Vietnamese telecom market Essay Example for Free

Vietnamese telecom commercialize EssayIntroduction Together with breakthroughs in technology, nimble telecom has been showing great innovations and bringing enormous benefits to consumers. Vietnamese erratic telecom grocery, through only if a few decades of suppuration, has proven to be an exceedingly potential industry. With analysis from the microeconomic standpoint, I would alike to clarify some far-famed matters seen in Vietnamese wandering(a) telecom marketplace forthwith. This essay is organize in trey parts * Part I Market Overview. This part provides brief information rough development account of the market and what the situation of the market is nowa daytimes. * Part II Market Tr nullifys. This part deals with novel-fashioned movements in Vietnamese ready telecom market. * Part III Consumers assoil or Lose? The final examination part of this essay analyses the benefits and losses that consumers face as a result of recent changes in the market. interr upt I Market Overview 1. Vietnamese Mobile Telecom Market A Brief History As a developing country, Vietnam has its runny telecom market started quite late. Though the demand for mobile go arose in the beginning of the 1990s, the first mobile telecom accompany of Vietnam MobiFone did not come into operation until 1994.This division marked the foundation of Vietnamese mobile telecom market. Fol woefuling steps of MobiFone, two more company joined the market Vinaphone (1997) and Viettel Telecom (Viettel for short) (2004). How invariably, before 2000, the use of mobile phones seemed to be restricted for urban and bounteous mickle. At that cadence, only the rich could afford the cost of using mobile value. The cost for a postpaid subscription r apieceed al some VND1,000,000 and the money consumed in one minutes mobile phone call could deal out the cost of food in a day for a rural family.One of the reasons for this extremely noble cost was that the market at that time was h ighly monopolistic. Until 2000, there were only two mobile dish providers in Vietnam, MobiFone and Vinaphone both of which atomic number 18 subsidiaries of Vietnam Posts and Telecoms root word (VNPT). Most consumers were not wealthy overflowing to access mobile service, so they stuck to the use of landlines, which, in fact, were also not very popular especially in the countryside. The increment of Viettel as a mobile service provider in 2004 was one of the biggest jump in the history of Vietnamese mobile telecom market.Viettel started to provide mobile function at a shockingly low price a mobile phone user might pay as little as VND50,000/month only. This low price encouraged the quantity demanded for mobile services to addition sharply. As time goes by, the cost of using mobile phones has become cheaper and cheaper, causing the depend of mobile subscribers to soar at the end of January 2012, there were 118. 5 million mobile subscribers compared to only 0. 3 million in 200 0. The number of service providers has also increased to 7 MobiFone, Vinaphone, Viettel, S-Fone, Vietnamobile, EVN Telecom and Beeline.Over 19 grades of development, from a market exclusively for high-income consumers, the mobile telecom market has been recognised as one of the most active market in Vietnam and almost everybody, rich or poor, is capable of owning and maintaining a mobile phone. Why do service providers try to increase their number of subscribers by lowering prices and giving big promotions? The answer is, in the short run, most cost incurred by a telecom firm are fixed costs, such as costs for infrastructure and bandwidth.Average total cost, as a result, decreases as the number of subscribers increases, thus reservation large profit for the firm. Hence, firms perk up strong motivations to attract more and more people to use their services. 2. How the Market Pie Is separate Today The current mobile telecom market in Vietnam can be seen as a typical monopolistic competition. Three biggest suppliers in the market are the ones with longest histories MobiFone, Vinaphone and Viettel. All these companies are state-owned MobiFone and Vinaphone are under mark off of VNPT, while Viettel is a subsidiary of Vietnamese Military Telecom Corporation.Together they control almost the whole mobile service market. According from statistics of the Ministry of learning and Communications, in 2011, Viettel was the leading firm with a market get by of 36. 72%. MobiFone and Vinaphone stood at the second and third positions with 29. 11% and 28. 71%, respectively. In total, the three state-owned companies took up nearly 95% of the mobile service market, leaving just oer 5% for the be service providers, namely EVN Telecom, Vietnamobile, Beeline and S-Fone.The reputation of these firms is so huge that once a person starts using a mobile phone, his first thought of what providers service to use that crosses his mind would generally be one of them. Three leading firms in the market pursue different business objectives. Aiming at low-income consumers, Viettel has apply low-cost packages to meet the needs of the majority of consumers. On the contrary, MobiFone and Vinaphone focus mainly on providing high- lineament services to people with higher income.Below are the ranks in market shares and service quality of the three biggest providers of mobile services in Vietnam according to an examination conducted by Department of Information Technology and Communications Quality steering (under the Ministry of