JACCAR EQUITY RESEARCH – VIETNAM

Transcription

JACCAR EQUITY RESEARCH – VIETNAM
Telecommunications
Analyst
NGUYEN Thi Thanh Hoa
81-85 Ham Nghi – District 1
Ho Chi Minh City
+84 8 39 14 90 60
htn@jaccar.net
DO NOT MIND MACRO, JUST PING
•
•
Next events
One Corporation
25/04/2009: Shareholder meeting
•
•
•
Achieved: April 22, 2009
Disclaimer : Please refer to important disclosures
at the end of this report
Telecommunications and ICT have been the fastest growing
industries over the last 5 years and have recently become the best
light sources in the gloomy macro picture in Vietnam. 2008 growth
rate of ICT was 20%, posts and telecommunications by 38%.
Slowly opening and removing legal barriers to the private sector, the
telecommunication market seemed to be customized for big stateowned players with significant benefits of license holding. In the
Internet business, 3 IXP/ISPs bite 95% market share, among them
VNPT occupies 75% of the playground.
Increasing
government
ICT
spending
and
passionate
telecommunication consumption in Vietnam secure the wealth of
leading operators.
The slowdown risk might help companies to transform and
restructure more strategically. We believe in an upside in 2009-2011
despite keep our concerns of constrained 2009 sales and profitability.
We adopt a recommendation of ACCUMULATE for ONE and BUY
for FPT with a target price of VND 14,800 and VND 71,000
respectively.
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TELECOMMUNICATIONS
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TELECOMMUNICATIONS
CONTENTS
DO NOT MIND MACRO, JUST PING .............................................................................. 1 INVESTMENT CASE ....................................................................................................... 5 A ROCKET RAMP ........................................................................................................... 7 Vietnam and Malaysia, the best ICT students for WB ................................................. 7 Double-digit growth is the unique rule ......................................................................... 8 The Vietnamese Internet Performance, a nice story with implicit ‘asymmetric’
access ............................................................................................................................. 9 Back to the past… ......................................................................................................................... 10 … to understand the current situation ........................................................................................... 11 THE LEGAL FRAMEWORK, A NEW CHINESE CASE? .............................................. 13 Regulation and policy making: a reforming follower to technology society and
liberalization ................................................................................................................. 14 Say ‘58’ ......................................................................................................................................... 16 The first conclusions after 10 years… .......................................................................................... 17 The show must go on .................................................................................................................... 18 …But keep protecting with the WTO commitment .................................................... 22 2009 rule will be a new step but in what direction? ...................................................................... 23 DAVID VS GOLIATH OR MICROSOFT’S GAME? ....................................................... 24 The infrastructure and technologies at a glance ...................................................... 25 Be connected ! .............................................................................................................................. 25 Access abilities, the international requests already applied ......................................................... 28 Don’t forget the ‘.vn’ ...................................................................................................................... 28 The service quality, a priority ........................................................................................................ 30 The ‘Pac Man’ game ..................................................................................................... 32 Short resumes ............................................................................................................................... 33 Who will be the winner? ................................................................................................................ 37 The digital content could be the next battle? ................................................................................ 43 COMPANY SHEETS...................................................................................................... 48 FPT Corporation............................................................................................................................ 48 One Corporation............................................................................................................................ 98 www.jaccar.net
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TELECOMMUNICATIONS
INVESTMENT CASE
Telecommunications is a
robust sector in Vietnam
Vietnam telecommunication has enjoyed a very nice performance in the last recent years. The
average growth rate of telecommunication revenue for last 3 years 2006-2008 is 37%, much
higher than the rate of Asean region of 10%. The chart below shows the sector scenario of
regional countries in 2008. The bubble size is size of the telecommunication revenue, vertical
axis shows the revenues of non-mobile sector (fixed lines and Internet) and horizontal axis stands
for number of Internet users.
Vietnam is the second
country for Internet
users in ASEAN
Among 10 countries of Asean, Laos, Myanmar and Cambodia have underperformance in
telecommunication sectors, their bubbles stays at the bottom corner of chart. Vietnam
telecommunication revenue stays number 6, higher than Brunei and 3 above countries. However,
Vietnam ranks the second in Internet users and has the balance between mobile and fixed services
revenue. The world trend in the telecommunication sector is that the mobile is booming and
surpasses fixed services.
Therefore, the Vietnam telecommunication sector still has a potential for booming in the next two
years. With a population of 85 mil people, the expected growth of the sector can reach more than
40% in 2009 – 2010.
Telecommunication revenues and Internet users in Asian Countries
3500
70.00
3000
60.00
Philippines
2500
50.00
Singapore
2000
40.00
1500
30.00
1000
20.00
500
10.00
0
‐10,000.0
‐5,000.0
0.0
5,000.0
10,000.0
15,000.0
‐500
20,000.0
25,000.0
30,000.0
35,000.0
40,000.0
0.00
Sources: BMI, Jaccar
Internet subscription
CARG was 60% for
2004-2008
Vietnam Internet subscription achieved a five year CAGR of 60% (2004-2008), the highest rate
of the region, penetration rate reached 25% in 2008. The fast growing strategy and strong
commitment of government in telecommunication has empowered that show.
Some reforms in legal
framework
Business environments and legal frameworks promise reform with new regulations and issuance
of telecommunication laws. However, the mechanism of regulation operation and conflict among
service providers, as well as dominance of key players and monopoly position of state-owned ISP
may not make impact effective.
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ISPs spur the investment
on international
bandwidth and fiber optic
network. Government
commits to invest VND
100trn in broadband
development
In order to prepare for welcoming the added value services and digital content, to fight for market
share and coverage before the wave of high profile global service providers, big ISPs spur the
investment on international bandwidth and fiber optic network. 3 key ISPs set the target of
doubling Internet broadband subscriber numbers by 2009. Recently, the Vietnamese government
has been investing heavily in developing broadband, announcing a commitment to inject VND
100trn (USD 6.3bn) in order to significantly raise penetration rates. Yet the big pie of those
investment amounts points to commercial broadband services such as 3G or Wimax.
Through VTF,
government finances the
universal service
obligations
In an effort to improve telecommunication access and realize investment, Ministry of Information
and Communication (MIC) established Vietnam telecommunication Fund (VTF) at 2007 end. In
2008, VTF has granted VND 1200 bn (USD 72mil) to VNPT, Viettel, EVN telecom and Vishipel
to develop fixed lines and Internet services in remote areas.
We forecast Internet
sales growth of 12% for
2008-2012
There was a fierce race in 2008 for subscription number among key ISPs. A series of promotions
for modem and subscription fees increased Internet subscriptions by 15% but forced Internet user
cost down by about 7%. The revenue of Internet rise 11%, but the profit margin of key ISP is
about 25-30%. In 2008, despite 20.8 million Vietnamese Internet users, broadband subscription
penetration was only 2%. Vietnamese government and enterprises are focusing on infrastructure
investment and improving penetration rate. Jaccar forecasts Internet revenue growth of 12% for
2008-2012, the average profit margin for 3 top service providers (VNPT, Viettel, FPT) is not
lower than 20%.
The price is going down
In 2009, the impact of the economy crisis and the continuing strategy increasing quantity to grasp
market share, the price will go down slightly, along with improved infrastructure and service
quality, the revenue will grow at 9%. The recovery in 2010 will attract more FDI, then the
demand will increase, the growth rate of 12%. In 2011 some reforms of telecommunication
policy will facilitate the market, with the joining of foreign content providers, the rate will reach
14%. However, at that time, the subscription number of 11 mil., penetration at 32%, equal to Asia
average rate, the increase will be more flat. There will be saturated Internet subscription in urban
areas, about 85-90%, the rural areas are not interested in content services except for simple tools
like browsing or emails, the growth rate in 2012-2014 is around 9%, and in 2015 only 7%.
In this report, we analyze the performance of two listed ICT companies, FPT Corporation on
Hochiminh Stock Exchange and One Corporation on Hanoi Securities Trading Center.
FPT Corporation (FPT) is the one of top 10 largest market cap companies and the no. 1 ICT
player in Vietnam with dominating power in its key ICT business lines. FPT has the strongest
presence in ICT infrastructure development projects and software industry with its very high
growth rate. It also builds up a powerful internal forces fueled by an elite management team and
highly IT qualified staff of 8,500. Believing in its high potential development and profitability,
our target price is VND 71,000 (USD 4.0) with a BUY recommendation.
So different from FPT, ONE is just penny stock, with low liquidity. Fortunately, ONE has its
own niche market in IT network business and poses the leading position in “fertile” Contact
Center business in Vietnam. With its small business scale, ONE can overcome the macro
economy headwind and keep its stable growth. We adopt an ACCUMULATE recommendation
with a target price of VND 14,800 (USD 0.9).
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TELECOMMUNICATIONS
A ROCKET RAMP
Vietnam witnesses a significant growth of its information and telecommunication industries, with
a strong development of the broadband Internet services and mobile phone networks in the years
2007 - 2008. Vietnam is now the second fastest country of telecommunication expansion.
Vietnam and Malaysia, the best ICT students for
WB
Vietnam ICT
performance has
improved year by year
According to the Information and Communication Technology Overview report released at the
Vietnam ICT Outlook 2008 seminar on July 15, 2008, almost all of the ICT indexes of Vietnam
have been increased (in World Bank's rates), reaching 3.0 and bringing the country into the
middle of the ranking list of global ICT communities. Vietnam’s Knowledge Index (KI) and
Knowledge Economy Index (KEI) are at 3.17 and 3.27 respectively, ranking 96 out of 140
countries ranked.
In particular, Vietnam’s E-Government ranking (E-Gov) issued by UNPAN (the United Nations
Public Administration Network) has advanced by 16 points in comparison to that of 2005,
showing that Vietnam has properly acknowledged the critical role of e-government (e-gov) in
social and economic development and is getting back on the right track.
Among the three indicators of e-gov ranking, Vietnam’s Web Measure Index scored 0.4448,
which is a 100% surge over the year 2005 and the highest increase compared with the other two
indicators: Telecommunications Infrastructure and Human Capital Indexes.
In 2008, UNPAN assessed the government websites primarily upon the content quality provided
rather than their quantity. Thanks for this new assessment approach, this index has closely
reflected the government technology implication, leaving all virtual or "non-used" websites
behind.
ASEAN ICT Index 2008 vs 2005
Countries
2008 Index
Singapore
Malaysia
Thailand
Philippines
Brunei Darussalam
Vietnam
Indonesia
Cambodia
Myanmar
Timor-Leste
Lao
Region
World
0.7009
0.6063
0.5031
0.5001
0.4667
0.4558
0.4107
0.2989
0.2922
0.2462
0.2383
0.429
0.4514
2005 Index
2008 Ranking
2005 Ranking
0.8503
0.5706
0.5518
0.5721
0.4475
0.384
0.3819
0.2969
0.2959
0.2512
0.2241
0.4388
0.4267
23
34
64
66
87
91
106
139
144
155
156
7
43
46
41
73
105
96
128
129
144
147
Source: World Bank
Ranking number 6 in
Asean ICT index
In Southeast Asia, Vietnam is ranked 6th, standing below Singapore, Malaysia, Thailand, the
Philippines and Brunei, but above Indonesia.
Another critical criterion for assessment is the Networked Readiness Index (NRI), and in 2008,
Vietnam also advanced 9 points, ranking 73 out of 127 countries. NRI is considered as a critical
indicator since it involves lots of development factors, such as business environments and
infrastructures, and the IT usage of businesses and governments.
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One of the ASEAN countries that joined the top-10 list of NRI is Singapore, ranking 5th out of
127 countries, higher than South Korea, which rank 9th. Indonesia ranks 76th, 3 points lower
than Vietnam.
Also according to this report of the World Bank, the copyright infringement rate of Vietnam in
2008 is 85%, showing a 3% decline since last year. So after 3 years since Vietnam listed as a
leading country of copyright infringement, it has striven for a 7% decrease and stepped out of the
top 9 countries of intellectual property rights violation.
Vietnamese ICT indicator ranking over 2006 – 2008
Ranking over
Ranking
no. of countries Compared
Index
Organization
ranked
with 2007
Knowledge Index (KI/KEI)
World Bank
World Economic
Forum
Networked Readiness Index (NRI)
E-Readiness Ranking
EIU
E-Government Ranking
UNPAN
Piracy Rate
BSA & IDC
2007
2006
96/140
3 up
90/132
104/132
73/127
65/70
91/182
10/108
9 up
Same
16 up
5 up
82/122
65/69
117/182
5/102
75/115
66/68
105/191
Jan-97
Sources: World Bank, EIU, UNPAN, ITU, IDC
Double-digit growth is the unique rule
Internet growth rate has
been more than 20%
The Internet converted subscribers in year 2007 has increased by 28%, and the estimated one for
2008 is 20%, showing a slight decline in comparison with previous years. The reason for that
slowdown may come from the unequal access and Internet infrastructure development among
urban and rural or remote areas. The ratio of Internet users per population is above 24%,
equivalent to more than 20 million people, and Vietnam still belongs to the top 20 countries of
highest Internet users.
95% market share is
dominated by 3 ISPs
VNPT keeps deepening the gap of Internet market shares from 55% to 76% with its projects in
promoting broadband growth and local telecommunication networking coverage. While FPT still
stays focused on a number of major cities, Viettel has overtaken FPT for the second position with
a market share of approx. 10%. These three enterprises account for approx. 95% market shares.
VDC/VNPT got more
than 60% international
bandwidth capacity,
others are waiting for
AAG
There is significantly increased volume of international connections, almost 200% by the end of
November 2008. During only September - December 2008, VDC/VNPT upgraded its bandwidth
around 3 times from 11 Gbps to 31.5Gbps for international connection services. VNPT continues
to dominate the market in terms of bandwidth market share and connection capacity (above
60%). The international connection capacity of Vietnam will be enhanced sharply in the near
future, especially in early 2009, with the $200-million Terabit Asia-America Gateway (AAG)
marine cable network landing in Vung Tau, and the collaboration of 4 Vietnam ISPs, namely
VNPT, Viettel, SPT, and FPT, with a variety of levels of involvement and contribution, might
upgrade their own bandwidths to 40Gbps or higher. The project is a bit delayed and is expected
to be completed by beginning of 2Q09 while the initial plan was the end of 2008.
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TELECOMMUNICATIONS
Internet Sector Trend
35,000,000
12000000
30,000,000
10000000
25,000,000
8000000
20,000,000
6000000
15,000,000
4000000
10,000,000
2000000
5,000,000
0
0
2008
2009e
2010e
Internet users
2011e
2012e
Broadband subscribers
Sources : ITU, MIC, BMI, Jaccar
We forecast the
penetration rate of
Internet of about 34% in
2012
Vietnam Internet is forecasted to boom by 2009 and keep the high growth rate till 2012. We
predict almost 10 mil Internet broadband subscribers by the end of 2012 (equivalent to 10%
penetration), total Internet users expected to reach a little over 32 mil, penetration rate at 34% of
people.
Vietnam Internet forecast
2008
Internet subscribers
6,050,000
Internet users
20,834,401
Penetration rate /Density of Internet users
24.04%
Total broadband subscribers
2,048,953
2009e
2010e
2011e
2012e
7,620,000
24,376,000
28.20%
3,442,000
8,890,000
27,179,000
30.90%
5,335,100
9,980,000
30,032,000
32.20%
7,680,000
11,190,000
32,650,000
34%
9,984,000
Sources: ITU, MIC, BMI, Jaccar
The Vietnamese Internet Performance, a nice
story with implicit ‘asymmetric’ access
Internet first entered Vietnam officially on November 19, 1997. After 10 years of development,
the Vietnam Internet background has reached certain level of success, and has become one of the
most effective tools in boosting economic and social growth. Vietnam is one of the leading
countries in terms of Internet users expansion in the period 2000-2008, reaching 9,561.5%, which
is 7.8 times higher than second ranked country.
The number of Vietnam
advanced to world level
in 2007
As of late 2007, the number of Vietnam Internet subscribers exceeded the Asian Internet
subscription milestone of 8.4%, and in March 2007, the figure advanced to the world level of
16.9%. From then on, Vietnam has been on the list of top 20 countries of Internet users, ranking
5th in ASEAN, preceded by Singapore, Malaysia, Brunei, and will possibly leave Thailand
behind by late 2008 with the estimated usage density of 25%, equivalent to a user population of
20 million people.
In a comparative view with other Asian countries, Vietnam has the sixth leading Internet user
population by 2007, preceded by China, Japan, India, Korea, and Indonesia.
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Vietnam is in top 20
leading Internet users in
the world
However, in considering Internet accessing time by minutes, Vietnam and other leading countries
and territories of Asia, such as Hong Kong, Korea, Singapore and Taiwan, are still at a lower
level, compared to the global average index.
Worldwide Internet usage growth
No
Countries
1
2
3
4
5
6
United States
China
Japan
India
Germany
Brazil
United
Kingdom
France
Korea. South
Italy
Russia
Canada
Turkey
Spain
Mexico
Indonesia
Vietnam
Argentina
Australia
Taiwan
7
8
9
10
11
12
13
14
15
16
17
18
19
20
TOP 20
Countries
Rest of the
World
Total World –
Users
Usage
Population
Growth
(2008e)
(2000 - 2008)
Internet
users
%
population
% users of
the world
218,302,574
210,000,000
94,000,000
60,000,000
54,932,543
50,000,000
71.90%
15.80%
73.80%
5.20%
66.70%
26.10%
15.50%
14.90%
6.70%
4.30%
3.90%
3.60%
303,824,646
1,330,044,605
127,288,419
1,147,995,898
82,369,548
191,908,598
128.90%
833.30%
99.70%
1100.00%
128.90%
900.00%
41,042,819
36,153,327
34,820,000
33,712,383
30,000,000
28,000,000
26,500,000
25,066,995
23,700,000
20,000,000
19,323,062
16,000,000
15,504,558
15,400,000
67.30%
58.10%
70.70%
58.00%
21.30%
84.30%
36.90%
61.90%
21.60%
8.40%
22.40%
39.30%
75.30%
67.20%
2.90%
2.60%
2.50%
2.40%
2.10%
2.00%
1.90%
1.80%
1.70%
1.40%
1.40%
1.10%
1.10%
1.10%
60,943,912
62,177,676
49,232,844
58,145,321
140,702,094
33,212,696
71,892,807
40,491,051
109,955,400
237,512,355
86,116,559
40,677,348
20,600,856
22,920,946
166.50%
325.30%
82.90%
155.40%
867.70%
120.50%
1225.00%
365.30%
773.80%
900.00%
9561.50%
540.00%
134.90%
146.00%
1,052,458,261
25.00%
74.80%
4,218,013,579
252.50%
355,266,659
14.50%
25.20%
2,458,106,709
468.90%
1,407,724,920
21.10%
100.00%
6,676,120,288
290.00%
Source: MiniwattsMarketing Group
Back to the past…
But Internet started a bit
later than other in the
region
Broadband Internet services (xDSL) first emerged in 2003 with less than 10,000 subscribers, but
remarkably reached 516,000 subscribers in 2006. The figure doubled in 2007, and is estimated to
reach a growth level of 60% in 2008. In October 2008, Vietnam Internet usage fulfilled its
objective for the year 2010 (as in QĐ TTG 32/2006) in terms of the ratio of broadband services
subscribed per total Internet subscribers, which is 30%, and the ADSL Internet services are
provided in 63 provinces and cities, which is failing to keep up with existing demand.
The Internet services development timeline
1993
1994
1997
1998
2000
2001
2002
2003
2007
2008
2009
VIETPAC Technology
Remote Printing Technology
Internet/VNN, IXP, ISP,ICP, NIX/VNN1260/1269
Basic IP-based services & Online services via IP
Next generation of IP-based services: Frame Relay, IP-VPN, WAP, Prepaid Internet
Major IP-based services, including data and voice services: VoIP, Datacenter services
Launching broadband services and expanding the network roaming services, prepaid VoIP,
ADSL, Wifi (test), Infogate
MPLS/VPN, NGN, ADSL++
Metro, Wimax (test)
NGN/MPLS+, mobile Wimax (test), FTTH, Video streaming services over Internet
3G, Wimax
Source: Jaccar
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… to understand the current situation
And has grown very fast
Since late 2003, all provinces and cities had completed the nation-wide school Internet program
for local high -schools, colleges and universities (according to VNPT & Ministry of Education &
Training). Since last September, Ministry of Education & Training has collaborated with Viettel
in a broadband (ADSL) Internet project for national education and training facilities (approx.
39,000 spots) is expected to be completed in mid of 2009. Since late 2005, Vietnam has
accomplished its goal of 100% land line telephone coverage and Internet access for all villages &
districts. However, almost Internet access in remote areas in 2005 was only dial-up via telephone
line with poor quality. It took time for people in rural areas to learn about computers or search for
information needed on the net. The cost of Internet access via telephone was still high in
comparison with living standards of rural people at that time.
Internet usage summary sheet (Vietnam)
Description
2003 2004
Growth Rate
Internet users
Growth Rate
Penetration rate /Density of Internet
users
Total International connection
bandwidth of Vietnam
Total international internet
connection
Growth Rate
Total domestic connection
bandwidth
In which, connection bandwidth
through VNIX (Mbps)
Total VNIX Network Traffic (Gbps)
Dot .vn domain name registered
Growth Rate
Vietnamese domain names
registered
Total allocated IPv4 address
Total allocated IPv6 address (/64
unit)
Total broadband subscribers
Growth Rate
2005
2006
2007
2008
2,906,422
4,059,392
5,218,987
6,050,000 (est.)
Jan-09
804,528
1,659,013
106.2%
75.2%
39.7%
28.6%
15.9%
3,098,007
6,345,049
10,710,980
14,683,783
18,551,409
20,834,401
20,894,705
104.8%
68.8%
37.1%
26.3%
12.3%
0.3%
7.69%
12.90%
17.67%
22.04%
24.04%
24.47%
3.80%
1,036
N/A
1,892
3,615
7,076
12,580
50,064
53,659
82.6%
91.1%
95.7%
77.8%
298.0%
7.2%
N/A
N/A
N/A
26,744
69,840
68,760
N/A
N/A
N/A
N/A
21,000
25,000
25,000
373
506,391
2,419,181
6,011,634
15,530,017
34,201,275
35,328,591
9,037
14,345
34,924
60,604
92,992
94,708
65.0%
58.7%
143.5%
73.5%
44.2%
1.8%
5,478
-
-
N/A
N/A
3,379
4,274
4,304
152,064
454,912
755,200
1,862,400
3,830,528
6,589,440
6,610,944
-
-
N/A
N/A
16,295,032,832
42,065,754,112
42,065,754,112
9,180
52,705
210,024
516,569
1,294,111
2,048,953
2,095,666
474.1%
298.5%
146.0%
150.5%
58.3%
2.3%
Sources: VNNIC, MIC
High density in the
biggest cities
With these facts and figures, we can think about the positive outlook of Internet usage in
Vietnam. However, to improve availability of Internet access, especially the broadband services,
appropriate, sustainable investments on networking and infrastructure development are still
needed. There're unbalancing challenges in regional services and infrastructures allocation, which
is deepening the existing digital gaps. A majority of the population is scattered across the rural, or
small and medium urban areas. The four major cities of Vietnam, which are occupied by only
14% of the total population, account for 29% of fixed telecommunication subscription, and have
an extremely high teledensity, compared with the average ratio of 25%: Ho Chi Minh City:
104%, Ha Noi: 141%, Da Nang: 106%, Hai Phong 86% (figures by MIC, 2007)
There was a digital divide
However, as happened with Internet development, the expansion speed of broadband services has
somehow declined, despite fierce race among ADSL service providers in 2008. As the
governmental controller, MIC states to concentrate on broadband development, to establish
policies to decrease the service costs, increase number of Internet broadband users and form a fair
mechanism and playground for service providers. Growth rate of broadband subscribers in 2007
was 150%, in 2008 is expected around 55%. The ratio of broadband subscribers per population at
2% is still lower than expected, in comparison with the Asian average. The broadband gap still
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TELECOMMUNICATIONS
exists between rural and urban areas. There are about 65% broadband subscribers in Hanoi and
Ho Chi Minh City, while the other 35% is scattered in 61 cities and provinces.
In a short time, the gap may be even deeper.
Geographical distribution of Vietnamese households 2007
HCMC
Hanoi Danang HaiPhong
Geographical Distribution (million)
Geographical Distribution (%)
Landline Distribution
Landline Subscription (million)
1.5
7%
14%
1.6
0.8
4%
10%
1.1
0.2
1%
2%
0.2
0.4
2%
3%
0.4
Others Total
17.8
86%
71%
8.1
20.8
11.5
Source: MIC
Geographical distribution of broadband subscriptions
HCMC
Hanoi Danang
Geographical Distribution (thousand)
Geographical Distribution (%)
Penetration rate
411
34%
27%
284
23%
35%
33
3%
17%
HaiPhong
36
3%
8%
Others Total
456
37%
3%
1220
6%
Source: MIC
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TELECOMMUNICATIONS
THE LEGAL FRAMEWORK, A NEW CHINESE
CASE?
MIC is the ruler
The Ministry of Information and Communications (MIC) is the policy making and regulatory
body in the field of post, telecommunications and Internet on behalf of the government. The
functions, tasks, authority and structure of the MIC is clearly defined in Decree No.
187/2007/NĐ-CP dated 25 December 2007. According to this decree, MIC has both rights of
jurisdiction and legislation, which fall into 4 primary functions:
•
•
•
•
Developing and drafting laws, resolutions, ordinances, and policies for submission to the
Government;
Developing strategies, plans, initiatives and implementation programs for submission to
the Prime Minister;
Issuing directives, decisions, circulars within its authority and power:
Providing directives, guidance, evaluation, and supports in implementing relevant
documentations, issuing technical criteria, licensing telecommunication services, radio
and television frequency spectrum.
Details on functions and jurisdiction of MIC in the national communication, information
infrastructures, Internet and telecommunications business is presented in the following box.
* Telecommunications and Internet:
a) Guiding and implementing national development plans and strategies in telecommunications and internet fields; developing and
implementing important policies to secure the growth of telecommunications and Internet infrastructures; governing specific terms
and conditions of investment in telecommunications; regulating telecom services activities in wholesale and retail markets; governing
public telecommunication services approved by the Prime Minister;
b) Regulating, within its power, the Internet resources and numbering planning; the codes of telecommunications prices and tariffs;
decision of granting and revoking numbering and Internet resources;
c) Granting, extending, temporarily suspending, suspending and revoking telecommunications licenses;
d) Governing Internet and numbering resources;
đ) Regulating telecommunications and Internet services’ quality, price, tariff;
e) Regulating and governing the connecting of telecommunication networks;
g) Regulating and managing competition issues, and resolving disputes in fields of telecommunications and Internet;
h) Regulating and managing the issuance of technological compliance certificates of dedicated devices of telecommunications and
telecommunication projects;
i) Governing the public telecommunication services providing;
k) Operating, deploying and securing the safe operation of nation domain name server systems.
* National information and communications infrastructures:
a) Assigning, organizing and providing guidance on regulations in safety, security of national information and communications
infrastructures approved the Prime Minister;
b) Issue solutions to secure the safety and security of information and communications infrastructures in converging environment;
mechanisms and policies related to usage of information and communications infrastructures.
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Regulation and policy making: a reforming
follower to technology society and liberalization
Slowly removing legal
barriers
Two of the most important legal documents on ICT fields is the Ordinance on Posts and
Telecommunications, which was approved by 25 May 2002, and the Law on Information
Technology, which was passed on 29 June 2006. The Law on Telecommunications, which is also
at final stages of review, will be submitted to National Assembly for approval by 2009.
For under-law documentation, a rising number of Viet Nam's decrees and directives on ICT
development has proven the government's efforts and commitments to build up an appropriate IT
development pathway for Viet Nam.
General ordinance
Document name
Date of
issuance
Description
Ordinance on Posts and
Telecommunications No.
13/2002/PL-UBTVQH10
25/5/2002
Governing the Posts and Telecommunication Industries
Document name
Date of
issuance
Description
Decision No. 158/2001/QĐ-TTg
18/10/2001
Joint Circular No.
02/2004/TTLT-BCVT-NV
27/05/2004
Directive No. 06/2004/CTBBCVT
Decision No. 33/2004/QĐBBCVT
7/5/2004
Approving the national strategy on posts and telematics of Viet Nam
up to 2010 and development orientation up to 2020
Guiding the functions, tasks, powers and organizational structures of
the Departments of posts and telematics of people's committees of the
provinces and Centrally-run cities
Intensifying the assurance of safety and security for Posts,
Telecommunications and Internet information in the new situations
On promulgating Industrial Standards
Source: Jaccar
General issues
29/07/2004
Source: Jaccar
Telecommunications
Document name
Date of
issuance
Description
Decree No.157/2004/NĐ-CP
18/08/2004
Decree No. 160/2004/NĐ-CP
3/9/2004
Specifying the implementation of a number of Articles in Ordinance
on Posts and Telecommunications, governing the
Telecommunications sector
Specifying the implementation of a number of Articles in Ordinance
on Posts and Telecommunications, governing the
Telecommunications sector
Source: Jaccar
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Internet
Document name
Date of
issuance
Description
Circular No. 04/2001/TT-TCBĐ
23/08/2001
20/11/2001
Circular No. 09/2003/TT-NHNN
5/8/2003
Decision No. 71/2004/QĐ-BCA
(A11)
26/05/2003
Directive No. 07/2004/CTBBCVT
Circular No. 05 /2004/TTBBCVT
19/07/2004
The management, provision and usage of Internet services
Guidance on implementation of Decree No.55/2001/NĐ-CP by the
Government on the management, provision and usage of Internet
services, Internet connections and Internet applications in posts and
telecommunications
Guidance on implementation of a number of Articles in Decree No.
55/2001/NĐ-CP issued on 23 August 2008 by the Government on the
management, provision and usage of Internet services
Promulgating Regulation on Internet resources management and
usage
On promulgating the regulation on ensuring safety and security in
activities of managing, providing and using Internet services in
Viet Nam
On enhancing the management of Public Internet agents
Decision No. 32/2006 QĐ-TTG
11/8/2005
(replacing Decree No.
55/2001/NĐ-CP)
28/8/2008
Circular No. 05/2008/TTBTTTT
12/11/2008
29/01/2004
16/12/2004
7/2/2006
Guidance on implementation of a number of Articles on the handling
administrative violations, complaints and denunciations referred to in
Chapter IV, Decree No. 55/2001/NĐ-CP by the Government on
management, provision and usage of the Internet services
Issuing the "Regulation on the management and usage of Internet
resources"
On the Planning on Vietnam’s Telecommunications and Internet
development up to 2010
On the management, provision and use of internet services and
electronic information on the Internet
Guidance on of a number of Articles of Decree No. 97/2008/NĐ-CP
issued on 28 August 2008 by the Government on management,
provision and usage of the Internet services and electronic
information over Internet for Internet services
Source: Jaccar
Pricing
Document name
Date of
issuance
Description
Decision No. số 217/2003/QĐ
TTg
(replacing Decision No.
217/2003/QĐ TTg)
26/8/2003
17/1/2006
Temporarily promulgating of the connection charges among
enterprises providing telecoms services
Amending a number of points of Decision No. 148/2003
27/10/2003
On management of posts and telecommunications services charges
26/4/2006
Promulgating the Regulation on interconnection between public
telecommunications networks
On management of posts and telecommunications services charges
Circular No. 02/2007/TT-BTTTT
21/3/2007
13-Dec-07
Guiding the implementation of regulations on management of post
and telecommunications service charges
Source: Jaccar
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Administrative punishments on Post / Telecommunications and Radio Frequencies
Document name
Date of
issuance
8/7/2004
Description
Regulations on administrative punishments on violations in posts,
telecommunications and radio frequencies
Source: Jaccar
Public services
Document name
Date of
issuance
Description
8/11/2004
On establishment, organization and operations of the Viet Nam
Telecommunications Public Service Fund
Source: Jaccar
Say ‘58’
“58”announced an
ambitious and clear
vision for ICT
development
The directive No. 58-CT/TW on “accelerating the use and development of information
technology for the cause of industrialization, modernization" of the Communist Party of Vietnam
in 2000 is a highlight in Vietnam public recognition of ICT development. It clearly states
"Information technology (IT) is one of the most important enabling forces for development" "that
creates deep changes in the social, economic and cultural life of the modern world". The
document points out the 3 principal objectives for Viet Nam towards 2010:
•
•
•
IT use will be increased in every sector;
The national information network will be developed to reach nationwide coverage; and
IT industry will become a spearhead economic sector, with a growth rate ahead of any
other sectors.
In the light of these, 5 initiatives were proposed, including:
•
•
•
•
•
Promoting IT practice and usage for an e-Vietnam (such as e-education, e-government, ebusiness, and e-commerce);
Promoting IT industrial development;
Developing Internet and telecommunication infrastructures;
Promoting human resources development for IT fields;
Creating favorable conditions for the use and development of IT.
With these 5 programs, 4 central strategic projects were set up, including:
•
•
•
•
Developing the infrastructures of an e-society;
Developing the infrastructures of an e-government;
Developing network connection infrastructures to enhance Internet accessibility;
Improving IT management performance.
Directive 58 specified 5 directive opinions, 5 action initiatives and major projects for interagencies and inter-department collaboration. Pursuant to the Directive, the Government set out
the primary goals for IT development and implementation. Strategy for Development of Viet
Nam’s Information Technology towards 2010 and orientations towards 2020 focuses on 4
sectors: IT Infrastructures; IT Industries; IT Implementation; and IT Human resources.
After 5 years implementing the strategy, in 2006, Vietnam reaffirmed the short-term initiative for
Internet and telecommunication development towards 2010 based on Decision No. 32/2006/QdTTg dated 2 February 2006, approving the “Planning of Internet and telecommunication
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development in Viet Nam towards 2010”. The Decision comprises 4 main sections: development
goals, specific criteria, directions, and resolutions.
A number of targets indicated in the Planning for expanding the Internet access coverage to a
national scale with enhanced quality and service availability by 2010:
•
An Internet subscriber rate of 8–12 per 100 (of which 30 per cent are broadband
subscribers);
• An Internet users rate of 25% - 35% population;
• Internet accessibility for a majority of workers, intellectuals, teachers, doctors, and
students of research institutes, universities, colleges and high-schools;
• Enforcing nation-wide Internet literacy to district levels. Ensuring public Internet access
point to 70% of villages and communes, and broadband Internet services to 100% of
districts and key economic zones;
• Ensuring government WAN broadband Internet connection and links for all government
bodies and agencies, down to the district level;
• Ensuring broadband Internet access points for all research institutes, universities,
colleges, vocational schools and high-schools; more than 90% of secondary schools and
hospitals having Internet connections.
List of Key Projects for Development of Telecommunication and Internet in 2006-2010
planned in pursuant to Decision 32/QD-TTg:
Key projects for Telecommunication and Internet between 2006-2010
Project
Investment
Development of Next Generation Network
(NGN)
Extension and increase of domestic
infrastructure (Switch operation system,
transmission, cabling…)
Improvement and new establishment of
national fiber optic and submarine cable
network
Universal provision of rural telephone
Universal provision of rural Internet access
Development of mobile sector and
infrastructure
Launching nation satellite
Projects of international submarine cables
Total
Finance source Progress
schedule
(bn VND)
15,000
Enterprises, society, international sources 2006 – 2010
30,000
Enterprises, society, international sources 2006 – 2010
5,000
Enterprises, international sources 2006 – 2010
10,000
2,000
30,000
Enterprises, Government (USO Fund), ODA 2006 – 2010
Enterprises, Government (USO Fund), ODA 2006 – 2010
Enterprises, society 2006 – 2010
3,500
5,000
100,500
Enterprises
2007
Enterprises 2006 – 2008
Source: Jaccar
The first conclusions after 10 years…
Discriminating players by
ISP vs. IXP licenses
In Internet development history, the promulgation of Decree 21/1997/ND-CP issued in March
1997, which created the temporary legal framework for Vietnam's Internet management and
application - became a premise for Internet service business to enter Viet Nam, with a reversed
guideline by the government: "Development within management capacity." In November 1997,
the only enterprise authorized to provide Internet eXchange Point (IXP) services is the Vietnam
Posts and Telecommunications Corporation (VNPT), along with four Internet service providers
("ISP"), including VNPT, the Corporation for Financing and Promoting Technologies (FPT),
Saigon Postel Corporation (SPT), and NetNam Corp. - Viet Nam Institute of Information
Technology (NETNAM), which had permission to offer Internet services to the market.
VNPT played as a
monopoly
With the growth of Internet, the legal frameworks and government recognition of Internet
management have been fundamentally improved. The Decree No. 21/1997/ND-CP no longer met
the increased needs of development. It was replaced by Decree 55/2002/ND-CP (dated 23
September 2001), which clarifies Internet management, provision and usage activities. And on 20
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November 2001, Circular No. 04/2001/TT-TCBD was issued by the General Department of Post
(now the Ministry of Post and Telematics), guiding the implementation of Decree No.
55/2001/ND-CP with the viewpoint of "Management within development capacity". It indicates a
change in management perception, from following the Internet usage expansion to advancing the
development trends of Internet activities and communities. The Decree has clearly defined all the
rights, responsibilities and obligations of any parties involved in Internet-related business in
Vietnam.
The mind opened in 2004
Then followed the Ordinance on Posts and Telecommunications (May 2002) and Decree No.
160/2004/ND-CP, specifying the implementation of a number of Articles in Ordinance on
Telecommunications (September 2004), that established a relatively open and stable legal
framework for Internet and telecommunication sectors. The documents focus on specifying all
services provided, those telecommunication enterprises and their relationships with the IT
infrastructure solution provider and service provider; defining principles of connecting and
sharing local infrastructures; affirming regulations on telecommunication registration and service
fee governance. These legal updates raised the interest of non-VNPT companies to join this force
of international connection and IT infrastructure business, opening new opportunities for other
private enterprises in 2005.
But the inter-charge of
services was another
barrier
Regulations and guidance on inter-company charges and telecommunication service charges are
specified in Decision No. 39/2007/QD-TTg and Circular No. 02/2007/TT-BTTTT. Regulations
on connection charging between telecommunications companies were specified in Decision
148/2003/QD-BBCVT dated 26 August 2003 by MIC, "temporarily promulgating charges for
connection between telecommunications", and its amendment is Decision No. 05/2006/QDBBCVT.
MIC has made some
efforts to solve
interconnection problems
Public telecommunications networks connection will be made upon agreed method by companies
involved and will be reported to MIC. However, during implementation, disputes concerning
connection quality might arise. In April 2006, Decision No. 12/2006/QD-BBCVT, which aimed
at securing the quality of telecommunication networks in terms of connection, transferred volume
and duration was issued by MIC. With this framework, enterprises are required to sign economic
contracts on provision of capacity for interconnection, which are:1/ Telecommunications
enterprises will plan, develop and implement their telecommunication networks, ensuring
adequate spare capacity for interconnection with public telecommunications networks in
accordance with the general planning on development of telecommunications networks and
services and interconnection agreements signed between enterprises; 2/ On the basis of
interconnection agreements signed between telecommunications enterprises and registered with
the Ministry of Post and Telematics according to regulations, annually, enterprises will negotiate
and sign contracts on provision of capacity for interconnection between public
telecommunications networks in the subsequent year. The provision contracts must be signed
before May 31 every year; 3/ When interconnection agreements of public telecommunications
networks come into effect, telecommunications enterprises shall have to ensure the
interconnection capacity as agreed upon in Interconnection Capacity Provision Contracts, and to
ensure non-discrimination between internal interconnection and inter-network interconnection.
