Q1 2016 www.bmiresearch.com VIETNAM TELECOMMUNICATIONS REPORT INCLUDES 5-YEAR FORECASTS TO 2019 Published by:BMI Research Vietnam Telecommunications Report Q1 2016 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: December 2015 ISSN: 1748-4944 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2016 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Telecommunications Report Q1 2016 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: December 2015 ISSN: 1748-4944 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2016 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Telecommunications Report Q1 2016 CONTENTS BMI Industry View SWOT Industry Industry Forecast Latest Updates Structural Trends Table: Telecoms Sector - Historical Data & Forecasts (Vietnam 2012-2019) 13 Industry Risk/Reward Index 15 Table: Asia Pacific Telecoms Risk-Reward Index - Q116 17 Market Overview 19 Market Drivers & Trends 19 Mobile 20 Table: Vietnam Mobile Market ('000) 21 Table: Value-Added Services 24 Wireline Voice & Broadband 25 Pay TV 29 Regulatory Development 33 Regulatory Overview 33 Table: Vietnam - Regulatory Bodies And Their Responsibilities 33 Legislation And Market Liberalisation 33 Regulation 34 Licensing And Spectrum 34 Competitive Landscape 37 Table: Key Players 37 Table: Vietnam Mobile Market Overview 37 Company Profile 38 Vietnam Posts & Telecommunications (VNPT) MobiFone VinaPhone Viettel S-Fone FPT Telecom 38 43 47 51 56 59 Demographic Forecast 62 Table: Population Headline Indicators (Vietnam 1990-2025) 63 Table: Key Population Ratios (Vietnam 1990-2025) 63 © Business Monitor International Ltd Page Vietnam Telecommunications Report Q1 2016 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 64 Table: Population By Age Group (Vietnam 1990-2025) 64 Table: Population By Age Group % (Vietnam 1990-2025) 65 Glossary 67 Table: Glossary Of Terms 67 Methodology 69 Industry Forecast Methodology 69 Sources 71 Risk/Reward Index Methodology 71 Table: Risk/Reward Index Indicators 72 Table: Weighting Of Indicators 73 © Business Monitor International Ltd Page Vietnam Telecommunications Report Q1 2016 BMI Industry View BMI View: Vietnam has experienced strong uptake of 3G and fibre broadband in recent quarters, demonstrating the rising inclination towards both mobile and fixed data use We now hold a more positive outlook on the adoption of premium services and advanced networks, although the government's restrictions on 4G rollouts could restrict operators' abilities to meet rising data needs in the short term 4G Rollout Restrictions - A Downside To Technological Infusion Vietnam Mobile Market Forecsts 200,000 150,000 100,000 50,000 2013 2014 2015e 2016f 2017f 2018f 2019f Vietnam - 3G & 4G phone subscribers, '000 Vietnam - Cellular Mobile Phone Subscribers, '000 f = BMI forecast Source: VNTA, BMI Latest Updates & Industry Developments ■ We are forecasting 156.299mn mobile subscribers by end-2019, for a 162.1% penetration rate Out of this number, 43.653 will be 3G/ 4G connections However, we highlight the figure is distorted by inactive prepaid subscriptions and multiple SIM ownership • Viettel has installed approximately 200 LTE-enabled base transmission stations (BTSs) in the residential area of Vung Tau City, Ba Ria City and Long Dien District after being granted permission by the government to conduct 4G trials Rising data consumption could increase subscribers' appetite for faster data transmission speeds through 4G, and Viettel is keen to be the first operator to move into the area © Business Monitor International Ltd Page Vietnam Telecommunications Report Q1 2016 SWOT Industry Telecoms Industry SWOT Analysis Strengths ■ Highly competitive mobile sector dominated by the state ■ Fixed-line penetration levels and internet user rates are high in major urban centres such as Ho Chi Minh City, Hanoi, Danang and Haiphong Weaknesses ■ Dependency on prepaid services exerts strong downward pressures on average revenue per user (ARPU) levels ■ Broadband growth continues to be highly dependent on DSL ■ Digital divide: many rural areas have little or no access to telecommunications services despite advanced networks being rolled out in larger cities