Vietnam’s Mobile Market in a

Regional Context

Roger Barlow
RJB Consultants Limited

3rd Mobiles Vietnam Conference

10th and 11th May 2006
Ho Chi Minh City
Socialist Republic of Vietnam
RJB Consultants
 11 Growth
Growth in
in Regional
Regional Mobile
Mobile Markets
Markets

22 Regional
Regional Metrics
Metrics

33 GSM/CDMA
GSM/CDMA

44 Data
Data Services
Services

55 Forecasts
Forecasts

RJB Consultants
What a difference 12 months makes….

• Vietnam’s mobile market has taken off

• The market remains the one of the fastest
growing in Asia
• Increased competition and lower prices
are key factors
• Vietnam’s booming economy is helping
fuel this growth
• Demographic change is also assisting the
process
RJB Consultants
 Asia - Numbers of Mobile Subscribers 2005

VN 9.5

TH 30.4

TW 21.9

SG 4.3

PH 34.9

MY 19.5

KO 38.3

JP 94.7

ID 45.9

IN 75.9

HK 7.4

CN 393.4

0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0
Millions

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia Net Additional Subscribers 4Q 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

-2000 0 2000 4000 6000 8000 10000 12000 14000 16000

Subscribers (000s)

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia - Mobile vs Fixed Penetration 2005
VN 7.7
11.4

TH 10.5
47.7

TW 59.4
96

SG 43.2
97.9

PH 4.2
40.3

MY 17.9
74.7

KO 54.2
79.4

JP 46
74.2

ID 4.5
20.4

IN 4.1
6.9

HK 53.1
106.1

CN 23.6
30.1

0 20 40 60 80 100 120
Percent Penetration

Mobile Fixed

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia - Mobile Customer Growth Rates 2004 to 2006

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

-20 0 20 40 60 80 100 120

Percentage Growth

2006 2005 2004

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Market Shares in the Region

• Regional Markets suggest that 2 to 3 operators

tend to dominate in most
– Regulation plays a part in this
– Market size less so (China - 2, India – Many)
– Consolidation is now taking place in multi-player
markets (India, Hong Kong)
• Vietnam is now a 4 (soon to be 6) player market
– Viettel has become a powerful player
– EVN Telecom and Hanoi Telecom will enter this year
– Will six players (plus Citifone) result in stability?

RJB Consultants
 Asia Mobile Market Shares 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN OTHERS

HK

CN

0% 20% 40% 60% 80% 100%

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Vietnam Mobile Market Shares – March 2006

Viettel
Vinaphone
S-Fone

Citiphone

Mobifone

RJB Consultants
Source: Vietnam News; VietnamNet Bridge; RJB Estimates
 11 Growth
Growth in
in Regional
Regional Mobile
Mobile Markets
Markets

22 Regional
Regional Metrics
Metrics

33 GSM/CDMA
GSM/CDMA

44 Data
Data Services
Services

55 Forecasts
Forecasts

RJB Consultants
 How does Vietnam compare?
• Analysts and investors like to review a number of metrics
to assess and compare mobile operators
• Vietnam’s metrics are better accessible now
• ARPU – key measure looked at by most:
– Vietnam probably in range of US$10/month and
declining
– Pre-paid ARPUs may be in region of US$8/month
– Not far off regional comparison group in US$10 ~
range
– ARPUs are falling as lower spending users come on
the networks, a trend seen not only in Asia but also
globally

RJB Consultants
 Asia - Average Revenue per User (ARPU) 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0 10 20 30 40 50 60
US$ per month

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Other Useful Metrics:
• Proportion Prepaid
– Vietnam estimated at about 85% prepaid, up from 70% in 2004/5
– Similar to other ASEAN countries, but as Vietnam’s penetration
rate increases so will prepaid proportions
• Churn
– Most operators quote churn as a percent of new adds, resulting
in high numbers (50 to 60%)
– Net estimated at around 10% - but still higher than region
– Increased competition will drive churn higher
• Minutes of Use
– No official data are available for Vietnam
– Estimated 250 to 275 minutes per month on average
– Judging by usage patterns no reason to suggest that lower than
region

RJB Consultants
 Asia - Proportion of Subscribers Prepaid 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0 20 40 60 80 100 120
Percentage

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia - Monthly Churn Rates 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Percent Churn

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia - Minutes of Usage 2005
VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0 50 100 150 200 250 300 350 400 450 500

Minutes per month

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 11 Growth
Growth in
in Regional
Regional Mobile
Mobile Markets
Markets

