A Dragon Stirs
By David James, Wed Oct 18 00:00:00 GMT 2000

Wireless communications and the Internet is helping to revitalize Vietnam's devastated telecommunications infrastructure and connect its large population.


Thang Long, meaning 'Ascending Dragon' in Vietnamese, was one of the early names of Hanoi, the historical and political capital of Vietnam. Sadly, the name would not be apt for Vietnam during the past 60 years, a period marked by war, occupation and economic decline. But now there is hope that information technology - and perhaps the mobile Internet - will help this great country to ascend again.

It is now ten years since postwar Vietnam took its first tentative step toward joining the rest of the world economically, adopting reforms called Doi Moi that were intended to establish a market-based economy while preserving a socialist, centrally-directed form of government. Vietnam's socialist ideology and large government bureaucracy has impeded the progress of its economy, but some important milestones have been achieved. In 1995, Vietnam gained admission to the Association of Southeast Asian Nations (ASEAN), expanding regional cooperation and trade. In July 2000, it entered into a bilateral trade agreement with its old enemy, the United States, opening more U.S. markets and opportunities for U.S. foreign investment.

Connecting Up


Now come wireless communications and the Internet, promising to help Vietnam revitalize its devastated telecommunications infrastructure and connect its large population - 78 million people spread throughout this long and narrow country stretching north and south along the South China Sea like a slender snake. And just about the only direction to go is up. Teledensity is among the lowest in the world, with about 4 lines per 100 people (compared to about 48 lines per 100 people in Japan). Currently there are only 2.8 million telephone lines serving just 81 percent of the country's cities, towns and villages. Yet there are 600,000 mobile subscribers, and a fiber optic backbone network, providing a 2.5 Gbps bandwidth, augmented by digital microwave routes in regional areas.

Computer penetration is low. More than one million computers are in use, but most of them are found in the offices of government agencies, banks, financial firms, airlines and corporations. Only about six percent of urban households has a home computer. And there are only about 80,000 Internet users, including government and business users. The government controls Internet traffic and allows only basic Internet services. Only five Internet service providers have been authorized, covering only 54 out of the country's 61 provinces.

Getting With IT


Yet the government is fairly bursting with plans for an IT future. Nguyen Thanh Hai, deputy director general of Vietnam's Department General of Posts and Telecoms, recently announced that the government would open two software parks, one in the north in Hanoi and one in the south in Ho Chi Minh City. He also said that policies and a legal framework would be prepared for an open market, with guidelines to support e-commerce development and a new government department to manage e-commerce.

In addition, in an effort to boost Internet use and encourage foreign investment, the government recently announced a cut in Internet access rates to 250 dong (US$.018 cents) per minute, a ten percent cut in international and domestic telephone rates, and a similar ten percent cut next year.

At a recent news conference, Nguyen Ngoc Tuan, head of the government's Pricing Committee, said that the new telephone rates would be applied to all users, eliminating the practice of charging foreign subscribers double the rates charged to domestic subscribers, which antagonized overseas investors. "Currently we are having difficulties getting [foreign] investment," said Tuan. "This is something to help foreign investment."

Rate cuts were also made for mobile phones earlier this year. Registration fees were reduced from 1.5 million dong ($107) to 1.2 million dong ($86), and monthly network connection fees were reduced from 250,000 ($17.90) to 200,000 ($14.30), inclusive of value-added tax. However, per-minute mobile charges remained unchanged at around 1,800 dong (13 cents) for local calls and 2,200 to 4,600 dong (16 to 33 cents) for long-distance domestic calls. Also, the cost of international calls for wireline and mobile phones remained high, at about $3 per minute.

Competition Calls


With rates coming down, there is now a strong possibility that Doi Moi market-based competition will take hold in mobile services despite a high degree of government involvement in the sector. Currently there are three mobile service providers: (1) Vinaphone, operated by the government's Vietnam Posts and Telecommunications Corp. (VNPT); (2) VMS-Mobiphone, operated by VNPT under a co-operation contract with Sweden's Comvik International Vietnam; and (3) Call-Link, operated by the government's Saigon Telecommunications. Recently, plans to create a fourth mobile service provider were announced by government-controlled Saigon Posts and Telecommunications Corp. (Saigon Postel) which will establish a nationwide network with a foreign partner, rumored to be South Korea's SK Telecom. The partner is expected to invest $200 million in the project under a business co-operation agreement with Saigon Postel.

Although there is no current plan to introduce mobile Internet services in Vietnam, growing mobile usage is certain to build market-based demand for them. The government expects that mobile phone subscribers will rise to 2.2 million by 2005 and that Internet subscribers will rise to one million. In the land of the Ascending Dragon, it is a good bet that by 2005 many of Vietnam's Internet subscribers will be mobile.

David James is president of Business Strategies International, a San Francisco-based consulting and venture-development firm specializing in Asia-Pacific business opportunities.