Thereíbre, before entering a íoreign market, an enterprise needs to make important decisions o f selecting the appropriate target market, selecting the market penetratio[r]
(1)Penetratỉng International Teỉecommunỉcatỉons Market The Case of Vỉettel
Dinh Van TOAN
University of Economics and Bũsiness - Vietnam National University, Ha Noi Email: dinhvantoan@vnu edu vn
Article history
Received on November 1, 2018 Revised on December 20, 2018 Accepted on December 26, 2018
Abstract
This paper clarifies the hotly debated issues about the international market penetration o f the Viettel Global Investment Joint Stock Company (Viettel Global) Based on the review o f íheories on market penetration and the company's data, this paper scrutìnìĩes the company's process o f selecting and investing in the teỉecommunicaíions market during the period 2011-2017 This paper draws a number o f important lessons fo r Vietnamese enterprises, namely: building effìcient connections, rapidly realizing new and unique ideas on each overseas market, and maintaining the determination, continuous effort and perseverance against hardships.
Keywords: International Market penetration, Telecommunication, Enterprises, Viettel Global
(2)Penetrating International Telecommunications M arket PD 32-52 H ' ^ I |
Introduction
Since 1986, Vietnamese enterprises have participated in international markets, mainly via the dừect export channel Hovvever, this is not the only way as enterprises can choose different ways to reach intemational markets such as licensing, ữanchising, setting up joint ventures or 100-percent foreign-owned companies Nevertheless, in order to penetrate international markets successíully, it is important for enterprises to select appropriate methods for theừ business objectives and strategies
In Vietnam, there has been íierce competition among telecommunication enterprises (TCEs) The telecommunications market has been dominated by large enterprises like Viettel, Mobifone, VinaPhone and FPT Therefore, in order to expand the market and increase proíĩts, TCEs should seek investment opportunities abroad and search for markets that are potential for íurther development
A prime example for a Vietnamese company, expanding its business into international markets is Viettel Global Investment Joint-stock Company (hereafter, Viettel Global) - a member o f the Viettel Group After 10 years of continuous investment, Vietteỉ Global was ranked among the world’s top 100 o f largest telecommunications brands as of December 2017 Viettel is currently investing and running businesses in 10 íòreign markets, including Laos, Cambodia, Timor-Leste, Cameroon, Haiti, Mozambique, Burundi, Peru, Tanzania and Myanmar As of June 2018, Viettel Global was generating proíits in countries and being the leading telecommunications provider in countries In Laos, Cambodia and Timor-Leste, Viettel Global has recovered its initial investments and generated prìts, which are four to íĩve times higher than its investment values (Thanh Thu, 2018) These impressive achievements o f Viettel Global are worth to learn for not only enterprises in Vietnam but also in the region
To date, studies on international market penetration íịcus mainly on international marketing Recent studies on internationalization concluded that telecommunication is crucial for the integrated economy due to its systematic/network nature and technology-reliant speed of transmission Hovvever, not many studies have been published on intemational market penetration in this industry, especially for developing countries Combining theoretical studies on internationalization, Krishna (2013) used a theoretical model càlled “network model” to íurther examine the international market penetration o f the TCEs in Malaysia The author shovved that in order to carry out successíul intemational market penetration, market selection is the most critical íactor for an enterprise The second factor relates to the íinancial resources for physical inírastructure and marketing development The third íactor relates to regulatory compliance, and obtain licenses, spectrum or buy bandwidth from network operators on the target market Additionally, TCEs also need government support in terms o f policies while doing theừ international market penetration Furthermore, the ability o f leaders to overcome challenges
(3)pp 32-52 Penetrating International Telecommunications M arket
as well as respond to the dynamic market landscape is critical to successíìilly penetrate international markets
The research by EYGM Limited (2015) showed that partnerships will play an ever more important ro le in driving innovation in the telecommunications industry Operators must consider the best way to combine different network standards to support the Internet of Things (IoT) Research by Transparency Market Research organization (2016) spotted the trend that TCEs strive for improving theừ networks and oíĩering expanded services to their customers by densifying network, developing fiber inữastructure, and enhancing spectrum efficiency Based on geographic criteria, this organization suggested that the global telecommunications market can be segmented into Asia Paciíic, North America, Europe and the rest o f the world
In line with the theories o f intemational market penetration analyzed by Krishna (2003), the studies by Vietnamese authors such as Nguyen Dong Phong et (2007), Tran Minh Dao and Vu Tri Dzung (2010) agreed that the content o f international market penetration is based on corporate decisions such as the company's goals in the international market, selecting the appropriate target market (market segmentation) to penetrate, analyzing the competitiveness o f nations and sectors, selecting the appropriate method(s) of penetration and strategic planning marketing mix, and implementing and monitoring the market penetration process
Based on the revievv o f existing studies on market penetration and the practices o f Viettel Global, this paper provides a comprehensive analysis o f the company’s activities in international market penetration The contents analyzed in this paper focus on the major stages o f the market penetration process, namely, selecting the target market, choosing the market penetration strategy, planning the marketing policies to make services and customers closer and implementing the strategy
This paper aims to present practical insights on Viettel Global’s experiences and its achievements in penetrating the intemational market during the period o f 2011-2017 Afterward, this paper draws policy lessons leamed for Vietnamese enterprises that wish to go global eíĩiciently This paper is organized as follows Section reviews key conceptual issues of market penetration for telecommunication enterprises Section analyzes the experience of Viettel Global in penetration o f intemational telecommunications market Finally, Section draws some lessons learned from Viettel Global for Vietnamese telecommunications enterprises
1 Key conceptual issues of market penetration for telecommunicatỉon enterprises
With the deepening globalization trend, TCEs, operating in the domestic market may find it diffĩcult to extend theừ market share due to a limited number o f consumers and an increasing number of domestic and íịreign competitors As such, entering íịreign markets is a decisive solution for TCEs to overcome the limitations of domestic market by enabling them to find new
(4)Penetrating International Telecommunicaỉions M arket pp 32-52 ỊT H 7 Ị
customers, and enhance competitiveness to meet the market demands Successful penetration allovvs TCEs to prolong the life cycles o f theừ services, particularly services that are in mature stages in the domestic market may be able to start new life cycles in the foreign markets Penetration into new markets also helps enterprises take advantages of theừ system capacity, experiences, technologies and deploy their businesses on a larger scale, thus, reducing product cost per unit In addition, it allows TCEs to take advantages o f incentives from theừ foreign markets and lessen competition pressure, thus, mitigating theừ business risks
Generally, for an enterprise, the strategy o f penetrating into intemational markets can be considered a set o f íìindamental long-term business perspectives and objectives that can orientate husiness activities, including the means and the marketing strategies to achieve the enterprise’s objectives in products and services Telecom international market penetration is activities, targeting to extend the market share of telecom Products and services by investment, marketing policies and implementation o f strategic solutions Penetrating into a íịreign market can be considered a marketing program for the Products and services For a TCE, selecting the target market for inírastructure investment and a method for market penetrating activities is essential Decisions on investment and penetrating methods/tactics depend largely on the factors relating to the target market, the competitors and the capacity of the company itself Thereíbre, before entering a íoreign market, an enterprise needs to make important decisions o f selecting the appropriate target market, selecting the market penetration strategies, planning and implementing marketing policies to bring its Products and services to íịreign customers (see Figure 1)
Pigure 1: Decisions of a telecom company for market penetration
The target markèt
Analyzing the business environment in the target market Analyzing the resources o f the enterprise
Selecting the market and the target group o f customers
M arket penetration
strategies
Licensing Franchising Joint venture Direct investment
Product policies Price policies Distribution policies Trade promotion policies
Developing the marketing resources
Source: Compiled by the author.