Opportunities ■ Government approach to liberalise the telecoms industry could see the entrance of more foreign investors ■ Divestiture of MobiFone from Viet Nam Posts and Telecommunications (VNPT) , and the former's subsequent planned Initial Public Offering (IPO) by 2016 should provide the impetus for operators to launch better quality services Threats ■ Geographical challenges to network deployments; nearly one-third of Vietnam's villages lie in mountainous areas without access to telecommunications services.Number of inactive mobile subscribers is unknown in what is still a market that lacks transparency and reliable data ■ The Ministry of Information and Communication (MIC) will hold off 4G licensing until 2017; delayed introduction of 4G could cause Vietnam to trail behind its peers © Business Monitor International Ltd Page Vietnam Telecommunications Report Q1 2016 Industry Forecast BMI View: Positive growth rates in 3G and FTTH subscriptions have enabled us to amend our five-year forecasts upwards MobiFone's privatisation will bring about more competition in the mobile sector, which we believe will drive operators to improve the quality of their services - painting an overall positive picture for the market However, the government's recent decision to delay the launch of commercial 4G services till 2017 could mean that Vietnam is unable to exploit the full demand for mobile data over the next couple of years, and fall behind its regional peers in technological advancement Latest Updates ■ 3G subscriber growth picked up over the first three quarters of 2015 and has led us to revise our subscription forecasts upwards this quarter We believe that 3G subscribers will reach 35.914mn by end-2015, and reach 43.653mn by end-2019 - accounting for 27.9% of all mobile subscriptions ■ We have revised upwards our fixed broadband subscription forecasts as well, in light of faster-thanexpected take-up, especially in fibre broadband According to VNTA data, FTTH connections grew by 380.7% y-o-y to 2.9mn in Q315 Despite this, fixed broadband penetration reached just 7.7% in Q315, underscoring the potential for strong subscriber growth to continue throughout our 5-year forecast period We forecast 7.20mn fixed subscriptions by end-2015, rising to 9.05mn for a penetration of 9.3% by end-2019 Structural Trends Mobile The VNTA reported that there were 123.7mn mobile subscribers in Vietnam in December 2013, which increased to 136.15mn at the end of 2014 The Vietnamese mobile market is highly saturated with more than 130% penetration, but 3G adoption remains low and constitutes only about 30% of the mobile market In June 2014, government-owned Vietnam Posts and Telecommunications (VNPT) sold off its mobile unit MobiFone with a view to entice outside investment BMI believes MobiFone's impending IPO will boost competition in the market as well, providing upside to the 3G market Strong competition between operators revolves around price, and aggressively low tariff rates have pushed the Vietnamese mobile industry towards market saturation and declining profitability Further evidence of a growth slowdown includes operators such as Viettel and VNPT looking at overseas markets for additional growth opportunities - VNPT's MobiFone opened a representative office in Myanmar in December 2012 We not expect the Vietnamese mobile market to return to double-digit growth While rural regions possess growth opportunities, the return on investment is comparatively low due to the need for the highest © Business Monitor International Ltd Page Vietnam Telecommunications Report Q1 2016 FPT Telecom Company Overview FPT Telecom is one of the subsidiaries of The Corporation for Financing and Promoting Technology The operator offers an array of services including ADSL, ADSL 2+, FTTH, leased line and WiMAX broadband services, and dial-up services In July 2007, the operator launched free Wi-Fi services for customers FPT launched ADSL services in 2003 The operator is the third largest provider of internet services after VNPT and Viettel Strategy FPT Telecom remains keen to enter into the mobile market and continues to look for stakes to purchase within existing mobile operators