M&A deals to be seen on Internet service market very soon

M&A deals to be seen on Internet service market very soon

The Internet service market has been dominated by three leading ISPs VNPT, Viettel and FPT, while tens of other enterprises just control a small area of the market. If the tens of enterprises merge into each other, the market would have some 3-4 ISPs with nearly the same market shares and power.

Only businesses with large infrastructure can survive

Under the plan to develop the national telecom network by 2020, every telecom market segment (mobile, broadband Internet, fixed line…) must have at least three service providers in order to ensure the healthy competition that brings benefits to customers and help stabilise the market and force enterprises to obey the policies.

According to the 2012 White Book about information technology and telecommunication, while the three leading ISPs have nearly the same market shares and dominate the market, the other enterprises do not.

The three ISPs now hold 95 percent of the market share. VNPT in 2011 held 63.31 percent of the broadband landline Internet services, which was triple of that of the enterprise on the second position – FPT Telecom (22.29 percent) and seven times higher than that of Viettel, the enterprise on the third ranking with just 8.85 percent of the market share.

Meanwhile, the remaining ISPs such as SPT, CMC TI, NetNam, SCTV-just hold 0.6-2 percent of the market shares.

Ninety one ISPs were licensed to provide Internet services in 2011, of which only 50 have been operational. Meanwhile, the figures were seven and 10 for mobile and fixed line telcos.

Hoang Trung Kien, deputy general director of FPT Telecom said the world is witnessing a growing tendency of converging technologies, networks, multi-services on one connection and standardising services on the broadband service.

This means that infrastructure quality would be the conditions for enterprises to develop following the world’s tendency. Therefore, experts believe the enterprises with no infrastructure like NetNam and CMC would find it very difficult to survive, and they may think of merging into each other to become more powerful.

Therefore, experts have every reason to think that besides VNPT, FPT Telecom and Viettel, only one or more other ISP would be existing on the market.

Vu The Binh, general director of NetNam, has admitted that small ISPs like NetNam would not be able to compete with the three big guys. Therefore, NetNam has been gradually quitting the ADSL service market for households, while it now focuses on providing high quality Internet services to high income clients and concentrated areas.

In the long term, the Vietnamese Internet market would see only 3-4 big enterprises existing. Binh of NetNam went on to say that the profits from Internet infrastructure services have been decreasing dramatically not only in Vietnam, but in the whole Asia as well. As a result, new enterprises cannot join the market, while operational small enterprises should not confront the big ones directly.

Meanwhile, an executive of CMC TI thinks by 2015-2020, the market would have two enterprises to hold 50 percent of the market share. The other 40-50 percent would be held by 4-5 other enterprises. Meanwhile, the remaining 5-10 percent would be reserved for the enterprises that serve specific subjects such as banks, five star hotels or multinational conglomerates.