(5)H ' f ^ H DD 32-52 Penetrating International Telecommunications H ark et
• Selecting the target market
The TCEs need to have an overvievv o f the global market in the telecom sector to narrovv down the foreign markets that they are interested in and able to peneưate After that, they must conduct research and detailed analysis to compare the opportunities and challenges o f each foreign market, including, but not limited to, business environment and competitive advantages Based also on the analysis o f available resources, TCEs will decide which ones are the most suitable (target market)
When analyzừig the business envừonment in target markets, the economic envừonment, cultural environment, human factor and natural conditions are extremely important The economic environment reveals the degree o f competitiveness and determines the attractiveness o f the market Factors in the economic envừonment o f a country where business is oữen concemed about are economic growth, living standards, population structure and social hierarchy The culture and human íactors are constituted of different elements: culture, religion, beliefs, spữitual life and the attitude o f the people towards themselves, others and the community They detemiine consumer behavior, which is related to the habits and tastes o f consumers o f telecommunications services on the market In a study o f the eíĩect o f psychic distance (factors such as cultural, language and business differences) on consumer behavior, Arenius (2005) found that the psychic distance has become less signiíicant to newly technology- based enterprises in selecting a íbreign market but remains important to others Therefore, in order to build an appropriate and íeasible market penetration strategy, an enterprise needs a deep understanding o f the cultural íactors and consumer behavior by age, occupation and residential areas The cuỉtural envừonment determines the success o f the business in a íịreign market and dữectly affects the marketing policies o f the company The cultural similarities between domestic and íịreign markets will enable the company’s Products and services to be consumed without signiíicant changes Social and demographic environment include population figures, population density and population structure classified by sex, age, rate o f telecommunications services usage, family size and so on The changes in these Êictors will aíĩect the demand for services Consequently, it will determine the size o f the market, which is a very important factor in telecom investment research The natural environment includes elements such as natural resources, land and terrain It is the system o f natural factors that affect many aspects of input resources needed for production, business and the consumption o f output o f an enterprise The deployment o f good telecommunications inữastructure depends heavily on natural conditions Therịre, enterprises cannot ignore the ĩects of natural factor
• Choosing the market penetration method(s) and strategies
It is ừnportant for TCEs to choose the best method(s) to enter the selected market, based on their determination o f the entừe intemational marketing program The method(s) to enter the chosen market must also be consistent vvith the company’s overall strategy, objectives and
(6)Penetrating International Teỉecommunications M arket pp 32-52
đuration o f each objective An optimal option is to harmonize costs, risks and the control factor Dừect entry (such as through a branch or subsidiary), although associated with high start-up costs, has full control over marketing activities such as promotions and sales Indừect entry poses
í low risk but the company cannot set the price of Products dừectly to consumers or provide
£fter-sales services to customers
The method(s) o f entry vvill be based on the above-analyzed factors In reality, the main ưiethods that are often used by enterprises are licensing, ữanchising, joint ventures and direct
investment.
Licensing is a form o f intellectual property licensing agreement (also known as intellectual property license) for the production and marketing o f Products in íịreign markets Ưsually, the subjects o f the license agreement are patent, copyrights, trademarks, technological processes and know-hows (Tran Minh Dao and Vu Tri Dzung, 2010) Regarding this approach, new enterprises may have the opportunity to quickly access íịreign markets and minimize risks
by saving theừ time and Capital investment As a result, small- and medium-sized enterprises (SMEs) can easily adopt this strategy to expand their international businesses and maintain their sales and profit targets Enterprises vvhich are high-technologies and knowledge based can use licensing agreements and, in retum, eam investment to promote the dissemination o f new products and technologies on íbreign markets However, there are some disadvantages to this method New enterprises not have the right to control the licenses or the ways o f doing businesses o f theừ partners In addition, when using the form o f license transferring, providers must share the know-how with íịreigners For enterprises who decide to take licenses, they have to calculate theừ own business scalability Therefore, there is a need for a broader selection o f methods to enter the íịreign markets One o f the options is establishment o f a joint venture with the license
Franchising is a form o f special license transfer, in which the company sells “limited rights” over its brand name to the buyer for a lump-sum payment and beneíĩt sharing However, unlike selling a license, the ữanchisee must agree to abide the strict rules o f business conduct Thus, the advantages are similar to those o f licensing In addition, the ữanchisor does not have to bear with the costs and risks o f penetrating into a íịreign market However, íranchising requừes the ửanchisee to strictly control the quality o f its Products and services in accordance with the principles and regulations o f the ữanchising agreement Selling Ễranchises can undermine the company’s ability to coordinate global strategy because franchisee often does not pay enough attention to the quality o f services they provide To overcome this problem, the ữanchisor can set up subsidiaries in each target market or area
Joint venture with one or more íoreign partners might be considered a faster and more expensive form o f obtaining a license when entering a íịreign market Joint venture is a co-
operation with local and íịreign Capital contributors for the purpose o f building a locally-and
jointly-owned and managed telecom company Foreign investors can purchase a portion of a
(7)pp 32-52 Penetrating International Telecommunications M arket
license-owned company or a license-owned company can purchase a portion o f a foreign company, or both parties can contribute to the establishment o f a new joint venture enterprise This option allows risk sharing among partners and enhances the ability to connect workflows together However, when choosing this method, the license-owned company needs to have a deep understanding o f the target market, the potential o f the joint venture, the local distribution system, and availability o f the workforce The partners may havé disagreements about basic