Information and Communications) in 2009 Provider Market ShareService Quality MobiFone 2 1 Vinaphone 3 2 Viettel 1 3 Overwhelmed by big firms in the market, small firms such as S-Fone, EVN Telecom, Beeline and Vietnamobile assume had to struggle to survive. Sharing only 5% of the market, these providers have been facing enormous difficulties in increasing the number of subscribers and acquire.Two of them, EVN Telecom and Beeline, are eventua lly sold to other firms. These MAs will be analysed in the following part. PART II Market burns The three leading firms in Vietnamese mobile telecom market MobiFone, Vinaphone and Viettel now possess great market big businessmans, and naturally they desire to take over the small firms in order to have more control of the market. Below are three notable events that have occurred recently in the market which would have lasting effects on its path of development in the future. 1.Viettels Acquisition of EVN Telecom EVN Telecom is a company belonging to Electricity of Vietnam Group (EVN). Joining the mobile telecom market in June 2010, after just over one year of operation, EVN Telecom faced the risk of being acquired due to poor business outcome (slow subscriber ripening, disappointing revenue, pressure on EVN to focus on its major field, etc. ) and substantial liabilities to Viettel and VNPT. Some telecom firms had the figure of acquire EVN Telecom, such as Viettel, FPT Group a nd Hanoi Telecom (the owner of Vietnamobile).After many speculations nigh what firm would take over EVN Telecom, it was officially announced that EVN Telecom was going to be sold to Viettel. However, the scholarship was not smooth right from the beginning. In November 2011, Hanoi Telecom expressed its view that Viettels skill of EVN Telecom might break Competition Law, emphasising that it would probably make Viettel a monopolistic firm in the market. Until December 2011, Government eventually agreed on Viettels plan as in this case, Viettel was barely a market leader, not a monopolistic firm. 2. Beeline Disappeared in the Market.In 2009, GTel Mobile Company, a join surmisal of GTel Global Telecom Corporation of Vietnam and VimpelCom Group of Russia, brought Beeline mobile telecom service into operation in Vietnamese market. However, after three years, VimpelCom decided to sold all of its 49% of shares in the joint venture at US$45 million to GTel in order to focus on our key markets, verbalize the Vice President of VimpelCom. Of course this is not the real answer to the question of why VimpelCom withdrew from Vietnamese market while it had not broken even, regarding its total investment of up to US$463 million.Right after its ingress in the market, Beeline conducted many discount programmes and promotions to raise the number of subscribers, such as Big Zero and Millionaires Cost Package. These policies thus lowered its ARPU to less than US$1. Moreover, its shockingly low prices cannot ease them surpass the giants in Vietnamese mobile telecom market whose brands have been set in minds of consumers though its subscriber growth was exceptional just about 15,000 new subscribers per day in 2011.The fact that Beelines profit did not support up to its VimpelComs expectation caused it to constrain Beelines operation and eventually to sell out its shares to GTel, making Beeline a completely domestic brand. Many people would doubt whether Vietnamese mobile s ervice market has become immune to foreign investment as VimpelCom has failed to make profit here while it has been extremely successful in Russian and Eastern European markets. Is the market so saturated that no new firm could possibly achieve a market share from the hands of established firms?Will VimpelComs failure warn foreign investors against entering Vietnamese telecom market although we have been a extremity of WTO for five years? 3. MobiFone and Vinaphone to be Merged March 2012 was a month of vibrancy in Vietnamese mobile telecom market when rumour had it that MobiFone and Vinaphone, two out of the three biggest service providers, would be merged as a step to restructure VNPT. MobiFone and Vinaphone have followed different development directions despite being subsidiaries of the alike(p) group, which has been an enormous waste in infrastructure.A merger of the two companies is expected to improve service quality and efficiency, thus lowering the prices charged on consum ers. This information was confirmed by VNPTs management though an official decision of Government has not yet been made for fear that this merge might violate Competition Law. If the merger of MobiFone and Vinaphone is successful, the new company will constitute almost 58% of the market, threatening the survival of other companies, especially small firms like S-Fone and Vietnamobile.Earlier in 2011, according to the regulations of Telecommunications Law an individual or organisation is not allowed to own more than 20% of shares in each of two telecom firms in operation(p) in the same telecom market VNPT stood amongst two options equitising either of MobiFone and Vinaphone or merging the two. If choosing to equitise MobiFone, VNPT even so could not own more than 20% of shares and might have to sacrifice a large cadence of profit as MobiFone contributed to over 50% of its profit while taking up only about 4% of human resources.The second option a merger would subject VNPT to v iolation of Competition Law. On the other hand, according to the Vice Head of Department of Competition Management (Ministry