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Latin American Debut for Vietnamese Telco

February 14, 2012

by Janie Hulse Najenson

Viettel, a Vietnamese telecommunications company, has recently made headway in the Latin American and Caribbean region. What makes this company unique in the region, besides being based in far-flung Honoi, is that its executives report to the Vietnamese Department of Defense. It is a military-run telco, which inevitably leads to comparison with another presumably military telco that has stormed Latin America over the last several years: China´s Huawei. (Though the latter actively denies widespread reporting of its connections to the People’s Liberation Army, PLA). Though a relative newcomer, Huawei is now a top equipment supplier to the region´s major telco service providers.

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Like Huawei in the beginning, Viettel focuses on the low cost segment and aggressively competes on price. It has taken a model that served it well at home where it now boasts over 50 percent market share and exported it abroad. The Vietnamese group is a service provider in Cambodia, Laos, Mozambique, Haiti, and Peru. Its international subscribers now outnumber its Vietnamese subscribers. Despite the global economic downturn, Viettel reported a 28 percent increase in revenues in 2011, reaching $5.6 billion.

In Haiti, the company launched services in September 2011. It successfully entered the island nation by offering substantial charity to earthquake victims; free-of-charge Internet services to schools; and preferential mobile prices for students, police and the poor. Something similar happened in Peru where the group beat out the competition—Russia´s Wynner Systems, Chile´s Americatel under Entel, and Brazil´s Hits Telecom Holding Company—with free service to over 4,000 schools over the next 10 years. During this same time period, it will invest around US$400m in setting up the network and business organizations in Peru.

Governments have shown little concern regarding the company’s military status. Unlike Huawei, that did face resistance in countries like India and still does today in the United States, developing world governments appear to overlook that issue and focus instead on the benefits of low-cost, high quality competition. 

There is remarkable similarity in strategies between Viettel and Huawei—military connection, state support, developing world focus, low-cost benefit, generous with freebees, etc. The only apparent Chinese connection, however, is its merger with China´s Chunghwa Telecom in 2007 aimed at acquiring Internet service capability.

Viettel has proven not only versatile but also multifaceted. Besides telecommunication service provision and networks, the company also provides sophisticated high-tech printing services and manufactures equipment. It now operates one of South East Asia´s most up-to-date production lines—The Viettel Centre for Electronics Manufacturing—that produces all sorts of telco equipment (normal and smart mobile phones, Ipads, and computers), Internet devises, and equipment for army information systems. This broad range of capabilities provides the company with a high level of autonomy in its operations. Press reports reveal that it will use its own networks in Peru and likes to use its own people as well. Even abroad, it brings in its own engineers and other experts. In its Mozambique operations, for example, it was reported that138 of its 500-plus staff are Vietnamese.

Viettel´s proposition is very attractive to regional governments; the price is right, competition fair and charitable donations more than welcome. Able to leverage its military-backed safety net and less concerned about quarterly results, the company can take its time in deciding where to go next. Press announcements in May 2011 already revealed its potential interest in Argentina. There, however, it would have to reckon with the likes of entrenched players like Telefónica, Telecom and Nextel. And, of course, the national security piece remains a question mark.

*Janie Hulse Najenson is a contributing blogger to AQ Online. She is an analyst based in Buenos Aires, Argentina and the editor and producer of Insights from the Field, a quarterly publication promoting perspectives from within Latin America on politico-economic and security issues affecting the region.

Tags: Telecommunications

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