(Telecom)Foreign Telecom Companies Are Coming
December 29, 2006
Source: Vietnam Economic News Online

While Vietnam is in the integration process, businesses have opportunities and challenges, and this is especially true for telecom companies. The challenges will be the same as those faced by every other kind of business - inadequate capital, outdated technology, poor service quality, poorly trained personnel, and competition for a limited number of customers.

Telecommunication and information technology businesses could do well after Vietnam becomes a full member of the WTO (World Trade Organization) because foreign telecom companies will come and buy or form partnerships with existing Vietnamese companies.

Vietnamese telecom companies are not ready to compete. And, because foreign companies have not been allowed to enter in force, they have plenty of opportunity to expand and improve. From 2007 to 2010, an investment of about US$2.5 billion will be needed for Vietnam to be able to put into place an adequate telecommunication network. At the moment in Vietnam, there are about 27 landline telephones for every 100 people. It's thought that market saturation would 80 landlines per 100 people. If true, this means that tripling the number of landlines would be a reasonable short-term goal. That is quite a business opportunity.

Prior to Vietnam's WTO membership, foreign telecom companies could enter Vietnam only if they entered into a business cooperation contract with a Vietnamese company. Immediately after Vietnam becomes a WTO member, foreign telecom companies will no longer be restricted to a business cooperation contract but can change the business relationship to a joint venture arrangement.

When the telecommunications market is open to foreign companies, Vietnamese companies, by becoming a part of joint ventures, will obtain access to modern technology. When Vietnamese companies become a part of foreign companies, competition will be between domestic (those remaining outside joint venture arrangements) as well as foreign telecom companies.

Tran Duc Lai, the Deputy Minister of Post and Telematics said that opportunities for post and telecom companies are not yet visible but it is possible to see clearly certain problems on the near horizon. When Vietnam is a WTO member, the entrance of foreign companies will mean instant competition, especially in telecom services. Vietnam's commitments to the WTO require it to open up more business possibilities for foreign telecom companies than was the case in the BTA (Bilateral Trade Agreement). When a foreign company represents a majority of the capital in a joint venture, it wields more decision-making power. The present Vietnamese post, telematics and information technology businesses command small networks, have limited capacity and will find that they will not be able to compete against foreign expertise. The professional services that foreign telecom companies will offer will be embraced by the Vietnamese public thereby threatening the Vietnamese companies now in control.

Nguyen Thanh Hung, the head of the Department of International Cooperation under the Ministry of Posts and Telematics said that foreign companies are lining-up, waiting to enter Vietnam. Vietnam's WTO membership will mean opening the door to foreign companies that are very able to provide high-speed Internet access at low cost. The Vietnamese people will benefit from better services at lower prices. Yet the State will perhaps put in place regulations that protect Vietnamese businesses from open competition with foreign companies.

Tran Thanh Hai, the vice-head of the Department of E-business under the Ministry of Trade said that in order for e-business to function well, there needs to be quality and dependable high-speed Internet service available. As competition steps-up, companies will find themselves more in need of e-business capability. This is another area where foreign expertise will move in. Vietnamese companies could form joint ventures with them. The foreign companies are coming, as sure as spring is just around the corner, and Vietnamese companies will simply have to compete to those who have more experience and capital, and better management skills.
 
 
 
 
 

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