However, the operator indicated that, in the event that it was not able to purchase a stake, it would deploy its own LTE network having received a licence from the Ministry of Information and Communications FPT Telecom is also keen to expand into the digital content business, having expanded into online gaming and online advertising in 2013 However, a slower economic growth in 2013 is causing enterprise to reduce advertising budget, while restrictive online gaming policies and games piracy is hampering growth of the online gaming business Going forward, FPT Telecom is expected to rely on VAS to drive revenue growth, given the company has successfully launched the Beta version of the eClick AdNetwork This advertising contributed close to 5% of total online advertising revenue in 2013 Operational Developments Networks In February 2009, FPT Telecom completed its tests for mobile WiMAX in the capital, Hanoi The trials enabled the operator to try out high-speed internet access, video downloads and the transfer of data and phone calls through wireless data speeds of up to 15Mbps, within 3km of a pilot WiMAX station The operator was responsible for completing the country's first-ever metro Ethernet and Optical network, with the help of Cisco Systems The 10Gbps NGN is equipped with a total metro Ethernet, broadband and IP/MPLS solution The network provides FPT with a platform to deliver a wide variety of data, voice and video services over high-speed broadband connections Cisco's solution will enable FPT to provide new value-added services, including triple play (data, voice and video) and IPTV According to VietNamNet, the Ministry of Information and Communications granted FPT Telecom permission to trial LTE technology in August 2010 In 2010, FPT Telecom opened branches in provinces and cities such as Da Nang, Hue, Khanh Hoa, Dak Lak, Tay Ninh, Phu Yen, Quang Nam, Can Tho, Sa Dec By the end of the year, FPT Telecom had infrastructure in 36 provinces In October 2012, FPT Telecom, along with Viettel and CMC Telecom, received approval to participate in the Asia Pacific Gateway (APG) regional cable project The APG cable, which is slated for completion in 2014, will connect a number of countries in the region, © Business Monitor International Ltd Page 59 Vietnam Telecommunications Report Q1 2016 including China, Hong Kong, Japan, South Korea, Malaysia, Taiwan, Thailand, the Philippines, Vietnam and Singapore In September 2013, FPT Telecom officially opened the extended part of Pham Hung data centre in Hanoi The firm's fourth data centre was inaugurated by FPT CEO Bui Quang Ngoc, FPT Vice-President Chu Thanh Ha and FPT Deputy General Director Hoang Trung Kien The operator's new data centre is the first in Vietnam to secure ISO 9001:2008 certification for quality management system It has also received ISO 27001:2005 certification for management system and ISO 50001:2011 for energy management system BMI expects this to boost enterprise data revenue for the operator In 2013, FPT completed the 3,600km B line of North-South backbone network to bring the first cross-service-border backbone network connecting Laos into service By the end of 2013, the company has expanded its operations to five major cities and provinces in Cambodia including Phnom Penh, Kandal, Kampong Cham, Battam Bang and Siem Reap Domestically, FPT Telecom has expanded service coverage to 54 cities and provinces nationwide In 2015, FPT announced it would be using Thomson Video's ViBE VS7000 multiscreen and HEVC encoding system to launch its upcoming pay TV service Also in 2015, it was revealed that FPT Telecom had partnered with Iveda, a global surveillance provider to offer its vast client base the service of home security systems that would seamlessly connect to their smartphones and tablets using Iveda's cloudbased technologies In November of that same year, local news sources noted that the firm is partnering with the Homecare Company to launch housekeeping services, where users are able to order a maid via an application downloaded from the iOS platform Financial Data ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Group Revenue (2010): VND20.517trn Group Revenue (2011): VND25.895trn