Vietnamese Telecom Market: Competition and Monopoly

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FOREIGN TRADE UNIVERSITY

An Insight into Market Structure
Vietnamese Mobile Telecom Market as a Fight between Monopoly and Competition

Student’s name: Vu Thi Ngoc Thoa
Class: A18 – CLC TCNH – K50
ID Number: 1113340224
Time of completion: June 2012

Table of Contents

Introduction| 3|
Part I: Market Overview| 4|
1. Vietnamese Mobile Telecom Market: A Brief History| 4| 2. How the Market Pie Is Divided Today| 5|
Part II: Market Trends| 7|
1. Viettel’s Acquisition of EVN Telecom | 7|
2. Beeline Disappeared in the Market| 8|
3. MobiFone and Vinaphone to be Merged| 9|
4. What Are the Trends?| 10|
Part III: Consumers: Gain or Lose?| 11|
1. Competition Makes Consumers Better off| 11|
2. The Trend of Monopolisation: Would Consumers Suffer?| 12| Conclusion| 13|
Reference| 14|

Introduction

Together with breakthroughs in technology, mobile telecom has been showing great innovations and bringing enormous benefits to consumers. Vietnamese mobile telecom market, through only a few decades of development, has proven to be an extremely potential industry. With analysis from the microeconomic standpoint, I would like to clarify some notable matters seen in Vietnamese mobile telecom market today. This essay is organised in three parts:

* Part I: Market Overview. This part provides brief information about development history of the market and what the situation of the market is nowadays. * Part II: Market Trends. This part deals with recent movements in Vietnamese mobile telecom market. * Part III: Consumers: Gain or Lose? The final part of this essay analyses the benefits and losses that consumers face as a result of recent changes in the market.

PART I – Market Overview

1. Vietnamese Mobile Telecom Market: A Brief History
As a developing country, Vietnam has its mobile telecom market started quite late. Though the demand for mobile services arose in the beginning of the 1990s, the first mobile telecom company of Vietnam – MobiFone – did not come into operation until 1994. This year marked the foundation of Vietnamese mobile telecom market. Following steps of MobiFone, two more company joined the market: Vinaphone (1997) and Viettel Telecom (“Viettel” for short) (2004). However, before 2000, the use of mobile phones seemed to be restricted for urban and rich people. At that time, only the rich could afford the cost of using mobile service. The cost for a postpaid subscription reached almost VND1,000,000 and the money consumed in one minute’s mobile phone call could cover the cost of food in a day for a rural family. One of the reasons for this extremely high cost was that the market at that time was highly monopolistic. Until 2000, there were only two mobile service providers in Vietnam, MobiFone and Vinaphone – both of which are subsidiaries of Vietnam Posts and Telecoms Group (VNPT). Most consumers were not wealthy enough 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 emergence 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 services 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 increase sharply. As time goes by, the cost of using mobile phones has become cheaper and cheaper, causing the number 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 2000. The number of service providers has also increased to 7: MobiFone, Vinaphone, Viettel, S-Fone, Vietnamobile, EVN Telecom and Beeline. Over 19 years of development, from a market exclusively for high-income consumers, the mobile telecom market has...
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