Capital, marketing, and other operating principles The difference in the total cost by each party makes the parties realize that the proíits are not commensurate with the costs and the risks incurred when establishing and putting the joint venture into operation In addition, they will have little control over theừ partners Same as licensing, a joint venture partner can become a potential competitor In general, joint ventures are now widely used globally as they allow enterprises to exploit theừ distribution netvvorks, combine Capital and technoỉogical strengths, develop new Products and penetrate new markets easier and with less risk
Dữect investment is One o f the most widely used forms to enter a íịreign market when an enterprise ovvns 100% o f the investment Capital through the establishment or acquisition of subsidiary companies Since a TCE has sufficient resources and experience in international trade and the volume o f its goods or services exporting to íịreign markets are large enough, this method is the most applicable The investor, in this case, has some advantages similar to those of joint venture, such as enhancing market access and avoiding tariíT barriers and quotas The establishment o f subsidiary companies vvill minimize the risk o f losing control and stealing technology In addition, it allows the company to tightly control over its activities in different markets, thus, it isable to enhance global coordination, economy o f scale, positional advantages, experience, and sustain the company’s competitiveness on different markets Compared to licensing and joint venture, dữect investment strategy helps an enterprise to expand its market faster, better control its business expansion and gain higher proíĩtability However, it is one of the costliest methods to enter íịreign markets as the parent company has to bear with the íull costs and risks o f establishing overseas subsidiaries
Selecting an appropriate market penetration method in telecommunications depends on extemal factors (culture, politics, laws, economy, market size and so on) and intemal factors (cost o f production, cost o f transportation, know-how, management, international experience and so on) o f an enterprise Accordingly, experienced and capable telecom enterprises usually choose to invest dừectly by establishing theữ subsidiaries or creating joint ventures vvith local enterprises
• Planning marketing policies to bring products/services on sales
The goal o f marketing policies is to ensure that the company is able to penetrate the target market, sell products/services, earn proíĩts and gain competitive advantages In order to reach
(8)Penetratìng International Telecommunications H ark et DD 32-52 1^ ' I
that goal, marketing mix, also known as 4Ps - Product, Price, Promotion and Place is the most important tool that needs to be deployed (Kotler, 2002; Nguyen Dong Phong eí a i, 2007).
Product policy There are three basic product adaptation strategies, which should be
considered for íịreign markets, namely maintenance o f the original product, adaptation by changes and the creation o f a new product Fừst, maintenance o f the original product means that the company provides telecom services to íịreign markets exactly as what it does in the domestic market Second, adaptation by changes means that company can change its products/services to adapt to the conditions or preferences o f new markets Finally, an enterprise can also create new products/services for the target market to increase market share, sales and profits New
products/services may be new to the company but not new to the target market and vice versa or
may be new to both the company and the target market
Price policy: Price is the most sensitive because it determines vvhether a product/service
is accepted by customers, and how many or how a product/service is consumed In other words, price policy dừectly affects the sales and proíit of a company Thus, an enterprise should have appropriate pricing policies suitable for each market and its own condition
Promotion policy: Promotion is alỉ the communication methods used to provide product
iníịrmation to different parties It aims at oíĩering and establishing relationships with partners and potential customers, and enhancing the competitiveness and brand o f an enterprise Thereíore promotion activities, including as advertising, public relations, sales organization and sales promotion are especially important for an enterprise when penetrating into íịreign markets
Place (distribution policy): Distribution is not limited to setting the dữection, objectives,
and preconditions o f cừculation, but also includes changing the time, space and procedures to bring consumers the telecom Products and services Distribution involves many tasks, from planning and controlling the product flows through distribution channels to carry the Products to reach and rationally exploit the needs o f the market Depending on the penetrating market, its business capacity, goals for market share or profitability and the characteristics o f the product, the company can choose appropriate distribution strategies It can be monopoly distribution, selective distribution or strong distribution netvvorks
In order to implement marketing policies and bring telecom services to customers, deploying marketing mix is required Thus, telecom enterprises have to develop the marketing
iníịrmation system ụ e peopỉe, equipment and procedures for collecting, analyzing, evaluating and distributing timely accurate information to decision makers), marketing budget (i.e identifying the source o f funding needed for the penetration based on the type and objectives o f the business) and marketing resources ụ.e human resources and technical resources to ensure the necessary conditions for implementation)
• Implementation and monitoríng
(9)pp 32-52 Penetrating International Telecommunications M arket
Regarding foreign market penetration, researchers, managers and consultants are vừtually unanimous on the importance o f speed as a competitive advantage and a requừement to achieve more rapidly a strategic decision-making o f an enterprise (Robertson, 1993) Entering international markets is accompanied by risks and challenges posed by the markets as well as the naturaỉ, social, and cultural envừonment (extemal envừonment) Thus, the speed helps an enterprise reduce risks while penetrating into foreign markets, and creating advantages o f market share and customer base
Robertson (1993) also agreed that “rapid sales acceleration is especially needed in technology-based Products” and “speed is a management imperative, especially in the domain o f new Products” He suggested that íirms can reduce the duration o f market penetration cycle following these guidelines: (1) Reach the market fírst; (2) Pre-announce the new product before the market availability; (3) Innovate constantly; (4) Occupy the market; and (5) Track market penetration by stages o f the purchase decision process
In line with Robertson (1993), the research by Arenius (2005) concluded that the psychic distance has become less signiíìcant in respect o f íịreign market selection by technology-based new íĩrms, but retains its signifícant negative effect on the speed o f market penetration (speed means how fast the technology-based new ventures establish themselves on the íịreign markets,
1.e identiíy partners and customers and eventually obtains sales income) Technology-based new ventures with social Capital can penetrate into foreign markets at a higher speed than those
vvithout social Capital because social Capital alleviates the liabilities o f newness and íoreignness
that enable these íirms to overcome the psychic distance