Group Revenue (2012) VND25.350trn Group Revenue (2013): VND28.647trn Group Revenue (2014): VND35.13trn Group Revenue (H115): VND:18.237trn Telecoms Revenue (2010): VND2.457trn Telecoms Revenue (2011): VND2.357trn Telecoms Revenue (2012): VND3.170trn Telecoms Revenue (2013): VND4.137trn Telecom Profit Before Tax (2010): VND601bn Telecoms Profit Before Tax (2011): VND550bn Telecoms Profit Before Tax (2012): VND818bn Telecoms Profit Before Tax (2013): VND970bn © Business Monitor International Ltd Page 60 Vietnam Telecommunications Report Q1 2016 Company Details ■ ■ FPT Telecom 48 Van Bao, Kim Ma Street Ba Dinh Dist Hanoi Vietnam ■ Tel: +84 (4) 760 1060 ■ Fax: +84 (4) 822 3111 © Business Monitor International Ltd Page 61 Vietnam Telecommunications Report Q1 2016 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050 The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy Population (1990-2050) 150 100 50 2050f 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 Vietnam - Population, mn f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 62 Vietnam Telecommunications Report Q1 2016 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,209 80,285 84,203 88,357 93,447 98,156 102,092 na 1.1 0.9 1.0 1.1 0.9 0.7 Population, total, male, '000 33,583 39,551 41,469 43,626 46,224 48,590 50,510 Population, total, female, '000 34,625 40,734 42,734 44,730 47,223 49,566 51,581 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98 Population, total, '000 Population, % y-o-y na = not available; f = BMI forecast Source: World Bank, UN, BMI Table: Key Population Ratios (Vietnam 1990-2025) Active population, total, '000 Active population, % of total population Dependent population, total, '000 Dependent ratio, % of total working age © Business Monitor International Ltd 1990 2000 2005 2010 2015f 2020f 2025f 38,808 49,712 55,795 61,655 65,572 67,775 69,459 56.9 61.9 66.3 69.8 70.2 69.0 68.0 29,401 30,573 28,408 26,702 27,875 30,381 32,633 75.8 61.5 50.9 43.3 42.5 44.8 47.0 Page 63 Vietnam Telecommunications Report Q1 2016 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,494 25,416 22,866 20,919 21,576 22,487 22,335 65.7 51.1 41.0 33.9 32.9 33.2 32.2 3,907 5,157 5,542 5,783 6,298 7,893 10,298 10.1 10.4 9.9 9.4 9.6 11.6 14.8 Youth population, % of total working age Pensionable population, '000 Pensionable population, % of total working age f = BMI forecast Source: World Bank, UN, BMI Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 1990 Urban population, '000 2020f 2025f 13,815.9 19,568.8 22,971.6 26,853.7 31,391.9 36,120.7 40,780.9 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.8 39.9 54,393.7 60,716.8 61,232.2 61,504.1 62,055.7 62,036.0 61,311.7 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.2 60.1 Life expectancy at birth, male, years 66.0 68.4 69.3 70.2 71.2 72.1 73.1 Life expectancy at birth, female, years 75.1 78.1 79.2 80.0 80.6 81.1 81.6 Life expectancy at birth, average, years 70.5 73.3 74.3 75.1 75.9 76.7 77.4 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, total, '000 9,211 7,244 6,751 7,265 7,740 7,601 7,108 Population, 5-9 yrs, total, '000 8,512 9,119 7,130 6,648 7,221 7,698 7,562 Population, 10-14 yrs, total, '000 7,769 9,052 8,983 7,005 6,614 7,187 7,664 Population, 15-19 yrs, total, '000 7,277 8,401 8,941 8,877 6,972 6,583 7,156 Population, 20-24 yrs, total, '000 6,570 7,610 8,242 8,764 8,803 6,908 6,522 Population, 25-29 yrs, total, '000 5,938 7,019 7,408 8,022 8,664 8,705 6,823 Population, 30-34 yrs, total, '000 5,079 6,300 6,863 7,223 7,932 8,572 8,616 Population, 35-39 yrs, total, '000 3,842 5,746 6,190 6,718 7,146 7,850 8,488 Population, 40-44 yrs, total, '000 2,447 4,938 5,663 6,096 6,640 7,065 7,766 Population, 45-49 yrs, total, '000 2,003 3,710 4,880 5,592 6,004 6,543 6,968 © Business Monitor International Ltd Page 64 Vietnam Telecommunications Report Q1 2016 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,956 2,331 3,658 4,801 5,467 5,875 6,410 Population, 55-59 yrs, total, '000 2,033 1,873 2,223 3,501 4,625 5,275 5,681 Population, 60-64 yrs, total, '000 1,658 1,779 1,723 2,055 3,314 4,392 5,023 Population, 65-69 yrs, total, '000 1,402 1,759 1,599 1,551 1,894 3,066 4,081 Population, 70-74 