Since the birth of this Decision, there was a decline in connection-related filed cases among
enterprises. 7 IXPs, along a dozen of ISPs and OSP, which were granted business licenses,
removed the business monopoly of VNPT, resulting in a better environment of fair and equal
competition.
The show must go on
Decree 97/2008 was the
hope for private entities
Vietnam became an official member of WTO in late 2006. In order to ensure the prompt
provision of Internet services, especially bandwidth ones, to create and develop a better business
environment for this sector, and to simplify administrative procedures in further compliance with
international and WTO's norms, Decree No. 97/2008/ND-CP on the management, provision, use
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of Internet services, and electronic information on the Internet was issued by the Government on
28 August 2008.
The Decree has 6 chapters, with 26 articles in all, specifying detailed governance policies on
Internet development; parties involved in supplying, using Internet services and electronic
information over the Internet; regulations on Internet services using and providing; promulgating
any usage, supply and management practices of electronic information over the Internet.
Inspection and violation handling procedures:
Articles involving Internet management and development policies are as follow:
•
•
•
•
•
•
•
•
1.To encourage Internet use across economic, cultural and social spectrum for
productivity improvement; expansion of commercial activities; supports for
administrative reform, increase of social utilities, enhancement of living standards, and
national security and defense;
To promote Internet development in the Party’s and the State's agencies, schools,
hospitals, R&D facilities, and to raise availability of Internet access in rural, remote,
border and island areas;
To offer more favorable conditions for organizations and individuals providing or using
Internet services, and at the same time step up Internet law propaganda, education and
guidance. To take measures to stop acts of taking advantage of the Internet to affect
national security, breach ethics and fine customs, violate laws, and protect children from
negative impacts of the Internet;
To develop the Internet with adequate high-quality services and reasonable charges in
order to meet the requirements of national industrialization and modernization;
To encourage the posting of information in Vietnamese on the Internet;
The national domain name "vn'', Internet addresses and autonomous system numbers
managed by Vietnam constitute a national information resource. They should be
effectively managed, exploited and used for proper purposes. To encourage and facilitate
the wide use of the national domain name ''vn'' and the generation of Internet addresses
Ipv6;
Confidentiality of private information of organizations and individuals on the Internet is
secured under the Constitution and laws. The control of information on the Internet must
be conducted by competent state agencies in accordance with law;
Internet Vietnam constitutes an important component of the national information
infrastructure, which is protected by law and inviolable. To ensure safety and security for
equipment systems and electronic information on the Internet is the responsibility of state
agencies and every organization and individual.
Regarding the State management, Ministry of Information and Communication shall take
responsibility for performing the state management of the Internet, including:
•
•
•
•
Formulating mechanisms, policies, strategies and planning for Internet development;
Submitting to the Government for promulgation or promulgating according to its
competence, and guiding the implementation of, legal documents on licensing of service
provision; connection; technical standards and specifications; quality, charge rates,
Internet resources; information safety, licensing of electronic newspapers and publication
on the Internet, and regulations on management of electronic information on the Internet;
Assuming the prime responsibility for and coordinating with concerned ministries and
branches and People's Committees of provinces and centrally run cities in managing and
enforcing laws concerning the provision and use of Internet services; establishing,
providing and using electronic information on the Internet, including licensing,
registration, reporting statistic, inspection, examination, handling of violation, settlement
of complaints and denunciations according to its competence;
Participating in international cooperation related to the Internet.
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The decree also has provisions on prohibited acts:
•
•
•
•
Abusing the Internet for the purposes of opposing the State of the Socialist Republic of
Vietnam;
Disrupting, destroying equipment systems and illegally obstructing the management,
provision and use of Internet services and electronic information on the Internet;
Stealing and illegally using the passwords, key words and private information of
organizations and individuals over the Internet;
Developing and installing computer virus programs and malicious software in order to
commit any of acts specified in Article 71 of the Law on Information Technology.
For electronic information and Internet services providers and users, the Decree affirms the rights
and scopes of business for Internet service providers; Private Internet owners; Internet agents;
Network infrastructure providers; Online social service providers and Internet service users...
The Decree also has specific provisions on management, provision and use of Internet services;
Management, provision and use of electronic information on the Internet. This chapter clarifies
provisions on licensing and distribution of electronic newspapers, publication on the Internet,
licensing of general websites...
The Decree also has provisions on Inspecting, examining and handling administrative violations
of any organization or individual committing or attempting to commit such violations.
There are 4 circulars guiding implementation of Decree 97. Circular No. 05/2008/TT-BTTTT on
the management, provision and usage of Internet services was issued in November 2008. The
other 3 circulars include: Circular on management and usage of Internet resources; Circular on
handling disputes regarding domain names, and Circular on guiding the implementation of
Decree on electronic information management over the Internet, which is expected to issued by
1Q09.
Why a new decree?
It seems a bit late for
small ISPs without
backbone
Decree No. 97 was issued in replacement of the controversial Decree No. 55, which has been left
far behind Internet development speed and increased demands of the telecommunication market.
Decree No. 97 has a number of updates:
•
•
•
First: from now on, the Internet services and information shall be under governance of
one single government department - Ministry of Information and Communications
(MIC);
Secondly, although Decree No. 97 does not mention IXP and OSP, it still has clear
definitions of "network infrastructure providers", to whom a "License for
telecommunication services and network establishment" is granted, and of "social
networking service providers" and "general web portal development". Therefore, the
ISPs who had IXP licenses already shall have no much legal advantages to pure
registered ISPs. All ISPs can legally connect to any Internet eXchanges (IX), such as
VNIX. In reality, in the last two years, it's the framework with years of implementation
and expenditures for infrastructure development, along with increasing network
integration charges and decreasing user service charges, that leaves new registered ISP
with no much business opportunities in this market;
The third innovative point is implied in the concepts of "local loop" and "local loop
unbundling". These notions came with provisions on equality and non-discrimination in
providing telecommunications transmission lines, which are defined as legal obligations
of a network infrastructure provider. For example, VNPT has to perform adequate local
loop unbundling so that Viettel or FPT may be able to provide ADSL Internet service
using VNPT land lines. However, this example also proves the feasibility flaw of the
Decree, since such well-established enterprises as VNPT can provide ADSL Internet
services themselves;
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•
As for the forth point, Decree includes the definition of "online social service providers",
and regulations on "management of electronic information sites" (social networks and
blogs are subject to supervision).
Open the door…
Regulation to bind
leaders
So, in recent years, in order to meet development needs of the market, MIC has offered more
open and smooth legislative reform initiatives. Setting tariff of services has been moved from
relevant authorities – MIC - to IXP & ISP themselves. Government interference is limited in
overall pricing framework and determining the service charges of dominant enterprises. This
aims at improving competitiveness among businesses in terms of utilities charges for service
users, protecting newly emerged companies, and assuring an anti-dumping mechanism for the
sake of the market. MIC will periodically (normally by the end of each year) issue its list of
services and service providers of dominant market shares and its forms of service charges control,
that list will be valid from the date of issuance till the next paper. (See the latest list below,
attached to Decision no. 1622 /QĐ-BTTTT dated 29/10/2008 by MIC).
List of services and service providers of dominant market share and its forms of service
charges control (October 2008)
List of services
Enterprises or a group of
Forms of tariff control
enterprises dominating
telecommunication market
shares
Fixed international telephone
Fixed local & long distance
International leased lines
Domestic leased lines
Mobile services
Local mobile services
Internet leased line & ADSL
VNPT
VNPT
VNPT, Viettel, EVN Telecom
VNPT, Viettel,
EVN Telecom
Viettel, Mobiphone, Vinaphone.
EVN Telecom
VNPT, FPT, Viettel
Reporting tariffs to MIC
Registering tariffs to MIC
SIM price: Reporting tariffs to MIC
Initial connection charges: Reporting
tariffs to MIC
Subs. fees: Registering tariffs to MIC
Added value fees: Registering tariffs to
MIC
Source: Jaccar
Note: Being dominator if one enterprise takes more than 30% market shares, dominant group of two if they are totally taking more than 50% and group if taking more than 65%
market shares.
…and public quality
control
Along with the new hierarchy of service charging and management, professional assessment and
inspection practices have been greatly improved. At the moment, the online reporting systems are
developed with Internet utilization within each enterprise, bringing the full picture of Vietnam
Internet development as well as that of each Internet-related business. Post-inspection procedures
became more important. Posts and Telematics Quality Control Directorate (PTQC) under MIC is
responsible for telecommunication quality controls, and performing annual or quarterly
randomized inspection activities and publishing assessment results for Internet businesses.
Implement separation on Internet and telecommunication laws enforcement at different levels of
governance, from IT and telecommunications State's departments to provincial agencies, has
helped increase the government supervision capacity of the local authorities as well as Internet
accessibility for the people.
In general, Vietnam has had positive Internet management mechanism and policies towards
global integration. International development experiences and conventions had been well adapted
into the Vietnam-specific scenario, including: licensing procedures, service charge control,
technical infrastructure management (technical quality), and Internet resources management.
Thanks to all of these efforts, the legal framework is significantly improved, promoting a more
stabilized and better environment for Vietnam Internet growth.
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…But keep protecting with the WTO commitment
Regarding the WTO commitments in Telecommunication fields, in comparison with BTA
(Bilateral Trade Agreement) with the US, Vietnam adapted a more open attitude for its
development. The concerned parties fall into two categories: the non-facilities-based and
facilities-based services providers.
Foreigners will be able to
hold 49% of legal capital
of the facilities-based
services joint ventures
•
… and 51% in nonfacilities-based service
businesses
•
Facilities-based services providers (service providers do own transmission capacity and
frequency bands): Vietnam offered no further concession to what has been agreed in the
US-Vietnam Bilateral Trade Agreement. In basic telecommunication services (such as
mobile and landline telephone services, data transmission services, private leased circuit
services, etc.), joint venture with telecommunications service providers duly licensed in
Vietnam are allowed, of which foreign capital contribution is limited to 49% of legal
capital of the joint ventures;
Non facilities-based service providers (who do not own transmission capacity but
contract for such capacity from a facilities-based provider): in the first three years after
WTO accession, joint ventures with telecommunications service suppliers duly licensed
in Vietnam will be allowed with a foreign capital contribution limited to 51% of legal
capital of the joint ventures. After this three-year period, the joint venture will be allowed
without limitation on choice of partner, and foreign capital contribution will not exceed
65%.
As for Virtual Private Network (VPN) and telecommunication value-added services (such as
electronic mail, Internet services, etc.) that major telecommunication enterprises are interested in,
joint ventures will be allowed without limitation on choice of partner, with foreign capital
contribution limited to 70% of legal capital of the joint ventures:
•
BCC is promised to
transform to another
favorable business form
•
Cross-border telecommunication services providers (international telecommunication
services): For wired and mobile terrestrial services, Foreign Service providers shall
through commercial arrangements provide services with an entity established in Vietnam
and licensed to provide international telecommunication services for Vietnam-based
customer approaches. For satellite-based services, three after WTO accession, Vietnam
commits to expand its scope of clients, with a main focus on multinational companies
operating in Viet Nam, if qualified, who are licensed for direct use of international
satellite-based services from a foreign-base provider. Vietnam's commitments also
indicate that foreign service providers shall be allowed to control fully-owned submarine
cable bi-directional transmission capacity which terminate at a cable landing station in
Vietnam, and to provide such capacity to international facilities-based service providers
duly licensed in Vietnam (such as VNPT, VIETTEL, EVN Telecom). Four years after
accession, foreign service suppliers will be allowed to provide such capacity to
international VPN and IXP service providers duly licensed in Vietnam (such as FPT,
VNPT, VIETTEL, EVN Telecom);
Commitments in Business Cooperation Contract (BCC) conversion: In the
telecommunications sector, foreign investors who have BCC could renew current
arrangements or convert them into another form of establishment with terms and/or
conditions no less favorable than those they are currently eligible to.
So for facilities-based network services, Vietnam's commitments are still the same as that of
Vietnam's BTA, which is key factor for its national defense.
No enterprises will be licensed to be operator from now to 2010. This is a privilege granted to
existing in-country telecommunication service providers registered in Vietnam by the
Government. In 2010 and beyond, there will be further developments, depending on results of
negotiation.
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2009 rule will be a new step but in what direction?
A little opening in legal
framework 2009 toward
new Telecommunication
Law
MIC is moving towards a new Telecommunication Law, which is expected to be submitted to the
Assembly in 2009, on telecommunication market-oriented management in a global integration
scenario with government's regulatory role, aiming at a further improved legal system for
infrastructure convergence and information development
The innovative aspects of the drafted Law include:
•
•
•
•
•
•
•
Continuing to promote a competitive environment with more sectors involved, including
private ones. The draft removes State-ownership limitation in facilities-based
telecommunication service providers (formerly, telecommunication service providers
must be those whose State capital shares are dominant);
The Government has strict management policies on public utility telecommunication
service providing and universalizing through the initiatives of the Vietnam public utility
telecommunication service fund (VTF) and tender mechanism among parties involved in
public service supply bidding;
Transparent, market-oriented mechanism of resources management: using public sales
and qualification procedures to select competent contractors with most effective business
approaches, reducing resources wastes;
Service fees and charges must comply with regional standards (formerly not applied in
Vietnam);
No limitation in licensing of telecommunication service supply, allowing all sectors to
involve telecommunication infrastructure development. Open and transparent provisions
on licensing of telecommunication service supply, if the resources are available;
Promoting a shift from pre-auditing to post-auditing procedures, with special attention to
service fees and quality;
Enhancing management control in corporate competition and usage of shared facilities.
Vietnam has recognized the implications of an effective and substantial development of
telecommunication infrastructures. From a legacy of loose facilities management framework, all
businesses involved in the telecommunication industry will now be able to sit down together for a
more collaborative agreement on their own facilities development or their leased ones (except for
a number of core systems and equipments required for sharing). MIC aims at separation of
enterprise types, who are licensed and encouraged to develop telecommunication facilities
constructions, for better commercialization of the field and more opportunities and development
in shared facilities and station place among the business community.
MIC is also to finalize regulations on service retailing, which is expected to come into effect in
early 2009. The drafted law defines three types of service allowed for retailing, including landline
telephone, Internet and mobile telephone. Enterprises of any economic sector are allowed to
purchase landline telephone, Internet and mobile telephone services from telecommunication
enterprises for selling to their end-clients. In mobile telephone services, only companies licensed
to provide telecommunication services (mobile virtual network operator - MVNO) are allowed to
purchase mobile telephone services from mobile facilities-based enterprises for retailing to their
end-clients.
Regarding the management framework, MIC is considering to a separation in policy making and
enforcement divisions, and plans to establish a Telecommunication management agency, which is
under governance of MIC.
The main direction for Vietnam telecommunication policy is to promote a free and open market
for this field.
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TELECOMMUNICATIONS
DAVID VS GOLIATH OR MICROSOFT’S GAME?
Increasing number of
players, but not good
taste for all
There are 8 IXPs, 18 ISPs, and 23 OSPs licensed for business so far. It's distinguishing the 3
types of providers mentioned above that leads to the dependencies of OSP- and ISP-specific
licensed providers to IXPs, and a number of ISPs with licenses still could not develop their
service business effectively: infrastructure facilities development required high capital
expenditure; IXPs are operating as a monopolist group, with infrastructure leasing and
international connection charges remaining high, whereas Internet service subscription has
substantially declined. Therefore, it's the key players with solid infrastructure facilities and strong
financial resources that keep controlling the market.
List of IXPs, IPSs and OSPs
Companies’ Names
EVN
Hanoi Telecom
SaigonPostel
FPT
VNPT
Viettel
VTC
QTNet
NetNam
OCI
VNGT/NGT
Vishipel
Thanh Tam JSC.
Hop Thanh JSC
SCTV
Dat Thinh
VTC Telecom
VIP
CMC Telecom
Kasati
Chau Phong
NEO
Nam Cuu Long
Southern Telecommunication JSC.
Thuan Thao
Tien Ve JSC
IncomNet
Nhan Hoa Software Development Ltd.
Tien Thinh Trading and Construction Ltd.
Matbao Trading and Service Ltd.
GNET Co.
IXP
ISP
OSP
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Source: MIC, 2008
Internet market share of ISPs
VNPT
FPT
Viettel
EVN
SPT
Netnam
OCI
TieNet
HTC
2003
2004
2005
2006
2007
2008 01/09 02/09
65.25
21.44
1.32
48.31
27.01
8.76
4.87
5.49
1.46
6.91
7.2
1.56
0.13
0.22
44.15
26.12
17.45
0.47
5.7
4.59
1.05
0.3
0.14
47.04
19.62
16.22
10.06
4.2
1.99
0.66
0.11
0.06
54.78
16.55
15.81
4.77
3.68
1.52
2.84
0.01
0
75.78
8.39
10.05
1.27
2.99
1.12
0.29
0
0
76.62
8.34
10.26
1.29
1.98
1.13
0.27
0
0.01
Sources: VNIX, MIC
As Internet needs boosting up, other broadband Internet and value-added services are expected to
develop, as well as Vietnam preparation works for international competitive environment such as
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24
TELECOMMUNICATIONS
the country entering the gate of WTO, and Vietnam Internet service providers heading to a battle
of market shares and positioning.
The infrastructure and technologies at a glance
Technology has caught
up to the world level
The infrastructure facilities mentioned in this section are the overall telecommunication
infrastructure facilities of Vietnam, including the Vietnam telecommunication transmission
systems and coverage. In reality, Internet service transmission to remote areas of Vietnam still
relied heavily on telephone cables, GSM or CMDA mobile telephone network or satellite signals.
Infrastructure expands
quite fast
Vietnam Internet infrastructure just started back then in 1996 with a small-scale system of
equipments, and was given a data center project by a VNPT partner. With its first 64kbps
connection, about 300 first users had access to the Internet world, presenting a new world of
Internet to the State leaders and thus began a long run for open policies of Internet access. Now
after 10 years of development, Vietnam Internet infrastructure facilities are considered as good as
most state-of-the-art environments in other developed countries, satisfying almost every
development demand of society. This is further assured by the large high priority investments in
the fields of telecommunication and Internet. The Internet infrastructure facilities could be
classified into 2 parts: IXP connection (backbone network infrastructure) and ISP connection
(service infrastructure) going on from 1996 until September 2008.
Teledensity was 82/100
inhabitants in 2008
One demonstration of the Vietnam infrastructure facilities development is that basic
telecommunication services are available to all urban and provincial areas, 100% of communes
having accessibility to telephone services, the surge of telephone subscription ratio, the highest
average ratio of landline telephone subscription, which is above 40% (according to ITU sources
of 2000-2007), three times higher than the Asian average ratio and 8 times higher the global one.
Within the period 2004 - 2007, the number of landline telephone subscriptions increased by 18%
annually, and mobile telephone subscription grew at the significant speed of 100%. By the end of
2008, the total number of telephone and mobile subscriptions had reached 79.1 million, with a
teledensity of approx. 82 unit/100 resident (Source: MIC).
A national satellite
launched
The world is witnessing an undeniable trend of technologies convergence: the industrial
convergence of IT, telecommunication and electronics, within the telecommunication field is the
convergence of Internet, digital contents and mobile information. In this trend, there are
possibilities of unlimited expansion of Internet infrastructure facilities, thanks to the supportive
wired and wireless infrastructures, along with VINASAT system and robust development of
mobile telecommunication technologies. The most expected event of Vietnam telecommunication
industry in 2009 is the licensing of 3G network implementation for mobile content providers,
which will be settled down in the 2nd quarter of 2009 by MIC (Documentation of the license
contest was released on November 5, 2008 for 7 existing mobile network operators). Then it
brings very first initiatives and opportunities for Wimax development. This provides a chance to
improve and enhance the broadband infrastructure facilities to meet the increased demands of
multi-services industry, aiming at national technology landscape of e-commerce, e-government
and inter-department digitalized connection capacities. And along with the media content
industry, 3G technology brings a variety of value-added services.
Be connected !
International backbone is
under IXPs’ control
As mentioned before, there are 7 Internet eXchange Point (IXP) service providers that came into
business since the issuance of Decree No. 55/2001/ND-CP. 5 out of 7 IXPs are active players in
the market. Each IXP has its own multi-dimensional routing for international Internet connection,
securing required bandwidth as well as using in case of contingency.
In fact, a number of incidents occurred, such as the broken marine optical cables or landline
cables that led to FPT service interruption, the declined services quality from other network
operators, or the connection contractual disputes among the IXPs, which resulted in the
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25
TELECOMMUNICATIONS
establishment of Vietnam National Internet eXchange (VNIX) by the Ministry of Posts and
Telecommunications. Yet the major issues have been settled, and international connection is now
considered qualified for operation.
With 3 telecommunication gateways in Ha Noi, Ho Chi Minh City and Da Nang, Vietnam has
established Internet connections with 10 countries (United States, Japan, Hong-Kong, South
Korea, China, Taiwan, Philippines and Thailand) with adequate bandwidth and contingency
capacity. The connection typologies include the submarine cable systems, cross border land line
connections, satellite links or regional ring connections for Viet Nam, Cambodia - Laos,
Thailand, Singapore and Hong-Kong.
International bandwidth
capacity is increasing
very fast to meet the
demand
There is a surge in international connection bandwidth capacity, from 1Gbps (2003) to 18 Gbps
(May 2008) and 33 Gbps (October 2008), 36.7Gbps (November 2008). By the end of 2008, when
VDC (Vietnam Data Communications) completed their own capacity enhancement plan of 32
Gbps, the total international bandwidth of Vietnam will reach 45 Gbps, and in 2Q09, with the
completion of the Asia-America Gateway (AAG) submarine cable (joined VNPT, Viettel, Saigon
Postel Corporation (SPT), FPT and other 14 international parties) and Intra Asia submarine cable,
it will reach approx. 200 Gbps. Therefore, it's almost impossible for any bottleneck incidents to
be caused by bandwidth shortage at the moment. In addition, with the latest servers and routers of
high performance, the increased demands of bandwidth in the near future will be met.
In addition, with the establishment of National Internet eXchange (VNIX), a large volume of
traffic among the in-country network service providers has been shared, significantly reducing
bandwidth occupied for international connection, and resulting in better national Internet
connection quality. Thanks to VNIX, online services, such as video, games, e-news, etc., have
gone beyond the limitation of single source of supply, reaching the end-users of other national
service providers. The ISP market shares is vary, since most of ISPs are enterprises of different
potentiality, performance and business strategies, contributing to a variety of network typologies
and trends. There are 3 forms of Internet physical connections: 1/ direct connection to ISP
network using land lines,2/indirect connection through Public Switched Telephone Network
(PSTN), and 3/wireless connection via satellite or microwave.
Capacity and direction of Vietnam connections
ISP/IXP
Direction
Capacity
(Mbps)
Total Capacity
(Mbps)
SPT
HTC
EVN
VIETTEL
FPT
VNPT
International Connections
NTT-HONGKONG
PCCW-HONGKONG
HUTCHINSON-HONGKONG
PCCW-HONGKONG
DTAG-THUONGHAI
HGC-HONGKONG
TELEGLOBE-HONGKONG
HGC-HONGKONG
GOOGLE-HONGKONG
CT-THUONGHAI
CHINATELECOM
PCCW
T-SYSTEM
CHINATELECOM
GOOGLE
NTT
SINGTEL
GOOGLE
CHINANET
GOOGLE-HONGKONG
TELIASONERA-HK
NTT-HONGKONG
T-SYSTEM
YAHOO-HONGKONG
PCCW-HONGKONG
SINGTEL (SINGAPORE)
KOREATEL (KOREA)
CHINANET (CHINA)
NTT (JAPAN)
PCCW-HONGKONG
www.jaccar.net
200.0
1000.0
2.0
45.0
155.0
45.0
155.0
45.0
155.0
155.0
620.0
620.0
775.0
620.0
155.0
1550.0
155.0
155.0
5000.0
310.0
622.0
1244.0
622.0
155.0
4354.0
1860.0
155.0
4360.0
620.0
620.0
1200.0
47.0
710.0
4650.0
12307.0
31015.0
26
TELECOMMUNICATIONS
VTC
SPT
NETNAM
EVN
FPT
NGT
HTC
OCI
QTSC
VIETTEL
VNPT
VTC
CMC
HUTCHINSON-HONGKONG
VNPT -G (HONGKONG)
CHINANET (USA)
T-SYSTEM (SINGAPORE)
HUTCHINSON-HONGKONG
HUTCHINSON-USA
Domestic Connections
VDC
VNIX
NGT
VNPT
EVN
HTC
NGT
VNIX
NETNAM
VTC
QTSC
VNIX
VIETTEL
OCI
VDC
VDC
EVN
SPT
VIETTEL
NETNAM
VNIX
VDC
FPT
VDC
VIETTEL
FPT
VINAGAME
VTC
VNIX
NGT
FPT
NGT
VTC
OCI
QTSC
VNIX
FPT
NETNAM
CMC
SPT
FPT
VIETTEL
VNIX
VDC
VDC
1860.0
12500.0
8120.0
920.0
90.0
45.0
135.0
100.0
4000.0
200.0
350.0
44.0
200.0
54.0
3000.0
44.0
1000.0
110.0
4000.0
6000.0
1.0
30000.0
10.0
54.0
200.0
200.0
200.0
2000.0
3.0
1.0
60.0
18.0
110.0
3000.0
1000.0
4000.0
200.0
6000.0
10.0
1110.0
3.0
60.0
5000.0
30000.0
350.0
500.0
100.0
1000.0
1000.0
2000.0
1110.0
500.0
4300.0
594.0
3098.0
41111.0
464.0
2200.0
4.0
188.0
14200.0
37133.0
5110.0
500.0
Sources: VNIX, MIC 2008
Domestic connection bandwidth has been greatly enhanced, as in below statistics. It is a positive
sign of domestic digital content improvement in responding to recent increase in demands,
including video streaming and online games. Especially, FPT has the highest downloading traffic
compared with other IXPs due to its advantages, attraction and variety in content provided.
Bandwith capacity of major IXPs and ISPs
Enterprise
VNPT
FPT
Viettel
EVN
SPT
HPT
VTC
International
bandwidth
Domestic bandwidth
through VNIX
19.4 Gbps
5.59 Gbps
4 Gbps
555 Mbps
145 Mbps
4 Mbps
5 Gbps
5 Gbps
3 GBps
3 Gbps
4 GBps
2 Gbps
2 Gbps
Sources: MIC,VNNIC 2008
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TELECOMMUNICATIONS
The total domestic Internet connection bandwidth is 68 Gbps, with hundreds of kilometers of
cross-country fiber optic network and PoPs of VNPT/VDC, Viettel, EVN Telecom reaching all
63 urban and provincial areas.
The direct connections to these IXP are ISPs with 2 bandwidth capacity, one for domestic traffic
and the other for international traffic. As defined in Decree No. 55/2001/ND-CP, all ISPs may
have at least 2 POPs in different regions, and most of them chose Ha Noi and Ho Chi Minh City,
and as a result, there are only 2 or 3 ISPs left for Hai Phong, Da Nang, Hue, etc. (most of them
belong to VNPT, Viettel, and FPT), and the remaining areas are under VNPT service coverage.
This unbalanced situation, again, led to rudimentary network systems of most ISP (excepts for
those of VNPT), with primary functions of network access, and their inter-POP transferring
systems and distribution networks depending on leased services from major IXPs This is optimal
choice for ISPs first entering the market, but will be a great handicap for these ISPs when they
escalade to higher levels of development, showing a geographically uneven development within
the nation. The new Decree No. 97/2008 eliminates those limitations by suggesting IXP (ISP has
infrastructure facilities) to adequate local loop unbundling for other ISPs and giving the equal
chance to all ISPs to connect with any Internet eXchange (IX). But the positive impact of this
reform may be seen by 2009. Meanwhile, normal ISPs still seek the chance to get a license for
telecommunication services and network establishment in order to gain initiative in network
development and expand service types. The newest license is granted to CMC TI (an joint-stock
of CMC Telecom and SCIC) by the beginning of February 2009.
Access abilities, the international requests already applied
New types of digital
convergence services are
offered
The most popular services provided by ISPs includes: Broadband connection subscription such as
ADSL, Leased-line, Wifi, Dial-up (via telephone line), CaTV/IPTV (TV via Internet connection),
VoIP, VPN. With the existing infrastructure and capacity, some big ISPs also provide related
services like webhosting, server hosting and domain. The growth of subscription volume depends
largely on each enterprise's capacity in physical infrastructure facilities development. There are
clients who want to be service subscribers but they are denied or are kept waiting by the
providers due to insufficiency of POP, cables network, access ports or the area is occupied by
other competitors. Therefore, the most challenging issue for existing ISPs in subscription
boosting is the infrastructure facilities development and coverage expansion. In fact, the two
biggest operators, VNPT and Viettel, thanks to advantage in infrastructure investment and
finance, have well-established physical infrastructure facilities. While EVN concentrates more on
leased-line and IXP services, their retail market via infrastructure of the existing electrical cable
systems has not been improved. FPT Telecom (a subsidiary of the listed FPT Corporation) has
shown its proactive approaches but only focused in a few big cities with a high density and added
value by premium services like FTTH or iTV. Other smaller providers have not yet found their
own solutions for the issue of expansion and are still dependant on renting the network
infrastructure from IXPs.
Don’t forget the ‘.vn’
IPv6 is encourged
Network resources usage should be given more attention. Although all Vietnam ISPs and IXPs
have been allocated IP addresses by VNNIC for their development needs, their planning ability
for effective address usage is still limited, and there are lots of issues existing. For example there
are only 3 service providers currently using dynamic routing technologies for routing services,
and the rest are focusing on static routing through one provider, which means low levels of error
tolerance and contingency. The usage ratio of existing resources is relatively low in comparison
with that of other countries in the region. The resources are under poor governance, the start of
new generation IP technology (IPv6), with supportive and encouraging policies from relevant
authorities and the government (Directive No. 03/2008/CT-BTTTT by Minister of MIC dated
May 20078), has made a surge in IPv6 usage.
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TELECOMMUNICATIONS
The number of IP addresses being used has partially represented the Internet infrastructure
network scale and the capability of utilizing Internet-based services and products. ADSL services
is the reason for a high volume of IP addresses used, the newly established ISPs are also in need
of IP addresses, even though the IP addresses registered have been doubled each year, and our
country now has only 1777 C-Class IP addresses, which means 6.6 times lower than Korea, 40
times lower than China, and 1.2 lower than Thailand. It should be noted that IPv6 has been used
in these countries since 2003, whereas Vietnam has only tested and used this type of IPs since
2007. At the moment, the IP ownership fee in Vietnam is generally lower than other Asian
countries. From what happened in other developing countries, Vietnam will keep its strong
growth in infrastructure facilities in the next 5 years before reaching a substantial development
stage.
Roadmap for IPv6 generation
October 2008:
May 2008:
On 21 October 2008, Vietnam Internet Network Information Center (VNNIC) promulgated
the decision No. 177/QD-VNNIC on issuing IPv6 addresses for the Corporation for
Financing and Promoting Technology (FPT). FPT is the 23rd member of VNNIC who was
allocated IPv6 addresses in Vietnam
VNNIC's IPv6 networks is ready for enterprises and organizations who are in needs of IPv6
connection.
Ministry of Information and Communication has issued directive No. 03/2008/CT-BTTTT
on speeding up the use of IPv6 Internet addresses.
VNNIC established their IPv6 connection with APNIC.
VNNIC and QTSC signed a memorandum for IPv6 connection experiments.
Source: VNIX, MIC
Internet domain names also indicated the socialization level of Internet among communities.
Regulations and legal procedures regarding domain names have been defined in Information
Technology Act (Article 23) and Decree no. 63/2007/ND-CP dated 10 April 2007 by the
Government. According to recent statistical data (October 2008), the quantity of domain names
registered is 87,377 (.VN) and about 10,000 500 general top-level domain names (gTLD: .com,
.net, org, etc.) were registered by individuals, organizations and domestic enterprises.
If IP addresses are considered background parameters for Internet infrastructure development,
then domain names are measurements of Internet usage skills. Domain names represent the
application addresses that traditional users utilize. If there are only a few domain names existing,
it means poor performance of online service as well as lack of information exchanges and userfriendliness.
Number of Internet
domain names is
increasing
Except for speculators, Internet domain names also tell us about the socialization of Internet of a
nation, for example defining how many services are available, which products and information
offered, and how Internet users can search for domain names matching their needs. In many
countries, an individual could legally own 2 or more domain names. For developed countries,
there are 4 to 8 persons with ccTLD domain names registered for every 100 people. This ratio in
member countries of Organization of Economic Cooperation and Development (OECD) is 2, and
Vietnam's just started at 0.00015. To be more specific, there are only 44,000 .com.vn domain
names for estimated millions of individuals and commercial organizations in Vietnam which is a
relatively modest figure. This is certainly a simplified comparison, yet to be a worthy
consideration to get a full picture of the market.
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TELECOMMUNICATIONS
Statistics of domain name .vn
Domain Name
Quantity
Total Domain Name
com.vn
gov.vn
int.vn
edu.vn
ac.vn
net.vn
org.vn
name.vn
pro.vn
biz.vn
health.vn
info.vn
layer 2 domain .vn
90189
44710
827
12
1955
64
1450
1210
52
74
328
24
199
39284
%
100%
49.57%
0.92%
0.01%
2.17%
0.07%
1.61%
1.34%
0.06%
0.08%
0.36%
0.03%
0.22%
43.56%
Statistic of global domain name
Domain Name
Quantity
com
gov
int
edu
ac
pro
biz
net
org
name
health
info
Total
2321
1
1
2
1
2
12
239
107
0
0
32
2718
%
85.39%
0.04%
0.04%
0.07%
0.04%
0.07%
0.44%
8.79%
3.94%
0.00%
0.00%
1.18%
1
Source: UPTO, December 2008
Source: UPTO, December 2008
Domain names are getting more popular and contributing to a variety of Vietnamese websites.
Yet the .com domain names are misused and lead to domain name thieves, web hacking and
complicated conflicts and disputes. Digital divide also appears in the domain development where
92% domain name .vn is registered by the subject located in Hanoi and HCMC.
The service quality, a priority
More focus on service
quality
The service quality offered usually depends on the number of clients simultaneously accessing
the network and ports, the quality of connection leased from IXPs, and the quality of network
equipments being used, etc., which substantially vary from case to case. Yet the ISPs' ability to
ensure the quality of services provided to their clients remains questionable.
For better protection of users' rights, MIC has issued the ADSL Internet Access Service - Quality
of Service standard TCN 68-227:2006, which defined 9 criteria for service quality and minimum
levels of required quality for registered providers. The most important indicators are Average
speed of data transmission and Time for setting up service.
For average speed of data transmission, all providers must assure the average speed of data transmission of the same
network (websites hosted by the service providers) is at least 80% and at least 60% for other networks (websites by
third-party providers) in comparison with the defined transmission speed (the service speed indicated in the service
agreements). Even though there's usually no provision on this transmission speed in service agreements, all providers
are required to comply with such quality standards.
As for criteria of time for establishing service: According to the TCN 68-227:2006, all providers will have to have 90%
of signed contracts with time for setting up service falling within the required range as follow: As for those with
available subscription telephone line, the time for setting up service will not exceed 05 working days; In case of no
subscription telephone line available, the time for setting up service will not exceed 12 working days for urban and
provincial areas, and 20 days for other areas. In case of being unable to sign the service agreement as requested by the
clients, the providers will within 3 business days inform the requested clients of their refusal of service provision in
written, and clearly state their reason(s) for refusal.
For service quality management of telecommunication in general and ADSL Internet services in
particular, MIC promulgated "The regulation on management of the quality of post and
telecommunications services" (Decision No.33/2006/QD-BBCVT on September 6, 2006).
According to the Decision, all relevant providers will have to announce the minimum required
quality of telecommunications services (which must not contravene or be lower than the
compulsory standards), and have to assure the service quality announced. The government
agencies (including the Ministry of Post and Telematics’ Telecommunications and Information
Technology Quality Control Bureau, and Departments of Post and Telecommunication of each
province) will be responsible for inspecting, supervising and enforcing disciplinary penalties to
any providers that compromised the published quality of services. In addition, the levels of
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TELECOMMUNICATIONS
service quality announced by the providers as well as their quality testing results are also
available on the official website of the Ministry of Posts and Telematics's Quality Control Bureau
at http://www.ptqc.gov.vn/
The published quality (such as terminal bandwidths) is only for statistical purposes, which is
much higher than the actual downloading capacity on user side, regardless of factors such as
frame-relay, error tolerance, supporting features, etc. In October 2007, the Ministry's Quality
Control Bureau carried out a non-scheduled quality inspection of the ADSL Internet services of
Viettel, VDC and FPT.
According to the ADSL service measurement results of VDC/VNPT, the average speeds of data
transmission of the same network for Extra, Maxi, and Pro packages did not meet the national
standards TCN 68-227:2006. As for time for establishing service, VDC/ VNPT reached only
60.11%, whereas the required indicator is 90% or more. The average speed of external network
data transmission of the Mega Style package offered by the second largest ADSL service
provider, FPT Telecom, was also found to be substand. Both VDC and FPT were fined by MIC
(as defined in decree no. 55). The incident had a great impact on today's trend of Internet service
improvement, urging other service providers to pay more attention to their service quality and
commitment to their clients. Later on, in November, in a seminar on "cooperation in Internet
service improvement in Vietnam", 5 providers VNPT, Viettel, EVN Telecom, SPT and NetNam
participated, came to a commitment in enhancement of infrastructure facilities, transmission
capacity, and service quality improvement. The recent quality check by MIC at VNPT, Viettel,
and NetNam services has shown positive signs of improvement: all criteria for service quality are
met by Viettel and VNPT, except for 4 out of 7 ADSL service packages of NetNam which are
still lower than expected standards. However, increasing domestic and international broadband
connection needs, along with international Terabit fiber-optic cable network projects of
VNPT/VDC, FPT, Viettel, SPT, and EVN Telecom, has indicated efforts of providers in their
commitment to service quality enhancement.
Service providers are
applying new
technologies in their
facilities
The infrastructure is
prepared for new highend services
Moreover, Vietnam's enterprises are also quickly approaching and applying new development
technologies for network infrastructures to further improve their service efficiency and quality.
Since December 2003, a new generation of telecommunication network, the NGN, has been
implemented and came into operation by VNPT. The NGN are utilized and developed by
Vietnam network operators (VNPT, EVN, Viettel, and FPT Telecom) for more services available
to their clients. In late 2008, VNPT and EVN telecom would basically complete their
NGN/MPLS infrastructure. The NGN-based networks are the right approaches for broadband
Conclusion:
There's a significant improvement in domestic information availability. In the past, most of
Internet communications were downloaded from foreign sources.
But now things have changed, and domestic communications through Internet have been
increased in comparison with the international connection.
