Why Vietnam could be the next giant market for telco investors

Photo credit: Lukasz Saczek

Vietnam is fast becoming a promising market for telco investors after it hit the 24 million subscriber mark in the last quarter of the previous year, contributing to its over US$15 billion revenue for the entire 2015. According to a local report, the country’s largest mobile network providers have already adjusted their annual revenue plans for next year, enhancing investor expectations in the country’s local telecommunications market.

Vietnam’s local telcos thriving

For instance, Vietnam’s third largest provider MobiFone, has already earned US$1.8 billion of revenue and a profit of US$370 million, mildly surpassing their 2015 target revenue with a return of equity (ROE) of almost 50 percent.

Viettel, on the other hand, has maintained industry dominance by netting a total revenue of US$9.94 billion, up by 13 percent from 2014. Its profit has also increased by 8.5 percent from the previous year at US$2.04 billion.

In a separate report by the Vietnam News, the three biggest telco players in the country—MobiFone, VNPT, and Viettel—recorded a combined revenue of approximately US$15.57 billion 2015. The competition has also expanded and opened doors to new players as more Vietnamese are now realizing the importance of being connected through mobile phones and the Internet.

Hanoi Telecom, among the new players, revealed that its very own Vietnamobile’s 2G and 3G mobile subscribers are now about to reach 11 million, with a total revenue playing  around at US$442 million.

Also, government-owned Viet Nam Posts and Telecommunications Group (VNPT) said that a total profit of US$147 million is expected of the local telco market, emphasizing that it could surpass early 2014 predictions of 12 percent increase.

Room for improvement opens doors to international players

Despite this unprecedented growth, the country’s mobile network infrastructure still has to undergo a lot of improvements.

This, however, could open doors to outside-industry investors and markets. Infrastructure problems have made countries like India an attractive market for the likes of 5BARz International (OTCQB: BARZ), an American firm that focuses on partnering with local telcos to distribute their plug-and-play technology, a radio-frequency, easy-install network enhancing equipment.

In 2015, the company has successfully closed deals with India’s largest telcos to help them alleviate the massive call drop problem in the country.

“The success in India has prompted us to expand our operations to Southeast Asia,” CEO of 5BARz International Daniel Bland said, “and Vietnam, with its unprecedented growth and undeniable potential, could be the first of our penetration targets in the region. Our goal is to be a global pioneer and leader in this new niche.”

Restructuring industry promotes investments into and out of Vietnam

Currently, the number of broadband internet users in the country has reached 7.6 million in 2015, with internet users accounting for 52 percent of the country’s population. The area of mobile phone coverage has also improved to 94 percent in 2015.

The previous year is also considered among the strongest years for local telecommunications market as this was when infrastructure improvements obtained attention from the government. Telco restructuring and transformation—especially that of VNPT VinaPhone and MobiFone—have made headlines in 2015, improving the industry’s reputation among consumers and investors.

Local telco leaders have also made investments outside the country, such as Laos, Cambodia, Peru, and Mozambique.