yrs, total, '000 1,021 1,313 1,520 1,390 1,369 1,682 2,739 Population, 75-79 yrs, total, '000 747 977 1,073 1,254 1,158 1,150 1,424 Population, 80-84 yrs, total, '000 426 593 726 809 957 893 895 Population, 85-89 yrs, total, '000 221 334 382 479 541 649 613 Population, 90-94 yrs, total, '000 70 131 176 208 265 305 370 Population, 95-99 yrs, total, '000 15 40 52 73 88 114 133 Population, 100+ yrs, total, '000 11 16 23 30 39 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group % (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, % total 13.50 9.02 8.02 8.22 8.28 7.74 6.96 Population, 5-9 yrs, % total 12.48 11.36 8.47 7.52 7.73 7.84 7.41 Population, 10-14 yrs, % total 11.39 11.28 10.67 7.93 7.08 7.32 7.51 Population, 15-19 yrs, % total 10.67 10.46 10.62 10.05 7.46 6.71 7.01 Population, 20-24 yrs, % total 9.63 9.48 9.79 9.92 9.42 7.04 6.39 Population, 25-29 yrs, % total 8.71 8.74 8.80 9.08 9.27 8.87 6.68 Population, 30-34 yrs, % total 7.45 7.85 8.15 8.18 8.49 8.73 8.44 Population, 35-39 yrs, % total 5.63 7.16 7.35 7.60 7.65 8.00 8.31 Population, 40-44 yrs, % total 3.59 6.15 6.73 6.90 7.11 7.20 7.61 Population, 45-49 yrs, % total 2.94 4.62 5.80 6.33 6.43 6.67 6.83 Population, 50-54 yrs, % total 2.87 2.90 4.34 5.43 5.85 5.99 6.28 Population, 55-59 yrs, % total 2.98 2.33 2.64 3.96 4.95 5.37 5.57 Population, 60-64 yrs, % total 2.43 2.22 2.05 2.33 3.55 4.47 4.92 Population, 65-69 yrs, % total 2.06 2.19 1.90 1.76 2.03 3.12 4.00 Population, 70-74 yrs, % total 1.50 1.64 1.81 1.57 1.47 1.71 2.68 Population, 75-79 yrs, % total 1.10 1.22 1.27 1.42 1.24 1.17 1.40 Population, 80-84 yrs, % total 0.63 0.74 0.86 0.92 1.02 0.91 0.88 © Business Monitor International Ltd Page 65 Vietnam Telecommunications Report Q1 2016 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.33 0.42 0.45 0.54 0.58 0.66 0.60 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.28 0.31 0.36 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.09 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 66 Vietnam Telecommunications Report Q1 2016 Glossary Table: Glossary Of Terms 2G second generation GDP gross domestic product NGN next generation network 3G third generation GPRS global packet radio service Mbps megabits per second ADSL asymmetric digital subscriber line GSM global system for mobile communications MHz megahertz ARPU average revenue per user HDSL high-bit-rate digital subscriber line MNP mobile number portability ASP average selling price HSDPA high-speed downlink MoU packet access memorandum of understanding BMI Business Monitor International HPSA high-speed packet access MOU minutes of use bn billion HSUPA high-speed uplink packet access MPLS multiprotocol label switching BTS base transceiver stations HTML hypertext markup language MSC mobile switching centre CDMA code division multiple access Hz hertz MVNO mobile virtual network operator CRM customer relationship management ICT information and communication technology - not available mobile D-AMPS digital-advanced phone service IDD international direct dialling OIBDA operating income before depreciation and amortisation DLD domestic long-distance ILD international longdistance POP point of presence DMB digital multimedia broadcasting IPO initial public offering R&D research and development DSL digital subscriber line IP internet protocol SaaS software-as-a-service DSLAM digital subscriber line access multiplexer IPTV internet protocol TV SDSL symmetric digital subscriber line DSU digital subscriber unit ISDN integrated services digital networks SIM subscriber identity module DTH direct-to-home ISP internet service provider SMS short messaging service DVB-H digital video broadcastinghandheld IT information technology TDMA time division multiple access video broadcastingDVB-SH digital satellite handheld ITU International Telecommunication Union division-synchronous code TD-SCDMA time division multiple access e/f estimate/forecast JV joint venture trn trillion EBITDA earnings before interest, taxes, depreciation and amortisation Kbps kilobits per second UMTS universal mobile telecommunications system EC European Commission KHz kilohertz VOD video on demand © Business Monitor International Ltd Page 67 Vietnam