Therefore, it can be concluded that successíìỉl market penetration requữes “wisdom”, or “tticks” from enterprises Being quick at selecting and approaching the market is not enough, another important consideration is to reduce the time needed to penetrate the market and bring the products and services on sales Hovvever, the long-term supremacy o f the Products depenđs on constant and unremitting innovation o f the company On the other hand, successíul new Products are an invitation to market entry for other competitors As product life cycles become shorter and the speed o f imitation increases, continuous innovation is the only sustainable strategy for success
2 International market penetration of Viettel Global
Viettel Global was established as a merger o f intemational investment departments with 98% o f the Capital investment coming from the Viettel Group As a subsidiary company in charge of foreign investment and businesses, Viettel Global follows the core values and business philosophy o f the Viettel Group as a pioneer in applying modem and innovative technology to create new Products and services o f high quality at reasonable prices, meet the demand, ensure the right to choose o f customers, and always care for and listen to customers for better improvement o f Products and services In 2006, Viettel Global started investment projects in
(10)Penetrating International Telecommunications Market DP 32-52
Laos and Cambodia After over 10 years, this number has increased at 10 investment prọịects in diíĩerent regions including South East Asia (Laos, Cambodia, Timor-Leste and Myanmar), Latin America (Haiti), South America (Peru) and Aírica (Cameroon, Tanzania, Burundi and Mozambique)
By the end o f 2017, nearly 40 million customers from intemational markets used Viettel’s mobile services, broadband Internet, landlines and wừeless phones As mentioned earlier, as of June 2018, Viettel attained proíit in markets, of which markets including Laos, Cambodia and Timor-Leste has returned the initial Capital investments To date, Viettel Global is generating proílts o f four-to-five times higher than the initial investments in these three markets (Thanh Thu, 2018) Encouragingly, Viettel was the top telecommunications provider in terms o f market share in íỉve countries, including Cambodia, Laos, Timor-Leste, Mozambique and Burundi (Viettel Global, 2017)
Viettel GlobaPs revenue from telecommunication services on íịreign markets has grown rapidly and continuously The annual growth rate was 21.5% in 2016, which was more than double that o f 2015, and increased by 2.5% at 24% in 2017 (Viettel Global, 2017) The number o f customers in íịreign markets was 13% in 2017, which was four times higher than that o f the global average (about 3%) New African markets continue to see strong grovvth rates at 1,343% for Viettel Tanzania, 43% for Viettel Cameroon 43% and 42% for Viettel Burundi (Minh Anh, 2018) In Myanmar - the newly-penetrated market, Mytel (also known as Telecom International Myanmar Co) had more than million subscribers just in over a month after the oíĩicial launch on June 9, 2018, surpassing Viettel Global’s target o f to million subscribers in the vvhole 2018 (Tu An, 2018), contributing to Viettel’s business achievements on íịreign markets
According to VNDIRECT (2018), after more than 10 years o f operation, Viettel GlobaPs charter Capital increased from VND 960 billion to VND 22,400 billion with a revenue o f more
than 500 times higher Its proíĩt increased by more than 300 times and the owner’s equity increased by 45 times The return on equity (ROE) reached 7% vvhile the market size expanded to 210 million people (2.2 times o f Vietnam’s population) In 2017, Viettel Global’s total
Consolidated revenue growth rate was 24% To date, Viettel is in the world’s top 15 TCEs by
number of subscription and the world’s top 40 TCEs by revenue (Thanh Mai, 2018)
From 2009 to 2015, Viettel was honored four times at the World Communications Award for the “Best telecommunication services provider in the developing countries’ markets” for its overseas brands such as Metíịne (Cambodia), Unitel (Laos) and Telemor (Timor-Leste) This is the most prominent international event in the world’s telecommunications industry, organized annually by Terrapin Communications (Australia) since 1999 to recognize companies that have made the best use o f the íeatures o f developing countries’ markets to achieve business success and contribute to the development o f the telecommunications market
(11)VSED pp 32-52 Penetrating International Telecommimications M arket
• Selecting target markets and target groups of customer
Prior to the decision to invest in and penetrate into the international market, Viettel Global had conducted intensive research on the potential and development of telecommunication market in different regions o f the world The data compiled in 2015 on mobile-broadband telecom services, one o f Viettel Global’s strengths, showed that there were over billion mobile cellular subscriptions worldwide, up from less than one billion in 2000 (ITU, 2015) Correspondingly, the annual growth rate was over 14% Also as o f 2015, the number of mobile cellular subscriptions per 100 inhabitants vvorldvvide was 46.1 while that o f developed countries was 81.3 Whereas, these figures for the Asia-Pacific region and Aírica were only 42.3 and 17.4, respectively (ITU, 2015)
According to Viettel Global (2015), the number of mobile subscriptions in the world between 2015 and 2019 is íịrecasted to increase by 1.3 billion (from 7.2 billion by the end of 2015 to 8.5 billion by the end o f 2019), equivalent to an annual growth rate o f 4.2% In this period, the 20 fastest-growing markets are predicted to be emerging markets in Aữica and the Central and South Asia With the highest grovvth rate o f 7.4% annually, Africa is considered a high potential market (see Figure 2)
Figure 2: Forecasted annual growth rates o f mobile subscriptỉons in the world and by region, 20 ỉ 5-20 ỉ 9
Source: Viettel Global (2015).
The íirst factor that Viettel Global considered when selecting a target country was the potential o f telecommunication Service business and its political, cultural and social environment They can have different impacts on the telecommunication market development
(12)Penetrating International Telecommưnications Market pp 32-52 | ^ t |
Subsequently, the competitive envừonment, potential competitors, threats ÍT o m substitute Products or pressures from customers and suppliers and so on were weighed up In addition, the natural environment factor that has an impact on input, output and the speed o f implementation was also taken into account
In South Asia, Laos, Cambodia, Timor-Leste and Myanmar are the markets vvith high potential and low barrier to entry In addition to the advantage o f similarities in the cultural, social and natural environment, the density of mobile cellular subscriptions of these countries is low compared to the regional average and those of the Philippines and Vietnam More importantly, the annual growth rates o f subscriptions in these countries were very high (see Table 1)
Table 1: Mobile cellular subscriptions per 100 inhabitants
Country 2005 2010 2015
Average annual growth rate
(% ) ASEAN
Cambodia 8.0 57.0 134.4 32.6
Laos 11.4 64.1 55.9 17.2
Timor-Leste 3.2 42.6 110.9 42.6
Myanmar 0.3 1.2 78.2 74.4
Vietnam 11.4 126.1 128.6 27.4
Philippines 40.3 88.7 115.8 11.1
AFRICA
Cameroon 12.9 43.2 79.5 19.9
Burundi 2.1 19.1 49 37.0
Mozambique 7.2 29.9 71.9 25.9
Tanzania 7.5 45.5 73.6 25.7
Source: ITU (2017)
(13)VSED pp 32-52 Penetrating International Telecommunications Uarket.