For example, with VNPT, the total international communication volume is approx. 32Gbps, and
the domestic communication volume (through VNIX) has reached 7.5Gbps, which accounts for
one third of the former indicator. For FPT, the ratio sometimes was higher than 1 (due to clients
from other IXPs using FPT's online services through VNIX). These figures proved that domestic
sources of information are getting more attraction, especially with the users have more chance to
use high-end services, such as online video, high-quality VoIP, online games, etc. There's also a
boost of websites with Vietnamese contents, enriching information and redirecting the sources for
retrieving, resulting in more cost-effective international bandwidth for providers. This is also a
positive strategic shift of content development by Vietnam's ISPs and OSPs.
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TELECOMMUNICATIONS
The ‘Pac Man’ game
VNPT seized 75% of
Internet market share
Just a reminder, in Vietnam, there are 13 active Internet service providers, including VNPT,
Viettel, FPT Telecom, EVN Telecom, SPT, NetNam, OCI, Tiennet and HPT, CMC, QTSC,
VTC, NGT. 3 dominant providers - VNPT, FPT Telecom and Viettel - account for more than
90% market share. The second group of EVN Telecom, SPT, NetNam takes less than 5%. And 7
other providers (OCI, Tiennet and HTC, CMC, QTSC, VTC, NGT) stand for only 1% with a
deep decline in market shares in the last 4 years. ADSL market seems to be just the battle of 3
key players. Among those, VNPT seizes the absolute domination with over 75% market share.
Market share in ADSL
Market share in ADSL
1.27% 2.99%
8.39%
10.05%
1.12%
0.4%
VNPT
FPT
Viettel
EVN
75.78%
SPT
Netnam
Others
Source: MIC
FPT and Viettel run
behind
The situation showed that it's the service providers with smaller scale infrastructure facilities that
are losing in this market share battle. Enterprises are discriminated by IXP licenses and criteria
for licensing. Many enterprises have ISP licenses, but could not join the market due to connection
charging difficulties as mentioned in previous sections. It is a fact that MIC have had to adjust its
Internet management policies to ensure better business conditions for Internet service providers
without well-established infrastructure facilities, otherwise they could hardly survive.
It's not only small and medium providers that witnessed their market share falling. Among three
key players of Internet service market, FPT has also suffered from this drop in market share,
leaving its second leading position to Viettel. In 2004, FPT accounts for 27% of Internet service
market, but in December 2008, the figure fell sharply to 8.39%. Meanwhile, Viettel showed a
breakthrough in market share, increasing from 8.76% in 2004 to 15.81% in 2007, followed by
FPT, but its market dropped dramatically in 2008 to 10%, yet higher than that of FPT.
However, according to recent polls of most favorite products of information technology telecommunication in 2008 by PC World, the VNPT' ADSL Internet services has been chosen as
the most preferred service by consumers (with 41% of votes). FPT Telecom came in second (with
38%), and Viettel, the third one (19%).
Biggest ISPs set the high
target for 2008, VNPT
won
At the moment, these 3 major providers are strengthening their own advantages for increasing
subscriber numbers. VNPT moves their focus into vertical development and expansion of their
existing services, aiming at higher service quality. The expected volume of subscription of this
provider is around 1.3m subscribers. FPT chose to enforce their Internet-based value-added
services, especially the IPTV (Internet Protocol Television). FPT’s number of ADSL subscriber
just reached 330,000 by 2008. As for Viettel, they looked closely into their service rates and
offered cheap price and promotion. Viettel took the second position from FPT, getting 360,000
subscribers in 2008 while they had only expected about half of this number in Jan 2008. The
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TELECOMMUNICATIONS
limitation in investment in back-up network, hence, reacting the disconnected problem in
international transmission, is the cause for FPT losing position.
EVN took some part in
leased line market
Like context in retail market, VNPT is still dominating local leased line circuit thanks to their
advantages of network coverage and service quality.
Market shares in local leased-line circuit
Market shares in international leased line circuit
2%
6%
54%
16%
19%
VNPT
Viettel
76%
Source: MIC, Jaccar
VNPT
Viettel
EVN
EVN
SPT
27%
Source:MIC, Jaccar
Short resumes
VNPT: Goliath
VNPT is the biggest
telecommunication
player
VNPT is the first established telecommunication group in Vietnam and has been the leader of
Vietnam telecommunication market ever since. According to VNR500 (Top 500 leading
enterprises of Vietnam by the Vietnam Report, published in November 2008 -based on latest
statistical data from 150,000 enterprises nation-wide collected by relevant government's agencies
(General Statistics Office, General Department of Taxation, and General Customs Department of
Vietnam, etc.)), VNPT belongs to the top 10 names of the list. In 2007, VNPT has ranked second
in the top 20 largest enterprises of Vietnam by United Nations Environment Program (UNDP).
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TELECOMMUNICATIONS
VNPT organization
VNPT
61 Provincial and Local PTTs
State owned subsidiaries
• Vietnam Telecom
National (VTN)
• Vietnam Telecom
International (VTI)
• Vietnam Data
Corporation (VDC)
• Vietnam Telecom
Services Corp. (GPC)
• Vietnam Mobile
Telecom Services
(VMS)
Joint Ventures
• VN-Telstra
• VN-Korea Telecom
• Vina Daesung Cable
• Optical Fiber Mfr
• VN-Alcatel
• VN-Siemens
• VN-Fujitsu
• VN-NEC
• Etv
Other Telecom -related
Companies
• VN Telecom
Equipment
• P&T Construction
• P&T Finance
• Equipment Installation
• Telecom
Manufacturing
Other Lines of Businesses
• Construction
• Tourism
• Consulting
• Import
• Insurance
• Engineer
• Printing
Source: VNPT
VNPT is the biggest telecom corporate with a workforce of 90,000 and more than 60 years
experience and development.
In January 2006, VNPT shifted to the consortium-type mechanism by the Prime Minister's
decision, with strategic objectives of becoming a key multi-service business player of Vietnam
and a main focus in IT - Posts - Telecommunication. VNPT is the first player of the market who
has sufficient licenses for infrastructure facilities development and telecommunication service
operations.
VNPT owns all state-ofart infrastructure
facilities and the widest
outlet network
Until 2005, VNPT was the only monopoly-oriented state-owned enterprise with dominating
business in telecommunication infrastructures and international connection. (Viettel and EVN
started their infrastructure facilities for domestic and international transmission services and
businesses in early 2005). VNPT was assigned the first telecommunications satellite project of
Vietnam (VINASAT) in 2005, and was responsible for VINASAT's network operation,
implementation and business since its successful launch in April 2008. VNPT's "Commune
Cultural Post Offices" initiative has been implemented in 1998 in a national scale.
In 2005, VNPT completed its telephone networks that cover 100% of communes and villages in
the country. By November 2008, VNPT has had 44.5 million. (approx. 58.2%) out of 76.5
million. telephone subscribers of the whole country, in which 30 million are mobile telephone
subscribers (from Vinaphone and Mobifone, accounting for 52% market shares of mobile
telephone market), and more 10 million landline telephone subscribers (taking 95% market
shares). Since early last year, VNPT has had new 16.8 million voice telephone and 15.9 million
mobile telephone subscribers. The leading position of VNPT was shown in the chart at the
beginning of this section.
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TELECOMMUNICATIONS
VNPT income statement (2001-2010)
70000
60000
50000
40000
30000
20000
10000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Revenue
PBT
Source: VNPT
VDC (Vietnam Data Communications, which was founded in 1989 as an affiliated company of
the Vietnam Post and Telecommunication Group (VNPT), is the largest ISP of Vietnam.
VDC/VNPT expanded its
capacity three times last
year
According to latest statistics updated by October 2008, the total international Internet bandwidth
of VDC has reached 19.399 Mbps (19 Gbps) - surpassing any connection capacity offered by
other ISPs so far. VDC has ensured connection directions to almost all of the world through its
main channels to the United States of America, Singapore, Japan, Hong-Kong, Korea, and China,
which are available in two cable systems: CSC in-land fiber cables (50%), and marine cables
(50%).
The domestic connection bandwidth had reached 7.5Gbps, and Internet/VNN services are
available to 100% of urban and provincial areas. For one month (September - October 2008),
VDC has put its new channels into operation, including four 155Mbps ones to Hutchison (HongKong), two 2.5Gbps to the U.S., and one 2.5Gbps to China. As forecasted, VDC will implement
5 more 2.5Gbps channels for U.S. and European connections, increasing its total international
Internet connection bandwidth to 31Gbps. Therefore the Internet/VNN network services managed
and operated by VDC/VNPT will secure its leading position in international Internet connection
bandwidth in Vietnam.
Growth rate of VDC was
24% in 2007-2008
VDC's gross revenue of 2007 is reported at more than VND 820 bn (equivalent to USD 51 m),
24% increase compared with that of 2006, and standing at the top of Internet enterprises of
Vietnam (0.4% higher than the previous year).
The Internet service subscription volume of VDC/VNPT was 2.8 mil. in 2007, and had risen to
15.667 mil. in October 2008. VDC's MEGA VNN ADSL Internet service package was the first of
its kind introduced to Vietnam market in 2003. According to VDC, the number of MegaVNN
subscribers has reached 1.32 million by the end of 2008, with a total indirect Internet connection
volume of 1.9 billion minutes, accounting for 60% of the total market shares. MEGA VNN is
among the most popular Internet service packages in Vietnam. In 2007 and 2008, MEGA VNN
won the award of most favorite ITC product of Vietnam by PCWORLD magazine's readers.
Revenue of Mega VNN services reached VND 1763 bn, grew by 184%. VDC is looking forward
to a total subscription of MegaVNN service of 2 million in 2009.
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TELECOMMUNICATIONS
VDC is now offering the following Internet service packages:
•
•
•
For clients classified as individuals or households: Mega Easy or Mega Family;
For entrepreneurial clients: Mega Extra, Mega Maxi +, Mega Pro, and Mega Dreaming:
better responses to trading and communication needs of enterprises with frequent
international and domestic connections; high-speed access, minimum operational costs,
thanks to Internet-based integrated technologies and value-added applications, such as
Internet, Video on demand, Video Conference,... Free static IP address for Mega Maxi +,
Mega Pro, and Mega Dreaming packages. Especially, the Mega Dreaming packages
come with minimum connection speed guaranteed;
For public Internet access and online game providers: Mega Maxi and Mega For Game.
Along with service quality and bandwidth volume enhancement, VDC currently has more plans
for Internet-based value-added services, such as E-learning, which is an Internet source of online
university and high school examination, and English learning materials, and MegaGames service,
which is for online games for MegaVNN subscribers, online payment and sales services of VDC,
online movie streaming services, megapayment, e-office, etc.
In 2006, VDC signed 2 IP-VPN service providing contracts with 2 major telecommunication
enterprises - KDDI Group and NTT Coms.
VDC is the top candidate
for Wimax license
VDC has successfully tested the fixed Wimax networks (with supports from Intel and USAID) in
Lao Cai province, and started the experimental Wimax-based mobile network with its partner,
Motorola, in Hanoi and Ho Chi Minh City. VDC is now the top candidate for Wimax licenses.
VDC is also promoting its development plans for metroNet and NGN-based applications.
FPT, Viettel, Saigon Postel, Netnam and EVN Telecom: David (s)
FPT is the most dynamic
player
•
FPT: Founded in 1988 with initial business objects in software and technical application
development, FPT was granted ISP license in 1997 and IXP in December 2006. FPT Tel
has a remarkable growth rate and has the second largest market share in Internet service,
after VDC, but the fastest growing provider of multi-service applications. FPT has also
provided the FTTH services as the pioneer, and started its NGN Softswitch operator.
Joined AAG and to have about 40Gbps international bandwidth in early 2009, yet FPT is
subject to bandwidth leasing agreements with other IXPs. Regarding ADSL, FTTH
services, FPT Tel focuses on infrastructure facilities development in major city of high
population density. FPT Tel targets to share the leadership in local leased line with VDC,
approx. 40%.
FPT is boosting its advantages in VoD, IPTV, television, and data transmission services.
The FPT's Vnexpress.net website has been on the list of top hit websites, with significant
online advertisement profitability. Its ratio of telecommunication service profits remains
high.
Supported by Ministry of
Defense, Viettel grew so
quickly
•
Viettel: As a telecommunication enterprise of the national department of defense founded
in 2001, Viettel has quickly grown and become a successful image of the
telecommunication market.
As for mobile telephony, Viettel Telecom has the second largest market share of 20
million subscribers, of which voice subscribers account for 34%, preceded only by
VNPT. In 2008, the total number of ADSL service subscribers of Viettel Telecom rose to
2 million, approx 10% of the market, taking the second position after VNPT/VDC. Its
fiber-optic cable system of 58,000km length now covers almost all communes, with
400Gb/s fiber optic backbone network and international bandwidth of 14.2Gb/s. The
group also has Viettel Telecom branches in all provinces. With local support by those
branches, the company plans to lay more 60,000 km fiber optic to expand the coverage of
services
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TELECOMMUNICATIONS
Saigon Postel and
Netnam focus on niche
market
EVN Telecom seems
misstep in the race
•
Saigon Postel: Saigon Postel was established in 1995, joined the Internet service market
in 1997 and was granted its IXP license in December 2006, and is currently providing
landline telephone, VoIP and mobile telephone services. SPT is the pioneer in cybercafé
market with a relatively stable ADSL service market in Ho Chi Minh City.
•
Netnam: Founded in 1994, the company is first of its kind, bringing Internet to Vietnam.
With the supports from IDRC, Canada, Netnam started with local bulletin-board service
(BBS) for foreign and national agencies and experts in Vietnam. Later in November
1997, it became one of the first four ISPs of Vietnam. Netnam's CEO, Mr. Tran Ba Thai,
is the most influential person in the course of Internet development of Vietnam. At the
moment, the main services provided by Netnam include Internet ADSL, leased line,
Intranet, webhosting, e-learning, e-commerce, and VoIP. The company is now focusing
on its Internet service offerings and solutions for ministerial and local authorities. In
2006, it became the solutions provider for de luxe hotels in Hanoi and Ho Chi Minh City.
However, the group has certain disadvantages compared with other ISPs since they do
not have IXP license. That's why Netnam's Internet service business has certain
limitations due to infrastructure facilities dependency.
•
EVN Telecom: Founded in 1995 EVN Telecom is a member of Electricity of Vietnam
Group (EVN). After few years of silence, EVN Telecom got full licenses in 2004 and
started to enter the public telecom sector. For network capacity, EVN telecom now has
over 40,000 km optical cables covering all provinces with 2 core backbone and 3,600km
of 2x2.25Gbps Optical fiber composite overhead ground wire (OPGW) along 500KV
Power Line from North to South of Vietnam. Inter-provincial optical network is about
7,500km. EVN Telecom has about 10Gbps international land line and expects to increase
up to 50 Gbps after completion of Intra Asia submarine cable system. A bit later VNPT,
in last November, EVN Telecom has announced the accomplishment of the IP-based
virtual network services connection (IP-VPN) as the collaboration contract with HGC
(Hutchison Global Communications), a member of Hutchison Telecom. However, as
MIC opens the playground of telecom transmission business, EVN Telecom will face a
lot of difficulties while their sales force is not strong and active enough.
Who will be the winner?
From the competition view, Internet - telecommunication market could be divided into 3
segments: segment for consumers (retailing), segment for enterprises and organizations using
leased-line services, and segment for universal services.
ADSL Retail Broadband: from coverage expansion to pricing war, but quality is still a
question
ADSL retail broadband is
the most profitable piece
The market movements depends on a number of factors: transmission capacity of infrastructure
facilities, including the number of PoPs, connection portals; marketing and business strategies,
distribution networks, and the methods of identifying target markets. In addition, the most crucial
criteria are service pricing and quality.
In general, VNPT/VDC is the enterprise with most advantages. It has solid experience and
privileges in infrastructure facilities, distribution networks, and wide-spreading organizational
structure: operating companies specializing in international connection management and satellite
transmission lines and the nation satellite system –VINASAT (VTI), another affiliated company
with main business focuses on inter-provincial telecommunication infrastructure development
(VTN), with a network of 63/63 posts and telecommunication departments in all provinces and
cities, and preferable conditions to develop their own network infrastructure facilities and VNN
subscription. VNPT also has more than 2000 post offices and 8000 points of commune posts.
Besides that, VNPT concentrated on its network expansion on a nation-wide scale, continuing to
speed up the connection capacity advancement, both internationally and domestically, enforcing
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TELECOMMUNICATIONS
their marketing campaign and making their ADSL services available to almost all regions.
VNPT's superior advantages in network coverage and infrastructure facilities are the reasons for
its significantly high market shares of ¾ the Vietnam market.
Very fierce competition
among ISPs
The Internet service fees have been lowered dramatically since 2001. Since the first ADSL
service became available, there has been fierce competition among ISPs for market shares, with
lots of service promotional campaigns for bigger number of subscribers.
ISPs offer the wide range
of ADSL packages
At the moment, ADSL bandwidth and subscription fees have become as low as other countries of
the region. The largest ISP has adopted a common business model of ADSL services with 2
separate service package offerings, one for enterprises and the other for home-use clients. Each of
these offered packages has a wide range of connection speed for client's choice of subscription.
The service packages offered to enterprises usually comes with higher service charges and
connection speeds, with or without committed information rate (CIR) on bandwidth. The strategy
of tariff and speed selection may reflect the business strategy of involved corporations. Below is
the ADSL service package structure table of VNPT, which is widely adopted by other ISPs for
their Internet tariff mechanism, including maximum usage charge, volume-based charge, and flat
charge.
Mega VNN quotation sheet 1 (Individuals or households)
Mega Easy Mega Family
Maximum Speed (Download/Upload)
Minimum Speed (Download/Upload)
1. Volume-based Charge
Subscription charge
(VND/month)
-
Cost per 01 Mb transfer
(VND/MB)
Maximum usage charge
2. Flat-Charge
IP address
Email account
Mega Extra
1 Mbps/512 kbps 1.5 Mbps/512 kbps 2 Mbps/512 kbps
No Guarantee
No Guarantee
No Guarantee
24,000
35,000
48
48
300,000
250,000
Dynamic IP
1
450,000
350,000
Dynamic IP
1
82,000
Mega Maxi
3 Mbps/ 640kps
No Guarantee
165,000
First 6000 Mb:55 First 6000 Mb: 55
Next Following
Next Following
Mb: 41
Mb: 41
700,000
1,100,000
550,000
900,000
Dynamic IP
Dynamic IP
1
1
Source VDC/VNPT
Mega VNN quotation sheet 2 (business households or enterprises )
Mega Maxi +
Mega Pro
Mega for Game Mega Maxi
Maximum Speed (Download/Upload)
3Mbps/640Kbps
4Mbps/640Kbps
6Mbps/640Kbps
Minimum Speed (Download/Upload)
No Guarantee
No Guarantee
No Guarantee
300,000
500,000
600,000
2,000,000
40
45
First 10 Gb: 450
Next Following
Gb: 350
2,272,727
1,818,181
1 Free Static IP
4 Others Available
Upon Registration
1
3,000,000
2,500,000
15,000,000
10,000,000
Dynamic IP
8 Free Static IP
1
1
1. Volume-based Charge
Subscription charge
(VND/month)
-
Cost per 01 Mb transfer
(VND/MB)
Maximum usage charge
2. Flat-Charge
IP address
Email account
First 6000MB: 50
Next 6000 MB: 45
Next Following
Mb: 40
1,818,181
1,454,545
1 Free Static IP
1
8Mbps/640Kbps
256 Kbps/192
Kbps
Source VDC/VNPT
Viettel prefers cheap
price stratedy
Viettel has still focused on their strategy of competitive pricing with service packages of low to
medium connection speeds: the lowest one is 1024Kbps/512Kbps (for household clients), and
highest one 3072Kbps/640Kbps (for enterprises). For a service package of similar speed, the flat
charge offered by Viettel is usually lower by 6-10%.
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TELECOMMUNICATIONS
FPT chooses premium
services strategy
Whereas, FPT choses its own way in high-end and premium service segments. The lowest-charge
service package of FPT is 3072Kbps/512Kbps (for households), highest is 4096Kbps/640Kbps
with the CIR of 192Kbps/128Kbps (for enterprises) and 5120Kbps/640Kbps with no CIR (for
home users). And FPT clients can also enjoy other value-added and online entertainment services
from this ISP, such as iTV (Internet-based television service) or other recreation offers from
FPT's service portals. FPT's tariffs are also 20 - 40% higher than that of VNPT, and usually
offered with 3 email accounts. FPT is the first corporation providing the FTTH high-speed
Internet service with packages offered ranging from 6Mbps to 12Mbps and they are also the
pioneer to provide Triple Play service.
But as indicated in the VNPT's service charge table, its service packages are offered on a wide
range of connection speeds, from 1Mbps/512Kbps to 8Mbps/640Kbps. As a leading service
provider of the market, VNPT are offering a variety of choices to its clients, including lowestcharge package as Viettel's and premium packages as FPT's (except for FTTH-based services),
and recently the MetroNet service packages available in major cities.
But no one can assure
quality provided
In fact, the actual connection speeds stated in ADSL service quotations could not truly reflect the
quality of offered services, which is just the ‘maximum’ of download/upload speed at a specific
condition of traffic. A technical factor that might affect user access speeds is the ISPs' traffic
volume management and control methods through their settings of Class of Service (CoS) and
Quality of Service (QoS)i. And these indicators remain unpublished or the service providers
might alter them for their specific technical approaches. ADSL service users in Vietnam have
never quite satisfied with the quality of ADSL services, most them considering it acceptable or
not. Even in case of high service density in specific regions (usually in period of massive
promotional campaigns), the quality is greatly compromised due to unmatched development of
infrastructure facilities and bandwidth capacity required for such expansion.
And this could explain why VDC/VNPT is still the dominant player in the market, thanks to its
wide network of services, well-established infrastructures, enriched ADSL service packages of
reasonable charges, largest distribution networks (local agents and post-offices), and its
ownership of best service brand secured by highest international bandwidth volume (accounting
for 70% of Vietnam total bandwidth).
Different views on technology selection for broadband development
Different ideas for
technology trend of
broadband development
For the strategy to develop broadband infrastructure, contrary to VNPT’s one that focuses on
fiber optic and 3G mobile network, Viettel cites their own success on mobile business by
reducing price for increasing subscribers. Aiming at cost reduction, Viettel recommends
deploying wireless Internet via Wimax technology with lower capital expenses and quicker
deployment. Other smaller ISP also agree with this opinion and are speeding up trials, hence they
can launch services right after being licensed
VNPT likes 3G and fiber
optic network
VNPT announced its USD2 bn investment in 2008-2009 for broadband infrastructure facilities
(3G-based mobile telephone and fiber-optic networks), with its ambition of monopolizing the
Internet market.
Viettel supports Wimax
idea
However, service quality is the greatest concern of the users, the actual Internet broadband
connection is still of low speed, instability, especially to clients of home packages or in
provincial areas. High quality-requested services like VPN and Video conference that the
government encourages to apply in ministries, state divisions and branches may not be deployed
easily. Regarding the solutions for broadband infrastructure facilities, contradicting with the
VNPT's focuses on 3G-base mobile telephone and fiber optic networks, Viettel has cited its
success in the mobile telephone networks with a strategy of low service charges for more
subscribers. Aiming at low cost of investment, Viettel recommended the wireless Internet
services using Wimax technology for its low cost of installation and quick deployment. Other
smaller ISPs also share the same idea, and are conducting trial procedures for immediate launch
of that service right after being licensed by MIC.
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TELECOMMUNICATIONS
The war of ‘supporting the education in Vietnam’
Education became the
hottest battle
Viettel signed the
agreement with MoET
The strategic approach to the educational field, with its wide-spread networks and increased
demands of Internet usage, is internationally accepted as an effective, sustainable PR initiative,
and this is also a potential, stable market. With a dynamic and quick adaptive mechanism, soon
after the MoET launched "The School Year of IT Application 2008-2009" program, Viettel had
signed a collaborative agreement with ICT Department on the deployment of an educational
network. According to this agreement, earlier in this school year of IT application, Viettel will
provide broadband Internet connection services, leased line services using fiber optic cable
systems with preferential prices for educational fields. Viettel has its official supports from the
MoET with the official dispatches, which inform and promote Viettel's broadband connection
initiatives, from MoET to all nation-wide educational units and facilities.
At the moment, the Ministry has two leased lines, an international 2-Mbps connection and a
domestic 34Mbps optic-based one, with a leasing tariff of VND 30 mil per month, which is
almost equivalent to 1-Mbps leasing previously. Viettel offered the Net+ package (the service
package of highest quality) with a service charge of only VND 175,000/month for educational
facilities (instead of VND 700,000/month). Fiber optic networking from the ministry level to
local authorities with only VND 1.22m / month for an 4Mbps bandwidth.
Details of the agreement include:
•
•
•
Connections among the MoET and Department of Education and Training at local levels:
Collaborative deployment, and which has been basically completed, with expected
established connections to all Departments of Education and Training at local levels in
October 2008;
Connections to Universities, Colleges, Technical Secondary Schools, and Vocational
Schools: to be accomplished in June 2009;
For primary, secondary and high schools, the two parties proposed a 3-year deployment
plan, which is expected to be completed in 2010.
Regarding supports, Viettel has the following policies for education:
•
•
For Departments of Education and Training, Universities, Colleges, Technical Secondary
Schools, and Vocational Schools, the broadband connection will be established via fiber
optic transmission in order to secure the required quality and traffic volume as well as to
meet future needs of these units. Viettel will apply appropriate pricing policies for the
current scenario of Vietnam educational development;
For primary, secondary, high schools, and the like, if there are Viettel cable systems
available in those areas, the connection will be made with coaxial cables, with the
minimum speed of 2Mbps. For remote or less developed areas, Viettel shall utilize its
100Kbps EDGE-based mobile wireless connection technology, which will be enhanced
to 1Mbps once the company implemented its 3G technology networks. Regarding costs,
Viettel offers its first free-of-charge connection. If there is an increase of demands with
these users, the group will adjust its pricing policies on a case-to-case basis.
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TELECOMMUNICATIONS
Viettel’ tariffs offered to education fields
MoET's Subcribers
MoET's Bureau (Edunet
management Center) ICT
Bureau
Domestic
connection
Tariff (discount International Tariff (discount
50% for MoET)
34Mbps
15,342,000
connection
2Mbps
50% for MoET)
21,479,000
Access points in Universities,
Colleges
+ Internet
+ Video Conference
'+ Data
12Mbps
8Mbps
6,402,000
4,603,000
2Mbps
1Mbps
Additional
discount
discount 20% per
total tariff (of
domestic and
international
connections)
discount 20% tariff
of international
connections
21,479,000
13,174,000
Final tariff
29,450,000
23,500,000
discount 20% tariff
of international
connections
15,100,000
Source: Viettel,
On 25 September 2008, Viettel and MOET officially launched their education network project in
Hanoi. Soon after that, Viettel moved to their next connection points in Da Nang and Ho Chi
Minh City.
It's the MoET's directives on the Viettel's Internet initiatives and the hectic implementation of
these that opened a new competition for Internet Service Providers (ISPs) in education fields.
Even though Viettel has certain advantages through signed agreements with the Ministry for their
education network deployment at preferential prices, VNPT/VDC was also eager to join the race
According to official dispatches from Department of IT of MoET, Viettel offered a free-ofcharge installation service, and monthly charge for Department-level connection is VND 1.22
mil. This is a real preference (a small comparison: FPT Telecom monthly charge of a 4Mbps
fiber-optic connection service package is VND 2.5mil).
VDC approaches
provincial MoET
agencies
VDC affirmed that the offered service charges of Viettel for education fields are very low. For
commercial and civil users, the provider could not "stand" with these offers due to loss of profits.
In order to keep its existing clients in education areas and to secure its position in this potential
market, VDC has developed four separate packages dedicated to education fields, which is a
different form of connection speed upgrading of existing service offerings. The new package
charges of VNPT are equal or a little higher, compared with Viettel's offers, but with higher
bandwidth.
VDC offered fiber-optic-based Internet Edu package with special pricing for educational and
training facilities. According to their offers, clients in the educational Ministry, departments,
institution, universities, etc., will be their targeted clients, the final service rates could be
negotiated for best interests of both parties.
The packages offered are
very competitive
Compared with the previous service charges, the new four packages (EduNET Basic,
EduNET Bronze, EduNET Silver, and EduNET Gold) offered by VDC are 62% lower. And in
comparison with those offers for enterprise clients, these packages for MoET are lowered by
88%. Internet gateway connection speed: domestic broadband Internet connection speeds come at
5, 10, 20, and 30 Mbps / subscriber respectively; international broadband Internet connection
speeds come at 512 Kbps, 1-3 Mbps / subscriber.
VDC quotation sheet
Connection
Internet Packages
speed
EduNet Basic
EduNet Bronze
EduNet Silver
EduNet Gold
5Mpbs
10Mbps
20Mbps
30Mbps
Domestic
Internet
5Mpbs
10Mbps
20Mbps
30Mbps
International Internet
Tariffs
Downlink
Max Uplink
Floor rate
512Kbps
1Mbps
2Mbps
3Mbps
5Mpbs
10Mbps
20Mbps
30Mbps
8,838,000
15,279,000
25,851,000
34,259,000
Sources: VDC, Jaccar
www.jaccar.net
41
TELECOMMUNICATIONS
FPT Telecom indicated that they would join this competition, but will keep their traditional
approach of quality services instead of starting a new "pricing war" as which is what Viettel has
done.
Not only Viettel, but for all ISPs involved in education market, once there's a surge of
subscription rate, how could they all manage their bandwidth distribution to secure the
international bandwidth upgrading, or just leaving it with the risk of bottle-necking? Although
VDC and other ISPs have their own plans of international bandwidth upgrading in the near
future, it could hardly say that whether the ADSL service quality for education fields is
committed and assured as expected or not. Yet it's the education sector which is benefiting the
most from this race.
The robust expansion of the real estate’s market, resort centers, high-tech and industrial
zones, another competitive approach for ISPs
New way to approach
retail sector
With the increased FDI, strong investments in telecommunication equipment production and the
development of urban area and resorts, many businesses tend to move into industrial and hightech zones, pre-export processing zones, office buildings and complexes, leaving IT and ICT
enterprises with a new market segment with great potentiality.
The average month subscription cost for commercial ADSL connection services is about VND 1
to 3 million.; for building-based facilities, the cost would come at only VND 300,000 to 400,000
per month. Enterprises located at high-tech and industrial zones prefer their own leased line
connection. These indicators show an attractive profitable source for ISPs. And this market
segment is of great profitability with ROI high yield. And that's why it's among the market
segments of extreme competition.
Telecommunication enterprises usually use their own advantages in approaching this market
segment. VNPT continues to maintain its market leadership, thanks to its nation-wide
infrastructure facilities and affiliated local telecommunication companies (originating from
previous provincial posts offices).
As part of its business initiatives, VNPT is providing active supports for its provincial
telecommunication companies in upgrading infrastructure facilities and optic-based networks
development. With its monopoly in the electronic industry, EVN Telecom came with a facilitiesshared telecommunication services along with its power supply projects in industrial zones and
residential areas (Internet connection via power lines). Taking full advantage of its bandwidth
infrastructure facilities in the mentioned education network, Viettel proves to be a tough
competitor in this market. Other ISPs have certain limitation in infrastructure facilities
development due to administrative complications and hindering from local Public Transportation
Bureau, Department of Posts and Telematics, and local authorities. In addition, the
implementation costs for underground cable systems are relatively high. Therefore, these ISPs
must try other ways. FPT Telecom keep focusing into major cities and neighbor industrial zones,
carefully planning and promoting pre-sales initiatives prior to their infrastructure facilities
investment projects. Saigon Tel has supported the telecommunication infrastructure development
of industrial zones in which they are shareholders. As for connection infrastructure facilities, they
leased from telecommunication companies of VNPT, Viettel or EVN.
Other forms of pricing competition are discounts for surplus charges, or high-end service
package. The primary competitive methods adopted by less advantaged ISPs in response to
dominant ones include to granting discounts of 10-12% of total surplus charges for building
complexes or resort areas, and to lowering 10-30% of premium package tariffs.
That is strategic
collaborative agreements
with big corporations in
banking and construction
industries
In order to secure its competitive advantages of well-positioned brand and nation-wide
infrastructure facilities, VNPT has signal a number of strategic collaborative agreements with key
players in banking and construction industries. The partner list of VNPT includes: Bank for
Investment and Development of Viet Nam (BIDV), Bank of House Development in Cuu Long
River Delta, Quang Trung Software Park, Lang Hoa Lac Industrial Zone, Vinaconex, The Binh
Duong Trading - Investment and Development Corporation (Becamex IDC Corporation),
www.jaccar.net
42
TELECOMMUNICATIONS
Vincom JSC., Urban Infrastructure Development Investment Corporation (UDIC) etc., from
which VNPT could approach its market of industrial zones, urban residential complexes and
buildings.
Following VNPT approach style, other ISPs also have their strategic collaboration plans for
"market rooms". Viettel signed cooperative agreements with BIDV, MoET. CMC Telecom
established their partnership with Geleximco Group, Bao Viet Group, Agribank. etc., Saigon
Postel shook hands with the investor of Phu My Hung town two years ago for their monopoly in
the deluxe residential complexes of Phu My Hung, Dist. 7, HCMC.
Decree No. 97 has opened new opportunities to enterprises, and the drafted Decree on
telecommunication service retailing is under development, which will allow all other sectors to
join this telecommunication retail market. And in 2009, the competition of service providing in
industrial zones, residential and urban areas will no longer be limited within the community of IT
& telecommunication enterprises. Those enterprises, which have been specialized in
telecommunication equipments & cables production, infrastructure facilities installation and
setup, and telecommunication solutions, are also preparing their own business initiatives for the
service market.
The newly opened market for new providers is, according to MIC, a must due to the existing
inappropriate telecommunication service charges as well as the gap between service charges and
expected quality of this field. And the measure for quality control and penalty is not strong
enough.
Conclusion
The Internet service fees have been lowered dramatically since 2001 when the playground
welcomed private players. ADSL service became available, there has been fierce competition
among ISPs for market shares, and lots of service promotional campaigns.
ADSL fees and PC cost
are still far above what
rural habitants and
ordinary workers can
afford
At the moment, ADSL bandwidth and subscription fees have become as low as other countries in
the region, the minimum charge is approx. USD 5 per month only. However, Vietnam is still a
developing country with most of population on low incomes. Its GDP per capita of 2008 is USD
960, USD 833 of 2007. The minimum salary is going adjusted up to VND 650.000 (USD 37) by
May 2009. The average cost of a PC is about USD400-USD500, and ADSL monthly service fee
is about USD 3-USD 5. The cost of IT devices, PC and Internet connection seems a bit far above
the affordability of rural inhabitants or ordinary workers.
The digital content could be the next battle?
With a surge in number of Internet users, industrial digitalized contents and online services are
blooming with a growing number of businesses involved.
The digitalized content
industry of Vietnam has
a fast pace of
development
In general, the digitalized content industry of Vietnam has a great pace of development, with a
gross income increased by 50% in 2006, and 58% in 2007. The total revenue of this industry in
2007 stood at more than USD 182m which in 2008 reaches USD 270m. Growth rate is 50%. The
figured is estimated to reach USD 480 m in 2010, and USD 1.7 bn in the next 5 years. So the
annual development speed of digitalized contents industry ranges from 35% to 50%.
www.jaccar.net
43
TELECOMMUNICATIONS
Revenues of digital content services
Internet content & online
advertisement
1%
4% 2%
15%
Games
1%
24%
28%
Mobile contents
E-commerce
E-learning
Digital movie
25%
E-medicine
Sources: IDG, MIC’s Telecommunications Department
Now there are more than 400 companies producing and doing business in digital content, in
which 300 specializing in this field with a 20,000-people workforce. Most of them are ecommerce solutions and Internet content providers.
Number of enterprises in the digital content sector
Workforce in the digital content sector
25000
500
450
400
350
300
250
200
150
100
50
0
20916
20000
459
15000
10000
5000
160
7540
1768
3179
4742
1274
1062
644
707
0
95
25
35
55
20
16
53
www.jaccar.net
44
TELECOMMUNICATIONS
Revenue of online services (in %)
Advertisement
6%
Games and Entertainment
3% 2%
33%
4%
E-commerce
8%
Data storages/search
engines
15%
E-learning
Digital movies, photos and
music
29%
Content sharing services
Other services
In spite of high expectation on growing speed, the above revenue chart indicates an uneven
development of content services, with a strong trend towards entertainment industry. The game
online market is growing at a remarkable pace of 300% per year. The involved enterprises in the
new industry are currently exploring most profitable contents for short-term business goals
instead of eco-social perspectives and needs such as education, online medical consultancy, and
information database development. The imbalanced situation may result in negative social
outcomes. Experiences from highly developed environments for digital contents, such as Korea,
show a balanced rate of entertainment and other services. It's the government who plays an
important role in direction and regulation. Vietnam's regulators must have appropriate and
stabilized development policies and frameworks in order to create better business environments
for providers of online medical and educational contents.
73% users for emailing,
messaging, online
information exchanging
According to recent surveys on the needs of Internet digital content users, the most frequently
used services were emailing, messaging, and online information exchanging (73%), then came
the online news services (55%), and a remarkably high percentage (44%) of clients with high
demands on website accessing and data streaming. There were a limited number of information
portal users, which took only one third of respondents. The number of online marketing and
advertisement service users is approx. 17%, which is the major source of income for this area.
An overview of Internet digital content usage:
•
•
•
•
•
•
Emailing, messaging, online information exchanging (73.32%);
News watching at e-magazines/newspaper (54.88%);
Using of websites with features of audio, video and data uploading and downloading:
(44.03%);
Using services at information portal (28.63%);
Using online marketing and promotional information (16.27%);
Never use Internet before (15.84%).
90% clients with daily access, 54% clients using Internet at least 4 hours / day, and 21% clients
using at least 8 hours / day.
www.jaccar.net
45
TELECOMMUNICATIONS
The survey also listed a number of problems that clients usually encounter while using Internet
digital contents. 95% respondents have complaints on connection quality, 67% showed certain
concerns over Internet safety, security or spread of virus and hacker attacks:
•
•
•
•
•
•
Bad connection quality: 95%
Concerns over information safety, security, and viruses: 67%;
Lack of clear, appropriate instructions: 32%;
Difficulties in information exchanging: 28%;
Font corruption: 20%;
Other problems: 35%.
Web 2.0 started to
develop, but no clear
profitability in near
future
Now the web 2.0 for industrial digital content supplies is of most interest with promising
profitability in the near future. The foreign e-commerce business models based on web 2.0 are
becoming popular. In this specific period, most of the profits are derived from online
advertisements, since most of content providers are building up their own markets, enforcing
their products, and enlarging their communities. Within the next 2 years, with such great pace of
Internet growth, their interactive properties will be modified and accommodated to market
demands, and web 2.0 websites will bloom out with new communities and high profitable
sources of online advertisements, value-added services, shared revenues with telecommunication
operators, membership fees, hosting fees and many other revenues. Among hundreds of Web 2.0
e-commerce website, the risks of future business loss are quite real, if operators do not have
appropriate business strategies, strong technical advantages, and financial supports until the right
chances appear.
