INTERVIEW: Ericsson Eyes Resilient Vietnamese Mobile Growth

STOCKHOLM -(Dow Jones)- Ericsson expects Vietnam's booming telecom market to remain resilient despite double digit inflation caused by rising food and energy prices, Eddie Ahman, Ericsson's Vietnam head, told Dow Jones Newswires in an interview Monday.

"In the past three years mobile penetration [in Vietnam] has gone from 5% to 35%," Ahman, President, Ericsson Vietnam, said. "I expect 40% penetration by the end of this year."

Sweden-based Ericsson is the largest telecom equipment supplier to Vietnam, a country with a population of 87 million. After 15 years of business in the country, it has about 50% of the mobile infrastructure market - the honeycomb of masts, or base stations used to send and receive call and data signals to customers.

Ahman pointed to Vietnam's strong first-half GDP growth, at 6.5% one of the fastest growing in the Asia-Pacific region, driven by strong manufacturing and large-scale foreign investment.

Still, inflation rose to 28.3% in August compared with a year earlier.

"Inflation may have slowed other infrastructure projects such as roads, but it hasn't and shouldn't affect the telecom industry," Ahman said.

Ahman said there are five main government-owned operators in the country, which the government is in the process of privatizing. Three of the operators use global system for mobile communication, or GSM, technology and the other two have up until now used code division multiple access, or CDMA.

GSM is the most widely adopted mobile technology globally, while CDMA is widely used in the U.S. and several other Asian countries.

Earlier Monday, Ericsson said it got a $450 million contract to move Hanoi Telecom from its CDMA network to a GSM-based system.

Under the contract, Ahman said Ericsson will install 60% of some 5,000 radio base stations, while Chinese rival Huawei Technologies Co. will install the remaining 40%.

"Pricing pressure is heating up," Ahman said. "All of the competitors ... are getting in here. It is getting fierce, maybe not like India or China, but it is going in that direction."

Ericsson also got a three-year managed services contract as part of the deal.

Behind Ericsson, Ahman said rival Alcatel Lucent has about 30% of Vietnam's telcom infrastructure market, Nokia Siemens Networks, the joint venture between Nokia and Siemens, has about 10%, and others such as Huawei and Motorola have the rest.

Ahman said equipment vendors are eager to tap into the market's growth potential. He expects the GSM market to grow to a penetration level of about 70% within a few years, with the country set to auction four third generation licenses next year.

Third-generation, or 3G, mobile service are loosely defined as offering high data speeds and greater voice capacity compared with 2G services. 3G enables operators to offer fast mobile Internet and other wireless multimedia applications to customers.

"The incumbent players are now upgrading their networks to be ready for the future move to 3G," Ahman said. "We are ready for it."

-By Adam Ewing, Dow Jones Newswires; +46 8 545 130 95; adam.ewing@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 1st September 2008