Transitioning from a centrally planned to a market-driven economy, Vietnam has achieved middle-income status in less than 20 years. The country's growth is heavily dependent on its low-cost labor in attracting foreign direct investment, which contributed 8% to GDP. The economy maintains a healthy growth rate as GDP has been growing consistently over the last five years.
The government has set a target to transition from an industrialized nation to a modern society by 2020. The country's latest social-economic strategy includes identifying its main priorities in meeting the above target. To achieve this, the government will be laying out plans to stabilize the economy, establishing key infrastructure, enhancing labor-force productivity and strengthening market based institutions.
The Vietnam mobile industry comprises seven operators, with the top three controling 90% of the market. Although the telecom regulator has not placed any cap on the number of mobile licenses to award, foreign investors face challenges reaping growth as a result of state-owned dominance. Vimpelcom and SK Telecom have announced their exit from the Vietnam mobile market, thus depriving the industry of much needed capital from foreign investment. Hutchison Telecom is the only foreign operator that has renewed its confidence in the market.
Regulatory intervention
The mandate was in response to complaints that the state operators had increased rental prices by 276%. However, we have yet to see significant reduction in the revised prices.
More than 95% of the mobile market is dominated by prepaid subscribers. The market is price sensitive and customer loyalty is weak. As consumers are constantly looking out for big promotions, mobile operators are constantly under pressure to compete aggressively on price and promotions in the form of free talk time and messaging to protect market share. The telecom regulator has not adopted any significant measures in mitigating downward price pressure.