Online payment
applications are expected
to be new booming
business
With the dramatic surge of mobile telephone users, the upcoming bandwidth technologies and the
expansion of commercial banking systems, online payment methods have been born with ecommerce transactions and online payment portal. These enterprises have been striving to
broaden their connection capacity and collaboration with other telecommunication service
providers, banks, and other e-commerce websites.
With more than 20 million Internet
users, approx. 60 million mobile telephone subscribers and 15 million bank accounts being used,
e-commerce and online payment applications are forecast to be new booming businesses in the
next few years in Vietnam.
The computer literacy and foreign language skills are major challenges to using Internet in
general, and to creating and developing professional websites in particular. These issues have
caused limited information transparency and exchange frequency among Vietnamese and
international communities. Meanwhile, websites using Vietnamese language lack content-rich
elements and popularity. From a general point of view, most of them are information collected,
generalized, and revised from traditional paper media. And therefore, the information offered to
relevant communities is not quite improved.
Since June 2003, the quantity of Internet domain names has been increasing a great deal, showing
a positive sign for Internet content development in Vietnam. Most of these content providers are
commercial users, who are in need of using Internet as means of business development. For
international domain names, such as .com, .net, .info, .org, and .biz, there were about 54,000
names registered by Vietnam-based Internet users (including ccTLD and gTLD according to
webhosting.info dated 24 November 2008), 80% of registered domain names were used for
commercial purposes. The .vn domain names stated below could reach more than 87,000 names.
However, they are only registered figures, and the actual domain names used for website
addresses took no more than 60% of them. For millions of enterprises registered for business
operations, and 30% of population living in urban areas, the figure is smaller than expected.
E-commerce has slowly
improved, compared with
other Internet-related
activities
The achievements in establishing local portals by industrial fields are quite encouraging, but it's
merely a good will instead of measured success. There are some sources of information that
remain unchanged after one year in operation. The point is, is it caused by a financial shortage,
less interest, or simply an act of going along with the crowd? This is also a counter effect to any
stimulus and procedural factors to online e-commerce, information supplies and usage, and
information technologies utilization.
www.jaccar.net
46
TELECOMMUNICATIONS
Except for websites from OSPs, ICPs, and ISPs, the websites in other fields, such as information
technologies, banks, tourism, export-import services, and education, all have high frequency of
accessibility. The general information available on commercial websites is published for business
purposes. They are advertisement, product and/or service offerings, sales activities, etc. In
contrast to poor performance of public websites, there's great enhancement in the quality of
commercial websites. Vietnam consumers can now enjoy more benefits from online transaction
applications. The top 10 commercial websites of 2008 ranked and published in early December
last year by Vietnam E-commerce and Information Technology Agency (Ministry of Industry and
Trade) all belong to B2C (Business-2-Consumers) websites. They include www.jetstar.com;
www.25h.vn;
www.vinabook.com;
www.megabuy.vn;
www.travel.com.vn;
www.thegioihoatuoi.com.vn;
www.saigontourist.net;
www.goodsmart.com.vn;
www.linhperfume.com; www.golmart.vn (according to Vietnam E-commerce and Information
Technology Agency - E-commerce Development Center's website www.ecomviet.vn).
Although there are a huge number of Internet users in Vietnam, the online trading communities
of Vietnam are still under-developed. The following websites are most typical cases
Collaboration initiatives between OSPs with other professional agencies have brought certain
Internet service quality enhancement and convenience to consumers. These services include
online search engines for examination results, phonebooks, music, legal documentation,
community healthcare consultancy, etc.
Now all the ministries, ministry-level agencies, urban and provincial authorities have their own
websites. These websites serve only as sources of information promotion to society, especially
specific legal documentation, directives for legal procedures, and providing access to individuals
and organizations. This will help to ensure professional communication among local authorities
with other parties (both domestically and internationally) Online information exchanging
between regulators and law enforcement agencies, such as providing public services, licensing,
and professional consulting, is still not realized. The implementation of e-government
applications has certain difficulties in assessment and measurement. Project 112 of the
Government in using IT applications to change administrative bodies' working methodology and
culture have turned into nothing but failures and financial waste due to lose control procedures.
The Government has issued Decree No. 64. Government agencies' websites are considered taking
their very first social responsibilities. MIC has recently carried out a survey for ranking websites
of public services.
It is time for online
advertisement business
The growing speed of online advertisement business is forecasted at 70-100% per year in the next
couple of years, and could result in revenue of VND 500 bn (USD 28 m) in 2010.
ii
Class of Service (CoS) is a way of managing traffic in a network by grouping similar types of traffic (for example, e-mail, streaming
video, voice, large document file transfer) together and treating each type as a class with its own level of service priority. CoS
technology is simpler to manage and more scalable as a network grows in structure and traffic volume.
Quality of service (QoS) is the ability to provide different priority to different applications, users, or data flows or to guarantee a
certain level of performance to a data flow
www.jaccar.net
47
TELECOMMUNICATIONS
COMPANY SHEETS
FPT Corporation
Rating: BUY
HIGH SPEED SURFING OVER STATEOF-ART CONVERGENCE PLATFORM
Target Price: 71,000 VND
Company Data
Price, close (Apr 21, 2009): 51,500 VND
Price, close (Apr 21, 2009): 3.09 USD
Market cap. (VND bn): 7,260
Market cap. (USD m): 435.62
Turnover per day: 1,818,020
Bloomberg code: FPT VN
•
Company Contacts
•
Truong Gia Binh (CEO)
Phan Duc Trung (CFO)
Bui Quang Ngoc (IR)
www.fpt.com.vn
•
Shareholder structure
Truong Gia Binh
SCIC
Deutsche Bank AG London
8.42%
7.20%
4.34%
•
Performance
300,000
250,000
•
200,000
150,000
100,000
50,000
0
4/07
7/07
Price
10/07
1/08
4/08
7/08
10/08
•
1/09
Price/VN Index
P&L Highlights
(VND bn)
Sales
EBIT
Op. Margin (%)
Net Income
Net Margin (%)
Fixed Assets
Debts
FCF
FCF yield (%)
2006
11,398
672
6%
450
4%
365
785
(156)
-106%
2007
13,499
1,048
8%
737
5%
1,013
1,316
(341)
-169%
2008
16,382
1,578
10%
836
5%
1,467
1,241
336
518%
2009e
16,489
1,694
10%
861
5%
2,076
1,335
191
370%
2010e
17,887
1,672
9%
974
5%
2,562
1,477
(16)
-30%
Key Ratios
(x)
EV/Sales
EV/EBITDA
EV/EBIT
PE
P/Book
ROE (%)
ROCE (%)
Div. Yield (%)
Payout ratio (%)
2006
0.8
12.0
13.4
20.0
5.9
35%
28%
0%
13%
Next Events
2007
0.9
10.8
11.8
16.6
6.3
45%
27%
2%
62%
2008
0.3
3.2
3.5
7.2
2.5
44%
38%
6%
53%
2009e
0.4
3.4
3.7
8.4
2.6
38%
33%
5%
44%
2010e
0.4
3.5
4.0
7.8
2.3
37%
25%
5%
47%
•
•
Being one of the top 10 highest market cap companies in Vietnam stock
markets, the no.1 local private and the no.1 ICT company, FPT seizes the
dominance in Vietnam market of all its key business lines including
integrated systems, software, ERP services, telecommunication services
and ICT product distribution.
In 2008, regardless of the recession, with its net sales growth rate of
21%, FPT Corporation did make a land mark with the first annual
revenue hit of USD 1 bn in its 20 year history.
"Globalization", "sector leading" and "fast growing" are key slogans that
has highlighted the shared goals of the group and its subsidiaries that
focus on value leverage for IT-related services and software solutions,
aiming at high margin business sectors and winning opportunities for
expanding to regional and international market. FPT's ambition is to be
the leading holding company and keep expansion to financial area.
FPT keeps fostering its "e-citizens" strategy in order to create a new ecommunity in the future enjoying and consuming the advanced high tech
service and products of FPT.
Hard expenses management and efficient operating leverage should go
on to drive margin growth as FPT addresses a commitment of cost
savings, more transparence in corporate governance and efficiencies in
human resources management.
Drivers for positive growth include the stronger capacity in big IT
projects, accumulative experiences and relationships with global IT
partners and internal resource efficiencies. We believe positive growths
and margin expansion to facilitate stable free cash flow performance.
For 2009, we expect total net revenue of USD 989 m (+0.7% y/y), net
margin expand to 5.2%. Our 2010 and 2011 estimates assume a
stabilizing environment, thus, we forecast 2010 revenue of USD 1,073 m
(+8.5% y/y), net margin to grow 5.5%, 2011 revenue of USD 1,189 m,
net margin expand to 6%.
We are initiating coverage with a Buy rating and VND 71,000 (USD
4.05) target price. We expect FPT’s core integration system, telecom and
software business to remain resilient during the current slowdown and
drive overall growth, as those segments benefits from big public projects
and higher demand on broadband telecom services.
SWOT ANALYSIS
Strengths
• No. 1 ICT company, being leader in all key
business lines, top private company
• Strategic partnership with leading global
technology firms like Cisco, SAP, Microsoft, etc.
• Prestigious ICT brand name in the region, strong
support by government, various biggest clients
• Dedicated and well-educated management team,
best technical team in Indochina ICT
Opportunities
Analyst
81-85 Ham Nghi
District 1
Ho Chi Minh City
Tel: +84 8 39 14 90 60
htn@jaccar.net
• Experiences and ability to approach international
market
• Huge investment in public ICT thanks to
government’s stimulus package and support by
World Bank
• Developing in the fast-growing business such as
media, telecom, advertisement, training
www.jaccar.net
Weaknesses
• Bureaucratic problems of big size, potentially
internal divergence among different levels of
management
• Products and services of distribution division
are not differentiated
• Risky expansion to non-core ICT segment like
banking, real estates and securities
• Overconfident in FPT culture
Threats
• Growing competition pressure in distribution
from both international and local players
• Risk of failure and losses in new financial
diversification sector
• Quality of outsourcing software is poorer than
India, China and others
• Economy recession impacts
48
TELECOMMUNICATIONS
VALUATION
As FPT is involved in different kind of businesses, we have to valuate as a holding. It means that
we used the following methods for each division, excluding the small stakes (we took into
account only the 2008 book value given by the company):
•
•
•
Discounted Cash-flows;
Peer Comparison;
Sector-based transactions.
DCF
For each business, the DCF is over 10 years as we have strong visibility on the performance and
the strategy of the company.
As FPT publishes only the revenues and the PBT (profit before taxes), we tried to estimate the
Ebitda, EBIT, Tax and Investments for each one. Our assumptions are resumed in the following
tables.
Otherwise, we would like to underline that the dividends were taken into account globally as the
company doesn’t pay any dividend separately.
DCF Integration system division
Sales
growth (in %)
2008
2009e
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
2,714,098 3,240,633 3,726,728 4,416,173 4,901,952 5,343,127 5,717,146 6,117,346 6,545,561 7,003,750 7,494,012
19%
15%
19%
11%
9%
7%
7%
7%
7%
7%
EBITDA
Ebitda margin (in %)
growth (in %)
Change in provisions
433,967 481,033.55 442,416.18 491,584.48
16%
15%
12%
11%
10.8%
-8.0%
11.1%
0
0
0
0
Change in WCR
(49,510)
(54,672)
39,532
Operating cash-flows
483,478
535,705
402,884
Taxes
Corporate tax rate
Investments
growth (in %)
Free cash-flows
Discount
Discounted FCF
EBIT
Op. Margin (in %)
Tax rate / EBIT
NOPAT
0%
525,995
11%
7.0%
0
562,815
11%
7.0%
0
602,212
11%
7.0%
0
644,367
11%
7.0%
0
689,473
11%
7.0%
0
737,736
11%
7.0%
0
789,377
11%
7.0%
0
62,112
44,898
44,898
44,898
44,898
44,898
44,898
44,898
429,472
481,097
517,917
557,314
599,468
644,574
692,837
744,479
89,441.47 93,913.54 105,988.14
19%
21%
22%
126,239
24%
135,076
24%
162,597
27%
173,979
27%
186,158
27%
177,057
24%
189,451
24%
48,543
11%
50,971
5%
53,519
5%
56,195
5%
59,005
5%
61,955
5%
65,053
5%
68,305
5%
40,143
40,405
1%
443,334.84
405,859
89%
265,139 274,940.79
80%
71%
303,887
63%
329,322
57%
338,521
50%
366,485
45%
396,462
40%
450,728
36%
486,723
32%
0
362,146
211,101
195,328
192,640
186,278
170,858
165,049
159,319
161,617
155,727
410,009
15%
0%
410,009
456,300
14%
20%
366,859
414,691
11%
23%
320,778
459,888 441,175.6 480,881.5 514,543.2 550,561.2 589,100.5 630,337.5 674,461.1
10%
9%
9%
9%
9%
9%
9%
9%
23%
29%
28%
32%
32%
32%
28%
28%
353,900
314,937
345,806
351,946
376,582
402,943
453,281
485,011
Sum of Discounted FCF
Terminal value
1,960,062
1,922,765
Total
3,882,827
43,831
8%
Source: Jaccar
www.jaccar.net
49
TELECOMMUNICATIONS
DCF Software division
Sales
growth (in %)
2008
706,655
2009e
823,960
17%
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
988,752 1,206,277 1,375,156 1,512,671 1,663,939 1,813,693 1,976,925 2,174,618 2,392,080
20%
22%
14%
10%
10%
9%
9%
10%
10%
EBITDA
growth (in %)
299,400 305,577.90 335,373.98 408,579.29
42%
37%
34%
34%
2.1%
9.8%
21.8%
0
0
0
0
Change in WCR
(14,007)
(15,560)
11,252
313,407
321,138
Taxes
Corporate tax rate
449,437
33%
10.0%
0
494,381
33%
10.0%
0
543,819
33%
10.0%
0
598,201
33%
10.0%
0
658,021
33%
10.0%
0
723,823
33%
10.0%
0
796,205
33%
10.0%
0
17,678
12,702
12,702
12,702
12,702
12,702
12,702
12,702
324,122
390,901
436,735
481,679
531,117
585,499
645,319
711,121
783,503
10,903.00 28,838.59 46,141.74
4%
9%
14%
57,201
14%
80,899
18%
88,989
18%
135,955
25%
149,550
25%
164,505
25%
224,385
31%
246,824
31%
Investments
growth (in %)
180,642
181,823
1%
197,240
8%
218,445
11%
233,736
7%
250,098
7%
267,605
7%
286,337
7%
306,381
7%
327,827
7%
350,775
7%
Free cash-flows
Discount
121,861
110,477
84%
80,741
70%
115,254
59%
122,100
49%
142,592
41%
127,557
34%
149,611
29%
174,433
24%
158,908
20%
185,904
17%
Discounted FCF
0
92,475
56,572
67,596
59,942
58,595
43,876
43,076
42,039
32,057
31,392
EBIT
Tax rate / EBIT
NOPAT
253,879
4%
242,976
258,585
11%
229,746
282,697
16%
236,555
Terminal value
527,620
549,543
Total
348,357 412,546.7 453,801.4 499,181.6 544,107.9 593,077.6 652,385.4 717,623.9
16%
20%
20%
27%
27%
28%
34%
34%
291,156
331,648
364,813
363,227
394,558
428,572
428,000
470,800
1,077,163
Source: Jaccar
DCF Telecom division
Sales
growth (in %)
2008
2009e
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
1,286,656 1,782,019 2,280,984 2,931,064 3,517,277 4,150,387 4,814,449 5,536,616 6,367,108 7,640,530 9,168,636
39%
28%
29%
20%
18%
16%
15%
15%
20%
20%
EBITDA
growth (in %)
479,588 642,023.39 766,360.58 980,269.52 1,176,323 1,411,588 1,693,906 2,032,687 2,439,224 2,927,069 3,512,483
37%
36%
34%
33%
33%
34%
35%
37%
38%
38%
38%
33.9%
19.4%
27.9%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
0
0
0
0
0
0
0
0
0
0
0
Change in WCR
(21,739)
(24,182)
17,486
501,327
666,205
748,875
Taxes
Corporate tax rate
94,806.00 129,196.35 159,668.86
20%
20%
21%
27,473
19,714
19,714
19,714
19,714
19,714
19,714
19,714
952,797 1,156,609 1,391,874 1,674,192 2,012,973 2,419,510 2,907,355 3,492,769
208,838
21%
258,791
22%
352,897
25%
457,355
27%
548,825
27%
658,591
27%
643,955
22%
772,746
22%
510,635
7%
546,379
7%
584,626
7%
Investments
growth (in %)
301,071
303,038
1%
328,734
8%
364,075
11%
389,561
7%
416,830
7%
446,008
7%
477,229
7%
Free cash-flows
Discount
105,450
233,970
85%
260,473
71%
379,883
60%
508,257
51%
622,147
43%
770,829
36%
986,919 1,250,285 1,717,021 2,135,397
31%
26%
22%
19%
Discounted FCF
0
197,774
186,114
229,442
259,487
268,493
281,194
304,325
371,777
29%
26%
276,971
530,723
30%
24%
401,527
641,599
28%
25%
481,930
837,637 914,492.0
29%
26%
25%
28%
628,799
655,701
EBIT
Op. Margin (in %)
Tax rate / EBIT
NOPAT
Terminal value
2,828,731
2,098,000
Total
4,926,732
325,891
378,309
397,702
1,079,100. 1,251,756. 1,439,520. 1,655,448. 1,986,537. 2,383,845.
6
7
2
2
8
4
26%
26%
26%
26%
26%
26%
33%
37%
38%
40%
32%
32%
726,204
794,402
890,695
996,858 1,342,583 1,611,099
Source: Jaccar
www.jaccar.net
50
TELECOMMUNICATIONS
DCF Distribution division
Sales
growth (in %)
2008
2009e
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
11,289,797 10,217,266 10,370,525 10,629,788 10,895,533 11,113,444 11,335,713 11,539,755 11,747,471 11,982,421 12,222,069
-10%
1%
2%
3%
2%
2%
2%
2%
2%
2%
EBITDA
growth (in %)
514,494 356,020.07 255,508.99 252,987.93
5%
3%
2%
2%
-30.8%
-28.2%
-1.0%
0
0
0
0
Change in WCR
(54,773)
(60,980)
44,094
569,267
417,000
211,415
Taxes
Corporate tax rate
Investments
growth (in %)
0%
263,107
2%
4.0%
0
268,370
2%
2.0%
0
273,737
2%
2.0%
0
279,212
2%
2.0%
0
284,796
2%
2.0%
0
290,492
2%
2.0%
0
296,302
2%
2.0%
0
69,279
49,671
49,671
49,671
49,671
49,671
49,671
49,671
183,709
213,436
218,699
224,066
229,541
235,125
240,821
246,631
44,700.54 41,482.10 39,861.71
13%
16%
22%
63,146
24%
64,409
24%
76,646
28%
78,179
28%
79,743
28%
63,908
22%
65,186
22%
80,906
11%
88,996
10%
93,446
5%
98,118
5%
103,024
5%
107,145
4%
111,431
4%
115,888
4%
66,905
67,342
1%
Free cash-flows
Discount
502,362.76
304,958
90%
96,881 62,941.62
81%
74%
61,294
66%
60,844
60%
49,301
54%
48,337
49%
48,237
44%
65,482
40%
65,556
36%
Discounted FCF
0
275,251
78,925
40,679
36,447
26,656
23,589
21,247
26,033
23,523
EBIT
Op. Margin (in %)
Tax rate / EBIT
NOPAT
557,570
5%
0%
557,570
311,500
3%
14%
266,799
205,604
2%
20%
164,122
195,935 217,910.7 222,268.9 226,714.3 230,795.1 234,949.4 239,648.4 244,441.4
2%
2%
2%
2%
2%
2%
2%
2%
20%
29%
29%
34%
34%
34%
27%
27%
156,073
154,765
157,860
150,068
152,616
155,207
175,740
179,255
Terminal value
598,630
731,531
2009e
183,765
37%
2010e
238,895
30%
2011e
305,785
28%
2012e
382,232
25%
2013e
477,790
25%
2014e
597,237
25%
2015e
716,684
20%
2016e
2017e
2018e
860,021 1,032,026 1,238,431
20%
20%
20%
EBITDA
growth (in %)
32,942 89,962.82 92,245.12 113,307.50
24%
49%
39%
37%
173.1%
2.5%
22.8%
0
0
0
0
135,969
36%
20.0%
0
169,961
36%
25.0%
0
212,452
36%
25.0%
0
254,942
36%
20.0%
0
305,930
36%
20.0%
0
367,116
36%
20.0%
0
440,540
36%
20.0%
0
Change in WCR
(3,320)
(15,560)
2,737
4,300
3,010
3,010
3,010
3,010
3,010
3,010
3,010
36,261
105,523
89,508
109,007
132,959
166,951
209,441
251,932
302,920
364,106
437,529
16,768.58 17,917.11 22,551.67
19%
19%
22%
29,913
22%
37,391
22%
46,739
22%
56,087
22%
67,305
22%
80,766
22%
96,919
22%
Total
73,052
8%
46,281
1,330,161
Source: Jaccar
DCF Training division
Sales
growth (in %)
Taxes
Corporate tax rate
2008
134,528
0%
Investments
growth (in %)
20,071
20,203
1%
21,916
8%
24,272
11%
26,699
10%
29,369
10%
31,425
7%
33,624
7%
35,978
7%
38,496
7%
41,191
7%
Free cash-flows
Discount
16,189
68,552
85%
49,676
72%
62,184
61%
76,347
52%
100,191
44%
131,277
37%
162,220
32%
199,637
27%
244,844
23%
299,419
19%
Discounted FCF
0
58,207
35,814
38,067
39,684
44,220
49,197
51,619
53,939
56,171
58,325
49,598
37%
0%
49,598
72,649
40%
23%
55,881
72,838
30%
25%
54,921
91,120
30%
25%
68,569
EBIT
Op. Margin (in %)
Tax rate / EBIT
NOPAT
Terminal value
485,244
343,273
Total
828,517
99,380.2 124,225.3 155,281.6 186,338.0 223,605.6 268,326.7 321,992.0
26%
26%
26%
26%
26%
26%
26%
30%
30%
30%
30%
30%
30%
30%
69,467
86,834
108,542
130,251
156,301
187,561
225,073
Source Jaccar
www.jaccar.net
51
TELECOMMUNICATIONS
Our WACC is based on:
•
•
•
•
Vietnamese 5 years bond: we took into account the average of the transactions on the
latest issue done by the government;
Beta: we used the date given by Bloomberg;
Risk premium: is calculated from a free default government bonds (i.e. the US
government bonds on the historical valuation), the Moody’s rating for long term bonds
(definition of the ADI default spread) and the adjusted country risk premium (equity
emerging markets are in average 1.5x more volatile than bond markets);
Long term interest rate: based on 2008 expectations for the group.
The WACC is changing for each division as well as we estimated the financial structure for each
one. We would like to give 2 examples: a low-leveraged and a high-leveraged:
WACC Distribution Division
WACC Software division
Cost of capital
15-years bond
Beta
Risk premium
Cost of capital
15-years bond
Beta
Risk premium
in %
9.19%
1.27
9.48%
21.23%
in %
10%
25%
7.5%
in %
87%
Cost of debt
Long-term interest rate
Taxes
Assumptions
Shareholder Equity
Share price
Nb of shares (fully diluted)
Debts
WACC
in %
9.19%
1.27
9.48%
21.23%
in %
10%
25%
7.5%
in %
24%
Cost of debt
Taxes
Assumptions
Shareholder Equity
Share price
Debts
WACC
13%
19%
76%
11%
Source: Jaccar
Source: Jaccar
Peer comparison
We selected only the key players in each industry in Asia, Europe and in the US. Regarding the
total number of competitors chosen (42), we cannot disclose a full description for each one.
However, we would like to underline that only the most relevant in terms of businesses,
profitability, strategy and ROE were selected. Please find below the tables for each activity (the
valuation will be resumed in the valuation summary table in the Conclusion paragraph):
Integration system division
Peer Comparison set 1
Company Name
NEC
Dimension Data
Digital China
3Com
Cisco
HARRIS
Unisys
Median
Last Price
301.00
46.25
3.40
3.44
17.93
29.91
0.72
EV/Sales
EV/Ebitda
EV/Ebit
2009e
2010e
2011e
2009e
2010e
2011e
0.35
0.21
0.08
0.39
1.96
1.19
0.17
0.35
0.37
0.21
0.07
0.41
2.02
1.18
0.17
0.37
0.37
0.19
0.06
1.83
1.23
0.18
0.28
12.08
3.95
5.82
7.92
4.73
1.47
5.27
12.47
3.71
4.50
8.70
4.55
1.29
4.53
6.96
3.32
3.36
6.92
4.69
1.39
4.02
2009e
41.65
6.62
4.94
8.42
7.26
5.37
6.00
2010e
46.25
6.27
3.97
9.01
7.05
3.66
5.12
2011e
27.45
5.00
3.02
7.01
7.06
3.39
6.01
Source: Bloomberg
www.jaccar.net
52
TELECOMMUNICATIONS
Software division
Company Name
Cognizant Technology
Sapient Corp.
Syntel Inc.
Infosys
Affiliated computer
Wipro
Hitachisoft
SAP
Oracle
Temenos
Accenture
Nomura Research Institute
Nihon Unisys
Intuit Inc.
IBM
Median
Last Price
23.10
5.25
22.25
1,409.30
49.58
268.75
1,205.00
29.00
18.87
12.00
27.80
1,656.00
705.00
25.39
99.27
EV/Sales
2009e
1.47
0.63
2.04
2.62
0.95
3.10
0.67
2.80
3.34
2.33
0.85
1.09
0.53
2.44
1.37
1.47
2010e
1.30
0.63
2.04
2.48
0.90
2.92
0.71
2.67
3.30
2.28
0.84
1.10
0.54
2.31
1.33
1.33
EV/Ebitda
2011e
1.30
0.54
1.66
2.26
0.85
2.65
0.71
2.67
3.30
2.28
0.84
1.10
0.54
2.31
1.33
1.33
2009e
9.70
7.87
10.06
6.00
7.76
4.54
10.39
8.32
7.38
5.31
5.19
4.13
8.60
7.18
7.57
2010e
8.42
6.48
9.94
5.44
7.49
5.30
9.28
8.39
6.66
5.33
5.11
4.80
7.66
6.94
6.80
EV/Ebit
2011e
7.35
6.83
6.04
9.10
5.14
6.85
5.14
8.59
7.91
6.39
5.11
4.95
4.64
7.16
6.77
6.77
2009e
8.25
9.61
8.76
8.76
18.93
9.42
11.20
7.38
12.17
6.29
7.52
8.55
8.45
8.28
8.66
2010e
7.17
6.50
8.69
7.90
18.87
11.10
9.57
7.51
10.87
6.30
7.64
8.55
7.80
7.87
7.88
2011e
6.10
5.90
7.89
7.41
17.15
9.92
8.68
6.60
9.46
6.02
7.24
8.02
7.09
7.57
7.49
Source: Bloomberg
Telecom division
Company Name
Afone
Comcast Corp
Clearwire
Media Communication
Time Warner Cable
I Cable
NCSoft Corp
Softbank
BT Goup
Median
Last Price
EV/Sales
EV/Ebitda
2009e
2010e
2009e
2010e
1.06
2.26
2.54
1.95
0.90
2.21
1.49
1.00
1.72
1.00
2.18
2.46
1.87
0.87
1.95
1.44
1.00
1.66
19.37
5.23
6.89
3.72
2.35
18.94
7.46
3.60
6.06
3.53
5.00
6.73
3.56
1.94
16.43
6.23
3.30
4.28
3.48
13.86
5.16
4.78
27.80
0.61
131,000.00
1,520.00
81.10
EV/Ebit
2009e
4.67
11.33
12.44
11.29
352.74
8.18
11.22
10.98
11.25
2010e
67.07
10.53
13.20
10.20
8.81
10.53
Source: Bloomberg
We would like to underline that no information are available for 2011 year.
Distribution division
Company Name
DELL US equity
HPQ US equity
AVT US equity
ARW US equity
2347 TT equity
SYNEX TB equity
IM US equity
TECD US equity
Median
Last Price
10.47
34.12
18.62
19.30
47.90
1.12
12.85
23.50
EV/Sales
2009e
0.22
0.82
0.20
0.22
0.77
0.14
0.07
0.05
0.21
2010e
0.21
0.79
0.21
0.21
0.42
0.13
0.07
0.05
0.21
EV/Ebitda
2011e
0.21
0.76
0.48
2009e
4.00
5.62
5.81
28.97
2.63
5.10
5.03
5.10
2010e
3.62
5.42
6.32
16.12
2.61
4.26
4.36
4.36
EV/Ebit
2011e
3.44
5.43
4.44
2009e
4.65
7.83
5.99
48.53
8.77
7.88
6.83
7.83
2010e
3.87
7.52
7.44
26.45
9.23
5.63
7.48
2011e
3.87
7.16
5.52
Source: Bloomberg
www.jaccar.net
53
TELECOMMUNICATIONS
Training division
Company Name
Last Price
Aptech Ltd
NIIT
BTS Group
Median
115.05
25.65
23.70
EV/Sales
2009e
2.48
1.90
0.81
1.90
2010e
2.27
1.90
0.78
1.90
EV/Ebitda
2011e
2.27
1.61
0.73
1.61
2009e
7.88
4.55
6.95
6.95
EV/Ebit
2010e
7.46
3.97
5.46
5.46
2011e
5.27
3.34
4.71
4.71
2009e
13.81
32.95
8.21
13.81
2010e
12.37
29.96
6.82
12.37
2011e
8.19
22.58
5.75
8.19
Date
Price
EV
India 9/1/2009
USA 20/1/2009
30/12/200
Germany
8
Denmark 2/12/2008
14/11/200
Germany
8
Belgium 9/10/2008
Italia 3/18/2008
Russia 16/9/2008
USA 21/8/2008
Germany 29/7/2008
Greek 18/7/2008
Israel 20/5/2008
USA 29/4/2008
Germany 24/4/2008
UK 28/3/2008
69
449
69
449
0.5
-
-
-
-
13
268
13
268
0.5
0.6
6.6
6.2
15.1
9.1
233.3
13.3
23
12
40
15
35
6
25
8
18
9
280
23
12
40
15
35
6
25
8
18
9
280
0.4
0.1
0.4
0.6
1.6
4
11.3
0.5
22.1
84.8
7
135
46
5
135
7
135
46
5
135
0.3
1.7
3.7
7.1
-
-
-
Source: Bloomberg
Sector-based transactions
Integration system division
Sector-based transactions set 1 (in M EUR)
Target
Bidder Country
Siemens Information Systems Ltd
Interwoven Inc
Siemens Corporation Finance Pvt.
Ltd
Corporation Plc
nextevolution AG
KMD A/S lautrupparken
White Beiligungsgesellschaft mbH
KMD holding A/S
SoftM Sotware und Beratung AG
Selligent SA
Selesta Ingegneria s.p.a
Reksoft Co Ltd
Wonderware Mobile Solutions
SYSDAT GmbH
Informer Group
Tarc Computers and System Ltd
Aleri Global Banking Business
HighQ-IT for the manufacturing industry GmbH
Civica Plc
T-system
LOGIX Group
sds business service GmbH
Accountis Europe Ltd
Wombat Financial Software Inc
Comarch Software AG
optizen
BNL - Gruppo BNP Paribas
TechnoServ A. S.
Wonderware Corperation
Cancom IT systeme AG
temenos Group AG
Matrix IT Ltd
Wall Street Systems
Perot Systems Corperation
3i Group Plc
Cognizant Technology Solutions
Coperation
Arrow Electtronics Inc
Affiliated Computer Services, Inc
Fundtech Ltd
NYSE Euronext
India 5/3/2008
France 25/2/2008
Germany 14/2/2008
UK 7/2/2008
USA 14/1/2008
P/
P/S Ebitda P/Ebit
PE
Source: Mergermarket.com
As more than 120 relevant transactions were referenced, we preferred to give only a sample of
the most recent ones. The median of the transactions between 2005 and 2009 is as follow: P/Sales
(1x), P/Ebitda (12.1x) and P/Ebit (17.8x).
www.jaccar.net
54
TELECOMMUNICATIONS
Software division
Target
P/
EV P/Sales Ebitda P/Ebit
Bidder
Country
Date
Price
Enghouse systems Limited
Foresight Group Octopus
Diagnos. Co.uk Limited
Investments
SoftM Software und Beratung AG
Comarch Sofware AG
Danet Gmbh
Devoteam SA
Mindware Engineering Inc.
ESI North America Inc
Ascribe Plc
Scroll Bidco limited
Helios IT
Norriq AS
FNZ Holdings Limited
H.I.G European Capital Partners
ILOG SA
IBM Corporation
MessageLabs Ltd
Symantec Corporation
Julie- Owandy
Arseus NV
Fermat International
Moody's Corporation
Selesta Ingegneria s.p.a
BNL
Orca Interactive Ltd
Viaccess
Ci Consulting Limited
CCH Inc
Reksoft Co Ltd
TechnoServ A/S
Esa Software
Il Sole 24 Ore
Secure Computing Corporation
Aladdin Knowledge Systems
EDB Gruppen A/S
Cidron IT A/S
DynaTrace Software Gmbh
Bain Capital
IBS AB
Deccan Value Fund
Zoomix Data Mastering Limited
Microsoft Corporation
Messtechnik Wetzlar GmbH
Hexagone AB
Praxis Calcolo s.p.a
Data Service SpA
Glint - Global Intelligent
Consiste Sistemas de Informacao SGPS Unipessoal LDA
Technologies SGPS SA
Alphameric Hospitality Limited
Alphameric Plc
Alchemy Software Development Ltd
Transactions.com Inc
Drummohr technology Limited
IRIS Software Group Limited
Tact Computers and System Ltd
Matrix IT Ltd
Mediasurface
A;terian
Realviz SA
Autodesk Inc
Micro Drainage Limited
Cardno Limited
Ascott Software A/S
Profdoc ASA
NetManage Inc
Micro Focus International Plc
Aleri Global Banking Business (Aleri Inc) Aleri limited
Wall Street Systems
i2 Ltd
Silver Lake Sumeru
Diligent Technologies Corporation
IBM Corporation
FilesX inc
IBM Corporation
Axial System Limited
NVM Private Equity Limited
Gruppo Datel SpA Cedass Srl
Sapient SpA
TFB Group
Tikit Group Plc
Paycorp Payment Solutions Pty Ltd
Birch Partners Plc
Million Handshakes AS
Portrait Software Plc
Pluck Corporation
Demand Media Inc
Consort NT SA
AZA Private Equity
Anyware Techonologies
Wavecom SA
Planet Holdings Plc
20-20 Techonologies Inc
Troltech ASA
Nokia Oyj
Superscape Group Plc
Glu Mobile Inc.
Hevacomp Ltd
Bentley System Incorporated
Dash Optimization
Fair Isaac Corporation
CSC (World) Limited
ISIS Private Equity Partners Plc
Sweden
3/4/09
6
6
0.7
-
-
-
UK
Germany
Germany
USA
UK
Belgium
New Zealand
France
UK
France
Belgium
Italy
Israel
Ireland
Russia
Italy
USA
Sweden
USA
Sweden
Israel
Germany
Italy
25/2/09
2/2/2009
19/01/2009
12/1/2009
17/12/2008
8/12/2008
5/12/2008
24/11/2008
17/11/2008
3/11/08
9/10/2008
3/10/2008
3/10/08
24/09/2008
16/09/2008
10/9/2008
4/9/2008
1/9/2008
5/8/2008
4/8/2008
14/07/2008
24/6/08
10/6/08
8
22
45
4
34
23
169
509
18
158
40
8
20
16
60
42
81
23
125
13
20
13
8
22
45
4
34
23
169
509
18
158
40
8
20
16
60
42
81
23
125
13
20
13
1.4
0.4
1.6
1.5
5.5
0.9
1.9
1.9
2
0.7
0.5
-
5.7
65.8
9.6
8.3
7.4
-
6.7
8.9
30.9
-
9.5
-
Portugal
UK
Ireland
UK
Israel
UK
France
UK
Danish
US
US
UK
US
US
UK
Italy
UK
Australia
Norway
USA
France
France
UK
Norway
UK
UK
UK
UK
5/6/08
5/6/08
3/6/08
27/5/08
20/5/08
16/5/08
7/5/08
3/5/08
2/5/08
1/5/08
29/4/08
24/4/08
17/4/08
10/4/08
10/4/08
3/4/08
3/4/08
27/3/08
20/3/08
3/4/08
3/3/08
1/2/2008
29/1/08
28/1/08
23/1/08
22/1/08
22/1/08
21/1/08
43
22
8
6
8
22
18
17
12
38
18
118
126
44
23
20
11
18
7
49
31
13
26
92
15
11
22
27
43
22
8
6
8
22
18
17
12
38
18
118
126
44
23
20
11
18
7
49
31
13
26
92
15
11
22
27
0.6
1
0.4
1.5
2.5
1.5
1.5
6.1
2.8
7.5
0.8
2.5
2.7
3.4
1.2
2.8
7.2
0.1
8.3
9.7
155.4
5
8.5
7.5
11.1
33.9
12
14.8
Trio Enterprises AB
PE
(1.8x), P/Ebitda (12.5x) and P/Ebit (15.9x).
www.jaccar.net
55
TELECOMMUNICATIONS
Telecom division
Target
Bidder
Cinet ooo
Stream TV Group
Liberty Surf Group SA
AxisMobile Ltd
Interwave
Soudelor Ltd
Amen
Tele2 Poland sp. Zoo
Verizon South Africa (Pty) Ltd
Zajil International Telecom Company
Datametrix AS
Nienshants - Pakt - Katrina - Riko-TV
Trader.com (Polska) Sp. Z o.o
Paycorp Payment Solutions Pty Ltd
Crossnet
123-Reg Limited
Atlas.cz
The Internet Business Limited
Country
Date
Price
NetByNet
Russia
AOA
Russia
Iliad SA
France
Synchronica Plc
Israel
NetByNet
Russia
UFG Private Equity Fund I, L.P
Russia
Reguster.it S.p.A
France
Netia SA
Poland
MTN Group Limited
South Africa
Etihad Etisalat
Saudi Arabia
Telenor ASA
Norway
Akado Group
Russia
Agora SA
Poland
Birch Partners Plc
Australia
Akado Group
Russia
Host Europe WVS Limited United Kingdom
Centrum.cz
Czech
UTV Media Plc
Ireland
23/10/2008
4/9/2008
26/08/2008
18/08/2008
12/8/2008
28/07/2008
16/07/2008
30/06/2008
25/06/2008
25/06/2008
23/06/2008
17/06/2008
14/05/2008
27/03/2008
25/03/2008
14/03/2008
26/02/2008
13/02/2008
8
172.06
800
4.4
4.69
5.09
17.1
31.76
111.12
13.6
28.07
19.34
35.19
17.56
6.48
154.68
39.81
6.72
P/
8
172.06
800
4.4
4.69
5.09
17.1
31.76
111.12
14.16
28.07
19.34
35.19
17.56
6.48
154.68
39.81
6.72
2.7
4.8
1.5
0.3
0.6
6.4
6.1
1.6
-
9.5
7
544.7
14.8
-
-
PE
-
(1.6x), P/Ebitda (11.2x) and P/Ebit (21x).