• Market penetration and investment strategies
In early 2018, Viettel Global established 10 subsidiaries and joint ventures in 10 íịreign markets, o f which subsidiaries and branches were dừectly invested by Viettel Global The others were joint ventures betvveen Viettel Global (holding more than 40% o f charter Capital) and major local enterprises
Table 2: Viettel GlobaPs subsidiaries, their brands and methods of investment in 10 countries
C ountry Enterprise B rand M ethod of investment
Cambodia Viettel (Cambodia) Pte., Ltd Metíịne Dừect investment
Laos Star Telecom Co., Ltd Unitel Joint venture
Timor-Leste Viettel Timor Leste
Unipessoal Lda Telemor
Dừect investment into Viettel branch Myanmar Telecom International
Myanmar Co Mytel
Joint venture (49%
Capital)
Cameroon Viettel Cameroun S.A Nexttel Joint venture
Burundi Viettel Burundi S.A Lumitel Dừect investment
Tanzania Viettel Tanzania Ltd Halotel Joint venture
Mozambique Movitel, SA Movitel Joint venture
Peru Viettel Peru SAC Bitel Dừect investment
Haiti Natcom SA Natcom Joint venture
Source: Viettel Global (2018).
After selecting the markets, Viettel Global’s strategy was to focus on large-scale investment and remote areas to take over the empty market and encửcle the urban areas from the rural areas In reality, mạịor intemational TCEs have penetrated and occupied the urban markets By employing these strategies, Viettel Global was able to rapidly attain a sizable market share despite the presence o f mạịor competitors Especially, Viettel Global’s strategy to invest in the technology and inữastructure before running its business was applied in every country This is due to the fact that telecommunication business is based on inírastructure, and the services rely on the quality o f infrastructure
(14)Penetrating International Telecommunications M arket pp 32-52 Ị Ị I Ị M Ị
For each market, Viettel had different strategic decisions for investment and penetration For instance, in Cambodia, Viettel Global chose direct investment through a subsidiary, namely, Viettel Cambodia Ltd Hovvever, the density o f mobile subscription was already 20% (compared to Vietnam’s 5% share when Viettel started deploying telecommunication services), thus, the
market potential is not high enough As a result, Viettel decided to em ploy a Creative and unique
penetration strategy to take over this market by investing in a íìber-optic transmission netvvork covering every City and district o f Cambodia As a result, Viettel’s transmission network is currently considered the best o f its kind in this country
In Laos, Viettel Global chose a different approach It established a joint venture with Laos Asia Telecom Company, namely, Star Telecom with a telecommunication brand called Unitel, o f vvhich Viettel Global contributed 49% of C ap ital investment in the form of equipment
With the goal of deploying the network quickly in just over a year, Star Telecom had built 3,500 km of fiber-optic transmission netv/ork for 17 cities all over the country, which is joined by Viettel Vietnam and Viettel Cambodia to form a Vietnam-Laos-Cambodia Central transmission route As of July 2012, Star Telecom íĩnished the largest fiber-optic transmission netvvork o f
17,000 km and 2,500 transmitters to cover all districts and used by 95% o f Laos population (Nguyen Minh Phuong and Le Nhu Quynh, 2013) It vvas a similar strategy o f investing in high- quality and systemized technological inửastructure as in Cambodia to provide the best services for local residents by making telecommunication services more accessible Viettel Global also invested directly in Viettel Timor-Lester under another brand name, namely, Telemor
The Peruvian market is different The economic environment and telecommunication market in Peru are more developed than those of Vietnam Nevertheless, the remote rural areas are still excluded from the telecommunication network Viettel Peru (Bitel brand) with 100%
Capital investment írom Viettel Global was licensed by the Peruvian government to conduct
business in telecommunication sector by committing to provide free Internet for schools in fòr the areas where no local enterprise want to invest in inírastructure In Haiti, Viettel became the fưst enterprise to be a “partner” o f the Haitian govemment Witnessed by the Prime Ministers o f the Vietnamese and Haitian governments, Viettel Global signed a memorandum o f understanding with Teleco, a Haitian telecommunication company as its strategic investment partner, to establish Natcom Network in Haiti Together with restorừig the landline telephone netvvork after an earthquake, Natcom invested in a telecommunication cable inírastructure that had never been built in Haiti previously Thanks to Natcom’s high-quality fíber-optic network, the quality o f telecommunication services in this country was improved drastically
(15)pp 32-52 Penetrating International Telecommunications M arket
• Developing and implementing marketing strategies
Product and distributiort policy:
Apart from pre-launch Communications about the Products and services, new product policy incorporating with a wide range o f services and ease o f use for residents in areas with limited access to services was deployed by Viettel at the fastest pace ever seen in all o f its íịreign markets In Timor-Leste, Telemor (also known as Viettel Timor Leste Unipessoal Lda.) oíĩered a variety o f Service packages for each customer group, especially the 3G services After nearly a year, the number o f customers had been doubled
In Peru, Bitel was the fưst nationwide 3G mobile network provider and was the only 3G mobile network in 2014 Thanks to attractive promotion programs and a variety o f products and services accompanied with the Bitel SIM cards such as Online TV, Online music and accessing to Internet at a high-speed connection, the number o f BitePs telecom Service users increased rapidly In this country, mobile Internet products were the new íuture o f telecommunications when Bitel (also known as Viettel Peru SAC) entered the market To meet the booming demand in Peru and also in Tanzania, Bitel and Halotel (also knovvn as Viettel Tanzania Ltd.) oíĩered many other value-added services such as Online TV, Online music, video calls and so on As a result, people were buying Bitel and Halotel SIM cards in these two countries immediately right aíter theữ arrivals HalotePs grovvth was recognized by the International Business Awards (Stevie Awards 2017) for the Fastest Growing Enterprise in the Middle East and Africa in 2017 (Sang Smith, 2018)
Regarding the Myanmar market, Mytel íịcused on the data segment and new digital services such as mobile phones, landline phones, value-added services, digital content, e-wallet, and other IT solutions At the time o f launching, Mytel was the only mobile netvvork in Myanmar that provided 4G services across this country for video calling on a 4G platíịrm o f high-speed and consistent quality In 2015, Metíone (also knovvn as Viettel (Cambodia) Pte., Ltd) in Cambodia also became the fưst to launch eMoney, an e-wallet Service.
