Vietnam's Pay TV market is seeing some fierce competition in price and service quality.
Viettel, the military telecom group, officially joined the Pay TV market this year, providing stiffer competition “with fees more attractive than our rivals”. Such a statement raised major concern among other Pay TV providers, who recognise the advantages held by their telecom rivals and try, unsuccessfully, to prevent them entering the market. When the Ministry of Information and Communication (MIC) gave the nod to telecom operators such as Viettel, FPT Telecom and VNPT providing Pay TV services it was believed that the entry of more operators would make the market more competitive and viewers would enjoy more services at a reasonable cost.
Few believed that Viettel could put up a good fight against VNPT, the largest player in the telecom industry, but it did so by applying a low-fee strategy. This helped Viettel develop strongly, with turnover and pre-tax profit of $2 billion and $1.2 billion, respectively, last year. It seems to have kept the low-fee strategy to conquer the Pay TV market, believing it would earn a profit based on high subscriber numbers instead of high fees per subscriber. With a licence to provide cable TV services granted in April 2013, Viettel targets customers in rural and remote areas where only a small proportion of households have terrestrial digital services or IPTV and the majority still watch analogue TV.
Meanwhile, in cities and towns, local cable TV rivals are dominating subscriptions. Analysts said that Viettel targets customers in “unoccupied areas”, with a large fibre cable system stretching 200,000 kilometres and covering 95 per cent of the country. “Viettel provided cable TV services in just a short period of times thanks to the fibre cable network it possesses,” said Viettel’s General Director Nguyen Manh Hung. “It would take the others at least ten years to build such a network.” Its coverage nationwide is on average 350 metres from each house, and Viettel plans to reduce this to 100 metres by 2015. Moreover, it also owns 25,000 technical and sales staff to ensure that its services can reach out to the areas throughout the country.
The telecom operator has announced subscription fees of VND30,000-40,000 ($1.37-$1.83) for rural subscribers, which some believe is aimed at conquering the market and squeezing out rivals. “The members of our association have expressed concerns over Viettel’s competitive behaviour in offering fees much lower than the current average,” said Mr Le Dinh Cuong, Deputy Chairman and General Secretary of the Vietnam Pay Television Association (VNPayTV). “With such a price it can ‘dump’ services and create serious conflict among industry players.” Direct-to-Home provider AVG now charges VND33,000 ($1.51) per month for its cheapest package, while VTC Digital said it may launch a package costing VND30,000 ($1.37) per month to combat Viettel. Mr Hoang Lien Son, Director of VTC Digital, believes MIC should control fees, as it does with telecom services. “Competitors are willing to incur losses by selling equipment below cost price and pay high content fees in the scramble for subscribers,” said Mr Son. Such unhealthy competitive practices, he said, result in an an unfair market and will not benefit the development of the TV industry.
MIC may consider setting up a floor price for Pay TV services, and VNPayTV has requested it do so to ensure healthy competition. According to Mr Cuong, though no case of “dumping” can be proven so far it’s likely to occur in the future as the market grows rapidly and competition becomes tougher. Besides Viettel, FPT Telecom has also been licensed to provide cable TV services. General Director Nguyen Van Khoa said that prices will not be the only factor in attracting customers. “What customers need is to be satisfied with what they pay for, and this is all about quality,” he said. There are 170 TV channels of all kinds available in Vietnam but in the view of industry insiders the number fails to meet market demand. Over 70 per cent of Pay TV programmes are imported from foreign countries and a large proportion of local channels use blocks of foreign content. Some Pay TV channels add advertisements, despite the nature of Pay TV being to collect fees from subscribers and supply them with channels free of advertisements. Meanwhile, the signal quality of Pay TV channels remains quite poor, and is believed that only 15 per cent of all households use such services.
In Viettel’s estimation, 16.5 million local households nationwide not being connected to cable TV means the potential to attract subscribers in the future is huge. The company plans to sign up a million subscribers each year, reaching 5 million in the first five years with 35 per cent being in urban areas and 65 per cent in rural areas. It intends to design seven service packages for three groups of customers, from urban areas, major cities and those who have demand for high added-value services. “We will save 50 - 70 per cent of the costs required to expand into remote and rural areas,” said Mr Hung.
Industry insiders said that the challenge for Viettel and VNPT is that they are not allowed to produce content so must cooperate with TV stations. However, TV stations can produce programmes themselves and obviously “don’t want to share them,” Mr Cuong from VNPayTV said. “There has been no agreement between TV service providers and TV stations for many years,” he said. According to Viettel, it has asked MIC to lay down policies on cooperation between parties on sharing content to ensure mutual benefit and avoid any waste of resources. In response, Mr Pham Hong Hai, Director of the Vietnam Telecommunications Authority, said that the ministry is classifying the basic TV channels that must be broadcast by Pay TV providers. This means TV stations will have to share some of their content.