Distribution division
We had to split this division into two sub-sectors as FPT is involved in the distribution of
computer hardware (85%) and other appliances (15%):
Target
Salon Svyazi Eldorado
Narico Holdings
Boulanger Espana SL
Euroset Group
Ultimate Ears
HomeBuy Group Plc
Tec7 Limited
Electric City A/S
Philips Sound Solutions
F Group A/S
Packard Bell NV
Link Stores Ltd
Grupo Arc
Markantalo Oy
Expert Invest AB
Median
Average
Bidder
Country
Date
Price
Mobile Telesystems OJSC
Mobile Telesystems OJSC
Sonae Distribuicao SGPS SA
ANN Investment
Logitech Intenational SA
Endless Investments LLP
Endless Investments LLP
DSG International Plc
D&M Holdings Inc
Lap Shun Hui
O2
Vinzeo
Expert ASA
Russia
Cyprus
Spain
Russia
USA
UK
UK
Denmark
Japanese
Denmark
Netherlands
UK
Spain
Finland
Sweden
26/02/2009
10/2/2009
20/10/2008
22/09/2008
31/08/2008
19/07/2007
1/5/2007
8/1/2007
3/1/2007
30/11/2006
16/10/2006
18/09/2006
2/3/2006
1/3/2006
3/1/2006
18
66
25
271
23
33
16
36
53
80
67
44
15
49
29
P/
18
66
25
271
23
33
16
36
53
80
67
44
15
49
40
0.3
0.1
0.6
0.1
0.4
0.2
0.2
0.1
0.2
0.4
0.6
6.0
10.3
10.3
15.6
13.7
13.1
PE
28.3
22.3
29.5
www.jaccar.net
56
TELECOMMUNICATIONS
Target
Dicota Gmbh
Philips Speech Recognition System
Stone Computers Limited
Scribona AB
NUR Macroprinters Ltd
PB Holding Company
Pearson Plc
Ezurio Limited
Sonex Group UAB
AT Computers
Becom Informationsysteme Gmbh
Advanet Inc
Actebis Computers BV, Gmbh, SAS
Knosos SL
Sahara Holdings
Review Video LLC
Calamus Danmark A/S
Elpro International Pty Ltd
Anix Group Ltd
ednet AG
Servo Computer Services Limited
Clarity Ireland
Austin AB
Packard Bell BV
Fargo Electronics
TPK Holdings
Rectron Holdings
Memorex Products
Raisonnance SA
Touchstar Technologies Limited
Topnordic A/S
Digital Network Services Deutschland
PSC Inc
Scitex Vision Ltd
ASKO-TBS Consulting
Cantata Technology Inc
KISS Technology A/S
Median
Average
Bidder
Country
Date
Price
Consortium of private investors
Nuance Communications Inc
RJD Private Eauity Fund II
Tech Data AB
Hewlett Packard
Gateway
M&F Worldwide Corporation
Laird Group Plc
Ementor ASA
AB-SA
Arxes Network Communication Consulting AG
Eurotech s.p.a
Arques Industries AG
Amper SA
Simeka BSG
Westcom Group Inc
Altaria AS
The MTL Instruments Group Plc
XploITE Plc
Elecom Co Ltd
Phoenix IT Group Ltd
Westcoast Ltd
Altor Equity Partners
Lap Shun Hui
HID Corporation
Balda Investments
Mustek Limited
Imation Corporation
Initiative et Finance
Belgravium Technologies Plc
Ementor
Arrow Electronics
Datalogic
Hewlett Packard
RBC Information Systems OAO
EAS Group
Cisco System Inc
Germany
Austria
UK
Sweden
Israel
Netherlands
USA
UK
Lithuania
Poland
Germany
Japan
Europe
Spain
South Africa
South Africa
Denmark
Australia
UK
Germany
UK
UK
Sweden
Netherlands
USA
Germany
South Africa
USA
France
UK
Denmark
Germany
USA
Israel
Russia
USA
Denmark
17/12/2008
1/10/2008
6/4/2008
19/05/2008
29/02/2008
27/02/2008
22/02/2008
11/2/2008
21/01/2008
11/12/2007
5/12/2007
4/10/2007
28/09/2007
6/9/2007
31/08/2007
17/07/2007
5/7/2007
17/05/2007
4/4/2007
27/02/2007
3/11/2006
24/10/2006
23/10/2006
16/10/2006
4/8/2006
26/07/2006
8/6/2007
28/04/2006
19/04/2006
27/03/2006
8/3/2006
30/12/2005
1/12/2005
1/11/2005
26/10/2005
24/10/2005
6/9/2005
14
66
36
40
80
31
154
17
22
28
100
46
6
88
18
16
12
15
13
43
15
236
67
234
119
6
272
6
12
127
130
163
204
12
142
51
P/
14
66
36
40
80
31
154
17
22
28
100
46
6
88
18
16
12
15
13
43
15
295
67
234
119
6
272
6
12
127
130
163
204
12
142
51
2.6
0.5
0.1
1.4
2
3.1
0.1
2.1
0.9
0.9
0.4
3.7
1.5
0.3
0.7
0.1
1.3
3.4
0.8
0.4
1.1
0.4
1
1.7
1.2
1.0
1.3
20.8
128.5
10.5
3.8
6
10.5
4
8.7
18.6
2.5
12.9
10.2
10.4
19.8
PE
9
10.6
5.4
10.6
10.9
20.1
11.7
3.9
15.7
19.5
16.1
10.8
11.7
58.2
10.7
14.3
3.1
17.2
30.6
7.6
7
18.7
92
40.8
15.8
25.9
P/Ebit
da P/Ebit
PE
Training division
Target
Bidder
Country
Date
Price
White Beteiligungsgesellschaft
Ness Technologies
QA-IQ group limited
Xpertise Group Plc
Sparxent Inc.
Logica Plc
BT Singapore Pte Ltd
ISIS Private Equity Partners
CSC Limited
Plc
ACAL IT Limited
Avnet Inc
Arxes network Communication Consulting AG
TDMI India Holding BV
Metekan Sistem ve Bilgisayar
Aktera
Longview Solutions Inc
Exact Holding NV
Calyx Group Plc
Stornoway Limited
QA-IQ Group Limited
Englefield Capital LLP
auSytems Operations (France, Italy, Norway, UK)
Devoteam SA
auSytems Operations (Sweden, Denmark, Poland)
Cybercom groupe Europe AB
Scomagg Limited
CSE-Servelec Group Limited
Asseco Poland SA
Sofbank SA
Fritz & Macziol Gmbh
Imtech NV
Whale Communications Ltd
Microsoft Corporation
QA Plc
QA-IQ Group Limited
Matrix Communications
Calyx Group Plc
QED Business Systems Ltd
Maxima Holdings
Arxes Network Communication Consulting AG
NDO Services BV
Mount Lane Training and Implementation Solutions
ILX Group Plc
Median
Average
Germany
Czech Republic
UK
UK
USA
Portugal
Singapore
30/12/2008
1/10/2008
22/09/2008
26/08/2008
25/08/2008
7/3/2008
24/03/2008
13
43
17
3
11
138
92
13
43
17
3
11
138
92
0.5
1.5
0.6
0.1
0.9
6.6
3.1
8.1
15.1
3.9
10.9
6.6
-
UK
UK
Germany
Turkey
Canada
UK
UK
Europe
Europe
UK
Poland
Germany
USA
UK
UK
UK
German
UK
21/01/2008
17/12/2007
10/12/2007
19/11/2007
9/11/2007
26/07/2007
5/6/2007
2/4/2007
2/4/2007
8/1/2007
4/1/2007
28/08/2006
26/07/2006
19/06/2006
12/6/2006
15/05/2006
30/01/2006
23/11/2005
27
59
17
239
37
153
46
10
75
13
162
50
59
9
60
6
23
6
27
59
17
239
37
153
46
10
75
13
162
50
59
9
60
6
23
6
2.8
0.6
0.6
1.8
1.7
0.2
1
1.3
0.4
0.2
1.2
0.5
2.6
0.8
1.0
9.7
14.9
14
3.4
8.1
27
9.3
4.7
8.7
10.4
11.1
16
23.5
12.7
8.7
6.7
11.9
12.7
14.8
24.7
66.2
13.9
8
11.5
14.8
25.2
nextevolution AG
Logos as
Xpertise Group Plc
Parity Training Limited
Network D Corporation
Edinfor Sistema Informaticos SA
BT Fronline Pte Ltd
EV P/Sales
www.jaccar.net
57
TELECOMMUNICATIONS
Conclusion
Valuation summary and recommendation
Valuation summary
Divisions
FIS
Software
Telecommunication
Training
Distribution
Media
Other assets
FPT securities (book value)
Tienphong Bank (book value)
FPT Capital (book value)
Valuation
- Debts
- Minorities
Total (in VND)
Total (in USD)
Number of shares
Valuation per share (in VND)
Valuation per share (in USD)
Including country Discount (in VND)
Including country Discount (in USD)
Methods
DCF
3,882,827
1,077,163
4,926,732
828,517
1,330,161
-
Including country & holding Discount (in VND)
Including country & holding Discount (in USD)
Peer comparison Transactions
1,732,437
5,720,156
2,465,808
3,133,805
3,381,725
7,062,360
476,896
595,010
1,537,938
5,199,149
142,296
Valuation
Total
3,778,473
2,225,592
5,123,606
633,474
2,689,083
142,296
243,500
53,000
158,500
32,000
13,651,327(*)
(1,877)
(526,235)
13,123,215
749.9
140
94,003
5.37
79,902
4.57
70,502
4.05
Source: Jaccar
(*) after taking into account dividends payment for the DCF valuation (base: 40% of pay-out ratio)
We adopt a Buy
recommendation with a
target price of VND
71,000
After the concatenation of the different methods applied, as well as the country discount (15%)
and the holding discount (we apply 10% for taking into account the future equitization of two
stakes and the small diversification recently made by the Group), our target price reached VND
71,000 (i.e. 4.05 USD). We have decided to adopt a BUY recommendation.
The headwinds in economy and stock market have resulted in FPT stocks being traded in a
fascinating valuation while the company keeps possessing the leading position in the most fruitful
and highest growing sector - ICT. The huge IT spending in the public sector and financed by
international institutions directly benefit FPT’s core businesses and keep its revenue rising. The
company’s technology capacity and strong drivers gives us a positive view on its long term
growth. Since 2008, the key financial ratios of FPT have been more and more reasonable, our P/E
estimates of 2009 and 2010 are 9.5x and 8.8x.
The global technology players seem to deal well with the recession during 1Q09, therefore, the
peer comparison brings the attractive results to all sub divisions of FPT. Meanwhile, those lines
are believed to retain high margins thanks to the potentiality of the emerging market, proper
development strategies with a long term vision. That facilitates FCF performance and pops up the
impressive DCFs for every key business line of FPT. Moreover, the company has not become a
full holding model as it has still concentrated on its core IT segments and expanded less to the
financial and banking sectors, the holding discount rate applied as relatively low as 10% is quite
reasonable.
Shareholders
On 31 December 2008, FPT's chartered capital was VND 1,411 bn (USD 80.2 m), with a total
volume of shares of 140,978,924, listed share volume of 139,787,819. The FPT's market
capitalization value on 16 April 2009 was VND 8,177 bn (USD 490 m), the price was VND
58,000 (USD 3.48).
www.jaccar.net
58
TELECOMMUNICATIONS
Shareholder structure (February 25, 2009)
State (SCIC)
7%
Others
35%
BOD,BOM, Supervisory Board, Chief Account.
30%
Overseas
28%
Source: FPT
Quiet SCIC, chairman is
the biggest shareholder,
BoD and BoM own 30%
The Government's holder representative, SCIC, currently owns 7.13% of FPT's shares. Althoug
one of the key holders, they showed no significant influences on FPT's business operations.
Mr.Truong Gia Binh, the chairman, is the biggest shareholder with 8.22%. The total share
volume held by FPT's Board of Directors, Board of Management, Supervisory Board and the
Chief Accountant is about 30.5%.
Deutsche Bank AG
London currently owns
4.34%
The foreign-owned ratio of shares is more than 28%, so there is still plenty of room for foreign
investors. Deutsche Bank AG London is the biggest foreign shareholder of FPT, with the
shareholding of 4.34%. On February 25, 2009, other foreign institutional shareholders recorded
are Red River holding (3.21%), Citigroup Global Markets Financial Products LLC (2.19%), UBS
AG London branch (1.66%), TPG Ventures - FPT, LLC (1.26%).
A new foreigner is
appointed to be BoD
member
The company management team is well balanced between the foreign side and others, with
sleeping SCIC, FPT board seems to keep the full control on the operations and management
decisions. The first foreign member on BoD, Mr. Jonathon Ralph Alexander Waugh from Oshan
Fund, was appointed in the Annual General Meeting last March, which is an effort to improve
transparency in corporate governance.
Management Team
FPT's board of management is a board of highly skilled, qualified and dynamic managers, along
with Vietnam's leading experts in IT industry, whose involvement might influence national ICT
development projects and policies.
• Truong Gia Binh – the Fleet Admiral
As one of the 13 founders of FPT in 1988, Mr. Truong Gia Binh has been the captain of the FPT
vessel, driving it through challenges and critical milestones of its business history with
remarkably successive growth in the last 20 years. He outlined important strategic targets for FPT
in each phase of its development: from trading with Eastern Europe, to the first initiative of
entering the ICT market, then going global. Truong Gia Binh has been a critical factor to most
FPT’s successes.
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TELECOMMUNICATIONS
He has some influence in
ICT sector policies
Nam is the general of
software troops
Binh has a communist family background, and was married to a daughter of General Vo Nguyen
Giap, a great leader of Vietnam's national army. He studied in the former Soviet Union, earning a
Ph.D. in mathematics and physics in Moscow in 1982, and worked as an associate professor in
Germany in 1981. Binh has held a number of important roles in Vietnam ICT industry and
business: head of business management faculty, National University of Hanoi; Senior Member of
Vietnam Chamber of Commerce and Industry (VCCI) and Vietnam Association for Information
Processing (VAIP); President of Vietnam Software Association (Vinasa). In 2009, he will leave
the position of FPT CEO, still be chairman for better focusing on developing the company’s ecitizen initiatives as well as training the next generation of senior executives.
Truong Gia Binh is considered to have a leading enterprise management mind in Vietnam, and an
influential player to policies related to the ICT development and telecommunication investments
of the Government of Vietnam. He is the architect of software industry investment, such as the
Lang Hoa Lac high-tech park participated in by several investors coming from Japanese and
domestic IT and telecommunication business communities.
• Mr. Nguyen Thanh Nam, CEO – new image and new hope for FPT
Nam received his PhD in Mathematics in Lomonosov University, Moscow in 1988 and began his
career at FPT Corporation, as one of the first Programmers, System Analysts and Designers, in
the same year. He then focused on business software in banking and enterprise management and
his team participated in almost all the major computerization projects in Vietnam during the next
decade. In 1997, Nam and Binh were determined to establish FPT Software as a key player in the
global software market. With the establishment of the FPT Software division in late 1999, Nam
was appointed CEO and Managing Director.
In 10 years, the export sales volume of FPT Software has risen by 90 times, with an increase of
human resources from 17 to 3,000 people. Nam has made FPT Software the biggest Vietnamese
software service provider, entering the list of top regional outsourcing companies with
subsidiaries and clients all over the world. FPT Software has become the front line unit of FPT's
globalization strategy.
He become CEO of FPT
Corporation since Apr 09
A FPT founder and key
top manager, Ngoc got a
top CIO award
Since December 2008, Nam has become the new chairman of FPT Software. Since April 2009,
Nam has become the highest manager, CEO of the FPT Corporation in replacement for Mr. Binh.
This position showed the confidence of Binh and the BOM in Nam's ability in encouraging FPT
forces as well as the deployment of strategies on Software - IT services, eCitizen, and
Globalization in order to lead FPT to regional level with substantial development.
• Mr. Bui Quang Ngoc: Vice-Chairman of the BOD, Deputy General Director
As one of the first members of FPT, Mr. Bui Quang Ngoc is a key leader of FPT, with crucial
contribution to FPT development foundation. He has intensive expertise in Vietnam IT industry
with excellent project management skills. Since the 90s, he had managed a number of Vietnam's
software and IT projects for the Government, including national defense, state-owned banks and
enterprises. In 2005 he was gained an award as one of the top Indochinese CIOs by IDG. Mr.
Bui Quang Ngoc graduated from Math Department of Kishinhov University, the Republic of
Moldova, and earned a PhD degree in Data Consolidations at Grenoble University in France. He
currently serves as the Vice-Chairman of the BOD, Deputy General Director, FPT-IS Chairman,
Head of Council of Shareholders, and QA Director of FPT.
• Mr. Do Cao Bao: Member of the Management Board, Vice General Director
Do Cao Bao is among FPT’s 13 founders. One of the most renowned software experts in Vietnam
during the 1984 -1992 period, he contributed to many national information technology projects
such as the construction of the National Internet Network, Profiling Network (Ministry of Public
Security), Unified Communication Infrastructure Network for the finance industry, Billing
application and Customer Service Network for the electricity sector.
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TELECOMMUNICATIONS
Bao leads FPT IS to
become the most
important division of
FPT
Graduating from the National Military Technology University in 1984 majoring in Controlled
Mathematics, he has taken up posts in many different institutions such as: Combat Department of
the General Staff Ministry, the Vietnam National Mechanic Institute, the National Information
Technology Institute. Mr. Bao also worked in the IT sector in Germany and France in the 1980s.
He has helped FPT Information System become the 1,700-staff-strong company it is today from
just 16.
Beside these key people are Mr. Le Quang Tien and Mr. Hoang Minh Chau. Both are Vice
Presidents of the Management Board, Vice General Director of FPT Corporation, also have an
open mind and great contribution to FPT development. Tien is a founding member and co-author
of financial system in FPT. Chau has been director of FPT Branch in HoChiMinh City since
1990, has joined hands in building FPT HoChiMinh City from a small branch, surpassing other
well-known IT companies in the area to become a leading organization in the South.
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TELECOMMUNICATIONS
MARKET DYNAMICS
FPT’s Vision
Clear vision with long
term values
FPT literally messages its vision: “FPT strives to be a company guided by technology
innovations, committing to the highest level of customer and shareholder satisfaction,
contributing at best to the society, and having the most favorable working environment for all
employees that enables them to explore their maximum potential in professional career as well as
spiritual life”.
The above clear vision implies a long term value and ability to encourage its internal resources to
strive for the corporation development. The results it has got over 20 years show the evidence of
this sound vision.
A trip over 20 years
Proud 20 year history to
become the 1stprivate
conglomerate of 15
affiliated companies in
ICT …
FPT Corporation, formerly the Food Processing Technology Company, was founded in 1988. In
1990, the Company was renamed The Corporation for Financing and Promoting Technology and
opened its first branch in HCM city. In 1994, the Company established its IT service and
equipment distribution centers. The Company was granted licenses to be the first Internet service
provider (ISP) and content service provider (ICP) in Vietnam in 1998. In 1999, it launched new
expansion initiatives in software development and IT specialist training. In 2002, the Group
completed its equitization procedures, and was licensed to be Internet Exchange provider (IXP).
Then it entered the Vietnamese brand computer market by a PC production factory. In 20032005, the Company became the holding company of several subsidiaries in a variety of high-tech
businesses, including: system integration, software solutions, telecommunication, media and
mobile technologies. 2006 marked an important milestone in the history of FPT with its business
involvement: granted USD 36.5 m by Texas Pacific Group and Intel Capital, it launched the Hoa
Lac and HCM City High-tech Zone development projects, started its business initiatives in real
estate, opened the FPT University, and officially listed in HoSE in December 2006. Then FPT
continued its quest for new markets, such as financial - banking, real estate and retailing business.
At present, FPT is a conglomerate of 15 affiliated companies operating in 6 major sectors.
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TELECOMMUNICATIONS
Organization chart
CORPORATION
BRANCHES & REP. OFFICES
FPT Ho Chi Minh
FPT Da Nang
FPT Can Tho
MEMBER
IT and Telecommunication
Real Estates
FPT Service Company
FPT Promo Company (60%)
FPT Communications Co. Ltd.
FPT Trading Group
•
•
•
Finance and Banking
FPT HoaLac High-tech
Park Development
FPT Land Company
FPT Distribution Company
FPT Retail Company
FPT Mobile Company
Education and Training
FPT Securities JSC. (25%)
FPT University
TienPhong Bank (15%)
FPT Capital JSC. (33%)
•
•
•
•
•
FPT Aptech Computer Education
FPT Arena Multimedia
FPT University in Hanoi
FPT University in Hochiminh City
Da Nang Enrollment Office
FPT Information System Company
•
•
•
•
•
•
•
FPT Information System for Financing and Banking Services
FPT Information System for Telecom and Public Services
FSE Information System
FPT Public Finance Solution
FPT ERP Services
FPT Information System Services
FDR Software Development
FPT Telecom JSC. (43.5%)
•
FPT Telecom North Co., Ltd
•
FPT Telecom South Co., Ltd
•
FPT Telecom International Co., Ltd
•
FPT Internet Data Service Co., Ltd
•
FPT Communications Co., Ltd.
•
FPT Interactive Media Co., Ltd.
•
FPT Network Co., Ltd
•
FPT Telephone Co., Ltd.
•
FPT Online JSC. (23.62%)
FPT Software Company (68.89%)
•
•
•
•
•
•
•
FPT
FPT
FPT
FPT
FPT
FPT
FPT
FPT Technology Development Center
Software Japan
Software Asia Pacific
Software Malaysia
Software EUROPE
USA
Australia Ltd.
Software Solution Co., ltd.
Sources: FPT
… and diversify to
financial and banking
sectors
Regarding organizational structure, FPT has several subsidiaries and affiliated companies, which
are joint-stock or limited liabilities companies. FPT is the dominant holding party, with a
majority voting control of 60%-100% in most of its IT and telecommunication affiliated
companies.
Like other successful enterprises in Vietnam, FPT has also diversified into financial services. It
has invested VND 110 bn for a 25% stake in FPT Securities which commenced operation in
October 2007 and VND150bn for a 10% stake in FPT Bank. In addition, it has also invested
VND36.3bn in FPT fund management company for 33% of its stake.
The core ICT business
lines still secure the
growth
Despite its latest expansion, FPT is still channeling corporate resources into the IT industry, the
heart of its business, for substantial development. With its loyal partners, the establishment of
these new businesses has allowed FPT to promote supportive financial channels for its corporate
visions of globalization, as well as to take full advantage of its well-positioned leadership in IT
industry for better business performance. The Group has thus avoided certain critical effects from
the recent crisis in Vietnam financial and securities markets, and moved on with its stable growth.
Sole ownership of large
contribution affiliated
companies
FPT is the sole owner of its affiliated companies with large contribution to its revenue structure,
such as FPT Distribution, FPT Soft, FPT-IS and others. FPT's ownership ratio in FPT Telecom
was less than 50%, (the other is state-owned portion) which qualified FPT Telecom as a stateowned corporation in terms of equity ratio requirements for full telecommunication license
holders.
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TELECOMMUNICATIONS
Having plans to equitize
some divisions
FPT's strategy aims at a more independent development for its subsidiaries, and then when the
time comes, they will be equitized and listed on stock markets. In 2008, FPT-IS and FPT
Telecom transformed into corporation form with 7 and 6 affiliated companies, providing supports
for these two corporations for a more flexible and independent operational framework. In 2009,
FPT also restructured its distribution networks by merging all sub divisions into FPT Trading
Group, prepared for FPT Distribution's PC production, the FPT Elead, and planned to equitize
FPT IS and FTG.
A shot of Formula 1
FPT is always at top rank
in ICT sector, blue chip
in stock market and has
some overseas branches
FPT is a leading ICT corporation and has been in the top 10 highest market cap companies in
Vietnam in 2008. FPT has a diversified scope of business, including: System integration,
Software solutions and exports, ERP services, Telecom and IT products distributions, Internet
access and Online content services, Education and training, Computers assemblies, Research and
development, Real estate and infrastructure development investment, Banking and Financial
services, Retails, Media and Advertisements. Having its Head Quarter in Hanoi, branches in
major cities and provinces in Vietnam, with a staff profile of more than 8,500 and software
development subsidiaries in Japan, France, US, Australia and Malaysia, FPT is also the 1stranked corporation of the Top 500 leading enterprises of Vietnam (VNR500).
Last 10 year magic
development to reach
USD 1 bn sales in 2008
In the last 10 years, FPT has kept breaking records in business growth, with its revenue increased
by 25 times, profit ratio by 137 times, and in the period of 2001 - 2007 having reached a growth
rate of 40%, and more than 20% in 2008 with about USD 1 bn sales.
Having high ranking
partnership with key
global IT vendors
FPT has developed partnerships with several key players in the global IT market, such as
Microsoft, IBM, Oracle, Nokia, Cisco, HP, SAP, Mitsubishi, etc. Its expertise and performance in
IT and telecommunication sectors are second to none, and have reached regional level. FPT can
handle ten-million-dollar IT projects. The local playground was no longer fit its operational scale,
since the last 2 years, the Group's management board has directed its business to global markets,
with expansion initiatives in every major business sector.
Benefits from a vast
customer base of many
valuable clients in public
and financial sector
In the domestic market, FPT has a vast customer base, consisting of government agencies, such
as Ministry of Finance, General Department of Taxation, National Treasury, General Department
of Customs; major corporations and groups in private sector clients, VNPT, Vietnam Airlines
Corporation, biggest state-owned corporation in oil, gas, and steel industries, and other leading
foreign and domestic banking institutions: VCB, BIDV, Vietinbank, Agribank, SCB, HSBC,
ANZ, and other international financial organizations, etc. The company has the strongest
presence in the financial and public administration services.
Besides its pioneering unit entering the global market - FPT Software, FPT’s system integration
unit has started its first successful project in the ASEAN region.
Having a combination of
5 important success
factors
The key factors of FPT's success include: (i) a highly qualified management team with welldefined corporate visions and strategies, supported by skilled staffs with high commitment, (ii) a
widespread distribution network, (iii) leadership in Vietnam high-tech industries with high
ranking partnerships with several global technology giants; (iv) a broad client base in software
development; (v) a state-of-art IT and telecommunication infrastructure;
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TELECOMMUNICATIONS
In the big scene of ICT
2008 global IT spending
rose 7%, 2009 forecast
decline 5% and IT world
will hardly recover until
2011
In 2008, according to Gartner, the global IT expenditure was estimated at USD 1,412 bn, an
increase of 7%, in which USD 810 bn were spent on IT services, + 7.6%; almost 42% of this
expenditure included software outsourcing and development, IT-based management and
production processes, and BPO (Business Process Outsourcing). But the global financial crisis
had left critical damages to IT industry, with a series of warnings of sales decline for IT key
players, and gloomy predictions for 2009. IDC lowered its forecast for the global IT growth
expenditure from 5.9% in August 2008 to 2.6% in November, the figure stopped at 0.5% in the
1st quarter of 2009. The lastest forecast from Gartner has shocked by a negative number, “ICT
will see about USD 3.2 trn in spending this year, compared with nearly USD 3.4 trn in 2008”,
decline of 3.8%, among which telecom down by 2.8%, sharply decline in IT of 5%. The world IT
market could hardly recover until 2011.
Worldwide IT Spending Forecast (in bn USD)
2008 Spending 2008 Growth in% 2009 Spending 2009 Growth in %
Computing Hardware
Software
IT Services
Subtotal - IT
Telecom
All ICT
381
221.9
809.5
1412.4
1948
4772.8
2.8
10.3
7.6
6.7
5.6
6.1
324.3
222.6
796.1
1343
1891.2
4577.2
-14.9
0.3
-1.7
-4.9
-2.9
-3.8
Source Gartner Inc., 03/2009
Vietnam ICT has still
developed well thanks to
a combination of
government ICT
investment, stimulation
package and huge
finance from World
Bank
However, Vietnam saw some more positive signs with a total IT expenditure in 2009, as
estimated by IDC, at USD 2.3 bn, accounting for 2.97% of its GDP, an increase of 7.4%
compared with 2008. But this growth rate indicated a real problem in comparison with its rate of
20-30% in previous years. 2008's total revenue of the industry reached approx. USD 4.5 bn, with
an overall growth rate of 20%, in which the telecommunication and electronic device industries
account for USD 2.8 bn (USD 2.4 bn for exporting, and the other USD 400 m coming from
domestic consumption), an increase of 16%; the computer hardware industry also gained USD
700 m (+ 16%); the software industry USD 600 m (+ 20%); and the digital content industry USD
270 m (+ 50%).
Vietnam IT industry is
forecast to grow 7.4% in
2009, 12.4% by 2010, and
18% by 2011
The gloomy outlook of both world and domestic economy in 2009 - 2010 period have put
Strategy for Development of Information Technology towards 2010, which was approved by
Vietnam government in 2007, at stake. This initiative was supposed to ensure an annual growth
rate of 20% - 25%, with a total revenue of USD 6 - 7 bn by 2010; and by 2020, the growth rate
would reach 20%, with a total revenue of USD 15 bn. Those targets seem very hard to reach.
However, this very tough period may show up the most favourable opportunities in Vietnam
market: The government has insisted on their e-Government and e-Commerce modeling, with
reinforced investment in demand stimulation and financial supports by World Bank; and shaping
telecommunication projects with next-generation technologies convergence and high volume of
investments (Vietnam telecommunication industry was forecasted to grow by 40% in 2009), and
the financial and banking institutions, once having their organizational restructuring completed to
deal with financial crisis, will channel their investments into IT industry and applications for a
better competitive edge. So, the Vietnam IT industry is forecast to grow 7.4% in 2009, 12.4% by
2010, and 18% by 2011.
Hardware vs. software
Services and software
will surpass hardware
and networking in IT
structure
Regarding IT industry structure, the value-added services and software development sectors tends
to surpass the hardware and networking device ones. IDC predicted that the software expenditure
would raise from 19.3% in total IT expenditure increase in 2007 to 20.8% by 2012
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TELECOMMUNICATIONS
Worldwide IT spending by Technology 2007
Worldwide IT spending by Technology 2012
Services,
38.80%
Hardware, 30.90%
Services, 39.30%
Software,
19.30%
Hardware,
31.60%
Software, 20.80%
Networking
equipment,
10.20%
Source: IDC
Networking equipment, 9.10%
Source: IDC
Software CARG of 4.2%,
IT sector CARG of 2.6%
in the period of 20072012
The software development sector is the pioneering driver for global IT expenditure growth,
thanks to its value-added services. The CAGR on software spending implies an increase of 4.2%
from 2007 to 2012. The CAGR for overall IT industry is 2.6%, with the slowest growth in the
networking equipment sector with a CAGR of only 1.3%.
Japan & Asia-Pacific
grows fastest
Regarding regional markets, software-related revenues of Japan & Asia-Pacific regions have
been always at highest level.
Enterprise Software Revenue Growth by areas (in %)
2006
2007
2008
Americas
EMEA
Asia Pacific And Japan
9.8
8.9
10.1
10
18
12.7
7.5
12.7
12.6
2009
2010
2011
2012
8
7.2
10.4
7.5
6.5
9.9
7.5
6.4
9.6
7.1
6.2
9.2
Source Gartner
SAP got the big 2008
success in Japan & AsiaPacific, especially in
Vietnam, Cambodia and
Pakistan with growth
rate of 89%
According to latest reports from SAP - a major partner of FPT and most local software
companies, 2008 saw growth rate of 23% for SAP in Asia-Pacific & Japan, including US$ 758 m
revenue from software and USD 1,521 bn (+24%) from related services. In ASEAN regions, SAP
software sector has grown by 20%, related services increased 19%, especially in Vietnam,
Cambodia and Pakistan (emerging markets) with the highest growth rate of 89%.
Vietnam software
outsourcing growth speed
likely falls
Regarding domestic development, the growth rate of the software industry remained at 20% for
2008, falling sharply from the 40% growth of 2007, and also much lower than the targeted rate of
35% as most forecast in early 2008 (Source: Vinasa). The oversea markets are used to play a
crucial role in Vietnam's total software revenue, but due to impacts of the economic slowdown
and recent cut-off in IT expenditures worldwide, these markets has shrunk a great deal. Some
companies even faced bad debts due to their client's payment problems. Several local software
developers have accepted new challenges caused by this financial crisis, and adjusted their
business strategies and plans. The domestic market has been targeted by some software
companies as an alternative goal. Vinasa had to outline an assistance program for software
companies to deal with this crisis, including pro-outsourcing initiatives, overseas sales increase,
and guidance on product and market development strategies. However, Vietnam still has a
fighting chance with its position among the top 30 countries with most favourable conditions for
international outsourcing business, and HCM City took the 4th rank in the Top 50 emerging cities
of best software outsourcing investment in the world. In the Asian-Pacific regions, Vietnam is
among the Top 10 leading countries in software outsourcing services with most competitive
labour costs. According to IDC's forecast, the growth rate of Vietnam software development
industry in the period of 2009 - 2011 is expected between 15% - 18%.
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TELECOMMUNICATIONS
Telecommunications: be still a light source… or the best?
Telecommunication
keeps a steady growth, a
hope for FTTH in Asia
Surpassing the IT industry, there is still a possibility for global telecommunication industry to
reach 7% by 2012, in which Asian-Pacific regions are of approx. 8%, outrunning the North
American & Middle East and African regions with an annual growth rate of 8.6% (according to
Gartner). Regarding Internet market, ABI Research indicated an estimated global broadband
subscription volume of 520 million by 2014, and in the next 6 years, the annual growth rate
would reach 7%. There are certain signs of market saturation in DSL services, with a new trend
towards FTTH services. According to another report from Heavy Reading, the growth rate of
FTTH service subscribers will be of 30% by 2012, and Asian markets will be among the hottest
regions with 54 million out of 89 million subscribers in total by 2012.
Vietnam
telecommunication is
booming, we forecast
Vietnam Internet CARG
of 25% over 2009-2012
This is also the most highlighted sector of Vietnam IT & telecommunication markets: with the
robust rise of Internet & telecommunication applications, the surge of telephony subscription
volume, with a total number of networked telephones of 82.3 million units, of which mobile
telephone subscribers account for 85.5%, and a teledensity of 97.5 units/100 inhabitants. There
are 20.67 million Internet users nation-wide, with a density of 24.20%. The total volume of
broadband subscribers had reached approx. 2 million. The 2008 total sector revenue was VND
92,445 bn, an increase of 38% compared with 2007. The submitted state budget was VND 11,831
bn, +22% (Source: MIC). Despite the economic slowdown, Vietnam Internet telecommunication development remained at high pace. Jaccar forecasts that the average growth
rate of broadband Internet subscribers in the period of 2009 - 2012 will be 17% - 49%. CAGR of
Internet services and transmission line in the 4-year period will be approx. 25%.
Now …as its worst: Distribution
Sharp falling in IT
distribution, -5% in 2009
The distribution segment is forecast to fall dramatically due to the global crisis. According to
IDC, by the end of 2008, the growth rate was only 3.8%, with a 12.6% decrease for 4Q08. 2009
will see a 2.2% sales decrease in handheld devices, compared with 2008. Only smartphone
products will show a positive signal with 8.9% sales rising worldwide. It is expected to resume a
positive growth rate by 2010. But not before late 2011, will the mobile sales possibly restore 2digit growth rate. According to a recent report by Merrill Lynch, it is said that the sales volume of
mobile devices in emerging markets might fall 5% compared with 2008.
2009 PC market down
4.5%
As for PCs, IDC also suggested a 4.5% decrease worldwide. Only computer hardware has a sharp
decline of 15%. This slowdown trend is also inevitable in Vietnam PC market, which is predicted
to recover in 18 months at the earliest. While PC and IT device sector suffers from a price
decline, the mobile telephone business will only be affected by price decreases, since Vietnamese
consumers still enjoy handphones for low and medium price. As a result, the sales volume for
this particular segment of mobile products maintained its growth, although much lower than its
previous growth rate of 40% in the period of 2006-2008.
Visible threats from
foreign distributor and
direct sale from
manufacturers in local
market behind WTO gate
In addition, from 1 January 2009, 100% foreign-owned retail companies have been allowed to
enter this market (according to WTO commitments), which might leave deep impacts on retailing
sectors. In preparing for new market accession in early 2009, many manufacturers have offered
their products directly to key retailers like Sony, or have planned to directly approach their endusers. In 2008, a number of other players, including Asus, Gigabyte, HP, and Lenovo, outlined
their proactive preparation plan even though they has still depended on their local distributors.
Their representative offices have started their own marketing and brand positioning plans, and
conducted direct negotiation with retailers on discounts. Therefore, the existing distributors
would only work as the intermediary of import and distribution with declined earnings. Once
these players completed their own customer service and maintenance centers, they will certainly
move to the next step with the establishment of Vietnam-100% legal entity for direct distribution
to current retailers. At present, several hardware manufacturers are developing their independent
warrantee programs and systems in Vietnam. As for retailing sectors, foreign players show a
slower penetration, with an expected period of 1.5 - 2 years for IT product retailing concerning
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TELECOMMUNICATIONS
post-sales warrantee services. International retailer corporations usually authorize their suppliers
or hire their local partners for warrantee services, and may be standby until other hardware
manufacturers launch their own warrantee systems.
Battles in the field
FPT key subsidiaries
Company
Key business
Capacity
Customers
FPT Information System IT system Integrator, solution supplier
and software developer in terms of
designing, building, providing solutions
for IT system in different fields; which
include Software solutions, BPO, ERP,
Network system, Security information
systems, Intelligent building solutions,
Stored systems, Backup and recovery
systems Data center systems and
services, Maintenance, etc.
+ Government Clients: Ministry of
Finance, Tax Bureau, State
Treasury , General Tax Bureau,
Customs Head Office, State
Securities Commission of
Vietnam, Department of National
Reserve, Ministry of Public
Security, and other dozen
ministries and government
agencies
+ Large corporations in
telecommunication, transportation
and other sectors like VNPT,
Viettel, EVN, VNA, Vietsovpetro,
PetroVietnam
+ All banks, many hospitals and
international organizations etc.
FPT Trading Group
+ Projects in banking, Health and
education sectors, Government
agencies
+ Retailed customers
FPT Software
FPT Telecom
FPT university
+ Highest ranking partnership (Gold Partner)
of Top global IT vendor: Cisco, Microsoft,
CheckPoint; Certified Advantage Partner by
Oracle.
+ 1st Diamond Partner of Symantec in
Vietnam
+ Top Vietnam Partner for 2008 by SAP,
Strategic Service Partner agreement with SAP
in APAC- Japan
+ Cisco Best Partner in Asia 2007, 2008 Five
accreditations by Cisco for Leading System
Integrator, Leading Hi-tech Partner, Leading
Security Partner, Leading Service Partner and
Best Satisfied partner.
+ Top Applications Partner for 2008 by Oracle
+ Best IT provider by Ministry of Information
and Communication
+ 2008 Sao Khue award for the software
“FPT.SmartConnect”
+ 2008 cup for Leading software provider in
Vietnam.
+ Owning more than 1000 international
certificates granted by world leading providers
such as IBM, HP, Cisco, Microsoft, Oracle,
SAP, SUN, ArInfo, Diebold, Checkpoint,
Netscreen, etc.