In terms o f distribution policy, Viettel Global under the brand name Unitel had chosen the door-to-door approach by sending its employees to each village in remote areas to marketing dừectly This strategy was tailored due to the fact that Laos is a country with a scattered population, where 10,000 villages and ethnic groups live mainly in mountainous areas Unitel, therefore, established hundreds o f vendors nationwide and bought hundreds o f motorcycles equipped with speakers for salesman communicate with costumers in the local languages and cultures With this approach, Unitel could go into remote areas with a sparse population to reach the target customers By 2013, Unitel had a distribution netvvork o f 143
(16)Penetrating International Telecommunications M arket DD 32-52
stores, 15,000 vendors and thousands o f sales staff across this country As a result, Unitel became the largest telecommunication network in Laos in terms o f customer base, coverage and revenue (Nguyen Minh Phuong and Le Nhu Quynh, 2013)
In Timor-Leste, Viettel Global built a strategy to provide nationvvide telecom services as soon as the business was launched Telemor maximized its distribution netvvork in the early months o f its operation While competitors had only One or two major agents, Telemor expanded its reach far to remote areas where it coníìdently took over thanks to the strong signal, low prices and over 3,000 vendors throughout Timor-Leste As a result, after only months of operation, Telemor had generated prìts, with a revenue growth rate o f 280% in 2014 compared to that in 2013 (Nguyen Son, 2015) In the Peru market, Bitel was also the only telecommunication brand with its own system (for SIM and terminal devices) covering all the districts in rural areas
In a nutshell, Viettel Global’s policies on Products, services and distribution in the above- mentioned countries and other markets have contributed to the parent company (Viettel Group)’s success in business and increased its market share in the last 10 years
Price and promotion policies:
In all íbreign markets that Viettel Global’s aíTiliated companies and subsidiaries are doing business, the price policy for telecommunication services provided is highly competitive The price o f services by Viettel Cambodia is o f 20%-25% lower than those by other network providers Mytel (also known as Telecom International Myanmar) provides its services at a very low price The price o f Mytel’s 5-gigabyte data package for 30 days is less than half of that o f Myanmar Post & Telecommunications - Myanmar’s largest telecom operator (Du Lam, 2018)
Telemor oíĩers increasingly cheaper price and the “one second plus on second block” product package (previously knovvn as “one minute plus one minute”) with free mobile SIM cards for students, teachers, policemen and so íịrth in Timor-Leste - a small island nation with a total population o f only 1.2 million In this country, mobile phone brands have been unpopular since operators only imported a very small amount o f mobile phones to meet the demand of customers Besides, the price o f mobile phones is very high Hovvever, things have changed since Telemor provided cheap phones and even free-2G phones to certain customers to encourage them to switch to its telecommunication services In Peru in 2014, as the íĩrst mobile Service
provider to have the network covering the entừe country and the only provider of 3G services, Bitel ran attractive promotion programs along vvith a variety o f Products and services that came with the Bitel SIM cards Thus, the number o f Bitel users increased rapidly just in the íirst year
With the philosophy o f “running business with social corporate responsibility”, right from the beginning stage o f foreign market penetration, Viettel has committed to governments of
(17)pp 32-52 Penetrating International Telecommunications H ark et
overseas markets for diíĩerent social and charity programs that received positive responses from the local customers In Laos, Uniteỉ implemented a number o f programs such as free Internet connection for over 600 schools and educational organizations, video telecalls, connecting the entừe nation, íunding for the construction o f two hospitals, providing supports to the victims of íloods and storms, and providing the Internet access for the army and police units Telemor also launched promotion programs incentivizing students, soldiers and policemen In othe Asian and Aírican markets, Viettel promotes social activities such as providing supports to the poor and íunding for schools and hospitals These social activities have connected the Viettel’s brands with people’s lives in order to gain its íootholds in those markets
• Investing in Service inírastructure and implementing penetration strategy
Rapid implementation is one of the key strategies that Viettel has employed in all countries During the phase o f infrastructure construction, the number o f workers involved could reach thousands Viettel Timor-Leste, for instance, were in íiill force right from the start of the prọịect In most o f the selected íbreign markets, Viettel finished the construction o f network inữastructure and the launching preparation within one year since receiving the investment license
In July 2013, after nearly years of network infrastructure investment, Telemor covered the entire Timor-Leste with a customer base o f 96% o f the population In Myanmar, just within one year, Mytel had íinished the construction o f the nationvvide network In the Mozambique market, Viettel’s Movitel (also known as Movitel, SA) netvvork became the largest provider, surpassing its competitors, Vodacom and Mcel, which have 15 years o f experience in the market, in just 11 months from the date o f receiving the license In Peru, after receiving a one-year license, Bitel went íurther than the commitment with the Peruvian government to provide free Internet in areas with extremely low living conditions by covering the entire country with the 3G network, which previously had been available only in big cities Particularly, in Tanzania, Viettel Global committed to investing USD billion to extend the 3G coverage to all o f the country’s 26 provinces and provide services to at least 4,000 villages that had not have mobile signal before In October 2015, nine months after the start o f this project, Viettel oíĩicially launched Halotel here (Thu Hien Doan, 2015) Accordingly, one year after receiving the investment license, Viettel Tanzania had completed its investment o f over 18,000 km o f fiber-optic cables, nearly 2,500 base-transceiver stations to cover even the remote areas o f Tanzania with the 3G network
Regarding the penetration speed, aíter nearly three years o f operation in Mozambique, Movitel became the country’s largest provider accounting for 38% o f the market share and led the competition on the telecommunication market In Cameroon, after only three months, Viettel Cameroon had reached million mobile subscriptions Meanvvhile, Halotel in Tanzania had
(18)Penetrating International Telecommunications M arket DD 32-52
contracted with million customers in less than months and up to million after months As o f October 2017, Halotel had more than 3.5 million customers, surpassing enterprises having over
