Internet market development and opportunities in Vietnam, an emerging market

Presented: Bien Nguyen, MBA (Hons.)

Equinix Asia Peering Forum, Bangkok, September 1, 2009

INFORMATION REVOLUTION….

THAT CHANGES PEOPLE’S LIVES

AGENDA

• Overview

• Regulatory Regime

• Market Dynamics

• Business Drivers / Challenges

• Infrastructure Development

• Future Plan

• Business Opportunities

• Tips for business collaboration with Vietnamese Telcos/ISP

OVERVIEW

• The Internet was introduced to Vietnam in 1997;• ¼ of population now have access to the

Internet;• International BW is as much as 65 Gbps;• Domestic BW is as much as 90 Gbps, among

which 40% through VNIX;• 110K DotVN domain names were issued;• 6.7 mlln. IPv4 addresses were allocated;• BB subs are as much as 2.6 mlln.(Sources: VNNIC, MIC, Operators)

OVERVIEW

(Sources: VNNIC, MIC, Operators)

OVERVIEW• The youth (15-24), 44% of the online population, is driving the Internet

use. 80% of them get connected very often. Females a bit more than men. 55% have a blog. Mostly females. The young adults (25-34) represent 32% of the online population. More men than women.

• Regular users spend in average 2h45 online every day.

• 91% of users have an ADSL connection. Internet has 66% home penetration in the 4 key cities.

• Between 2005 and 2009, twice more people own a personal computer and four times more homes have an Internet access.

• Home use has now overtaken Internet café and office use. 46% home users get connected many times every day.

• 27% of users buy online. 38% of them are part of the (15-24) segment.

• Main reasons for internet use: getting information’s for 56% users, online buying for 8% of users.

(Sources: A marketing agency)

REGULATORY REGIME

• Key Government Agencies– Ministry of Information and Communications;– Ministry of Police;– Ministry of Planning and Investment;– Ministry of Culture, Sports, and Tourism.

• Key Policies– Classify service providers for licensing purposes (ISP, IXP,

ICP, OSP) to ease the administrative procedure;– Facilitate network optimization (IIX, VNIX) and enhance e-

security;– Encourage and maintain competition;– Promote new technologies, services, and local content;– Support non-infrastructure ISPs.

REGULATORY REGIME

(Sources: MIC)

MARKET DYNAMICS

• The licenses issued by MIC (up to 2009)– 11 licenses for telecom infrastructure deployment

have been issued;

– 67 ISP licenses have been granted.

• The player dynamics– 54 ISP provides no services;

– 56 ISP possesses no infrastructure.

• The market share– 10 out of 13 ISP haves less than 2% market share.

– CR3,CR4>90%. There is oligopoly stronghold.

BUSINESS DRIVERS

• The integration into the world economy causing increasing demand of one-stop shop services from enterprise customers who need ICT, not separate telecom or IT services;

• The leap frog of advanced technologies and the growth of supplementary industries;

• The growing young population;

• The commitments from the country leaders;

BUSINESS DRIVER

ENTERPRISES

BUSINESS DRIVER

SUPPLEMENT INDUSTRIES

• IT industry 2008 growth rate of 20% and total market value of US$ 4.5 blln. ;

– Hardware: 16% growth rate;

– Software: 35% growth rate;

– Content: 50% growth rate;

(Sources: MIC)

BUSINESS CHALLENGES

• Slow privatization, ineffective regulation and incomplete telecom market liberalization;

• Signs of industry consolidation and restructure;

• Fast pace of changing technologies hurting return on investment;

• More and more demanding and less loyalty customers;

• Security threats and violation of IP rights;

INFRASTRUCTURE

DEVELOPMENT

• International Connectivity– Vinasat ;– Cross border landline cables from Vietnam to

Cambodia and China;– New submarine cables , namely, AAG, TGN-IA, and

APG.

• Domestic Infrastructure– North-South backbone network by operators;– NGN and high-capacity last mile solutions;– IDCs in key cities;

FUTURE PLAN

• Regulator’s Views

– <The Master Plan for Telecom and Internet in Vietnam to 2020>

(Sources: MIC)

FUTURE PLAN

• Services providers’ views

– Transformation from “network operator” to “service provider”;

– Intelligent network optimization;

– Effective cost management;

– Sustainable brand building;

BUSINESS OPPORTUNITIES

• Individuals– Social networks;– Customization & personal reflection;

• Households– Committed high speed broadband, esp. wireless

solutions;– Information and entertainment services;

• Enterprises – IDCs;– Professional BPO services;

• Government Agencies & Communities– VPNs on health care, school, etc.

TIPS FOR DOING BIZ• Understand the local institutions and adapt to the culture

– Approach and build relationship with the regulators and relevant government agencies;– Be aware of and respect to national culture and corporate culture;– Obtain education on investment policies in telecom & Internet;– Understand the prospect in terms of size, business scope, licenses, financial health, and

customer base ;• State-owned vs. joint-stock Co.;• Incumbent vs. new entrants;

• Be prepared if the partners are– About to ask for acceptance of intangible assets such as licenses and spectrum right of

use;– Lack of adequate resources such as information capital;– Lack of competent human resources;– Unfamiliar in developing sound business plans;

• Should record the progress in written documents– South vs. North negotiation style

• And avoid– Relying too much on indirect communications;– Pushing too hard at the beginning;– Using many business consultants.

biennn@spt.vn

Thank you!