Name: Chu Hung Thang – VEMBA 12 HCMC

Final Paper
BUS 620 MICRO PAPER: COMPETITIVE ENVIRONMENT ANALYSIS OF YOUR
BUSINESS UNIT

Introduction

2017 marked a very important milestone of Vietnam Internet Roadmap when Internet

has exactly come to Vietnam for 20 years. In 1997, after 3 years of experiment with

the assistance of Australian experts, internet officially sold to end users with the first

and only state-owned supplier named VNPT. Just few months after that, we - FPT

Group - owned the license to become an ISP (Internet Services Providers) and

officially became a member of one of the most potential and fast-growing market of

Vietnam, providing fixed broadband internet services to the population of more than

seventy million people all over the country. FPT Telecom was then established to be

in charge of telecommunication business line of FPT Group.

VNPT, Viettel Telecom and FPT Telecom are now the Big Three in internet services

market of Vietnam with 46%, 22% and 18% market share respectively (figures in 2017

with details in below table). Other small providers including CMC, SCTV, SPT, Netnam

only occupy less than 20% of the market share. Telecommunication is a conditional

business and strictly controlled by the Government, in which every new entrant must

have the license from the Government. In addition, to start the internet provision

business, very huge investment in initial infrastructure and annual fixed costs

investment plan are needed. Therefore, the market in which FPT Telecom is a player

is considered oligopoly. VNPT is now still the first ranked internet provider thanks to

the great support from the state, especially state investment in infrastructure from

years ago and wide network advantage of post offices nationwide. Viettel Telecom is
 in the second place thanks to very competitive price strategy with the financial support

from the Military, resulting in especially strong competitiveness in rural areas. Our

company, FPT Telecom, is in the third place with significant competitiveness in urban

areas thanks to outstanding speed as compared to the competitors and plenty of

attractive add-on services including FPT IP based Television, FPT Playbox, self-

produced entertainment programs.

2017 FPT Telecom Viet Tel VNPT SCTV Others (CMC

Telecom, SPT,
Netnam..)
Charter Capital VND VND VND VND N/A
1,370 Billion 250,000 60,000 2,000
Billion Billion Billion
Fixed broadband 1,692,270 2,374,638 4,194,283 518,599 318,438
subscriber
% OF MARKET SHARE 18.6% 21.6% 46.1% 5.7% 3.5%

Pay IPTV subscriber 445,805 534,966 802,449 N/A N/A

% OF MARKET SHARE 25% 30% 45% N/A N/A

Source: Ministry of Post and Telecommunication (MPT) – The White Book 2017

Evaluation of the current competitive environment using Slater and Olson

Framework

Current competitive environment in internet provision market is quite tough and

challenging. Although we had no new entrant since 2007, as I mentioned above, our

two main competitors in the market are all from very powerful state-owned corporation

with very strong financial and investment capacity. I would like to recall the

infrastructure and price war from Viettel Telecom during 2015-2016 as an example of

very tough competitive environment. During these two years, while FPT Telecom

mobilized all the resources we had to upgrade the infrastructure from ADSL

(Asymmetric Digital Subscriber Line) to FTTH (Fiber to The Home), Viettel Telecom
have fulfilled two important targets at the same time – upgrading the infrastructure to

FTTH and lowering the price to end users – thanks to the giant financial and policy

support from the Military. Such war led us the miserable profitability period and put us

in the situation to survive by anyway through the storm. 2015-2016 was also the time

we strongly felt the customers’ power with the highest ever churn rate. Viettel

Telecom’s attractive price and promotion drew many of our customers to them. Our

salesmen force and customers service center worked day to night to persuade

customers to stay while technical and R&D center hastened the new services and

highly focused on quality and speed enhancement of the current broadband line to

help and equip the front-end sale force solutions to keep the customers. We have

launched a whole new customers care program named “All services on one

connection” in which we provided the customers with many value-added services and

products including IPTV payTV, the highest speed Internet broadband service in

Vietnam (SOC-1Gbps) with the ambition that once the customers have experienced

the quality and creativity of FPT Telecom products and services, they would not leave

despite the lower price from Viettel Telecom. We succeeded in passing through the

customers withdrawal storm thanks to this strategic campaign.

Through above example and analysis, it can be seen that customers cannot make

bargain in our business, but they can easily withdraw or terminate the contract if we

are not competitive enough in price and service quality. Moreover, in the situation that

fixed costs occupy more than 70% of our total costs, we are a very high fixed-cost

company, resulting in all ISPs (Viettel telecom, VNPT, FPT Telecom as well as other

small providers) will compete aggressively to gain the largest amount of market share

and customers possible to cover the fixed costs although it is truly hard for newcomers
to join. The fact is that there has been no new ISP joining the internet provision

business since 2007 up to now.

Besides the threats from aggressive rivals, we also face the challenge from a very

fast-growing substitute product and service – 3G/4G mobile network. Mobifone,

Viettel, Vinaphone – the three biggest mobile network operators in Vietnam – are

offering customers various daily, monthly and annual attractive packages. For

example, Mobifone is offering Mobi Big 90 – a package in which customers only pay

VND 90,000 per month for 9 Gigabyte Data in twelve continuous months. Such

package is very competitive to our fixed broadband products which start from

VND165,000 per month in minimum. The 3G/4G packages offered by the mobile

network operators are especially suitable for students, transporters, workers who are

our very important targeting customers. 3G/4G is unable to replace fixed broadband

due to its constraints in speed and quality stability in different geographical areas but

obviously affect our profitability through increasing market share, attracting young

(generation X) customers on mobile-based services and competing us in pricing.