of Industry and Trade), market share is not the only criterion to examine VNPTs merger scheme as it whitethorn motley from year to year. Competition power, market access capacity, opportunity seizure, etc. are vital elements to be considered. The substructure of the merger, if successful, is a close supervision and control of Ministry of Industry and Trade as well up as Ministry of Information and Communications.4. What Are the Trends? Along development steps of the market are the shifts showing what its trend is. Overall, Vietnamese mobile telecom market, although service quality has been greatly improved and price never stop falling, has hardly ever been viewed as a competitive market. At first, it was a complete monopoly, and then reached the peak of competitiveness with 7 suppliers now it is getting closer and closer to an oligopoly. (For illustration p urpose only) The market now is the race between VNPT and Viettel.Nevertheless, this is a counterfeit competition as both are state-owned firms. Government ought to study this matter intensively since it has both advantages and disadvantages. If it continues to let the two compete with each other, consumers will benefit while state cash invested in them will be partly wasted due to self-competition and vice versa. PART III Consumers Gain or Lose? 1. Competition Makes Consumers Better off Most mobile phone users would agree that they are benefiting more and more from service providers policies.Ten years ago, only wealthy people could own a mobile phone and afford the use of mobile telecom service, which is a completely distinct from todays situation where mobile technology is nothing strange to most people, regardless of their income. The shift of the market from a monopoly to a more competitive one enables consumers to choose the service provider which suits them best in quality an d price. Landlines services are being outnumbered by mobile services and will probably in short become obsolete as now they cannot compete with mobile services in price, let solely in convenience, diversity and flexibility.In addition, telecom services are the only items whose prices have constantly decreased, despicable against the storm of inflation in Vietnamese economy. D2 S11 S2 D1 E1 P1 P2 E2 Q2 Q1 (For illustration purpose only) The increase of quantity supplied is greater than the increase of quantity demanded, making the equilibrium point move from E1 to E2. At E2, P2 is lower than P1 and Q2 is larger than Q1, which makes consumers better off. 2. The Trend of monopolization Would Consumers Suffer?Monopoly causes deadweight losses this is undeniably true. Though consumers have been enjoying more and more benefits from service providers at least in the past few years, we may wonder if this could last for long when it comes to the trend of monopolisation which is becoming clearer and clearer in the market. After EVN Telecom and Beeline, will there be another(prenominal) acquisition that makes another small brand disappear? Will big firms take over all the small ones to encounter the whole market?If someday there are only state-owned companies providing mobile services, will they agree with each other to raise service prices and prevent new firms from entering the market, which undoubtedly shrinks consumer surplus? Suppose that day would come, consumers may try to constrain their use of mobile services. However, the amount of reduction would be negligible since mobile services are now so necessary that the demand for them is relatively inelastic. Consumers today are richer and frequently more dependent upon mobile services than they used to be therefore, it would not be easy for them to pull down down on using mobile phones to save money.Service providers would keep earning more and more profits from consumer welfare. In general, monopolisation har ms the benefits of most people while benefiting only a small group of people. Monopolisation is a two-edged trend, so it is important to balance the benefits between suppliers and consumers. An ideal mobile service market may be one with a small number of firms, i. e. three or four, but with comparatively akin market shares. This enables infrastructure to be effectively exploited as well as market power to be evenly distributed among suppliers, reducing the probability of a monopoly arising.Conclusion There would be not enough space to discuss all factors of a market within a short essay however, I have tried to apply microeconomic theories to analyse notable features and remarkable changes in the market that have had significant influences on consumers, together with given personal evaluations and opinions about the development trend of the market. I commit that eventually I have achieved a clarification of economic principles hidden in daily-life matters such as behaviours of fi rms and consumers in the mobile telecom market in Vietnam.Due to time pressure as well as inexperience in researching and writing, my essay may contain errors and misunderstanding. I would like to receive your feedbacks and suggestions to help me improve its accuracy and quality.Reference * Gregory Mankiw, Principles of Microeconomics (5th Edition). * VnExpress. net, Development of Vietnamese Telecom Market. * CafeF. vn, Viettels Aquisition of EVN Telecom Might conk out the Law. * Tuoitre. vn, Beeline Is to Disappear. * Tienphong. vn, Merging MobiFone and Vinaphone Good and Harm. * Vcci. com. vn, Telecom Market Back to Monopoly? * National Assembly, Competition Law, 2005.