22 Regional
Regional Metrics
Metrics

33 GSM/CDMA
GSM/CDMA

44 Data
Data Services
Services

55 Forecasts
Forecasts

RJB Consultants
 GSM is still dominant in region

• Vietnam, like most of SE Asia, remains GSM

2/2.5G focused, although CDMA 2000 systems
will get a boost this year
• 3G is changing this:
– CDMA 1x and 1x EV-DO deployments are increasing
– Being deployed for both mobile and WLL applications
– CMDA at 450 MHz well suited to rural environments
– W-CDMA later to market, but clear evolution path
from GSM 2G/2.5G to 3G & then HSDPA
– Incumbents with existing GSM infrastructure will
almost certainly move to W-CDMA

RJB Consultants
 Asia - Cellular Standards 2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

GSM/UMTS CDMA Other Excludes Fixed Wireless Deployments

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 3Q 2005; RJB Estimates
 UMTS/3G Deployment in Asia (WCDMA)
Country Network Date of Launch
Japan NTT DoCoMo 2001
Vodafone KK 2002
Korea SK Telecom 2004
KTF 2004
Hong Kong 3 January 2004
CSL 1010 December 2004
SmarTone December 2004
PCCW/Sunday July 2005 (Data)/March 2006
(Voice)
Singapore Singtel December 2004
M1 February 2005
StarHub April 2005
Malaysia Maxis December 2004
Celcom May 2005
Taiwan FarEasTone July 2005
VIBO Telecom July 2005
Brunei B-Mobile December 2005

RJB Consultants
Source: GSM Association & UMTS Forum websites; RJB Estimates
 CDMA 2000 Deployment in Asia (1)

Country Network Type Date of Launch

Bangladesh PBTL & RanksTel Mobile/WLL 800 MHz 1X – 2Q 2006
WLL – in service
Cambodia Cambodia Shinawatra WLL 450 MHz 1X – 3Q 2004
AZ Coms Mobile/WLL 800 MHz 1X – 4Q 2006
China China Telecom WLL 450 MHz 1X – 1H 2003 Trials (Tibet
Province)
China Unicom Mobile 800 MHz 1X – March 2003
China Unicom Mobile 2100 MHz 1X EV-DO Trials
India Several operators Mobile/WLL 800 MHz 1X – 2002/03
Indonesia Several operators Mobile/WLL 450, 800 1X – 2002/4
& 1900 MHz 1X EV-DO - TBA
Japan KDDI Mobile 800 MHz 1X EV-DO – 2003
Laos Lao Telecom WLL 450 MHz 1X (EV-DO – TBA)
Malaysia Telecom Malaysia WLL 800 MHz 1X - TBA
Mongolia SkyTel Mobile/WLL 800 MHz 1X – 3Q 2004 (EV-DO TBA)
Nepal Nepal Telecom; United Tel Mobile/WLL 800, 1X – 2005
1900 MHz 1x EV-DO - TBA

RJB Consultants
Source: CDMA Development Group website; RJB Estimates
 CDMA 2000 Deployment in Asia (2)

Country Network Type Date of Launch

Pakistan Several operators Mobile/WLL 450 & 1X – in service
1900 MHz 1X EV-DO 3Q 2006
Philippines Express Telecom Mobile 800 MHz 1X - TBA
Korea KT Freecell Mobile 1700 MHz 1X EV-DO – 2002
LG Telecom Mobile 1700 MHz 1X EV-DO - 2002
Sri Lanka Several Operators WLL 800 & 1900 MHz 1X – in service
1X EV-DO - Trial
Taiwan AsiaPac B’band Coms Mobile 800 MHz 1X EV-DO – 2003
Thailand CAT & Hutchison CAT Mobile 800 MHz 1X EV-DO – 2003
Vietnam Hanoi Telecom Mobile 800 MHz 1X EV-DO – 3Q 2006
SPT Mobile/WLL 800 MHz 1X – 2003
1X EV-DO - Trial
EVN Telecom Mobile/WLL 450 MHz 1X -2005 (WLL)
1X EV-DO - 3Q 2006

RJB Consultants
Source: CDMA Development Group website; RJB Estimates
 11 Growth
Growth in
in Regional
Regional Mobile
Mobile Markets
Markets

22 Regional
Regional Metrics
Metrics

33 GSM/CDMA
GSM/CDMA

44 Data
Data Services
Services

55 Forecasts
Forecasts

RJB Consultants
 Data Service Usage in Asia

• In many countries in Asia SMS is used extensively,

particularly by the young
• WAP not successful, although GPRS usage growing fast
– HSDPA will boost WCMDA data capability significantly
• CDMA 1X EV-DO roll-out resulting in:
– Higher data usage rates (Rev A: 3.1 Mbps downlink)
– Use of CDMA for data access applications
• Examples of growth in data usage rates:
– China: 2002 2% of ARPU; 2005 20% of ARPU
– Indonesia: 2002 12% of ARPU; 2005 28% of ARPU
– Korea: 2002 8% of ARPU; 2005 18% of ARPU
– Malaysia: 2002 6% of ARPU; 2005 18% of ARPU
Statistics Source: Merrill Lynch, Global Wireless Matrix 4Q 2005