Distributor of IT hardware, software,
+ 956 agents covering 53 out of 64 cities and
devices, game applications & mobile
provinces (396 for IT, 560 for mobile
handsets, simcards
distribution)
+ 60 prestige partners incl.IBM, Lenovo,
Microsoft, HP, Nokia, Toshiba, Oracle,
Samsung, Cisco, Dell, Lynksys, Nortel, 3Com,
Veritas, Computer Associates, Apple, Intel,
Symantec, NEC, Seagate, MSI, Foxconn,
Sandisk, Logitech, Motorola, Vertu, HTC
+ Best distributor of authentic merchandise in
Vietnam
Outsourcing BPO, ERP, QA Testing and + CMMI 5 certificates, BS7799, ISO
Embedded services,
9001:2000 certificates
+ Overseas branches in Japan, Singapore, the
US, Australia, France and Malaysia
+ 3 out of 4 software awards in Vietnam ICT
Award 2008: Best software company; Best
revenue, Best quality management
+ EU: Harvey Nash, IBM France,
IBM Benelux, Neopost
+ Vietnam: Unilever, Vinamilk
+ Asia Pacific: Iperintis, IBM
Singapore, Jurong Port, Petronas,
Schoroders Investment
Management
+ Japan: Canon IT Solutions,
Fujifilm Group, Hitachi Group,
IBM Japan, JIP, Kyocera Group,
Mizuho Trust Systems, NAM,
NCS, Nomura Research Institute,
Panasonic Group, Sanyo Group,
Sanyo Group, Toshiba Group, TIS,
USOL Vietnam
+ The US: Ambient Consulting,
Agilis Solutions, CourtTrax,
DataLab, Freescale, IBM US,
MSNBC, Tamale, Triwire
Providing both internet networks and
+ Advanced infrastructure: Wimax Wifi,
+ Government Clients: Ministry of
internet-based value added services such ADSL 2+, VDSL2+, FTTH in 8 big provinces Finance, Ministry of Industry,
as online game, IPTV, server and web and cities, MLPS, 20Gbps International
Commerce, Ministry of Public
hosting, online ads, etc.
Bandwidth
Security, and other dozen
+ Fast-grown value added services, IPTV,
ministries and government
Online game, digital music, SMS, VoIP, triple- agencies
play, hosting, server-related services
+ Large corporations in
telecommunication and other
sectors like VNPT, VNA, Ford
motor Vietnam, Toyota Vietnam,
Unilever Vietnam etc.
+ Banks, Embassies and
international organizations
IT Academic education and link with
1,800 students, training facilities in Hanoi,
Aptech
Hochiminh City and Da nang
Source s:FPT, Jaccar
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TELECOMMUNICATIONS
Revenue and profit performance by business lines ( in bn VND)
2007
Revenue
Rev.
Contribution
PBT
margin
Profit
Contribution
System Integration
Software
Telecom
Training
Distribution
Retail
Media
Maintenance Services
1,814
476
842
65
10,154
59
83
5
13.43%
3.53%
6.23%
0.48%
75.21%
0.43%
0.62%
0.04%
10.0%
36.3%
27.0%
31.6%
4.7%
-18.0%
18.0%
92.4%
Others
Total
2
13,499
0.01%
-3402.3%
7.6%
2008
Revenue
Y/Y
Growth
Rev.
Contribution
17.6%
16.8%
22.1%
2.0%
46.1%
-1.0%
1.5%
0.4%
2,714
707
1,287
135
11,066
223
167
28
49.7%
48.4%
52.9%
107.1%
9.0%
281.3%
99.6%
451.8%
16.6%
4.3%
7.9%
0.8%
67.6%
1.4%
1.0%
0.2%
-5.5%
56
16,382
3290.6%
21.4%
0.3%
PBT
Profit
Margin Contribution
11.8%
31.7%
27.7%
32.4%
4.0%
-7.9%
12.6%
79.4%
307.7%
20.5%
25.9%
18.1%
28.8%
3.5%
35.4%
-1.4%
1.7%
1.8%
-13.9%
Source: FPT
FPT-IS - “Steel Punch” with system integration, software
development and ERP services
FPT-IS has a diverse
client base, esp. in
financial and public
sector
FPT-IS is the ICT company with the largest market shares in Vietnam, with 3 major businesses of
system integration, ERP and software solutions. FPT-IS operates as a holding corporation of 7
affiliated companies specializing in each business line. FPT-IS has developed most of the
national IT and communication infrastructure, with a diverse client base covering a wide range of
areas, including national defense, ministerial bodies, government offices, education
organizations, telecommunication companies and corporations, and transportation enterprises.
Especially, it dominates the public financial and banking sectors with several key clients, such as
Ministry of Trade, General Department of Taxation, National Treasure, State Bank of Vietnam,
and major banks like VCB and BIDV, Agribank.
FPT IS holds over 1,000
IT certificates, hence
becoming the top
Vietnam partner of most
global vendors
FPT IS is the second largest company of FPT in terms of revenue, contributing 16.6% of its gross
2008 revenue with a remarkable growth rate of 50%, 20% higher than planned. FPT IS is now the
only Vietnam IT company being selected as a golden partner of all four international key players
in networking technologies, system development, software and security, namely Cisco,
Microsoft, Oracle and Checkpoint. FPT IS is also a premium partner of more than 20 other firms
with top IT experts holding 1000 international certificates and credentials in IT and solutions.
FPT IS has always been selected as a best partner of the year by Cisco, SAP and Oracle in terms
of revenue criteria, project volume and technical team quality.
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TELECOMMUNICATIONS
Market share in system integration (in %)
Visco, 3.5%
ONE, 3.5%
ISP, 4.0%
DTS, 4.0%
Hong Co, 4.0%
Tecapro, 4.0%
FPT, 47.7%
HiPT, 5.1%
CMC, 8.1%
Elcom,
7.9% HPT,
8.2%
Source s: Jaccar, FPT
FPT IS occupied 48%
system integration
market shares
The 2008 total domestic market value of integrated systems and solutions was approx. USD 340
m, in which FPT IS's revenue accounts for 48%, equivalent to approx. USD 162 m. FPT IS has
been the key player dominating the domestic IT market, with its annual gross revenue 7 times
higher than that of the second largest company. Among its areas of business, banking revenue
reached USD 80 m, telecommunication and public service sectors USD 34 m, enterprise solutions
USD 18 m, software and services USD 24 m (USD 17.5 m for software development, USD 6.5 m
for service business), software exporting USD 1.5 m.
Having capacity to deal
ten- million IT projects
FPT IS has continuously focused on building up its capacity in order to be able to manage some
USD 50-million system integrated projects, and some USD20-million software development
projects. By late 2008 and early 2009, FPT IS consistently won a series of major projects,
including: USD 15 m of personal taxation service package in 3 years, the ATM systems for
Agribank of approx. USD 7.5 m, and a USD 4 m data solution for Vietnam's General Statistics
Office. By December 2008, the total value of 2009 transferred contracts accounted for approx.
USD 75 m.
FPT IS will secure its top leadership in the domestic IT industry and globalize software and
service outsourcing business, targeting the South East Asian & Japanese markets, with an income
contribution of 20% to FPT's gross revenue. FPT has planned to equitise FPT IS to improve the
division’s independence and effectiveness, but no more than 10% of its chartered capital will be
sold in the initial period.
High growth rate of 50%
in 2008
Next to a light decline of FPT IS's revenue in 2007, 2008 witnessed a surge in FPT IS's revenue
with a growth rate of 50%, and its pre-tax profit margin was more than 11.8%, thanks to a series
of major projects in financial-banking sectors, taxation & customs, security, aviation, and other
IT infrastructure and solution investment projects ordered by key domestic players as well as FDI
enterprises for their enhancement in international competitiveness at the WTO accession of
Vietnam.
Its revenue is forecasted
to grow of 19%, 15% and
27% with slight decrease
in pre-tax margin in
2009-2011
However, the global economic slump has left a great impact on IT expenditure, with Vietnam IT
spending rate expected to reach 7% in 2009. However, the tough situation brings great
opportunities, such as: demand stimulus package and IT expenditure by the government, and
recent huge projects financed by World Bank to Vietnam public financial sector and IT system
modernization. At the same time, although the private companies and financial - banking
institutions have had to struggle to survive during the crisis, the small and medium enterprise
sector turned their attentions to business management software solutions for more effective
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TELECOMMUNICATIONS
operations and competitiveness. With a series of major contracts with the government, FPT IS's
revenue is forecast to rise about 19%, earning more than USD 185 m in 2009. The recovery of
the global economy and FDI's capital flows in 2010 will be the base for FPT-IS to maintain its
growth rate of 15%. In addition, its positioning in solution and service export sectors aiming at
regional and Japanese markets, along with the stabilization of international markets, will help
FPT IS raise its export volume to 20 times higher than that of 2008, with a revenue growth speed
of 27% by 2011. FPT IS's contribution percentage of FPT's gross revenue will be 10%, 21% and
22% by 2009, 2010, and 2011 respectively. FPT IS will have a slight decrease in profit before tax
margin, ranging from 11.5% to 10% in the next 3 years to win future projects and maintain its
development speed in the situation of increasing competitiveness both domestically and
internationally. FPT IS human resource is expected to increase from 2 - 2.5 times by 2011.
FPT software - Flagship for Globalization
FPT Software got CMMi
5 and 6 overseas
branches
Vietnam software
outsourcing is growing,
but small scale and low
quality
With their belief in the globalization dream and from what they learned from their failure
overseas in the 1999 - 2000 period, today FPT Software has gained remarkable achievements,
with a software export volume increase by 90 times within 10 years of operation, powered by a
2,700-strong workforce of highly qualified expertise, awarded a 5-level CMMi (Capability
Maturity Model Integration in software development) certificate. FPT Software has launched its
representative offices in Japan (2005), Singapore (2007), the U.S, Australia, France, and
Malaysia (2008).
Vietnam software industry is a robust sector with a large number of participants, including some
3,000 domestic companies with approx. 40,000 programmers, but only 800 – 1,000 of them can
secure their business with stable performance and most of them are small businesses. The
domestic software development companies with a workforce of 1,000 employees or more, which
are considered a large-scale business in Vietnam but much smaller than other Indian, Chinese and
Philippines giants with tens of thousands employees, are quite a few, namely FPT
Software, TMA solutions, and CSC. Those with highest growth pace, such as Global CyberSoft,
CMC Soft, NCS, Tinh Van, Luvina, etc. still have not yet reach that level of FPT human
resources. Besides, there is also a big gap in business scale and capacity among these software
developers. According to Ho Chi Minh Computer Association (HCA), among 30 leading
software enterprises of this city, the total earnings of the top 5 were VND 890 bn or USD 556 m
(while the total earning of all 30 enterprises was approx. VND 1,400 bn or USD 875 m) in 2007.
This gap (in revenues) between the leading company and the last-ranked one is of... 958 times!
The weakness of Vietnam enterprises is reflected in its capital insufficiency, unstable capacity,
poor foreign language communication and quality assurance. However, Vietnam is considered as
an attractive destination for software outsourcers, key international players in software industry,
such as NEC Solutions, Harvey Nash, Hitachi, and Kloon GmbH have established their
partnership, collaboration or merger with other local companies to run outsourcing business here.
FPT Software is the best
and the biggest
Among the domestic business community, FPT Software has always taken the 1st rank with
world-class quality for its solutions. FPT Software also won three of a total of four Vietnam ICT
Awards on 14 March 2009 for the software company of best software business development,
highest revenue and best quality assurance practice.
2008 growth of 48%, net
margin of 30%, EPS of
USD 0.53
In 2008, its revenue was VND 707 bn (USD 42 m), an increase of 48%, contributed 4% of FPT's
income, but its profit before tax margin was 32%, accounting for 18% of the company PBT, net
margin was 30%, the net attributed profit to FPT corporation was VND 134 bn (USD 8m). 2008's
EPS of FPT Software was as high as VND 8,968 (USD 0.53). Other local competitors, such as
CMC and Tinh Van JSC, with highest growth rate of 60-70% in 2008, could hardly catch up with
FPT Software in terms of revenue and size.
Its scale is small and
medium compared with
average global ones
FPT Software services include Outsourcing BPO, ERP, QA Testing and Embedded services, but
all of them are outsourcing services on a low-level basis. In a global scale, FPT Software is still a
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TELECOMMUNICATIONS
small-and-medium business (with a labour force of less than 5,000 people). As a member of the
top 10 Asian countries for software outsourcing services, Vietnam remained at the bottom of this
list with a competitive edge only on labor cost. Other indicators of Vietnam, such as foreign
language skill, government's supports, human resources, infrastructures, educational systems,
cultural similarity, globalization ability, are far behind those of its peer countries, such as
Thailand, Philippines, Pakistan, and can hardly be compared with India, China and Mexico.
It had a good position in
Japan market
However, FPT Software has become a well-known brand with its position secured in the
Japanese market, with a client base of IT giants, such as IBM and other leading corporations in
Japan, marking Vietnam on the global outsourcing map.
FPT Software Market breakdown 2008 (in %)
EU, 10%
US, 10%
Vietnam, 6%
Asia Pacific, 13%
Japan, 61%
Source: FPT Software
FPT software will benefit
from FPT university and
cooperation with Hitachi
Software
The Achilles’ heel for Vietnam-based IT companies lies in its limited human resources, education
environment and foreign communication skills. FPT soon identified and surmounted this set of
weaknesses by the establishment of FPT University, dedicated to IT-oriented training and
education. The amazing growing speed of FPT University and supportive collaboration efforts
from Hitachi Software will secure a solid background for both FPT and Vietnam software
development.
With its experience in foreign business operations and reliable partnership with Japan, this
business line is a promising venture with remarkable potentiality, contributing 6% of FPT sales
and approx. 18% of its pre-tax profit by 2011.
We forecast this division
to rise around 16.6%,
20% and 22% with stable
pre-tax margin of around
28% in 2009, 2010 and
2011
Vietnam software export & software development industry have always been of high growth rate,
approx. 35-40% before 2008, and had received full supports from the government with a total
profitability targeting VND 1 bn by 2010. In 2008 there were periods when this growth rate
seemed to freeze at approx. 20% with more than USD 620 m (VND 1,046 bn) in revenue (while
the government expected +35%, reaching USD 670 m or VND 1,126 bn), and the reason for this
situation is the global economic recession. FPT software is still the rising star in the market with
a growth rate of 49%. However, with the forecast negative growth of the global economy in
2009, its clients in the U.S.A and Japan would suffer, thus FPT Software's growth rate will only
be at 16.6%, equivalent to VND 824 bn (USD 45 m), of which its pre-tax profit and net profit
will be VND 231 bn (USD 13 m) and VND 208 bn (USD 11.7 m), accounting for 28% and 25%
sales margin. With the establishment of its crisis management board, Hitachi Joho-Fsoft
development center in operation, long-term partnership with the Hitachi Group, new human
resources initiatives, plan of chartered capital increase of 50% approved in its recent AGM, new
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TELECOMMUNICATIONS
positive indicators of global economy, FPT Software is forecasted to resume its growth speed of
20% and 22% by 2010 and 2011, with a PBT margin reaching 28% and 28.5%, pre-tax profit
obtained by 2011 reaching VND 344 bn (USD 19 m), net attributed profit to the company of
VND 195 bn (USD 12 m), accounting for 17% the company net profit.
“Big toe” FTG – Best Vietnam distributor
Distribution contributes
the largest proportion to
FPT, its 2007 market
share was 60%
FPT's distribution business (including FDC, FPT mobile and FPT Retail, all 3 of them have just
merged together under the new entity namely FTG this year) enjoys the widest mobile handset
and IT product distribution channels in Vietnam, holding 60% of market share with about 956
retail agents in 53/64 provinces and cities. In IT market, FPT is a reliable partner of more than 60
international corporations, namely IBM, Lenovo, Microsoft, HP, Toshiba, Oracle, Samsung,
Cisco, Dell, Linksys, Nortel, 3Com, Apple, Intel, Symantec, NEC, Seagate, Foxconn, Sandisk,
Logitech, etc. FDC was also the major distributor of Nokia with a revenue of USD 310 m and
USD 333 m, a growth rate of 77% and 21% in 2007 and 2008 respectively. FDC was the
authorized reseller of Vertu, a high-end mobile telephone brand. Regarding mobile devices, FPT
Mobile was the distributor of Samsung and Motorola products, and most recently the PDA
products from HTC.
Distribution net profit
margin is lower than
other segments, about 3%
The revenue derived from the distribution segment had always been the biggest proportion,
accounting for approx. ¾ of FPT's revenue. Due to its limited margin, the distribution sector
contributed only 30% of the company pre-tax profit. In 2008, its distribution revenue marked a
breakthrough volume of VND 11,066 bn (USD 588 m).
Failure in retail market
and rising competition,
FTG market share will
shrink
FPT had operated as a wholesale distributor until 2007, after that it decided to enter the retail
segment with the launch of FPT Retail and its series of [IN] stores. But this initiative seemed a
misstep of this division. FPT Retail has not yet recovered from the business loss. In 2008, its
distribution business line showed certain signs of falling growth speed, contributed only 68% of
the company’s net sales due to: the participation and competition of new emerging distributors of
solid capacities like PSD, Viettel and FPT's new focuses on other IT and software-related
services. IT product market has witnessed the existence of known and well-established retailers,
such as Nguyen Kim, Tran Anh, Phong Vu, The gioi di dong (laptop sales) etc. Carrying the
countering crisis plan of cutting ineffective units, FPT Retail had to close [IN] stores and merged
with FDC. FPT's market share in IT distribution sector also dropped down from 60% to approx.
40%, due to competitive pressures from other retailers such as Vinh Trinh, Digiworld, Petrosetco
Distribution (PSD), and CMC. In the market of Microsoft copyright software to the government
sector and large corporations, FPT and CMC are equivalent boxers.
In the handset device market, there are more than 20 distributors working for key international
manufacturers, among which the largest players are Nokia, Samsung, Sony Ericsson, and
Motorola (in order of market share volume owned). Gfk, a market research firm, reported that
Vietnam market growth speed had reached 30% in 2008, with total revenue of more than USD 1
bn. FPT had previously contributed to 70%-90% of local revenues of its premium partners, such
as Nokia, Samsung, and Motorola. But new strategies from manufacturers now aim at
minimizing business risks posed by dominant influences from such a major distributor. From its
leading position with 70% of market share in mobile telephone distribution in the period of 20042006, FPT had to face rising competition from other distributors, such as Viettel, PSD, P&T,
Lucky, Thuan Phat, Vien Thong A (VT A), and AB Tel.
PSD is a threat
Among the competitors of FPT, PSD has emerged as a redoubtable fighter. After taking over a
substantial market share of Nokia's product distribution (40% in 2007), within the last 5 months
of 2008 since the date they first entered the IT distribution market, PSD has become the official
distributor of Acer, Dell, HP, Lenovo, Gateway, etc. in which Dell, HP, and Lenovo are
considered the major partners of FDC distribution networks. PSD also has powerful financial
support from the Vietnam Oil and Gas Group, along with its experience in the mobile telephone
distribution business. PSD distribution networks have expanded rapidly with more than 400
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TELECOMMUNICATIONS
Nokia retail agents, and 150 IT product outlets, with maintenance, delivery, and financial support
strategies.
Following PSD, the Phu Thai Corporation, which was a leading distributor of consumer products,
entered the IT market by becoming Samsung Mobile's mobile telephone official distributor
through its agreement just signed on March 5, 2009. Phu Thai has a 15-year experience in
distribution markets with 30 affiliated companies, 8 primary and 5 secondary inventory facilities
nation-wide. Samsung mobile telephone distribution accounted for 70% of FPT Mobile's
revenue, with the participation of Viettel (who launched its national mobile outlet network in
2008), and Phu Thai Corporation, the earnings of FPT in this field will be greatly affected.
Manufacturers start to
penetrate market directly
FPT's IT and handset device distribution sectors dropped to 45%. Another threat posed to FPT is
that manufacturers are authorized to set up their distribution networks, and international retailers
will rush into Vietnam once it completely opens the retailing market as committed with the
WTO. In early March, the leading software distributor of Russian and SNG region, Softline, set
up their office in Vietnam. Sony establishes the distribution channels for its own products. The
care centers of Nokia and Samsung operating in Vietnam showed a decline in market domination
of local distributors. The turnover and profit margin of the distribution sector is forecast to fall
sharply under competitive pressure and limited spending of consumers in these gloomy economic
scenarios. In dealing with this upcoming recession, FPT has to concentrate on its products of high
margins and growth speeds, such as Smartphones and PDAs, even enter consumer products line;
meanwhile, it should explore the regional markets with new product offering. Also, other
administrative measures, such as cost cuts, inventory management, retailer credit control, market
valuation, etc., will need to be reinforced if FPT wants to ensure its expected earnings.
FTG will suffer a
shocking decline by 9.5%
in 2009 due to
deteriorating IT
consumption, then slowly
recover a positive growth
of 1.5% and 2.5% in
2010 and 2011
Product distribution sector will significantly suffer from the global economic slowdown and
fierce competition. FPT's market share and its rate of return will shrink. After years of an
amazing growth speed of more than 10%, it is forecast that FPT will face its first negative growth
rate of -9.5% in 2009, yet contributing 62% of the company revenue. In 2010, the speed of
revenue growth might be resumed to 1.5%, as the growth speed of Asian IT and mobile telephone
markets will be expected to reach 5%. In 2011, there will be a brighter picture for all, with its
equitization completed, its capacity enhanced, and its strategies fortified; spreading the business
to regional markets and bringing hopes to a growth rate of 2.5% with its new range of products.
Its revenue percentage will be as high as 54%. However, due to increasing competitive
complexity, threats from international and local competitors, and in return for expected revenue
rise, its PBT will fall gradually, remaining at 1.8%, 1.6% and 1.5% per relevant revenue of 2009,
2010, and 2011. The percentage of pre-tax profit contribution will decline by 13%, 10% in 2009
and 2010 to 8% by 2011.
Amazing Telecom - Leading in Convergence
Early granted ISP
license, FPT Telecom
has grown up so quick to
be the no.2
Founded in 1997, and being the first of FPT's IT affiliated companies granted ICP and ISP
licenses one year later, FPT Telecom has become the second largest Internet service provider in
Vietnam, following VNPT, with 32% market shares. FPT Telecom has also had a robust revenue
growth of 45% - 50%, and became the first provider of ADSL and FTTH services. In 2006, FPT
Telecom was fully authorized, with appropriate licenses, to establish and provide fixed
telecommunication networks and services nation-wide. The organizational structure of FPT
Telecom in 2008 was transformed into a holding corporation model with the establishment of its
affiliated companies: FPT Telecom North (FTN), FPT Telecom South (FTS), FPT Internet Data
Service (IDS), FPT Advertising Service (ADS), FPT Online Company (FOC), FPT
Telecommunication International (FTI). The affiliated companies run intensive businesses,
including Internet services, triple play entertainment, data, hosting, online games and
international telecommunication services. The new form of FPT Telecom targets at clear
separation of market and service segments as well as enhancing the organization performance.
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TELECOMMUNICATIONS
Among 30 enterprises licensed to be ISPs, VNPT, Viettel and FPT are the group of dominant
corporations in Vietnam Internet market. By late 2007, VNPT held 55% market shares, FPT
came in second with 16.5%, and Viettel 15.8%. By January 2009, the total market shares of these
3 providers accounted for 95% market, in which VNPT was 76%, Viettel 10%, and FPT Telecom
falling to 3rd rank with 8.4%.
ADSL market share by subscriber number ( 01/2009)
FPT, 8.39%
Viettel, 10.05%
EVN, 1.27%
SPT, 2.99%
Netnam, 1.12%
Others, 0.40%
VNPT, 75.78%
Sources: VNNIC, MIC
It is the most dynamic
ISP and concentrates on
profitable cities
FPT Telecom is still considered the most dynamic company in the Internet market. The company
focuses on markets of high profitability, such as major cities, and become the first one entering
the value-added entertainment service market. The reason that pushed FPT Telecom behind
Viettel was that Viettel's infrastructure facilities had been developed and covered all 64 provinces
and cities in 2008, while FPT only targeted a few cities like Hanoi, HCMC, Hai Phong, Hai
Duong, Binh Duong, Da Nang, Vung Tau, Can Tho. Therefore, if the ADSL market share is
accounted on the revenue, FPT still surpasses Viettel, and is more efficiency than others on
APRU. The new subscription volume of FPT Telecom reached 150,000; the total number of
subscribers was 420,000.
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TELECOMMUNICATIONS
ADSL Market share by revenue
Viettel, 14%
FPT, 33.60%
Others, 2.60%
VNPT, 49.80%
Source: FPT Telecom
Sales efficiency by ADSL providers
Company
ARPU
FPT Telecom South
FPT Telecom North
VNPT
Viettel
VND 260000
VND 240000
VND 140000
~ VND 60000
Source :FPT Telecom
2009result will benefit
from the state-of-art
telecom infrastructure
and advanced services
In 2009, FPT Telecom has pioneered in launching Triple Play service, offering all 3 Internet,
television, and voice services in one line. The company continues to develop its infrastructure
facilities, enhance its international Internet bandwidth capacity, NGN/MPLS technological
deployment for service quality improvement. FPT will invest VND 200 bn in domestic
infrastructure facilities, including: expanding its service coverage to further 10 provinces and
cities, extend its investment portfolio FTTH (GEPON-based optical access infrastructures) and
VDSL2+ (shifting 25-30% of its clients of Hanoi and Ho Chi Minh City from ADSL2+ to
VDSL2+) for better technical supports of Triple Play quality, deploying landline telephone
networks, investing into system equipments and technologies, etc.
The company has joined the AAG Alliance for the Pacific submarine fiber optic cable project,
which will raise FPT Telecom's bandwidth to 50Gbps with a cost 30% lower than the current one
by the Mid 2009. As one of five licensed mobile Wimax trials, FPT Telecom has announced
mobile Wimax trial success and its preparation plan for the service commercialization. However,
the story for Wimax is not written down yet while the 3G race of rich mobile operators is still in
the “hottest” columns in telecommunication.
2008 performance was
nice and lead by ADSL
segment
In 2008, FPT Telecom's revenue reached VND 1,299 bn (USD 77 m), an increase of 50% in
compared with 2007, with a revenue contribution percentage of 8%, taking the 3rd place after
distribution and FPT IS, and its pre-tax profit of VND 356 bn (USD 22 m) with a PBT margin as
high as 31%, accounting for 17% FPT PBT margin. Net income was VND 242 bn (USD 14 m),
+41%, contributing 29% to FPT net income. The before-tax profit growth rate was 57%, after-tax
profit growth rate 50%. The following chart indicates FPT's structure of service business and its
revenue percentage.
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FPT Telecom Revenue Structure by services
FPT Telecom Revenue Structure by subdivisions
FTI, 10%
Leased
line,
10%
ADSL, 70%
Game
online, 8%
Server and web
hosting service,
6%
FOC, 8%
IDS, 6%
ADS, 5%
Online
Advertisement
service, 5%
Others, 1%
FTN, 28%
FTS, 42%
Source: FPT Telecom
Source: FPT Telecom
In terms of affiliated company mapping, FTS will be the leading company with highest sales
volume, thanks to the robust southern market
FPT Telecom owns less subscriber market shares than VNPT and Viettel due to its service
coverage limited to major cities instead of reaching all other provinces and cities. FPT Telecom
still continues with its step-by-step expansion strategy, targeting value-added services and areas
of high potentiality, along with infrastructure enhancement for its new high margin entertainment
services. In 2008, FPT completed its infrastructure investment for VoIP (I-Voiz) services, which
will be commercialized in 2009. So FPT Telecom is expected to maintain its high speed of
growth in both turnover and profit in the future.
FPT Telecom Outlook
Vietnam telecommunications industry (including mobile telephone sector) is the most highlighted
part of the Vietnam economic map. Overall growth speed in 2009 of this industry is expected to
reach 50% by the Government. In online entertainment and Internet sectors, the growth speed is
forecast to be approx. 30-35%. FPT Telecom's plan for 2009 is to advance to 10 other provinces
and cities, channeling investments into its FTTH and VDSL2+ systems, deployment of land line
telephony and technologies. FPT Telecom's client portfolio of 2009 will not be leveraged as in
previous years. Jaccar reckons FPT Telecom's growth speed of 2009 will be high about 38.5%,
equivalent to VND 1,782 bn (USD 100 m), contributing to 10% of FPT's sales, with a pre-tax
profit of 37% as the top high, equivalent to VND 517 bn ( USD 29 m), whereas other member
companies cannot obtain such high growth in both turnovers and profits. Internet and related
service growth will remain high by 2010, FPT Telecom's next year revenue growth is expected at
28%, with a slight decline in its PBT, remaining at 28% margin. By 2011, its sales growth will
return to an average rate of 28.5%, with its pre-tax profit margin of 28.5% thanks to the boom
point of FTTH and triple play, owning a leading revenue contribution of 43%. But please note
that FPT currently owns a portion (43.5%) of FPT Telecom's equity, so the after-tax profits may
rise, but with the minority shareholders' interests excluded, the contribution rates for its holding
company would not be so high. Assuming that FPT has no change in the ownership percentage of
FPT Telecom, the net income contributed to the parent company is about VND 251 bn (USD 14
m), accounting for 21% FPT net income.
FPT Education – new bullet
FPT University shows a
great potentiality of IT
training and education
business
Founded in 2006 and soon becoming the most popular name in IT university training and
education of Vietnam, FPT University established 2 premises in Ho Chi Minh City and Hanoi,
with more than 1,800 students enrolled and attending, and about 5,000 students studying in
Aptech and Arena Media schools. Its annual growth speed of 60% in 2007, and 107% in 2008,
and its leading PBT margin of 32% in 2008 has shown the great potentiality of IT training and
education business. FPT University also has its training advantages through favorable education
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program, and still enjoys a low land leasing rate. The IT personnel demand is huge, and with
years of partnership and supports from APtech, its reliable training quality and its promising
outputs are considered key factors to FPT University's future success and development.
Other external factors include the openness and educational socialization of Vietnam education.
If those factors are improved positively, FPT training business will expand to non-IT subjects and
develop rapidly from the firm base of IT education.
Education is believed to
keep high growth rate of
sales and margin
This segment growth is forecast to be higher than others but a lowering trend of 36.6%, 30% and
28% in the next 3 years, with expected pre-tax profit rate of 36.5% by 2009, then a slight decline
and maintaining 30% in both 2010 and 2011 due to its investments in technology infrastructure
facilities and campus.
FPT Media – a nice lady
Impressive performance
of FPT media in 2008
thanks to the global
football event
FPT Media was oriented as a professional provider of television broadcast services. FPT Media's
strength lies in its experienced board of management with their proactive, dynamic technical
team. In 2008, FPT Media's turnover exceeded 40% compared with its commitment of VND 166
bn (USD 9 m). Among major successes of FPT Media were television shows and EURO-related
events and TV programs.
FPT media has the
periodical growth trend
Being vulnerable to the global climate, FPT Media's 2009 revenue will not be as remarkable as
that of 2008, only remaining at VND 141 bn (USD 8 m), with a PBT margin at 14%. 2009 is also
the year that FPT Media starts its TV film series for Singapore's Media Corporation and
according the periodic football events, FPT Media's growth speed is expected to reach 20% by
2010 and 21% by 2011 after the global economic recovery, with pre-tax profit margins of 18%
and 12%.
Maintaining FPT Services
Small is beautiful
This is a small service business sector in terms of scale yet high margin, standing at an average
growth of 92% in 2007 - 2008 period. Thanks to good climate of FPT’s system integration and
distribution sales, IT maintenance services lines will get regular jobs and revenue. The annual
growth rate of this sector is expected to be steady 20% for the period of 2009 - 2011, and its PBT
margin will gradually decline due to increasing competitiveness, being as low as 85% by 2009
and 2010, and 80% by 2011.
New areas – real estate, banking and financial services
infected with 2008 flu
Expansion to financial
sector – just faulty timing
Like other successful enterprises in Vietnam, FPT had also diversified into “hot” financial
services in 2007-2008. It has invested VND 110 bn (USD 6.9 m) for a 25% stake in FPT
Securities in October 2007 and VND150bn (USD 9.4 m) for a 15% stake in Tien Phong
Bank(with Mobifone and Vinare). In addition, it has also invested VND36.3bn (USD 2.3 m) in
FPT fund management company (FPT Capital). FPT established two 100% subsidiaries in real
estate namely FPT Land and FPT Hoa Lac hi-tech Park Development. If FPT Hoa Lac HPD had
a clear mission, got the initial success with Hoa Lac hi-tech park project and been looking around
hi-tech parks in Vietnam, FPT Land has faced a lot of difficulties during the slowdown period of
the real estate market. Its current missions are construction and development of FPT existing land
for the group purpose of facilities.
In the financial sector, there are already a large number of players, 4 state-owned commercial
banks hold more than 70% market shares, the rest is shared among over 80 joint stock and
foreign banks; there were over 100 securities companies. So it will not be an easy game for new
comers, especially in the financial crisis of 2008-2009.
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The reason to stay is still
there
FPT Capital made a first achievement of VND 8 bn (USD 476K) pre-tax profit in 2008 and the
joint establishment of Vietnam-Japan fund with SBI holdings, Japan managing USD 100 m. for 6
years. Tien Phong Bank also reported VND 20bn (USD 1.2 m) pre-tax profit last year. Sharing
sad story in financial services, the most painful division is FPT securities with a loss of VND
59.8 bn (USD 3.6 m).
Those affected lines have raised hard questions to FPT board. FPT management has committed
no more investment in FPT Securities and a review on FPT land. However, this segment is
considered as a financial investment with a small proportion by FPT. We think that FPT will
remain in there with careful investment moves.
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BEING THE TRANSFORMER NOW
Towards a more fruitful model
Deep macro impacts on
and fierce competition in
distribution segment,
FPT moves its focus on
software and services to
raise margin
Most of FPT's revenue is contributed by its mobile and IT device distribution business. This
business line accounted for 68% in 2008, and 75% in 2007. Since 2007 backward, the line growth
had been very high, but with the lowest net profit margin and gradual drop, and its pre-tax profit
margin at only 4%, just a half of FPT profit margin in general. Last year, the presence and
threatening development of emerging competitors, such as Petrosetco Distribution (PSD) and
Viettel, with the failure of FPT’s retail network, are serious warnings to the company. With an
increasingly crowded playground and competitive landscape, FPT's profit margin began to
shrink. In a matter of time, FPT as a distributor will lose its influence and be considered an
intermediary of the manufacturers, plus, international retail corporations entering the market on
WTO accession, along with other mobile operators (with handset-included service business
model being adopted in the U.S. and E.U.), will all want to come on-board.
Soon realizing these threats, FPT has outlined a “Software and service” strategy, switching to
more profitable businesses, such as software outsourcing, ERP services, BPO, data centre and
managed services, Internet and telecommunications, and communication service training.
Software and service
EBT accounts for 64% of
FPT’s EBT in 2008,
from 47% in 2007
This strategic focus brought FPT a significant achievement in 2008, with earnings before tax
(EBT) of software and services reaching VND 781 bn (USD 46.5 m), accounting for 64% of the
company EBT (compared with 48% in 2007).
Leaping beyond local boundaries
Software took the 1st leap
on international
playground
Globalization has been a dream of FPT's BOM for more than 10 years. Its pioneer for going
global is the software outsourcing division. After its first failure in India, FPT has precious
experiences leading to its later successes in overseas business. Next successful operation in
Japan had brought confidence to FPT in opening new representative offices in other countries.
Thanks to these achievements, FPT's expertise and capacity in globalization was greatly
enhanced, being ready for upcoming challenges from international playground.
We think FPT’s export
value will be about USD
150m by 2012
With its strong, skilled human resources by regional ranking and its partnership with giants in
technological markets like Microsoft or its strategic relationship with Hitachi Software, FPT will
be able to ensure its top position in domestic market, and begin to mark its name on the global IT
map. Along with its well-established outsourcing business of FPT Software, FPT IS provides
other IT services and solutions, such as managed services, ERP services, BPO services, which
might increase the globalization value of FPT. FPT IS's system integration services have reached
a world-class level and might be a success in regional scope. FPT's revenue in the international
market is forecasted to reach more than USD 150 m by 2012.
'E-citizen’ strategy
Aiming at creating and
serving e-citizen
community
FPT Corporation strategy from now until 2015 with an “E-citizen” name can be briefed as
follows:
FPT strives to be a leading corporation in terms of infrastructure development and e-services
provision for an e-citizen community among which information technology and
telecommunications continue their essential foundation role in the digital convergence trend to
provide the most convenient products and services for e-citizens. This is the most important
direction in the development strategy of FPT Corporation.
The strategy is based on the perception that Internet has made profound changes to the world and
has become an opportunity for Vietnam on the path of integration into the world. Essential needs
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of the human remain unchanged but the ways these needs are fulfilled will never be the same
with the wide spread of internet; e-services will be key tools that support organizations to
compete effectively to bring about comfort and convenience in daily life. FPT calls these
organizations and consumers e-citizens and aims at creating added-value chains to fully satisfy
needs of e-citizens.
This strategy shows the FPT's BOM visions of a future IT society of digital convergence, where
enterprises will not only be service providers but also a driver of social trends towards their
advanced lines of products and services provided.
Its’ initial e-networks
had about 1 million
accounts
FPT set up its technical team for Visky Project aiming at an advanced development of services
and technologies for Vietnam Internet users. Visky's first products include the social network
Vihuni www.vihuni.com, e-commerce channel vimua www.vimua.com, and mobile chat Vitalk
with an initial success with 1 million accounts. These are the first eCitizens with potential
development into a future information community and loyal clients to FPT's member
corporations, such as FPT Telecom, FPT Trading (distribution), FPT Securities, FPT bank, etc.
Harvest of web 2.0
models need to wait for 2
years more
This is considered as a long-term strategy, because the number of accounts in those communities
is fast increasing but its services are mostly free of charge, and the success of web 2.0 business
model and mobile contents in Vietnam is still a matter of potentiality, and the time for harvest in
web 2.0 model will be realized in at least 2 years time.
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FOUR-CYLINDER ENGINE
Powerful internal force
From the penthouse
An elite top management
team
FPT has an elite management team with high commitment to its development. FPT's vision from
the early days of its business remains valuable. FPT's BOM focuses on building its corporate
cultures with core values that lay the foundation of its human resources development. In each
phase of its development, each appropriate strategy has been adopted by FPT: trading activities in
Eastern Europe for primitive accumulation of capital, anticipating growing trends in the
telecommunication and information technology industries and becoming the leading Vietnam IT
corporation; software exporting, service advancing and globalizing towards market cap and
competitiveness enhancement, and grasping business opportunities on national and regional
scale.
…with proper reaction in
hard times
FPT's management team is an example of management quality in hard times. In the first half of
2008, FPT founded its crisis encountering board to monitor and deal with market movements and
outline appropriate policies to timely respond to the situation, and carry out the C20 initiative of
about 1,000 staff reduction. In 2009, FPT will continue its restructuring program, with a
commitment of 30-80% expense reduction in all divisions for better business performance and to
better cope with macro-economic slowdown. Changes in senior management positions, bringing
foreign executives to FPT's BOM showed its efforts to separate between corporate governance
and business management, improving its transparency in corporate governance.