Telecommunications Report Q1 2016 Glossary Of Terms - Continued EMEA Europe, Middle East and Africa km kilometres VoIP voice over internet protocol EV-DO evolution-data optimised LANs local area networks VLAN virtual local area network FDI foreign direct Investment LEC local exchange carrier WAP wireless application protocol FTTB fibre-to-the-building LTE long-term evolution W-CDMA wideband CDMA FTTH fibre-to-the-home M2M machine-to-machine WiBro wireless broadband FTP file transfer protocol mn million WiMAX worldwide interoperability for microwave access Gbps gigabits per second MEA Middle East and Africa WLL wireless local loop GPON gigabit passive optical network MENA Middle East and North Africa WTO World Trade Organization Source: BMI © Business Monitor International Ltd Page 68 Vietnam Telecommunications Report Q1 2016 Methodology Industry Forecast Methodology BMI's industry forecasts are generated using the best practice techniques of time-series modelling and causal/econometric modelling The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined Common to our analysis of every industry is the use of vector autoregressions Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis Such single-variable analysis is called univariate modelling We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA) In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, we use a 'general-to-specific' method We mainly use a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately selected regression models BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); ■ All results are assessed to alleviate issues related to auto-correlation and multicollinearity © Business Monitor International Ltd Page 69 Vietnam Telecommunications Report Q1 2016 We use the selected best model to perform forecasting It must be remembered that human intervention plays a necessary and desirable role in all our industry forecasting Experience, expertise and knowledge of industry data and trends ensure that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Sector-Specific Methodology Our Telecommunications industry forecasts are generated using a number of principal criteria, and differ from the regression and/or time-series modelling used in other industries ■ Average Market Growth Indicator takes into consideration the historical growth patterns of the fixed-line, internet, broadband and mobile markets, providing a basis from which to forecast Using historical data is often the most desirable method of analysis In most cases, subscriber data are derived from individual operators and/or national regulators ■ Subjective Indicators Indicators look at a number of factors, such as the following: ■ Neighbouring/similar states These types of markets often share similar telecoms markets For example, Japan and South Korea are both highly developed technophile markets where growth prospects are high in 3G Meanwhile, China and India both offer high growth in successfully emerging markets ■ Tracking growth High growth may be more likely to be repeated in the near future, and is unlikely to turn into a significant decline in the short term, although there may be exceptions to this rule ■ Market maturity Where markets have reached saturation, they are not likely to expand as fast as those that are less developed ■ Competition from alternative technologies, such as VoIP versus fixed-line, ADSL versus mobile broadband ■ Operator behaviour Operators' corporate strategies and investment behaviour may dictate changes in the telecommunications market This is similarly the case for regulatory developments, which have been accounted for in our integration of the Telecommunications Risk/Reward Index © Business Monitor International Ltd Page 70 Vietnam Telecommunications Report Q1 2016 Sources Sources used in telecoms reports include national ministries and media/telecoms regulatory bodies, officially released company results and figures, national and international industry organisations, such as the CTIA, the GSM Association and the International Telecommunication Union (ITU) and international and national news agencies Risk/Reward Index Methodology BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market