RJB Consultants
 Asia ARPUs - percent Data Services

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0 5 10 15 20 25 30 35 40 45 50
Percent

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 Asia Data Revenues % of ARPU 2003-2005

VN

TH

TW

SG

PH

MY

KO

JP

ID

IN

HK

CN

0 5 10 15 20 25 30 35 40 45 50
Percent

2003 2004 2005

RJB Consultants
Source: Merrill Lynch, Global Wireless Matrix 4Q 2005; RJB Estimates
 11 Growth
Growth in
in Regional
Regional Mobile
Mobile Markets
Markets

22 Regional
Regional Metrics
Metrics

33 GSM/CDMA
GSM/CDMA

44 Data
Data Services
Services

55 Forecasts
Forecasts

RJB Consultants
 Continued Rapid Growth
• Vietnam remains the fastest growing key market
in Asia
• Demographic trends suggest that the boom will
continue for at least the next 5 years, and
probably longer
• As GDP and income grow Vietnam’s mobile
penetration has room to grow significantly
• Thus by 2010 we forecast:
– Total market of 46 million mobiles is achievable in
Vietnam
– Mobile penetration of over 50% is thus possible

RJB Consultants
 Drivers of this Growth
• Economic growth
• Competition
• Lower prices of handsets and service plans
• Network expansion into rural areas
• Convergence between mobile and fixed
networks
• Demographic trends
• Broadband capabilities and data usage
• One issue – registration of pre-paid subs may
result in one-off decrease in absolute numbers

RJB Consultants
 Key Demographic Trends

• Population is ageing, with increases in key

market segments for mobile services:
– 25 to 39 age group will increase by 16.2% in
period 2004 to 2014
– 40 to 50 age group will increase by 39.3% in
same period
• With rising incomes the value of these two
groups over the next 5 years increases by
5.4% and 7.6% respectively
RJB Consultants
 Vietnam’s Changing Age Profile
2004 compared with 2009 2004 compared with 2014

70+ 3526
3144 70+ 4131
3144
1816
65-69 1629 2286
65-69 1629
60-64 2314 2009
1825 60-64 3034 2014
2004 1825
55-59 3117 2004
2275 55-59 3959
2275
50-54 4119
3146 50-54 4885
3146
45-49 5092
4302 45-49 5703
4302
5862
40-44 5317 6405
40-44 5317
35-39 6489
5989 35-39 7062
5989
30-34 7132
6510 30-34 7667
6510
25-29 7804
7136 25-29 8085
7136
20-24 8319
7962 20-24 8192
7962
8358
15-19 8637 7962
15-19 8637
10-14 7992
8567 10-14 7626
8567
5-9 7586
7910 5-9 7325
7910
0-4 7357
7483 0-4 7026
7483
0 2000 4000 6000 8000 10000
0 2000 4000 6000 8000 10000
Asian Demographics Ltd Persons 000s Asian Demographics Ltd Persons 000s

Source: Asian Demographics Ltd

RJB Consultants
 Other Demographic Factors

• Labour force growing by 1.7% per annum

• Household incomes increasing by 2.3% p.a.
• By 2014, 31.6% of the population will live in
urban areas
• An additional 1.1 million people of working age
each year
• Number of households is increasing by 2.5% per
annum
• Some of these trends are Vietnam specific

RJB Consultants
 Impact on the market
• Additional household income, and decrease in
average size of households will result in
additional discretionary spending
• Mobile operators will need to develop messages
specific to the key market segments
• Customer retention and loyalty schemes start
becoming important
• Successful branding (and sub-branding) a key to
success
• Population age profile suggests that youth
market less important from 2010 onward

RJB Consultants
 Vietnam Mobile Subscriber Forecasts
60000

50000

40000
Subscibers (Millions)

30000

20000

10000

0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Year

MPT Lower 06 MPT Higher 06 RJB 06 BMI 06

RJB Consultants
Source: RJB Estimates; BMI; MPT targets
 Vietnam Alternative Density Forecasts
70

60

50
Density %

40

30

20

10

0
2004 2005 2006 2007 2008 2009 2010 2011 2012

MPT Lower 06 MPT Higher 06 RJB 06 BMI 06

RJB Consultants
Source: RJB Estimates; MPT targets; BMI; Asian Demographics
 Thank you!

Roger Barlow
roger@rjb.hk
www.rjb.hk

RJB Consultants
 Country Abbreviations

• BD Bangladesh • VN Vietnam
• KH Cambodia • TW Taiwan
• CN China • SG Singapore
• IN India • KO Korea
• ID Indonesia • JP Japan
• LA Lao • HK Hong Kong
• MY Malaysia
• MM Mongolia
• MM Myanmar
• NP Nepal
• PK Pakistan
• PH Philippines
• TH Thailand

RJB Consultants