And strong target at fast
growing business lines
FPT has consistently concentrated on its target of high growth, channeling all of its resources for
this ultimate purpose. All business plans approved would be those with high potential
profitability. In considering its major business lines, we could see FPT's high growth-oriented
strategies of each development phase that reflected the sound vision of its board of management
Proper strategies and
focus for each forward
movement
• Software outsourcing and telecommunication services: most powerful engines
Established and developed from its earlier stages, FPT are making a fortune out of these services.
As witnessed in the last 3 years, Internet and outsourcing services have proved to have amazing
growth. In 2006, 2007 and 2008 FPT Telecom has a surprising growth rate of 77%, 47%, 53%,
FPT Software has grown at the speed of 83%, 78%, 49%. PBT margin ratios of FPT Telecom and
FPT Software have surpassed other divisions of FPT, reaching 28% and 32% in 2008. By 2011,
telecommunication and outsourcing services will be the drivers of FPT earnings
•
ERP, system integration service, Media, Education and Software development:
These services have been offered in the last 3 years, and all indicated positive growth. ERP,
education, and software development have been successful businesses in their first stages with a
growth speed of 70%, thanks to the technological platform and highly qualified workforce from
FPT. The media segment in 2008 was surpassed by 40% compared with its initial plan. These
services are expected to continue thriving in the future. With a resumption of the optimal macro
climate, the education, ERP, software development and media services will bloom.
•
Long-term opportunities for financial investment: real estate, securities and financial
services
FPT entered the new market of real estates and finance in late 2007. The weak economy in 2008
had left negative impacts on these venture businesses; but once present difficulties are overcome,
banking and financial services will be the core of future economy. The combination of a
diversified client base, important co-stakeholders (VMS-Mobifone and Vinare in Tienphong
bank, SBI holdings in FPT Capital) and a new line of e-clients to be created based on its well of
technology infrastructure facilities gives the potential base for this business growth.
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In 2008, both Tienphong Bank and FPT Capital made profits, and in the securities and real estate
field, FPTS and FPT Land experienced an extremely difficult year due to macro-economic and
sector impacts. FPTS had a business loss of VND 60 bn (USD 3.6 m), but FPT's ownership ratio
in FPTS was only 25%, so it was not so serious impact, and the company does not have further
investment plan for FPTS in 2009. FPT Land is a whole-owned affiliated company of FPT, which
was founded at a quiet period of real estate market, with a target of building the operational
spaces and workplaces for the company and its affiliated companies. FPT still enjoys certain
favorable conditions granted by the government for its land projects, so the existence of FPT
Land will be ensured in a near future.
…to the basement
Highly qualified force is
assembled
FPT has always considered human resources as a foundation of its success. Besides a
management team consisting of several doctors and experts in technologies and management,
FPT has also enjoyed a pool of skilled, experiences rising stars in each business sector. FPT has
adopted specific management models and incentives to promote its staff's abilities. With a staff of
8,600 holding thousands of international technological certificates granted by well-known
manufacturers, FPT has been known as the IT Corporation with the highest IT human pool in
Vietnam, with region-class technological expertise. Low cost labor force is also an advantage for
FPT in competition on a global scale. In addition, the establishment and initial success of FPT
University is an effective IT human resources preparation for FPT's future development.
The company has developed the human resource management tool with a ranking system for
personnel. The “map rank” has just been renewed from 7 levels to 19 levels for smoother
promotion encouragement. The company also focuses on building the company culture and unity
with regular sports events and internal magazines. These are expected to reinforce the company’s
internal forces.
Prepared for the
substance
Along with recent investment and development of technical expertise, FPT has consistently
focused on training and preparing its young staff and management team for the substantial
growth of the company. The “Young Leader” program is a strategic move by FPT in its roadmap
to building a strong, well-qualified human asset.
However, the large scale and fast growth of the company have some risks in internal resource
management. There is a hidden conflict between the top management who has the strongest
power and benefits control, and the middle-level management team, those directly operates and
visibly contributes into the company earnings. The changes in map rank and top position may
raise unavoidable controversies among some management levels. FPT has been headhunting the
most talents to fuel the organization human resources but it cannot always keep them all forever,
always. Furthermore, too strong culture results in overconfidence and false pride of the company
staff. The recent bad images in FPT 20 year celebration was a lesson. But it is believed that those
negative stories are just short term problems.
Empowered by strategic partnerships
3 year Strategic Alliance Agreement with Microsoft
The strategic alliance
agreement with Microsoft
was the most important
driver
In late November 2006, FPT entered a 3-year strategic alliance agreement with Microsoft. This is
a very important leap into a business model of higher profit margins. The agreement consists of
the following key points:
• Building up a team of high expertise on Microsoft technologies is the core factor of
further rising its Group competitiveness on global markets. The highly skillful workforce
can be assigned to regional markets.
• Mutually co-operating on the shift of the Lotus Notes into Microsoft applications in the
Southeast Asia region; collaborating on IT solutions for Vietnam's government
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•
ministerial offices and agencies; working together for optimum development of IT
infrastructures across the region using Microsoft-based platforms; co-operating in
application software development for mobile technologies and embedded devices;
collaborating on the deployment of Microsoft's enterprise solutions in Vietnam and
across the region
Microsoft will provide supports to FPT University in terms of academic documents,
Microsoft certification and training activities in Vietnam
The benefits of this deal have been exposed:
• With support from Microsoft, FPT team strongly grows up to be well-positioned in
regional markets, and FPT's embedded software services will help this Group to
successfully penetrate the Japanese market and go international.
• FPT has been recommenced and completed a USD 7 m Microsoft-related project for
Petronas, Malaysia, and won a series of major Microsoft projects as well as government
information infrastructure development projects
• FPT University has been transferred a solid background by Microsoft in terms of training
plans and activities, ensuring its earning driving success and brand name for FPT
education business.
Seizing the premium partnership with several top global
technology vendors
Gaining a firm stand on
the giants’ shoulders
Cisco, Checkpoint in the world of networking system, Oracle and SAP in ERP solutions are the
top names, and FPT is the only company ranked by these 4 giants as their golden partner in
Vietnam and Indochina regions. FPT IT expert team holds the highest level certificates of those
vendors. Besides that, FPT is the premium partner of more than 20 international technology
giants, such as HP, IBM, SUN, ArInfo, Diebold, Nortel, etc. This could explain why FPT is the
brightest name for major projects of national ICT infrastructure facilities and enterprise
application software. With its 48% market shares, FPT was selected to be the master contractor of
a USD 15 m project for the General Department of Taxation, proving its current capacities in IT
solutions and information system integration. The corporation's known prestige for technological
capacity is a golden guarantee for its tremendous growth.
Following the trends of IT development and application in vast major corporations and
government agencies in Vietnam, FPT will secure its overwhelming position and high growth
rate in the IT and ERP sector. This is also a strong background for FPT to enter regional markets,
aiming at international successes in IT and application development.
Good connections with the government
FPT benefits directly
from trust of the
government and the
leading reputation in
financial sector
Many of FPT's leaders have had an important influence on ICT development policies of the
government. With its continuous growth, FPT has received consistent support from the
government, by granting FPT with appropriate licenses for its operations in targeted industries as
well as its collaboration projects with state-owned enterprises and government bodies. FPT has
the strongest presence in the financial and public sectors with major valuable clients, such as the
Ministry of Trade, General Department of Taxation, General Customs Department of Vietnam,
Agribank, Vietcombank, etc.
FPT was also granted full business licenses in telecommunication, banking, finance, securities
and higher education in a surprisingly short time. Being selected to run the Lang – Hoa Lac hightech Park is another indication of FPT's power. With its technology expertise, FPT will keep
reaping benefits from IT infrastructure development projects for large corporations and
government bodies.
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Winning the trust of the Japanese markets
The achievement in
Japan has widely opened
the global opportunity for
FPT
Since the day FPT Software first set foot on Japanese markets and positioned its brand there, it
has taken every opportunity available in these markets. FPT Software was awarded the most
prestigious certificates in software outsourcing industry, such as CMMi level 5, BS7799, and ISO
9001:2000, ensuring its capacity to meet the demanding requirements of Japanese markets. Japan
has always accounted for approx. 60% of FPT's software export market share, and also was the
first overseas market targeted for BPO services. FPT has established its partnership with the
Hitachi Group, opening Hitachi Joho-FPT Center, the first software centre in Vietnam, with the
ambition to be the biggest Vietnam-based software outsourcing partner in Japan.
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FORECASTS
2008 impression
2008 growth rate of 21%,
net margin of 7%
2008 was a critical year to both the global and Vietnamese economy. The last months of 2008 left
a down tone to every economy in the world with financial shock waves, the pathetic spiral in
world securities markets, the corruption of well-known banking institutions, and forecast
recession and reported lay-offs in IT sectors. In dealing with such situations, FPT adopted a
number of management measures to enhance its business performance, such as a 20% operational
expense cut in certain fields and a reduction of its pool of human resources in vulnerable
divisions, which helped maintain its positive growth. FPT made a highlighted mark of its 20-year
development history by an annual sales reaching USD 1 bn (approx. VND 16,806bn), net sales
after deduction reaching VND 16,382 bn (USD 975 m) , an increase of 21% y/y, an profit before
tax (PBT) of VND 1,240 bn (USD 74 m), an increase of 20.5%, and net profit of 1,051 bn VND
(USD 62.6 m), an increase of 19.4%, net margin of 7.4%, net profit for shareholders grew 13.4%
up VND 836 bn (USD 50 m), EPS increased by 12% at VND 5959 (USD 0.35)
2008 performance (in m VND)
Net Sales
Gross profit
Profit before tax
Profit after tax
Net attributable profit
EPS
2007
2008
Y/Y growth
13,498,891
1,961,448
1,028,985
880,271
737,469
5,317
16,381,840
2,978,436
1,240,085
1,051,047
836,271
5,959
21.4%
51.8%
20.5%
19.4%
13.4%
12.1%
Sources: Jaccar, FPT
Software and service
lines have reached
expectations
Expense control plan has
been implemented
Sales came from its major business sectors, including system integration & software solutions,
telecom and software exports, which indicated a significant rise of 50%, 49% and 53%
respectively. Almost all revenues of the key businesses exceeded its plan (adjusted by second
quarter 2008).
For software and ICT services business only, their sales income was around VND 2,688 bn (USD
160 m), an increase of 47.7% y/y. The earnings reached VND 781 bn (USD 46.5 m), an increase
of 58%, with a rate of return of 29.4%. The percentage of profit contribution of software
development and services accounted for 64% in 2008, compared with 47.8% in 2007. This
indicated FPT's serious attentions in core businesses, and a continued strategy in globalizing and
promoting IT services and software development for a higher profit margin.
With FPT's C20 plan of personnel lay-offs, one of the most remarkable IT events of Vietnam in
2008, the company has affirmed its preparation in dealing with the economic slowdown.
FPT ended its fiscal year with better business results considering the macroeconomic headwind.
With a proper reaction and hard cost savings in dealing with the business slump, FPT is believed
to stay on with its positive growth in the future.
IPO and equitization plan of FPT's affiliates:
exceptional assumption
FPT approved the equitization plans of FPT IS and FTG at its shareholder meeting held on March
29, 2009. In the same year, FPT Telecom has set its target to be listed on HASTC in the 3Q09. A
subdivision of FPT Distribution, the FPT Elead, would have completed its IPO in early March, if
it has not been postponed due to further additional procedures required by the State Securities
Commission of Vietnam (SSC).
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FPT IS and FTG are
planned to be sold about
10% to public
According to these plans, FPT IS and FTG once equitized will not sell over 10% of their charter
capital. In the case of FPT Telecom, FPT has not changed its current ownership ratio in this
affiliated company (43.5%). Thus FPT will continue to own, influence, and consolidate these
companies for at least one more year. In addition, there are no reliable sources of information
about the stock price of these companies in the market. As a result, forecast data from Jaccar will
be based on the assumption of continued consolidation of these mentioned companies, and the
equitization procedures will not basically impact the FPT's financial status until 2011.
The statistical forecasts will be updated upon the actual IPO and equitization procedures, or
specific information on share value being published, or changes influencing the parent company's
finance.
Income Statement
Sales: brightening future
Sales Forecast by business lines (in bn VND)
2009
System Integration
Software
Telecom
Training
Distribution
Media
Others
Total
Revenue
3,241
824
1,782
184
10,217
142
35
64
Y/Y
Growth
19.4%
16.6%
38.5%
36.6%
-9.5%
-15.0%
28.0%
15.0%
16,489
0.7%
Rev. Cont. Revenue
19.7%
3,727
5.0%
989
10.8%
2,281
1.1%
239
62.0%
10,371
0.9%
170
0.2%
42
0.4%
69
17,887
2010
Y/Y
Growth
15.0%
20.0%
28.0%
30.0%
1.5%
20.0%
20.0%
7.0%
8.5%
2011
Rev. Cont. Revenue
20.8%
4,416
5.5%
1,206
12.8%
2,931
1.3%
306
58.0%
10,630
0.9%
195
0.2%
51
0.4%
75
19,810
Y/Y
Growth
18.5%
22.0%
28.5%
28.0%
2.5%
15.0%
20.0%
8.5%
Rev. Cont.
22.3%
6.1%
14.8%
1.5%
53.7%
1.0%
0.3%
0.4%
10.8%
Source: Jaccar
Downturn in distribution
will strain FPT sales
although system
integration and telecom
remains high increases
A macro-economic headwind will impact the 2009 company revenue more seriously than 2008.
The growing speed of all business divisions could hardly be high, except for telecom and
education areas (remaining higher than 30%). The distribution line suffers from the hardest hit
with the price decline, lowered market share due to constrained spending in handset and IT
products in this gloomy economy. Although FPT IS, FPT Telecom and the Education division
are forecast to reach a growth rate of 19.4%, 38.5%, 36.6%, a decline of -9.5% of the distribution
business unit contributing nearly 70% of total net sales, leading to an overall growth rate as low
as 0.7% compared with the remarkable rate over 20% of the last year. Revenue from the media
division has fallen dramatically from its peak of 2008, standing now at -15%. In fact, this service
line developed so well in 2008 with an unexpected rise of 40% compared with the planned figure,
thanks to EURO football-related events and service. 2009 is a year of no special sports events,
and FPT Media will turn its focus into television channels with a series of TV movies.
We forecast 0.7% growth
rate in 2009, 8.5% and
10.8% by 2010 and 2011
with assumption of
improved macro context
FPT's revenue in 2010 and 2011 will resume at 8.5% and approx. 10.8% thanks to distribution
business coming back with positive growth, and IT divisions will maintain its competitive edges
with a growth rate of 20% or more once the economy recovers. Meanwhile, the globalization
capacity of the company will be fully utilized for WTO's opportunities. A combination of FDI
capital flows, the robust domestic enterprise and banking sectors, and increasingly IT spending
from the government and public sectors will bring plenty of benefits to a leading company like
FPT.
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Profitability: steady increase thanks to expense controls
Cost and Profit Forecasts (in m VND)
2007
Net Sales
COGS (%)
Other external costs (%)
EBITDA
% sales
EBIT
% sales
Pre-tax profit
% sales
Corporate tax (%)
Net attributable profit
% sales
13,498,891
80%
7%
1,147,440
8.5%
1,048,350
7.8%
1,024,942
7.6%
14.5%
737,469
5.5%
2008
2009e
2010e
2011e
16,381,839.8
79%
5%
1,728,091
10.5%
1,577,809
9.6%
1,280,044
7.8%
14.8%
836,271
5.1%
16,488,904.2
79%
4%
1,891,408
11.5%
1,693,541
10.3%
1,414,783
8.6%
22.7%
861,723
5.2%
17,887,028.5
78%
5%
1,896,025
10.6%
1,672,437
9.4%
1,613,975
9.0%
23.2%
974,862
5.5%
19,810,048.5
76%
6%
2,258,346
11.4%
2,000,815
10.1%
1,955,137
9.9%
23.3%
1,189,096
6.0%
Source: Jaccar
79% COGS-to-sales in
2009
External costs tend to
increase in long term
Ongoing personnel cuts
till 2009
• Decreasing COGS vs. rising external cost
With its new strategies in leveraging software and service business, reducing hardware and
distribution lines, along with initiatives for more cost-effective and enhanced productivity to react
to the crisis, COGS will gradually decline from year to year, the percentage of COGS over
revenue will fall gradually, from 79.1% in 2008 to 79% in 2009, and 78% in 2010. This ratio, in
2011, is forecast to drop to 76%, when telecommunication services, software export and service
business lines will gain a high growth rate with better globalization capacity and higher
contribution percentage in the group’s revenue and profit.
Contrary to COGS decreasing trend, the percentage of other external costs such as management
and selling expenses will rise. However, with cost cutting determination of 30%-80% in all
divisions to cope with the crisis, the percentage of other external cost per sales will stand around
4% in 2009, then increase up to 5.2% and 5.6% in 2010 and 2011.
• Personnel cost tends to rise – one step back to go faster
In 2008, FPT launched the C20 initiative, with an aim of 20% staff reduction, for more effective
organization, ensure its adopted strategies and development to get through the economic
difficulties. This initiative will continue to be implemented in 2009 due to forecast business
slowdown to year end. The total number of its staffs decreased to 8,300 and the total human
resources cost of VND 919 bn (USD 51 m), +7%, since the staffs remained after the C20
program will be paid better salaries. However the cost-to-revenue ratio is lower, at 3.3%
(compared with 5.3% of 2008).
By 2010, the economy will begin to recover and the company will raise its human pool to more
than 9,000 employees in order to meet personnel demands for globalization and to realize the
planned earnings. Total personnel expenses will increase more than 20% compared with 2009,
and the average salary will rise, with a cost-to-revenue ratio reaching 6.2%. Year 2011 will see a
record breaking in human resources increase as well as personnel expenses as FPT carries out its
resources reinforcement for long-term development of software service exports. At that point of
time, the size of its human resources will reach 10,800 people.
•
No more favorable
corporate tax
Taxation
Regarding the enterprise tax rates for the State budget, FPT had enjoyed 3 tax privileges: (i) IT
sector tax defined by the Government, (ii) favourable tax for software outsourcing company, and
(iii) favourable tax for enterprises of state-owned capital that recently listed. In 2009, FPT will no
longer be eligible for the 50%-reduced favourable income tax for recently listed. Only small-andmedium businesses such as FPT Promo, FPT Online, etc. are entitled to favourable demand
stimulus tax by the Government. From 2009 onwards, favorable taxes will be only applied to
software “creating” business with 50% reduced in division income. Therefore, the group income
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88
TELECOMMUNICATIONS
tax rate will rise from 15.2% in 2008 up to 22.7%, 23.2% and 23.3% in 2009, 2010 and 2011
respectively.
Pre-tax profit by divisions (in m VND)
2009
System Integration
Software
Telecom
Training
Distribution
Media
Others
Total
Pre-tax profit
372,673
230,709
516,785
67,074
178,802
19,814
26,518
2,408
1,414,783
% Contribution
26.3%
16.3%
36.5%
4.7%
12.6%
1.4%
1.9%
0.2%
2010
Pre-tax profit
391,306
276,850
638,675
71,668
165,928
30,570
36,065
2,911
1,613,975
% Contribution
24.2%
17.2%
39.6%
4.4%
10.3%
1.9%
2.2%
0.2%
2011
Pre-tax profit
441,617
343,789
835,353
90,207
159,447
23,437
43,278
18,009
1,955,137
% Contribution
22.6%
17.6%
42.7%
4.6%
8.2%
1.2%
2.2%
0.9%
Source Jaccar
Still FX impact in 2009
• Conclusion for profitability
Thanks to high commitment for expense control, REBIT margin (recurrent operating margin) will
reach 10.4%, 9.4% and 10.1% in 2009, 2010 and 2011 respectively. 2008's foreign exchange rate
fluctuation has left deep impacts on FPT, since FPT heavily depended on its imported input for
system business and distribution. FPT's financial cost had reached approx. VND 495 bn (USD
29.5 m), of which about VND 400 bn (USD 23.8 m) loss due to exchange rate changes. In fact,
the Group suffered only a VND 80 bn (USD 4.8 m) real loss due to exchange rate, the remaining
has been accounted into the gross profit thanks to the adjustment of new exchange rate being
incorporated into the sales of IT equipment and devices. In 2009, due to a ban in implementation
of currency option trading and unpredictable movements of the international financial market,
FPT can hardly afford an effective loss control for unstable exchange rates, hence its financial
costs are forecast to remain high.
FPT's 2008 profit-before-tax margin was 7.6%, growing 21%. With the upcoming grey economic
picture in 2009 and expected recovery in 2010 onwards, all FPT business lines’s profit margins
will tend to fall in the coming years. According to the detailed outlook of each business line
above, FPT's net profit margin of 2009 is estimated at 8.6% of its revenue, reaching 9% by 2010,
and 9.9% by 2011. The profit growth rate is expected to rise in 2009, reaching 14% by 2010, and
21% by 2011.
Net margin will steadily
increase by more than
5% over coming 3 years
As mentioned above, the corporate tax rate keeps increasing. Assuming a stability of minorities
interest, FPT net margin will slightly rise about 5% y/y, reaching 5.3%, 5.5% and 5.8% over sales
in 2009, 2010 and 2011 respectively.
Balance Sheet
Fixed assets: slight increase
FPT fixed assets increase annually, reaching 40% growth rate over 2007-2009, with the
completion of its new office buildings in Lang Ha & Cau Giay, and its new telecommunication
infrastructure facilities. In the coming years, the fixed assets have an average increase of 20% or
higher. The FPT's ratio of fixed assets over total assets has gradually increased to 24% in 2009,
28% in 2010 and 33% in 2011. With this relatively balanced and appropriate ratio, FPT will have
a stable technological platform and workplace, ensuring the overall development for all of its
divisions and units.
Reasonable current assets
Along with appropriate ratio of fixed assets, FPT's current assets will also be well managed, and
the ratio among cash, inventories and trade debtor will be relatively balanced. Forecasts for 2009
- 2011 period implied a successful financial management, and a stable liquidity with current ratio
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89
TELECOMMUNICATIONS
around 1.4, quick ratio around 1.0. The debit balance will not have much change, with average
debt period well controlled at the same duration as 2008, 41 days, in following years.
Financial structure
Current liabilities and shareholder’s equity will slightly fluctuate between 60/40, and the equity
remains at high level indicating the healthy financial status of FPT. With its plan of 2/3 of
shareholder earnings reserved, the 2009's shareholder equity is expected to gradually increase,
reaching 48% of its total resources as that of 2008, and by 41% in 2010 and 43% in 2011.
Cash flows
Stable Capital Expenditures
In the period of 2009-2011, FPT is forecast to have a net capital expenditure gradually increased
based on its investments in fixed assets. Change in debt will fluctuate with positive value, since
FPT has had a good credit history, and can make use of short-term loans for investments in its
business operations and business.
Pay-out ratio stabilized
In 2008, FPT offered a cash dividend of 26% (approx. VND 244 bn), and retained VND 518 bn
for re-investment. With the stable financial status and increasing earnings, ensuring the
substantial growth of the group, Jaccar forecasts that, in 2009, the payout will be 25%, 27%, and
28% for the period of 2009-2011. While these pay-out ratios are not very high compared with its
market prices, they are quite appropriate in terms of maintaining FPT's level of earnings used for
re-investment in further advancing the group technology platform and value.
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TELECOMMUNICATIONS
Company Profile
Risks
Established in 1988, FPT Corporation has magic development steps to become the no.1 ICT company
in Vietnam, one of top 10 market cap companies in Vietnam Stock market, the 1st rank in the top VNR
500 list of biggest private companies in Vietnam. FPT has participated in biggest ICT infrastructure
projects, branch offices in the US, Japan, Malaysia, EU, Australia. Over 20 years, its human resource
increases 22 times, sales increases 25 times and profits 137 times. Now FPT is a conglomerate
involving a wide range of business lines, including IT & Telecommunication, Media, Education, Real
estates, Banking and Finance. Average growth rate over recent 10 years was above 30%. FPT
brandname has been recognised in the region and the world. The company website is visited at
www.fpt.com.vn
Internal
Key Figures
What’s Up
Geographical breakdown (sales)
External
• Slowdown of economy and collapse in financial segment significantly reduce sales and profit;
• More and more fierce competition in IT and mobile distribution;
• Cutdown in world ICT spending, many software contracts stop.
Company
Division breakdown (sales)
2.8%
0.5%
0.5%
0.9%
• Bureaucratic problems, potential internal conflicts between medium and top management due to big-size and fast
growth;
• Diversification in non-ICT business lines like real estate, banking, securities in the slowdown period;
• Corporate governance risk when BoD and BoM have not clear independence.
• FPT Telecom will benefit from completion of AAG project by the mid 2009;
• FPT Telecom plans to list in HASTC in 3Q09;
• FPT IS and FTG plan to sell 10% shares to public in 2009.
1.5%
E
Q
U
I
T
Y
Sector
19.7%
• Vietnam ICT and network exhibition 2009 will be held in Hanoi from April 16-19th;
• The government announces VND 980 bn program to spur the digital content and software industry;
• Vietnam firstly hosts the World Information Technology Forum 2009 (WITFOR 2009) and international ICT
exhibition in Hanoi, August 26-28th;
• Vietnam IT week 2009 and ICT Award event in September –October 2009.
5.0%
10.8%
62.0%
95.3%
1.1%
T
I
P
S
System Integration (FPT IS)
Software Export (FPT Software)
Telecommunication (FPT Telecom)
Training (FPT University)
Distribution (FPT Trading Group)
Media, IT Services and others
Vietnam
Japan
North America
Europe
Asia Pacific
Efficiency profile
VND bn
Peers Comparison
Profitability profile
In %
VND bn
In %
2,200,000
13.5
7,000,000
40
2,000,000
12.5
6,500,000
38
1,800,000
11.5
6,000,000
36
1,600,000
10.5
5,500,000
34
1,400,000
9.5
5,000,000
32
1,200,000
8.5
4,500,000
30
1,000,000
7.5
4,000,000
28
800,000
6.5
3,500,000
26
600,000
5.5
3,000,000
2006 2007 2008 2009e 2010e 2011e
EBIT
Op. margin
24
2006 2007 2008 2009e 2010e 2011e
Assets
ROCE
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TELECOMMUNICATIONS
Income Statement (VND bn)
2004
2005
2006
2007
2008
2009e
2010e
2011e
Sales
% of growth
Price (%)
Volume (%)
Organic growth (%)
External growth (%)
Other income
Total Sales
8,735
-0%
185%
111%
0%
0
8,735
14,101
61%
-1%
125%
61%
0%
0
14,101
11,398
-19%
-1%
-11%
-19%
0%
0
11,398
13,499
18%
-1%
24%
18%
0%
0
13,499
16,382
21%
-1%
20%
21%
0%
0
16,382
16,489
1%
-4%
1%
1%
0%
0
16,489
17,887
8%
-3%
14%
8%
0%
0
17,887
19,810
11%
-3%
16%
11%
0%
0
19,810
Change in inventories
COGS
Gross Income
% of growth
8,330
405
n/m
13,451
650
61%
0
9,693
1,705
163%
0
10,809
2,690
58%
0
12,965
3,417
27%
0
13,026
3,463
1%
0
13,952
3,935
14%
0
15,056
4,754
21%
Other external costs
Taxes
Personnel costs
EBITDA
% of growth
9
151
245
n/m
4
218
427
74%
606
0
351
748
75%
943
0
599
1,147
53%
815
0
874
1,728
51%
652
0
919
1,891
9%
930
0
1,109
1,896
0%
1,109
0
1,387
2,258
19%
Depreciation
Reported provisions
Other incomes and charges
EBIT
% of growth
29
1
215
n/m
59
9
359
67%
107
0
31
672
87%
171
0
72
1,048
56%
240
0
89
1,578
51%
247
0
49
1,694
7%
277
0
54
1,672
-1%
317
0
59
2,001
20%
Interest income
Interest expenses
Interest balance
Pretax Income
% of growth
4
28
(24)
191
n/m
7
40
(33)
326
71%
11
74
(63)
609
87%
49
72
(23)
1,025
68%
197
495
(298)
1,280
25%
91
371
(280)
1,414
10%
131
190
(60)
1,613
14%
165
206
(42)
1,959
21%
Income taxes
Tax rate
Minority interest
Associate income
Net income before extraordinary items
% of growth
18
9%
0
173
n/m
43
13%
21
262
52%
74
12%
85
0
450
72%
149
15%
143
4
737
64%
189
15%
215
(40)
836
13%
320
23%
219
(13)
861
3%
374
23%
258
(7)
974
13%
456
23%
313
3
1,193
23%
Extraordinary items
Net Income
% of growth
173
n/m
262
52%
0
450
72%
0
737
64%
0
836
13%
0
861
3%
0
974
13%
0
1,193
23%
Division breakdown / Sales (% of growth)
-
52%
143%
98%
-20%
-12%
11%
-6%
78%
47%
50%
48%
53%
19%
17%
39%
15%
20%
28%
19%
22%
29%
Geographical breakdown / Sales (% of growth)
Vietnam
Japan
North America
-
61%
265%
-
-19%
-6%
-
18%
123%
-
17%
345%
high
0%
9%
17%
8%
28%
32%
10%
25%
16%
2004
2005
2006
2007
2008
2009e
2010e
2011e
Net Income
Depreciation and amortization
Capital gains/losses on asset disposals
Others
Cash Flow Statement (VND bn)
173
29
20
262
59
28
450
107
0
57
737
171
0
47
836
240
0
126
861
247
0
126
974
277
0
126
1,193
317
0
126
Cash Flow from Operations - Gross
Net change in operating assets & liabs
Cash Flow from Operations - Net
Gross CAPEX
Net CAPEX
Money spent on acquisitions
Cash received from divestment
Net financial investment
Dividends paid
Dividends received
Others
FCF
222
140
82
53
53
2
0
2
0
2
33
(3)
349
541
(192)
142
143
0
4
(4)
2
0
89
(421)
773
391
382
247
246
12
0
12
35
0
246
(156)
1,243
304
939
487
480
312
0
312
280
0
207
(341)
1,645
(189)
1,834
708
669
28
0
28
389
12
423
336
1,235
(210)
1,445
673
673
0
0
31
370
11
191
191
1,378
152
1,226
731
731
34
0
34
407
12
81
(16)
1,632
239
1,393
809
809
38
0
38
431
13
104
24
0
(3)
137
(284)
591
434
37
(304)
115
450
0
191
0
(16)
0
24
276
0
273
245
0
(39)
(180)
0
254
526
0
222
(64)
0
387
95
0
286
143
0
127
185
0
210
Increase in shareholder equity
Excess Cash Flow
Change in long term debt
Foreign exchange rate effect
Net Increase (Decrease) Cash & Equivs
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TELECOMMUNICATIONS
Balance Sheet (VND bn)
2004
2005
2006
2007
2008
2009e
2010e
2011e
150
76
75
n/m
266
116
157
111%
481
205
314
99%
954
356
607
94%
1,208
514
916
51%
1,881
738
1,495
63%
2,612
981
1,947
30%
3,621
1,261
2,565
32%
Gross intangible fixed assets
Accumulated depreciation intangibles
Intangible Fixed Assets
of which goodwill
0
0
0
-
10
2
8
-
26
10
16
0
55
21
35
0
83
39
45
0
83
39
45
0
83
39
45
0
83
39
45
0
Long Term Investments
% of growth
0
-
0
-
0
-
0
-
0
-
0
-
0
-
0
-
0
14
0
-
8
33
0
-
37
35
0
-
9
372
0
-
222
506
0
-
351
537
0
-
316
571
0
-
206
609
0
-
Fixed Assets
% of growth
89
n/m
199
125%
365
83%
1,013
178%
1,467
45%
2,076
42%
2,562
23%
3,218
26%
Inventories
Trade debtors
Prepayments
Provisions
Other debtors
356
715
0
0
52
384
1,147
0
0
75
555
1,672
0
0
149
1,428
1,727
0
0
292
1,224
1,887
0
0
305
1,725
1,899
0
0
307
1,871
2,060
0
0
333
2,072
2,282
0
0
368
Cash Bank
Marketable securities
373
-
415
-
669
-
896
-
1,243
-
1,518
-
1,633
-
1,830
-
-
-
-
-
-
-
20
-
1,495
n/m
2,021
35%
3,045
51%
4,343
43%
4,658
7%
5,448
17%
5,917
9%
6,552
11%
297
0
569
91%
40
1,537
170%
123
1,939
26%
283
2,373
22%
526
2,834
19%
742
3,360
19%
804
4,101
22%
891
0
13
0
2
15
0
75
0
3
78
20
26
0
3
49
66
37
0
3
106
19
57
0
3
79
15
58
0
4
29
106
15
86
0
4
43
148
15
97
0
4
49
165
Debt - long term
Debt - short term
Debts
% of growth
174
553
726
n/m
125
836
961
32%
7
778
785
-18%
67
1,249
1,316
68%
4
1,237
1,241
-6%
3
1,332
1,335
8%
3
1,474
1,477
11%
3
1,660
1,663
13%
Accounts payable
Other current liabilities
371
174
407
152
848
67
1,547
87
1,627
156
2,288
220
2,451
238
2,645
264
Accruals and deferrals
0
13
0
78
123
0
0
42
Gross tangible fixed assets
Accumulated depreciation tangibles
Tangible Fixed Assets
% of growth
Construction work in progress
Long term deposit
Long term prepaid expenses
Long term assets
Total Financial Fixed Assets
% of growth
Current Assets
% of growth
Shareholders Equity
% of growth
Minority interest
Discretionary provisions
Bonus and welfare funds
Training funds
Fund for board of management
Other funds
Provisions - total
1,584
2,219
3,409
5,356
6,125
7,525
8,479
9,771
Treasury shares
Working capital
% of growth
Total Liabilities
0
577
n/m
75
0
1,047
81%
157
0
1,460
39%
314
0
1,814
24%
607
0
1,633
-10%
916
0
1,423
-13%
1,495
0
1,575
11%
1,947
0
1,814
15%
2,565
Average Capital Employed
666
1,246
1,825
2,827
3,099
3,499
4,137
5,032
Off-Balance Sheet
Off-balance lease liabilities
Off-balance rental liabilities
Others Off-balance liabilities
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2004
2005
2006
2007
2008
2009e
2010e
2011e
EV/Sales
EV/EBITDA
EV/EBIT
PE
PEG
Valuation (x)
-
-
0.8
12.0
13.4
20.0
-
0.9
10.8
11.8
16.6
-17%
0.3
3.2
3.5
7.2
-57%
0.4
3.4
3.7
8.4
18%
0.4
3.5
4.0
7.8
-7%
0.3
3.0
3.4
6.5
-17%
P/Book
Dividend yield (%)
-
-
5.9
0%
6.3
2%
2.5
6%
2.6
5%
2.3
5%
1.9
6%
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TELECOMMUNICATIONS
Per Share Data (k VND)
2004
2005
2006
2007
2008
2009e
2010e
2011e
3
3
5
5
61
61
61
92
92
141
141
148
148
151
151
154
66
66
66
66
48
48
48
48
7
7
7
7
12
12
8
8
9
9
6
6
6
6
6
6
7
7
6
6
8
8
8
8
-
-
204.4
291.7
86.4
148.0
148.7
295.6
144.7
201.5
50.0
146.0
32.1
64.9
51.5
59.5
37.7
51.5
51.5
51.5
51.5
51.5
113
0
104
1
25
5
32
4
26
3
20
3
23
3
27
