom is regarded as an area concerning national security.
The quality of the GSM networks has steadily improved from shaky beginnings six years ago, but the likelihood is that prices will remain high in the absence of open competition, keeping mobile phone penetration low.
Currently, Vietnam has a cellular penetration rate of 0.24 percent, compared with an estimated 2.6 percent in the Philippines, 12.4 percent in Malaysia, and 24 percent in Singapore.