The RRI system divides into two distinct areas: Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development This is further broken down into two sub categories: ■ Industry Rewards This is an industry specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors • Country Rewards This is a country specific category, and the score factors in favourable political and economic conditions for the industry Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period This is further broken down into two sub categories: ■ Industry Risks This is an industry specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market • Country Risks This is a country specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score We take a weighted average, combining industry and country risks, or industry and country rewards These two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall Risk/Reward Index a weighted average of the total score Importantly, as most of the countries and © Business Monitor International Ltd Page 71 Vietnam Telecommunications Report Q1 2016 territories evaluated are considered by BMI to be 'emerging markets', our score is revised on a quarterly basis This ensures that the score draws on the latest information and data across our broad range of sources, and the expertise of our analysts Indicators The following indicators have been used Overall, the index uses three subjectively measured indicators, and around 20 separate indicators/datasets Table: Risk/Reward Index Indicators Rationale Rewards Industry Rewards - ARPU Denotes depth of telecoms market High-value markets score better than low-value ones - No of subscribers Denotes breadth of telecoms market Large markets score higher than smaller ones - Subscriber growth, % y-o-y Denotes sector dynamism Scores based on annual average growth over our five-year forecast period and also take into account the penetration rate - No of operators Subjective evaluation against BMI-defined criteria Evaluates market openness and competitiveness Country Rewards - Urban/rural split A highly urbanised state facilitates network rollout and implies higher wealth Predominantly rural states score lower, with overall score also affected by country size - Age range Proportion of population under 24 years old States with young populations tend to be more attractive markets - GDP per capita, USD A proxy for wealth High-income states receive better scores than low-income states Risks Industry Risks - Regulatory independence Subjective evaluation against BMI-defined criteria Evaluates predictability of operating environment Country Risks - Short-term external risk Score from BMI's Country Risk Index(CRI) Denotes state's vulnerability to externally induced economic shock, which tend to be the principal triggers of economic crises - Policy continuity From CRI Evaluates the risk of a sharp change in the broad direction of government policy - Legal framework From CRI Denotes strength of legal institutions in each state - security of investment can be a key risk in some emerging markets © Business Monitor International Ltd Page 72 Vietnam Telecommunications Report Q1 2016 Risk/Reward Index Indicators - Continued Rationale From CRI Denotes risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies' ability to compete - Corruption Source: BMI Weighting Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight Consequently, the following weighting has been adopted: Table: Weighting Of Indicators Component Rewards Weighting, % 70, of which - Industry Rewards 65 - Country Rewards 35 Risks 30, of which - Industry Risks 40 - Country Risks 60 Source: BMI © Business Monitor International Ltd Page 73 [...]