0 years o f experience in the market such as Zantel Telecom, Tanzania Telecom and Smart In July and August 2017, Halotel contributed 50% to the 427,500 new subscriptions in the market (Nguyen Tuan, 2017) As in the words of telecom experts, Viettel GlobaPs performance in these markets was exceptional
3 Lessons learned for Vietnamese telecommunication enterprises
After 10 years o f development in 10 íịreign countries, Viettel Global has gained valuable experiences in íịreign market penetration, contributing to the Viettel Group’s achievements in universalizing access to information and telecommunications technologies as well as in changing the quality of life o f the people in these countries It is notevvorthy that market penetration is not an easy process since it requừes wisdom and techniques in the implementation process The strategies and tactics that Vietteỉ adopted to achieve the above-mentioned results are as follows:
Fừst, selecting appropriate markets and investment and penetration strategies Viettel Global always takes into consideration the crucial aspects o f the selected markets such as market potential, inírastructure conditions and the cultures o f the people Dừect investment and joint venture can be the ways to develop modem and synchronous technical inĩrastructure before entering new markets They are also suitable for various telecommunication Products and services, such as landline telephones, íĩxed vvừeless, mobile phones and broadband Internet Viettel Global’s strategy is to enter and occupy the markets whcre competitors are unvvilling to their businesses (including remote areas) In addition, it also expands in urban areas following the philosophy o f “íinding ways to provide all services to the entữe population”
Second, wisely employing investment strategies and suitable penetration policies for íòreign markets During the investment stages, Viettel Global built a cooperative and supportive relationship vvith local governments and local joint venture enterprises As a result, it has gained strong support írom the local governments in ủilíilling its commitments to socio-economic development and security o f the invested countries In particular, penetration strategies have been fully implemented in a “customized” manner along with policies that fit local communities and people as well as theừ cultures and practices
Thừd, concentrating all resources to rapidly take over the market Viettel Global approaches the íịreign markets vvhere telecommunication access is not available on a large scale Its rapid and robust investment in inírastructure ensures the provision o f high-quality services The duration o f investment process and preparation for the Products and services to introduce the markets has ahvays been shortened as much as possible It is crucial that the methods used to introduce and promote products/services must enable to reach the customers in the shortest time
(19)pp 32-52 Penetrating International Telecommanications M arket
Fourth, applying multiple marketing policies simultaneously Besides providing suitable and diversiíied Products (such as fixed vvữeless telephone, 3G, 4G, video calls, televisioa services and so on), Viettel Global has set its Service prices lower than its competitors to attract customers, and widespread its distribution channels to bring the door-to-door services to customers The implementation o f social and security programs and commitments such as free Internet for schools and providing supports to local governments, also improves the eíTectiveness o f promotion programs
Fifth, boosting the staíTs morale and eíĩort The characteristics o f the V ietters corporate culture are stringent discipline and work ethics After months working with the V ietters team in Vietnam, the Haitian delegates were most impressed with V ietters employees who work from the moming until night with high discipline Meanxvhile, the Viettel’s leaders also pay as much attention to details as their engineers (Manh Chung, 2011) Cultural diíĩerences seem not signiíĩcantly to impede the access to íịreign markets since the caring and attentive nature at work has appealed customers as much as the company’s services themselves
Given the existing challenges and opportunities in each íòreign market, enterprises need to formulate strategies and policies that are speciíícally tailored for theừ investment and penetration into íịreign markets For TCEs, it is necessary to ensure a vvide network o f technical inữastructure, the best price, a wide distribution system, diversifíed policies and continuous innovation o f Products and services
Those requừements are not new to enterprises in general but Viettel Global has proven its courage to think and differently Many overseas subsidiaries o f Viettel Global such as Metíịne, Mytel and Bitel have strived to be the best in some certain aspects from the very beginning such as best network quality, widest coverage, best price and best customer services However, the determination and goals alone are not enough What is even more important is the fast-paced execution This is what Viettel Global’s subsidiaries in íoreign màrkets have already achieved
In conclusion, the elements constituting a corporate spữit o f Viettel have been vividly portrayed in many aspects o f the investment and penetration process into telecommunication markets o f various countries Though speciíĩc situations may differ, the lessons leamed for all Vietnamese enterprises are that they need to build a cooperative and supportive netvvork, implement theữ new and different ideas in the fastest way, and keep in their minds a clear business philosophy “for customers, for the people and for the community” Also, they should always stay determined and keep ceaseless eíĩorts in order to overcome diíĩiculties All Ũ1 all, these are the manifestations o f true “corporate spừit” in the world o f integration and competition today
(20)Penetrating International Telecommunications M arket DP 32-52 I ^ iỊỊỊ
REFERENCES
• Arenius, p (2005), “The Psychic Distance Postulate Revised: From Market Selection to Speed of Market Penetration”, Journal o f International Entrepreneurship, Vol 3, issue 2, pp '115-131, Springer Science + Business Media, Inc., Netherlands, [Accessed on October 14, 2018, URL: https://link.springer.com/article/10.1007/sl0843-005-4203-6] • Kotler p (2002), Marketing Management Millemium Edition, Tenth Edition, pp 9-10,
Pearson Custom Publishing
• Krishna, A (2013), “Addressing the critical issues for successíul international market penetration by Malaysian telecommunications íĩrms”, DBA thesis, Southern Cross University, Lismore, NSW, Australia, [Accessed on November 10, 2018, URL: https://epubs.scu.edu.au/cgi/viewcontent.cgi?article=1392&context=theses]
• EYGM Limited (2015), “Global telecommunications study: navigating the road to 2020”,
[Accessed on November 14, 2018, URL:
https://www.ey.com/Publication/vwLUAssets/ey-global-telecommunications-study- navigating-the-road-to-2020/$FILE/ey-global-telecommunications-study-navigating-the- road-to-2020.pdf]
• Transparency Market Research (2016), “Telecommunication Market - Global Industry Analysis, Size, Share, Growth, Trends, and Forecast 2016 - 2024”, [Accessed on
https://www.transparencymarketresearch.com/telecommunication-industry-market.html] • Robertson, T s (1993), “How to Reduce Market Penetration Cycle Times”, MỈT Sloan
Management Revìew, Vol 35 (1), pp 87-96.