Suppliers in our business sector are not very powerful due to our very huge investment

in devices and equipment. The quantity is large enough for us to control the price and

quality of the suppliers. Our purchase volume helps the suppliers to have big and

stable revenue, therefore they always try the best to supply us the best price and on-

time goods and services.

Low market turbulence is another advantage of our business. We are operating under

the Law of Telecommunication of the Government, which is very stable over years.

The fixed broadband market is also a mature and highly concentrated market, enabling

us to be confident in intensive infrastructure investment for long-term development.

As regard to the role of complementors, in addition to the core broadband services, we are

developing IP based television (IPTV). IPTV has many more outstanding features as

compared to traditional cable television such as 4K media standard, interactive

entertainment, or playback broadcasting function. We have bundled IPTV with our

traditional broadband services for 3 years now, and thanks to this, we have gained more

than 1 (one) million subscribers. That helps adding to our economies of scope.

Finally, our business has close relationship with the market growth. Vietnam

population, according to an officially recent announcement, is 97 million people.

Among them, 64 million people are active internet users. As a result, internet

penetration in Vietnam is estimated approximately 67% at the end of 2018, in which

fixed broadband services penetration is 50% or 13 million active household

subscribers. The market is expected to continue increasing rapidly in the next coming

10 years, so our services of internet usage to households, enterprises and

organizations have big economies of scale.

In conclusion, applying Slater and Olson Framework into our business, we see the

key factors as below:

Slater & Olson Forces Oligopoly

Supplier power Low

Customer power Low

Composite competition Varies

Market turbulence Relatively low

Market growth HIGH

 Complementors HIGH

Factors that affect our business in the near future

According to Statista, Vietnam e-commerce volume reached 2,269 million USD in

2018 and became one of the top 6 fastest growing ecommerce market in the world. It

is expected, according to Euromonitor, to be 2,425 million USD in 2020. This is a great

opportunity to internet service provider like FPT Telecom. End users will need high

speed internet to make prompt and secure transactions while ecommerce companies

like Lazada, Tiki, Shopee, Sendo, .... will have high demand of data centers and

advanced data warehouses to keep all the transaction in secure place. FPT Telecom

will also have great opportunities to provide internet services to world-class partners

including Amazon, Alibaba, Facebook, Google when they aggressively invest in

Vietnam young online market. We have taken many preparation steps to be ready for

these opportunities like building many more very modern data centers using the most

advanced technologies.

We also consider the booming of ecommerce as our challenging because, also

according to Statista, transactions through smartphones (mobile version) accounted

for 72% of the total ecommerce volume. This means the mobile network operators will

have greater opportunities than us. If we do not have proper strategic competition

plans, we will be looser. As a step to prepare for this, we are applying for mobile

service provider license and once we are approved, we will go ahead with 5G mobile

network immediately. Financial and technology preparation have been well-planned.

Fintech, named FOXPAY by FPT Telecom, is our new and potential product and

service. We have the valuable millions of existing customers with monthly/yearly

instalments, which enable us to enter the online payment market. We launched

FOXPAY in April 2018 with the application HI-FPT. Customers can use the app to pay

for the internet fee online instead of going to the branches with special promotions. In

the near future, we will launch our own e-wallet after getting approval from the State

Bank of Vietnam. E-wallet will enable us to provide the customers with a widespread

ecosystem services by cooperation with many other companies within FPT Group like

FPT Shop, FPT Education, FPT Online, Sendo Ecommerce. As an example, a

customer who buy smartphone at FPT Shop can pay by FOXPAY e-wallet with special

promotions co-sponsored by FPT Telecom and FPT Shop.

As for the core broadband services, in the next 3 (three) coming years, we plan to

upgrade the current urban infrastructure as well as expand the rural infrastructure. We

will apply technology of dynamic pricing through omni-channel to optimize the

profitability, that is, we will set a higher price in urban areas to maintain the profit and

lower price in rural areas to quickly expand the market share.

Conclusions

In 2018, FPT Telecom reached a revenue target of 8,670 billion VND, an increase of

13.3 percent compared to 2017 revenue; pre-tax profit was at 1,394 billion VND, an

increase of 14.6 percent compared to 2017. FPT Telecom has gained a market share

of 18.6 percent in the Internet fiber business compared to Viettel of 26.1 percent and

VNPT of 46.1 percent.

Different from the two competitors in the same business sector, we focus on customers

services in urban areas with high-income customers to maximize profit. New products

and services as value-added to the core fixed broadband are continuously developed

to achieve the strategy of “All services on one connection”. We believe that with the

growing and young market in the next coming years, we still have many opportunities

to increase profitability.

Some detailed strategic program for increasing profitability:

1. With fixed broadband in the consumer and enterprise markets, deploy as many

customers as possible on current infrastructure to increase profits. We base on

the outstanding salesmen force to achieve this goal. We aim to acquire 500,000

new subscribers of fixed broadband in 2019.

2. With FPT IPTV service, the price of purchased content will be adjusted properly

and flexibly by areas in order to increase the number of subscribers. We aim to

acquire 500,000 new IPTV subscribers in 2019.

3. For the Enterprises market, we expand our economies of scope with other IT

companies within FPT Group and expand our overseas markets in Lao,

Cambodia and Myanmar to increase profitability.

4. Catching up on the trend of ecommerce and other business sectors growth, we

build data centers with highest world technology to provide services to domestic

and foreign firms as their outsourcing partners to increase the economies of

scope.

5. Launching FOXPAY with full functions: online payment, e-wallet, ecosystem to

establish the real and efficient loyalty program.

With all above-mentioned action plans, in condition that the Government and Ministry

of Information and Communication continue to support joint-stock companies like us

to have more opportunities in more market-driven economy as Vietnam has committed

with the world organizations, we fully hope for significantly higher and higher

profitability in the near future.