... International Ltd Page 20 Vietnam Telecommunications Report Q1 2016 Vietnam Mobile Market Shares (%) 2011-2014 Source: BMI, VNTA, Operators Table: Vietnam Mobile Market ('000) 2014 Viettel Telecom 63,037 MobiFone 41,7978 Vinaphone 22,7371 Vietnamobile 4,901 Gmobile 3,812 Sfone 0 Source: BMI, VNTA © Business Monitor International Ltd Page 21 Vietnam Telecommunications Report Q1 2016 Vietnam 3G Subscribers... Page 13 Vietnam Telecommunications Report Q1 2016 Telecoms Sector - Historical Data & Forecasts (Vietnam 2012-2019) - Continued Broadband internet subscribers/100 Inhabitants 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 5.3 5.6 6.5 7.7 8.8 9.1 9.2 9.3 e/f = BMI estimate/forecast Source: National sources, BMI © Business Monitor International Ltd Page 14 Vietnam Telecommunications Report Q1 2016 Industry... Monitor International Ltd Page 23 Vietnam Telecommunications Report Q1 2016 means that the government's decision to delay the launch of 4G services to 2015 at the earliest will effectively put the brakes on network development over the short term Table: Value-Added Services Date Details Jan-15 Vietnam' s government has approved plans to split state-owned Vietnam Posts and Telecommunications (VNPT) into... the high level of PC ownership that exists in Vietnam According to a survey conducted by Alcatel-Lucent, some 95% of Vietnamese households now have access to a desktop PC, of which 16% are planning to purchase a laptop Official figures from the MIC differ significantly © Business Monitor International Ltd Page 27 Vietnam Telecommunications Report Q1 2016 Vietnam Internet Users 2008-2015 40,000 75 30,000... low pay-TV penetration rate in Vietnam, FPT Telecom and AVG have submitted a joint application to provide cable TV services to the Ministry of Information and Communications VietNamNet Bridge reported that the two companies have built up a 2,000km north-south transmission backbone, which © Business Monitor International Ltd Page 31 Vietnam Telecommunications Report Q1 2016 is expected to be completed... Vietnam Telecommunications Report Q1 2016 Regulatory Development Regulatory Overview Table: Vietnam - Regulatory Bodies And Their Responsibilities Regulatory Body Responsibilities Ministry of Information and Communications (MIC) 18 Nguyen Du Street, Hanoi, Vietnam Tel: +84 4 943 5602 Fax: +84 4 826 3477 Web: www.mic.gov.vn The Ministry of Information and Communication of the Socialist Republic of Vietnam. .. low tariff rates have also pushed the Vietnamese mobile industry towards greater market saturation and declining profitability However, MobiFone's initial public offering (IPO) could provide a major upside for the sector by encouraging investment into improving services © Business Monitor International Ltd Page 19 Vietnam Telecommunications Report Q1 2016 Mobile Vietnam Mobile Market Growth 2012-2015... Corporation and NetNam © Business Monitor International Ltd Page 28 Vietnam Telecommunications Report Q1 2016 Compared to Vietnam' s internet sector, the fixed broadband segment has been growing at a faster rate, on average, which is partially attributed to a low-base effect The number of fixed broadband has increased from 4.8mn in Q1 2013 to 6.077mn in Q4 2014 At the end of 2014, VNPT held 54.3% of... 5.2% between 2013-2019 to bring the total number of fixed broadband subscribers in Vietnam to 7.9mn by 2019 © Business Monitor International Ltd Page 12 Vietnam Telecommunications Report Q1 2016 Industry Trends - Wireline Sector (2012-2019) 15,000 10,000 5,000 0 2012 2013 2014e 2015f Broadband internet subscribers, '000 2016f 2017f 2018f 2019f Main telephone lines in service, '000 e/f = BMI estimate/forecast... Risk team's forecast that real GDP will contract by 4.4% in FY2015-16 (July 16, 2015- July 15, 2016) Developing APAC Countries - Industry Rewards Will Rise With Economic Growth Industry Risk and Reward Scores (Q11 6) Source: BMI © Business Monitor International Ltd Page 16 Vietnam Telecommunications Report Q1 2016 Industry Risks/ Rewards Malaysia's Industry Rewards score fell from 50.0 to 47.5 this quarter ... 19 Vietnam Telecommunications Report Q1 2016 Mobile Vietnam Mobile Market Growth 2012-2015 Source: BMI, VNTA © Business Monitor International Ltd Page 20 Vietnam Telecommunications Report Q1 2016. .. 13 Vietnam Telecommunications Report Q1 2016 Telecoms Sector - Historical Data & Forecasts (Vietnam 2012-2019) - Continued Broadband internet subscribers/100 Inhabitants 2012 2013 2014e 2015f 2016f... Monitor International Ltd Page 21 Vietnam Telecommunications Report Q1 2016 Vietnam 3G Subscribers 2013-2014 Source: VNTA By the end of 2014, 3G subscriber base in Vietnam had increased to 28.96mn,