• Thanh Thu, (2018), “Viettel is generating prìt in over 10 íịreign markets” [Viettel có lãi tám mười thị trường nước ngoài], Vnexpress, Accessed October on 14, 2018, URL: [https://kinhdoanh.vnexpress.net/tin-tuc/doanh-nghiep/viettel-co-lai-o-tam-tren-muoi-thi-truong-nuoc-ngoai-3773732.html]
• Nguyen Minh Phuong and Le Nhu Quynh (2013), “Investing in telecommunications in Laos: Experiences Í T o m Viettel’s success” [Đầu tư viễn thông sang Lào: Kinh nghiệm từ thành công Viettel], Journaỉ o f Economics & FÒrecasting, No 9/2013, [Accessed on October 14, 2018, URL: Retrieved from http://centralinvest.gov.vn/view/dau-tu-vien- thong-sang-lao-kinh-nghiem-tu-thanh-cong-cua-viettel-235.aspx]
• Nguyen Son (2015), “Four ‘tricks’ that got Viettel to Number in Timor Leste” [Bốn ‘chiêu’ để Viettel lên số Đông Timor], VnEconmy, [Accessed on October 15, 2018, URL: http://vneconomy.vn/cuoc-song-so/4-chieu-de-viettel-len-so-1 -tai-dong-timor-20151027115456483.htm]
• Minh Anh (2018), “Valuation at USD 1.5 billion, Viettel Global listed at VND 15.000/stock” [Định giá 1,5 tỷ USD, Viettel Global lên sàn giá 15.000 đồng/cổ phiếu],
November 10, 2018, URL:
(21)pp 32-52 Penetrating International Telecommunications Harket.
VnEconmy, Accessed on October 14, 2018, URL: http://vneconomy.vn/dinh-gia-15-ty-
usd-viettel-global-len-san-gia-15000-dong-co-phieu-20180925153433839.htm]
VNDIRECT (2018), “VNDIRECT supporting Viettel Global on UPCoM” [VNDIRECT đồng hành Viettel Global giao dịch sàn UPCoM], [Accessed on October 15, 2018, URL: https://www.vndirect.com.vn/vndừect-dong-hanh-cung-viettel-global/] Sang Smith (2018), “V iettđ’s Halotel reaching 2-digit market share in Tanzania” [Nhà mạng Halotel Viettel đạt thị phần số Tazania], Vietnam Audio Visual
Magazine, [Accessed on October 15, 2018, URL: http://nghenhinvietnam.vn/tin-tuc/nha-
mang-halotel-cua-viettel-dat-thi-phan-2-con-so-tai-tanzania-33916.html]
Nguyen Tuan (2017), “One million customers in three months, Viettel has ‘new record’ at the International Business Awards” [Đạt triệu khách hàng chi tháng, Viettel có kỷ lục Giải thưởng kinh doanh quốc tế], Cafebiz, [Accessed on October 15, 2018, URL: http://cafebiz.vn/dat-l-trieu-khach-hang-chi-trong-3-thang-viettel-co-ky-luc- moi-tai-giai-thuong-kinh-doanh-quoc-te-20171023163 8471 ó.chn]
Du Lam (2018), “The strategy that got Viettel 2.5 million subscriptions in months” [Nhờ chiến lược này, Viettel đạt 2,5 triệu thuê bao Myanmar sau tháng], ictnews, [Accessed on October 25, 2018, URL: https://ictnews.vn/vien-thong/nho-chien-luoc-nay- viettel-dat-2-5-trieu-thue-bao-tai-myanmar-chi-sau-2-thang-172128.ict]
Tu An (2018), “Mytel - ViettePs brand in Myanmar reached million subscriptions after month” [Mytel - thương hiệu Viettel Myanmar đạt triệu thuê bao chi sau tháng khai trương], Vietnam lnvestment Review, [Accessed on October 15, 2018, URL: https://baodautu.vn/mytel—thuong-hieu-cua-viettel-tai-myanmar-dat-2-trieu-thue-bao- chi-sau-1 -thang-khai-truong-d85021 html]
Manh Chung (2011), “Viettel invests aboard: Technology goes ahead” [Viettel đầu tư nước ngoài: Kỹ thuật trước], VnEconomy, [Accessed on October 14, 2018, URL: http://vneconomy.vn/doanh-nhan/viettel-dau-tu-ra-nuoc-ngoai-ky-thuat-di-truoc-
20110208100937782.htm]
Tran Minh Đao and Vu Tri Dzung (2010), International Marketing, National Economics University Publisher, Hanoi
Nguyen Dong Phong et al (2007), International Marketing, Lao Dong Publisher, Hanoi Viettel Global (2015), 2015 Annual Report, Ha Noi.
Viettel Global (2018), 2018 Annual Report, Ha Noi.
ITU (2015), [Accessed on October 10, 2018, URL: https://www.itu.int/en/ITU- D/Statistics/Documents/facts/ICTFacts Figures2015.pdf]
ITU (2017), [Accessed on October 14, 2018, URL: https://www.itu.int/en/ITU- D/S tat ist ic s/Pages/stat/defau lt aspx]
https://link.springer.com/article/10.1007/sl0843-005-4203-6 https://epubs.scu.edu.au/cgi/viewcontent.cgi?article=1392&context=theses https://www.ey.com/Publication/vwLUAssets/ey-global-telecommunications-study- https://www.transparencymarketresearch.com/telecommunication-industry-market.html] http://centralinvest.gov.vn/view/dau-tu-vien- http://vneconomy.vn/cuoc-song-so/4-chieu-de-viettel-len-so-1 http://vneconomy.vn/dinh-gia-15-ty- https://www.vndirect.com.vn/vndừect-dong-hanh-cung-viettel-global/ http://nghenhinvietnam.vn/tin-tuc/nha- http://cafebiz.vn/dat-l-trieu-khach-hang-chi-trong-3-thang-viettel-co-ky-luc- https://ictnews.vn/vien-thong/nho-chien-luoc-nay- https://baodautu.vn/mytel—thuong-hieu-cua-viettel-tai-myanmar-dat-2-trieu-thue-bao- http://vneconomy.vn/doanh-nhan/viettel-dau-tu-ra-nuoc-ngoai-ky-thuat-di-truoc- https://www.itu.int/en/ITU-