Cash Flow from Oper Per Share - Gross
Cash Flow from Oper Per Share - Net
84
31
64
(35)
13
6
0
0
0
0
0
0
0
0
0
0
Free Cash Flow Per Share
(1)
(77)
(3)
(0)
0
0
(0)
0
Profitability Ratios (%)
Shares outstanding (millions)
Number of share fully diluted (millions)
EPS - Basic - Before extras
EPS - Basic - After extras
EPS - Diluted - Before extras
EPS - Diluted - After extras
Latest price
High price
Low price
Average price
Dividend per share
Book value per share
2004
2005
2006
2007
2008
2009e
2010e
2011e
Gross Margin
5%
5%
15%
20%
21%
21%
22%
24%
EBITDA Margin
Operating Margin
3%
2%
3%
3%
7%
6%
9%
8%
11%
10%
11%
10%
11%
9%
11%
10%
Net Margin
2%
2%
4%
5%
5%
5%
5%
6%
Division breakdown / Margins
EBITDA Margin
-
-
-
11%
44%
36%
16%
36%
27%
15%
31%
28%
12%
28%
26%
11%
30%
28%
Operating Margin
-
-
-
10%
37%
27%
15%
36%
29%
14%
31%
30%
11%
29%
28%
10%
29%
29%
Net Margin
-
-
-
-
-
-
-
-
Geographical breakdown / Margins
EBITDA Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
Operating Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
Net Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
ROE
ROCE
Solvability & Efficiency Ratios (%)
58%
30%
50%
24%
35%
28%
45%
27%
44%
38%
38%
33%
37%
25%
37%
24%
Gearing
Equity / Total Assets
19%
26%
45%
36%
39%
38%
40%
42%
Pay-out Ratio
Interest cover
n/m
8.7
1%
10.6
13%
10.1
62%
15.9
53%
3.5
44%
5.1
47%
10.0
44%
10.9
Inventories (nb of days)
Trade debtors (nb of days)
Accounts payable (nb of days)
Working capital (nb of days)
14.7
29.4
15.3
28.8
9.8
29.3
10.4
28.7
17.5
52.8
26.8
43.6
38.1
46.0
41.2
42.9
26.9
41.5
35.8
32.6
37.7
41.5
50.0
29.2
37.7
41.5
49.3
29.8
37.7
41.5
48.1
31.1
Number of employees (FTE's)
Sales / Employee
EBIT / Employee
Salary / Employee
Bonus / Personnel costs
3,177
2,749.4
67.6
47.5
0.1
4,878
2,890.7
73.6
44.7
0.3
7,008
1,626.4
95.9
50.1
0.1
9,433
1,431.0
111.1
63.5
0.1
8,634
1,897.4
182.7
101.2
0.1
8,318
1,982.3
203.6
110.5
0.1
9,050
1,976.5
184.8
122.5
0.1
10,800
1,834.3
185.3
128.4
0.1
www.jaccar.net
94
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Sales
% of growth
Price (%)
Volume (%)
Organic growth (%)
External growth (%)
Other income
Total Sales
Income Statement (USD m)
524.09
-0%
185%
111%
0%
0.00
524.09
846.05
61%
-1%
125%
61%
0%
0.00
846.05
683.88
-19%
-1%
-11%
-19%
0%
0.00
683.88
809.93
18%
-1%
24%
18%
0%
0.00
809.93
982.91
21%
-1%
20%
21%
0%
0.00
982.91
989.33
1%
-4%
1%
1%
0%
0.00
989.33
1,073.22
8%
-3%
14%
8%
0%
0.00
1,073.22
1,188.60
11%
-3%
16%
11%
0%
0.00
1,188.60
COGS
Gross Income
% of growth
499.81
24.28
n/m
807.07
38.97
61%
0.00
581.55
102.33
163%
0.00
648.54
161.39
58%
0.00
777.89
205.02
27%
0.00
781.57
207.76
1%
0.00
837.11
236.11
14%
0.00
903.34
285.26
21%
Taxes
Personnel costs
EBITDA
% of growth
0.51
9.06
14.71
n/m
0.26
13.10
25.61
74%
36.36
0.00
21.09
44.88
75%
56.59
0.00
35.96
68.85
53%
48.89
0.00
52.45
103.69
51%
39.11
0.00
55.17
113.48
9%
55.81
0.00
66.54
113.76
0%
66.56
0.00
83.20
135.50
19%
Depreciation
Reported provisions
EBIT
% of growth
1.77
0.06
12.88
n/m
3.53
0.54
21.54
67%
6.41
0.00
1.86
40.34
87%
10.26
0.00
4.31
62.90
56%
14.37
0.00
5.36
94.67
51%
14.84
0.00
2.97
101.61
7%
16.63
0.00
3.22
100.35
-1%
19.02
0.00
3.57
120.05
20%
Interest income
Interest expenses
Interest balance
Pretax Income
% of growth
0.26
1.70
(1.44)
11.44
n/m
0.43
2.42
(1.99)
19.55
71%
0.68
4.46
(3.78)
36.56
87%
2.94
4.34
(1.40)
61.50
68%
11.85
29.71
(17.87)
76.80
25%
5.46
22.24
(16.78)
84.83
10%
7.84
11.41
(3.57)
96.78
14%
9.88
12.38
(2.50)
117.55
21%
Income taxes
Tax rate
Minority interest
Associate income
% of growth
1.08
9%
0.00
10.37
n/m
2.55
13%
1.25
15.75
52%
4.42
12%
5.11
0.00
27.03
72%
8.92
15%
8.57
0.24
44.25
64%
11.34
15%
12.89
(2.40)
50.18
13%
19.23
23%
13.16
(0.80)
51.65
3%
22.45
23%
15.49
(0.40)
58.43
13%
27.34
23%
18.77
0.15
71.58
23%
Extraordinary items
Net Income
% of growth
10.37
n/m
15.75
52%
0.00
27.03
72%
0.00
44.25
64%
0.00
50.18
13%
0.00
51.65
3%
0.00
58.43
13%
0.00
71.58
23%
-
52%
143%
98%
-20%
-12%
11%
-6%
78%
47%
50%
48%
53%
19%
17%
39%
15%
20%
28%
19%
22%
29%
Vietnam
Japan
North America
-
61%
265%
-
-19%
-6%
-
18%
123%
-
17%
345%
high
0%
9%
17%
8%
28%
32%
10%
25%
16%
Cash Flow Statement (USD m)
2004
2005
2006
2007
2008
2009e
2010e
2011e
Net Income
Others
10.37
1.77
1.19
15.75
3.53
1.68
27.03
6.41
0.00
3.40
44.25
10.26
0.00
2.80
50.18
14.37
0.00
7.54
51.65
14.84
0.00
7.54
58.43
16.63
0.00
7.54
71.58
19.02
0.00
7.54
Gross CAPEX
Net CAPEX
Dividends paid
Dividends received
Others
FCF
13.32
8.40
4.92
3.15
3.15
0.09
0.00
0.09
0.00
0.15
2.00
(0.17)
20.96
32.46
(11.50)
8.53
8.57
0.00
0.25
(0.25)
0.13
0.00
5.32
(25.27)
46.36
23.46
22.90
14.80
14.76
0.72
0.00
0.72
2.07
0.01
14.74
(9.38)
74.55
18.23
56.32
29.22
28.82
18.74
0.00
18.74
16.83
0.00
12.39
(20.46)
98.72
(11.31)
110.03
42.48
40.14
1.69
0.00
1.69
23.36
0.71
25.40
20.15
74.09
(12.62)
86.70
40.41
40.41
0.00
0.00
1.86
22.20
0.63
11.43
11.43
82.67
9.12
73.55
43.83
43.83
2.05
0.00
2.05
24.43
0.70
4.88
(0.94)
97.91
14.33
83.57
48.54
48.54
2.25
0.00
2.25
25.84
0.77
6.23
1.47
Excess Cash Flow
0.00
(0.17)
8.20
(17.07)
35.44
26.06
2.24
(18.23)
6.88
27.03
0.00
11.43
0.00
(0.94)
0.00
1.47
16.54
0.00
16.36
14.73
0.00
(2.34)
(10.79)
0.00
15.26
31.55
0.00
13.32
(3.81)
0.00
23.22
5.70
0.00
17.13
8.55
0.00
7.61
11.12
0.00
12.58
www.jaccar.net
95
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
% of growth
Balance Sheet (USD m)
9.03
4.55
4.48
n/m
15.94
6.99
9.44
111%
28.89
12.28
18.81
99%
57.25
21.36
36.42
94%
72.47
30.81
54.96
51%
112.87
44.28
89.68
63%
156.70
58.89
116.79
30%
217.25
75.67
153.91
32%
of which goodwill
0.00
0.00
0.00
-
0.62
0.11
0.51
-
1.54
0.58
0.96
0.00
3.31
1.24
2.07
0.00
4.99
2.31
2.67
0.00
4.99
2.31
2.67
0.00
4.99
2.31
2.67
0.00
4.99
2.31
2.67
0.00
% of growth
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
Long term deposit
Long term assets
% of growth
0.00
0.83
0.00
-
0.49
1.98
0.00
-
2.20
2.11
0.00
-
0.53
22.31
0.00
-
13.31
30.36
0.00
-
21.09
32.22
0.00
-
18.98
34.27
0.00
-
12.34
36.52
0.00
-
Fixed Assets
% of growth
5.31
n/m
11.93
125%
21.88
83%
60.81
178%
87.99
45%
124.57
42%
153.73
23%
193.10
26%
Inventories
Trade debtors
Prepayments
Provisions
Other debtors
21.35
42.87
0.00
0.00
3.13
23.06
68.79
0.00
0.00
4.49
33.28
100.31
0.00
0.00
8.92
85.69
103.60
0.00
0.00
17.53
73.44
113.23
0.00
0.00
18.28
103.48
113.97
0.00
0.00
18.40
112.26
123.63
0.00
0.00
19.96
124.33
136.92
0.00
0.00
22.11
Cash Bank
22.36
-
24.90
-
40.17
-
53.73
-
74.55
-
91.05
-
97.96
-
109.78
-
-
-
-
-
-
-
1.19
-
Current Assets
% of growth
89.71
n/m
121.24
35%
182.67
51%
260.56
43%
279.50
7%
326.90
17%
355.01
9%
393.14
11%
Shareholders Equity
% of growth
Minority interest
17.85
0.00
34.15
91%
2.38
92.21
170%
7.39
116.37
26%
16.96
142.41
22%
31.57
170.04
19%
44.49
201.58
19%
48.27
246.04
22%
53.45
0.00
0.77
0.00
0.11
0.88
0.00
4.49
0.00
0.17
4.66
1.18
1.58
0.00
0.17
2.93
3.99
2.23
0.00
0.17
6.38
1.13
3.42
0.00
0.17
4.72
0.90
3.49
0.00
0.21
1.75
6.35
0.90
5.16
0.00
0.23
2.58
8.88
0.90
5.84
0.00
0.25
2.92
9.92
Debt - long term
Debt - short term
Debts
% of growth
10.42
33.17
43.59
n/m
7.50
50.17
57.66
32%
0.42
46.68
47.10
-18%
3.99
74.96
78.95
68%
0.23
74.21
74.44
-6%
0.18
79.91
80.09
8%
0.18
88.46
88.64
11%
0.18
99.57
99.76
13%
Accounts payable
22.24
10.47
24.41
9.11
50.86
4.05
92.80
5.21
97.61
9.36
137.31
13.19
147.07
14.31
158.70
15.85
0.00
0.80
0.03
4.70
7.38
0.00
0.00
2.52
Training funds
Other funds
Provisions - total
Total Liabilities
95.02
133.17
204.55
321.36
367.49
451.48
508.74
586.24
Treasury shares
Working capital
% of growth
0.00
34.64
n/m
4.48
0.00
62.82
81%
9.44
0.00
87.60
39%
18.81
0.00
108.83
24%
36.42
0.00
97.97
-10%
54.96
0.00
85.36
-13%
89.68
0.00
94.48
11%
116.79
0.00
108.81
15%
153.91
39.95
74.75
109.48
169.63
185.97
209.93
248.21
301.91
Off-Balance Sheet
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2004
2005
2006
2007
2008
2009e
2010e
2011e
EV/Sales
EV/EBITDA
EV/EBIT
PE
PEG
Valuation (x)
-
-
0.8
12.0
13.4
20.0
-
0.9
10.8
11.8
16.6
-17%
0.3
3.2
3.5
7.2
-57%
0.4
3.4
3.7
8.4
18%
0.4
3.5
4.0
7.8
-7%
0.3
3.0
3.4
6.5
-17%
P/Book
Dividend yield (%)
-
-
5.9
0%
6.3
2%
2.5
6%
2.6
5%
2.3
5%
1.9
6%
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96
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Per Share Data (USD)
2.63
2.63
5.47
5.47
60.81
60.81
60.81
92.35
92.35
140.98
140.98
148.03
147.84
150.80
150.80
153.82
3.94
3.94
3.94
3.94
2.88
2.88
2.88
2.88
0.44
0.44
0.44
0.44
0.73
0.73
0.48
0.48
0.54
0.54
0.36
0.36
0.37
0.37
0.35
0.35
0.40
0.40
0.39
0.39
0.47
0.47
0.47
0.47
-
-
12.3
17.5
5.2
8.9
8.9
17.7
8.7
12.1
3.0
8.8
1.9
3.9
3.1
3.6
2.3
3.1
3.1
3.1
3.1
3.1
Dividend per share
6.78
0.02
6.24
0.03
1.52
0.28
1.91
0.25
1.54
0.16
1.21
0.17
1.36
0.17
1.63
5.06
1.87
3.83
(2.10)
0.76
0.38
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
(0.07)
(4.62)
(0.15)
(0.00)
0.00
0.00
(0.00)
0.00
Latest price
High price
Low price
Average price
2004
2005
2006
2007
2008
2009e
2010e
2011e
Gross Margin
5%
5%
15%
20%
21%
21%
22%
24%
EBITDA Margin
Operating Margin
3%
2%
3%
3%
7%
6%
9%
8%
11%
10%
11%
10%
11%
9%
11%
10%
Net Margin
2%
2%
4%
5%
5%
5%
5%
6%
EBITDA Margin
-
-
-
11%
44%
36%
16%
36%
27%
15%
31%
28%
12%
28%
26%
11%
30%
28%
Operating Margin
-
-
-
10%
37%
27%
15%
36%
29%
14%
31%
30%
11%
29%
28%
10%
29%
29%
Net Margin
-
-
-
-
-
-
-
-
EBITDA Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
Operating Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
Net Margin
Vietnam
Japan
North America
-
-
-
-
-
-
-
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
ROE
ROCE
58%
30%
50%
24%
35%
28%
45%
27%
44%
38%
38%
33%
37%
25%
37%
24%
Gearing
19%
26%
45%
36%
39%
38%
40%
42%
Pay-out Ratio
Interest cover
n/m
8.7
1%
10.6
13%
10.1
62%
15.9
53%
3.5
44%
5.1
47%
10.0
44%
10.9
14.7
29.4
15.3
28.8
9.8
29.3
10.4
28.7
17.5
52.8
26.8
43.6
38.1
46.0
41.2
42.9
26.9
41.5
35.8
32.6
37.7
41.5
50.0
29.2
37.7
41.5
49.3
29.8
37.7
41.5
48.1
31.1
Sales / Employee
EBIT / Employee
Salary / Employee
3,177
0.2
0.0
0.0
0.1
4,878
0.2
0.0
0.0
0.3
7,008
0.1
0.0
0.0
0.1
9,433
0.1
0.0
0.0
0.1
8,634
0.1
0.0
0.0
0.1
8,318
0.1
0.0
0.0
0.1
9,050
0.1
0.0
0.0
0.1
10,800
0.1
0.0
0.0
0.1
www.jaccar.net
97
TELECOMMUNICATIONS
One Corporation
Rating: ACCUMULATE
SWITCHING AND GETTING THROUGH
Target Price: 14,800 VND
Company Data
•
Starting as a small IT company, One has run over 15 years to
become a medium company with a specific position in both IT &
telecom sector. Although ONE market share is not too big, among
thousands IT & Telecom companies in different types of
ownership and SOEs with hidden favors, ONE seems to find out a
firm stand with valuable clients from public sector.
•
Being listing on stock market might be a venture for ONE because
the company is just a ‘penny stock’, but that shows the company’s
ambition of long term transparent growth.
•
Seizing the highest rank partnership in Vietnam by Alcatel-Lucent
and Nortel, with the high technical capability, ONE is an
experienced and professional integrator in telecommunication and
IT network sector.
•
Top management team of ONE has been growing and matured
internally in the company since the first date of their career: they
are young, ambitious and dynamic, appropriate to the IT and
Telecommunication industry with very fast developments. The
internal strength of ONE is the unity of company management and
Board of Director.
•
2009 FCF are forecasted to reach more than VND 16 bn (USD
915k). Thanks to FCF performance, the company would be able to
finance its investment in 2010. Meanwhile sales stably grow, ROE
and ROCE remains at medium high around 20%.
•
Still a small size company, liquidity of ONE shares is a bit low
•
Valuation of ONE uses the average of DCF and Peer Comparison
methods, implying a target price is VND 14,800. We adopt an
Accumulate recommendation as Vietnam ICT develops fast and
its public investment keep growing more than 10% y-o-y.
However, a potential dilution in 2010 is not accounted in our
target price.
Price, close (Apr 21, 2009): 12,800 VND
Price, close (Apr 21, 2009): 0.77 USD
Market cap. (VND bn): 29
Market cap. (USD m): 1.77
Turnover per day: 12,700
Bloomberg code: ONE VN
Company Contacts
Dang Anh Phuong (CEO)
Lu Hong Chieu (CFO)
Do Lien Huong (IR)
www.one.com.vn
Dang Anh Phuong
Nguyen Doan Le Minh
Lu Hong Chieu
10.33%
5.38%
5.08%
Performance
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
6/08
9/08
Price
12/08
3/09
Price/VN Index
P&L Highlights
(VND bn)
Sales
EBIT
Op. Margin (%)
Net Income
Net Margin (%)
Fixed Assets
Debts
FCF
FCF yield (%)
2006
95
0
0%
(3)
-3%
3
21
(4)
-
2007
142
12
8%
8
5%
1
0
(2)
-
2006
-68%
-1%
-
2007
31%
111%
0%
2008
108
11
10%
7
7%
2
7
(19)
-134%
2009e
119
9
8%
7
6%
4
7
18
137%
2010e
127
12
9%
9
7%
16
7
(8)
-60%
Key Ratios
(x)
EV/Sales
EV/EBITDA
EV/EBIT
PE
P/Book
ROE (%)
ROCE (%)
Div. Yield (%)
Payout ratio (%)
Next Events
25/04/09
2008
0.3
2.6
2.9
3.9
0.9
24%
24%
4%
13%
2009e
0.1
1.5
1.6
4.0
0.8
21%
36%
12%
47%
2010e
0.2
1.5
1.6
3.6
0.7
21%
25%
8%
36%
SWOT ANALYSIS
Strengths
• 1st integrator in Vietnam in Contact Center; High
ranking partnership with global suppliers
• Qualified and experienced technical team
• High consensus among BoD and BoM
• Various customers: state agencies and privates,
local and foreign companies
Weaknesses
•
•
•
•
Just a local, small and private company
Products and services are not differentiated
Less fix assets and unstable cash flows
Major business is too dependent in traditional
customers
Shareholder meeting
Opportunities
Analyst
81-85 Ham Nghi
District 1
Ho Chi Minh City
Tel: +84 8 39 14 90 60
htn@jaccar.net
• Contact Center services is expected to boom by
coming years
• With supports by government, ICT investment
budget is increasing
• Top world vendors' entering Vietnam,
experienced local integrators needed
• Demand of ICT is increasing along with FDI wave
www.jaccar.net
Threats
• Main business of ONE is network (less
intelligence value) that brings lowering margin
• Thanks to WTO, strong global companies are
easy to approach market and set game rules
• Many competitors, fierce competition in same
segments
• Easy to be merged or bought by other
98
TELECOMMUNICATIONS
VALUATION
In order to valuate ONE, we take a look at different methods: DCF, Peers comparison, Sum of
the Part, Sector-based transactions.
•
•
•
•
DCF: thanks to the positive Free Cash Flows in 2007 - 2008 and assumption of stable
growth in coming years, we decide to value the Free Cash Flows over 5 years.
Peers Comparison: we decide to take the valuation multiples of AFONE, UNISYS, NEC
and Dimension Data as they are global integrator and IT project-based traders.
Sector-based transactions are not relevant for ONE because it is small and based on
project sales.
Sum of the Part: We did not choose this method as ONE is too small and its product
segments cannot be breakdown in term of profit and margins.
DCF
DCF assumptions
Sales
growth (in %)
EBITDA
growth (in %)
Change in WCR
Taxes
Corporate tax rate
Investments
growth (in %)
Dividends
Others
Free cash-flows
Discount
Discounted FCF
EBIT
Op. Margin (in %)
Tax rate / EBIT
NOPAT
Terminal value
Sub-total
- Debts
- Others
Total
Nb of share fully diluted
Target price
Long-term growth rate
2008
2009e
2010e
2011e
2012e
2013e
108,250
118,814
9.8%
8,992.24
8%
-24.8%
0
(14,301)
23,294
1,373
15%
1,500
1.3%
3,450
0
16,971
86%
14,607
7,864
6.6%
17%
6,491
126,662
6.6%
11,870.48
9%
32.0%
0
2,012
9,859
2,893
24%
13,500
800.0%
2,645
0
-9,179
74%
-6,800
10,421
8.2%
28%
7,528
139,468
10.1%
12,146.29
9%
2.3%
0
2,247
9,900
2,840
23%
1,500
-88.9%
3,312
0
2,248
64%
1,433
10,562
7.6%
27%
7,721
153,415
10%
13,361
9%
10%
0
2,000
11,361
3,607
27%
1,500
0.0%
3,643
0
2,611
55%
1,433
16,109
10.5%
22%
12,501
168,757
10%
14,697
9%
10%
0
2,000
12,697
3,968
27%
1,500
0.0%
3,643
0
3,586
47%
1,694
17,719
10.5%
22%
13,751
11,956
11%
0
5,094
6,862
2,340
20%
1,481
1,000
0
2,041
0
10,885
10.1%
21%
8,545
12,368
49,297
61,664
2,841
0
64,505
2.645
24,387
3%
Source: Jaccar
We use some assumptions for DCF method:
•
•
•
Sales and EBITDA, EBIT is forecasted to grow stable 5-7% over 2009-2011;
Corporate tax rate: in 2009, ONE enjoys the favorable rate at 18% as a small size
company in the slowdown. Starting 2010, ONE will pay full tax rate of 25%;
New investment of VND 12bn (USD 674,000) added in 2010 after good performance of
cash flows in 2009;
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TELECOMMUNICATIONS
•
The company keeps stable rate of dividends at 10% par value in cash, 10% in stock in
coming years. And 30% new investment is funded through new issuance in 2010. The
dividend increases steadily with number of shares;
As ONE is based on commercial business model, we decide to value the FCF over 5 years.
WACC
Cost of capital
5-years bond
Beta
Risk premium
in %
9%
1.68
9.45%
25.06%
in %
10%
25%
8%
in %
49.4%
10,500
2,645,000
51%
16.2%
Cost of debt
Taxes
Assumptions
Market cap.
Share price
Debts
WACC
Source: Jaccar
WACC is based on the following indicators:
• Vietnamese 5 year bond: we took into account the average of the transactions on the
latest issue done by the government;
• Beta: we used the data given by Bloomberg (0.68). We add a coefficient of 1 to take into
account the small size of the company and the illiquidity on the stock;
• Risk premium: is calculated from a free default government bonds (i.e. the US
government bonds on the historical valuation), the Moody’s rating for long term bonds
(definition of the ADI default spread) and the adjusted country risk premium (equity
emerging markets are in average 1.5x more volatile than bond markets);
• Long term interest rate: based on 2008 expectations for the group.
This method gives a target price of VND 24,387 per share.
PEER COMPARISON
We select some following network system integrators and IT- telecommunication providers:
•
•
•
•
Afone SA provides telecommunications services to individuals, French associations and
groups;
Unisys Corporation is the global information technology services and solution company.
It includes system integration, outsourcing, infrastructure, server technology and
consulting;
NEC Network and System Integration Corporation designs, constructs and maintains
communication systems. The company services are system integration services for digital
switching, local area network (LAN) and mobile communication systems;
Dimension Data holdings Plc. is also the global technology services company. The group
provides solutions and services of infrastructure performance management and
integration. One affiliate of the group is Data Craft that is specializing in system
integration and established the company named Data Craft Vietnam - one of key players
in Vietnam market;
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100
TELECOMMUNICATIONS
Peer comparison
Company Name
Afone
NEC Network and SI
Dimension Data Hld
Unisys Corp.
Median
EV/
Last Market EV/Sales EV/Sales EV/Sales EV/Ebitda Ebitda
Price
cap
2008
2009e
2010e
2008
2009e
3.42
943.0
47.25
1.17
28
477
1,168
433
0.30
0.13
0.24
0.24
0.28
0.12
0.22
0.22
0.12
0.19
0.15
18.16
3.07
3.96
1.78
3.52
3.46
3.07
3.72
1.57
3.26
EV/
Ebitda
2010e
2.89
3.32
1.68
2.89
EV/Ebit EV/Ebit EV/Ebit
2008
2009e
2010e
1.32
7.41
3.05
18.84
6.62
12.73
4.93
4.93
Source: Jaccar
Through this method, our target price reached VND 14,284.
Conclusion
Valuation summary
DCF
Peer Comparison
VND
VND incl. country
discount
USD
24,387
14,284
19,336
20,729
12,142
16,425
1.19
0.69
1.0
Source: Jaccar
We adopt an Accumulate
recommendation with a
VND 14,800 target price
We have decided to adopt an Accumulate recommendation with a target price of VND 14,800 per
share (after our country discount of 15% and s discount of 10% regarding the low liquidity of the
stock). We would like to underline that it doesn’t take into account the risk of dilution (the
enterprise could decide to issue new shares in 2010 for financing new investments).
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TELECOMMUNICATIONS
SMALL IS BEAUTIFUL?
Born in dynamic world, took right steps on
time to expand and grow up
15 years in IT & telecom
system integration
Found in 1994, ONE started as a small IT company, named One Ltd., under form of a private
entity, providing IT network and devices. In Vietnam at that time, IT equipment were still
“luxury” goods and IT was a fresh and potential sector.
Four years later, when IT equipment resellers became more and more popular, the margin of IT
equipment business slowdown, ONE expanded to telecommunication business by providing and
installing PABX and optical transmission system.
By 2000, ONE had started the business of multi-service networks. On March 2001, ONE
reformed into joint-stock company and increased the registered capital up to VND 10bn (USD
670,000), more focused on telecommunication and data networks.
In 2005, ONE was able to integrate and provide Contact Center and access systems requiring
higher technology and intellectual engineer team. ONE has kept the pace of the development of
Vietnam IT & Telecommunication.
By the time, ONE has changed and added more intellectual value into their products and services;
which helped ONE maintained the good margin approx. 10% per products sold.
Newly listing by Mid
2008
Board of Management
holds 23.25% ownership
By the end of 2007, One JSC doubled its registered capital, at VND 20bn (USD 1.25m), renamed
ONE Corporation and was listed in Hanoi Stock Exchange (HASTC) on 24/6/2008.
The chairman of ONE is Mr. Tu Long, founder and former CEO of ONE during 2000-2007, now
owning only 4.6% of the company. Mr. Dang Anh Phuong, became CEO by December 2007,
also the biggest shareholder of ONE, seizing 10.3% ownership. The management team owns the
biggest portion with 23.2% of the company, by which, they can run the business with less
conflicts and more the approvals by Board of Management smoothly.
Member
Position in Company
Tu Long
Nguyen Doan Le Minh
Nguyen Thi Hop
Dang Anh Phuong
Lu Hong Chieu
Nguyen Ha Thanh
Hoang Ha
Le Viet Thang
Nguyen Thi Minh Nguyet
CEO
Vice President
Vice President,
Director of HCMC Branch
Vice President
Vice President
Chief of Accountant
Position in the
Board
% of capital
% of voting right
Chairman
Board member
Board member
Board member
Deputy of BoM
4.60%
5.38%
3.70%
10.33%
5.08%
4.60%
5.38%
3.70%
10.33%
5.08%
Board member
3.10%
3.10%
Board member
1.83%
1.33%
1.58%
1.83%
1.33%
1.58%
Source: Company
However, with the company size and business activities of ONE, IPO is a quite surprising
decision. The moment of listing was not really favorable. It can be seen as the ambition of the
young management team toward the long term and transparent development of the company.
That may bring the challenges and the economy and stock market slowdown may unexpectedly
impact on the company.
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TELECOMMUNICATIONS
Power is concentrated in the new CEO
Power transfer to the
young generation
Technical VPs have 14
year working in ONE
Mr. Dang Anh Phuong handles the top management position of ONE at the time of IPO and
preparing listing on the stock market. Mr. Phuong joined ONE as a normal salesperson in 1996,
promoted to sales manager in 1998, then Deputy Director in 2001. The sales department is the
heart of the trading company; so, the promotion of Mr. Phuong is easy to understand. But it
seems to have a transfer of key ownership and management power from the former to the new
CEO.
Born in 1974, becoming the top after 12 years working for ONE, this young CEO is the worthy
representative for leading ONE in the active business of IT & Telecommunication sector.
Besides Mr. Phuong, there are 4 important Vice General directors of ONE. The first one is Mr.
Lu Hong Chieu, the Vice Director on Financial Administration and Vice Chairman of BoM. Mr.
Chieu, a former independent investor with more than 10 years in financial management, has
realized the opportunities and potential growth of ONE, decided to become one of its key
shareholders. He currently owns 5% of its equity, and is working as a chief consultant on
business administration and financial management.
Other 2 vice directors, Mr. Hoang Ha & Mr. Viet Thang are in charge orderly of product
technical management, handling solution consultancy, and supervising solution development.
They have been active members of the Corp. since 1996, using their expertise in this industry to
develop a skilled technical labor pool for the Corp. Mr. Ha Thanh, ONE Corp.'s Vice General
Director and Southern Branch Manager since 1999, has successfully integrated his wellestablished market understanding and administrative skills into the expansion of the Corp. list of
partners and clients. The revenue of the Southern market has gradually increased, with a prospect
surpassing headquarter market in next year.
The sales department remains at the heart of the
organization but strong technical team is essential
Like many other enterprises in the integrated system and commercial solution market, ONE
business structure puts the sales division at the center of its operations - which involving all
business planning and promotional activities, bidding and handling of business agreements.
High qualified technical
team builds the strong
capacity for big
projects…
However, it is the technical department with its skillful staffs and engineers with years of large
project implementation experiences which defines ONE competitive edges against its
competitors. The technical engineering team of ONE, who was trained and accredited by its
internationally renowned suppliers, has extensively grown up. ONE has engaged and successfully
completed a number of technically complicated projects with high requirements in technologies,
such as submarine cable recovery & repairing projects, the Contact Center 1080 solution for
Dong Nai Province's post-office and the nation-wide Contact Center solution for VMS-Mobifone.
…and high ranking
partnership with
international suppliers
Thanks to these big deals, ONE Corp. has established a tight partnership at high level with
international corporations such as Alcatel, Nortel, Keymile, ZTT, etc. The success of ONE has
come along with those partners' reputation.
At present, ONE Corp. has 80 experienced technical staff, 70% of them have graduate and postgraduate education. By implementing the projects, ONE technical team keeps being trained and
certified by the mentioned international partners. ONE Corp. has also contracted 30 technological
consultants and associates with technical expertise as an extra support for upcoming projects. All
of the above things contribute to ONE technical capacity for attending tenders over other
competitors. Among the same size companies in the same range of products and services, this
team of ONE‘s team is stronger and more experienced. However, this advantage is only useful in
some limited deals where products and solutions of ONE’s suppliers are selected. On the other
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TELECOMMUNICATIONS
hand, there will be not much chance for ONE to win in competing against much bigger
integrators like FPT or CMC in the IT projects of or provided to non-traditional clients.
Organization chart
Board of Shareholder
Board of Supervisors
Board of Management
CEO
Vice Director
Accountant General
Sales Director
Accounting
Division
Technical Director
Importing Division
Sales Division
Personnel
Department
Technical
Division
Saigon Branch
Customer Service
PABX
Transmission
Call Center
Source s: ONE, Jaccar
www.jaccar.net
104
TELECOMMUNICATIONS
VALUABLE CUSTOMER = SUCCESS KEY
The below chart is an overview of main forms of products and services in enterprise information
technology industry and top listed vendors.
Overview of technology industry
Average
Gross Margin
26%
Enterprise IT “Stack”
IBM, CSC, HPQ IT Services
Intelligence Application Software
75%
SAP, NSFTM,CRN 74%
ORCL, MSFT 65%
CSCO, JNPR Network
28%
HPQ, DELL, IBM Hardware
Software
Infrastructure Software
Infrastructure
Source: Jaccar
Networking is lowering
margin business
ONE is working on Enterprise Networking business. The intelligence and value adding factor in
this segment is not high, so the margin of business is going down (only 2-10%). That is the
reason why ONE and alike integration companies need to increased percentage of services in
total revenues. The industry includes 8 segments, the below table provide key information of
each market segment:
Market shares of top international suppliers
Market Projected
(In USD)
Size
Growth
Switches
Routers
Telephony
17.3
4.3
9.6
6%
3%
7%
Appl. Delivery Controller
1.1
11%
WAN Optimization
Wireless
0.8
1.9
15%
14%
Security
5.2
5%
Video
Enterprise Networking
Sector
1.7
23%
Top3 Vendors, 2Q08
Cisco (67%)
HP (5%)
3Com (4%)
Cisco (76%) Juniper (6%) 3Com (3%)
Avaya (18%) Cisco (17%) Nortel (13%)
Prime market Spending
Driver(s)
Priority
Macroeconomic
Macroeconomic
Macroeconomic
Cost Savings
Cisco (34%) F5 (33%) Citrix (10%)
Productivity
Cisco (27%) Blue Coat (25%) Riverbed (24%)
Productivity
Cisco (50%) Aruba (7%) Motorola (7%)
Data Protection
Productivity
Cisco (40%) Juniper (10%) Check Point (9%)
Cost Savings
Tandberg (36%) Polycom (33%) Radvision (3%)
Low
Low
Low
High
Medium
Low
High
Low
7%
Sources: Infonetics Research, Wainhouse Research, and William Blair & Company, L.L.C estimates
Note: Forecasted CAGR (2008-2011) were made at the time before the incident of the global financial crisis.
The most relevant segment of ONE are Switching and Telephony, let’s take a look at the global
market share of those segments and the whole enterprise network for ideas on ONE’s suppliers:
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TELECOMMUNICATIONS
Top Six Enterprise networking Vendors (2007)
Enterprise Telephony Market share (2Q08)
Other, 35%
Juniper, 2%
Avaya,
18.0%
Other,
19.1%
Siemens,
3%
Avaya, 4%
AlcatelLucent, 4%
NEC, 7.2%
Nortel, 6%
AlcatelLucent,
13.0%
Siemens,
11.9%
Nortel,
13.4%
Cisco, 46%
Cisco,
17.3%
Source: Infonetics Research and William Blair & Company, L.L.C
Source : Infonetics Research and William Blair & Company, L.L.C
Application Switching market share (2Q08)
Radware,
5.6%
Other,
6.7%
Foundry,
5.8%
Cisco,
34.2%
Nortel, 6.2%
Citrix, 9.6%
F5, 32.8%
Source : Infonetics Research and William Blair & Company, L.L.C
ONE obviously has the good partnership with some in the top venders such as Nortel, AlcatelLucent, Juniper, therefore has a good stand in market. Sum of their market share is totally 12%,
unable to compare with Cisco with 46% total network market share. Though, ONE chooses nonCisco partners to go business with as Cisco had dozen of local ones in Vietnam. It is hard to fight
in the crowded playground. In the specific segments such as telephony, switching where Nortel
and Alcatel-Lucent are not overpowered by Cisco, ONE still gets its own space.
In local market, the entry barrier of system integration sector is low with the already occupancy
ONE market share is not
higher than 4%
by big leaders like FPT of 50% market share and many same size competitors, there is not big pie
for ONE. Despite getting a specific position in the sector, ONE still stands somewhere in the lowmedium group with its market share not higher than 4%.
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TELECOMMUNICATIONS
Market share in system integration
ISP
Visco ONE
DTS
Hong Co
Tecapro
FPT
HiPT
CMC
Elcom
HPT
Source: Jaccar
Products, system & solutions: 96% /
Services: 4%, is it the best cocktail?
Improving services
proportion to products in
total revenue
With 15 years in business, ONE Corp. has successfully built up its image of quality system and
service providers with continual improvement of technical expertise. ONE Corp. has grasped any
opportunities to penetrate its advanced telecommunication products and solutions available to the
market. What's more important is that ONE has consistently focused on its branding and image
building strategies along with its business ties with key customers, including the Ministry of
Public Security, Electricity of Vietnam (EVN), major telecommunication enterprises of VNPT,
Government's agencies, overseas corporations, banks and organizations.
Sales breakdown (2006-2008)
2006
Products and solutions, incl:
Optical cables
LAN, WAN, etc. for Enterprise
Network, Transmission (Carrier)
SDH and Access
PABX and Contact Center
Video Conferencing
PCs and IT devices
Others/Softwares
Services
Total Revenue
2007
2008
Value
94,031
14,000
29,000
8,000
25,000
5,431
600
12,000
%
98.95%
14.73%
30.52%
8.42%
26.31%
5.71%
0.63%
12.63%
Value
140,985
80,000
16,000
6,000
14,985
14,000
1,000
9,000
%
98.95%
56.15%
11.23%
4.21%
10.52%
9.83%
0.70%
6.32%
1,000
95,031
1.05%
1,500
142,485
1.05%
Value
104,160
8,037
27,115
10,262
677
45,698
337
8,006
4,029
4,090
108,250
96.20%
7.40%
24.90%
9.40%
0.60%
42.00%
0.30%
7.40%
3.70%
3.80%
Source: Jaccar
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TELECOMMUNICATIONS
A policy of long term contract
Key projects and customers
Items
Key Customer
/Project
Value/Year of
implementation
EVN – Power
Company region 3
(PC3)
(2006-2007)
2006: VND10.3bn
2007: USD 4mil
2005: VND9bn (Fiber
optic), VND500mil
(Fusion splicer)
2006-2007: VND 23.3bn
(Fiber optic)
2007: VND ~58bn
Telecommunication
Fiber Optic
Suppliers: ZTT
EVN – Power
Company region 3
(PC3)
EVN – Power
Company region 2
(PC2)
Da Nang & 9
provinces in
Middle region
Products/
solution
provide
Fiber optic of
ADSS, F8
types and
accessories
(ZTT)
Da Nang & 9
provinces in
Middle region
Fiber optic of
ADSS, F8
types (ZTT),
Fusion splicer
(Sumitomo)
Sites
2007: VND22.3bn
Southern Region
2001: USD 476,000
2002: USD 825,000
Optical Transmission:
2003: USD 890,000
2004-2005: USD
Hanoi, HCMC, Da
+ PDH,
2.032mil
Nang & other
+ SDH,
VNPT – VTN
2006: USD 750,000
provinces
+ DWDM
2000-2001: VND 4bn
Ministry of Public
+ Metropolitan Area
Security - Information 2001-2002: VND 6.2bn Hanoi, HCMC, Da
Network-Ethernet
2002-2003: VND 11.5bn Nang & other 61
Center
(MAN-E),
2004-2006: VND 15bn
provinces
(2000-2006)
Suppliers: Nortel and EVN – Power
Company region 3
Da Nang & 9
Alcatel
(PC3)
2005: VND 21.2 bn
provinces in
(2005-2006)
2006: VND 14.2 bn
Middle region
PABX system &
Contact Center
Suppliers: Nortel and
Alcatel
VNPT/VMS
Ministry of Public
Security - E13
(Communication
Division)
E13
VNPT/Dong Nai P&T
VMS
Truong Minh Jsc
HSBC Hanoi
HSBC Hanoi
2005-2006: VND 15.6bn
2001-2002: VND 1.5bn
2002-2003: VND 3bn
2004-2005: VND 5bn
2007: VND 4.5bn
2007: VND2.9bn
2007-2008: VND5.1bn
2007-2008: VND13.8bn
2007: VND2.35bn
2007-2008: VND2.36bn
www.jaccar.net
SDH: TN-1C,
TN-1X, TN16X (Nortel)
SDH: TN-1P,
TN-1X, TN16X (Nortel)
SDH: TN-1P
(Nortel);
MUX: UMUX
1500 (Keymile)
Contact Center
Hardware,
Software
(Nortel) and
software
Hanoi, HCMC, Da developed by
One
Nang
OmniPCX
Enterprise
PABX
Hanoi, HCMC, and
(Alcatel)
other provinces
PABX
Contact Center
Contact Center
Contact Center
Contact Center
PABX
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TELECOMMUNICATIONS
VNPT/VDC
VNPT/VDC
Frame Relay/X.25:
2003: VND 15bn
2004: VND 4.5bn
2005: VND 4.8bn
2006-2007: VND 6.5bn
2003: VND 15bn
2004: VND 4bn
2005: VND 6.5bn
Multiservice
Switch
Hanoi, HCMC, Da
Passport
Nang & other 16
(Nortel)
key provinces
North: 9 provinces:
South: 9, Middle: 3 Access Server
provinces
(Aastra)
LAN, WAN,
Servers and
workstations
(IBM, HP),
switch,
passport
Hanoi, HCMC, Da
(Nortel), cables
Nang & other
(AMP)
provinces
2000: USD50,000
2001: USD200,000
2003: USD150,000
IT and telecom
2004: USD150,000
network:
2005: USD650,000
+ Broadband Access
2006: USD500,000
System (xDSL) &
2007: USD800,000
EVN - PC1 & PC3
Multi-Service Access
1996-2000: USD 580,000
Node (MSAN)
2001: USD252,000
+ Data Network and
2002: 350,000
Security Network
2003: USD 630,000
Switch,
+Server, Switch, Router
2004: USD 510,000
Vietinbank HQ &
passport
+LAN, WAN and
2005-2006:
USD700,000
145
branches
over
(Nortel),
cables
Vietinbank
(1996cables
2007: USD 400,000
the country
(AMP)
2005)
Switch,
passport,
WALN
2000: USD 150,000
(Nortel), cables
2001-2002: USD:
(AMP), PC,
500,000
2003-2004: USD 600,000 Campus, e-library, Server data
network
2005: USD500,000
all division and
Poly technique
(SUN,IBM,HP)
2006: USD 600,000
facilities
University, Hanoi
HSBC in HCMC
2007: VND3.8bn
E15-Technical Dept. 2007: VND 4.5bn
(MoPS)
2007-2008: 3.2bn
LAN
Camera and
speaker
Others
Hochiminh city Power 2007-2008: VND 6.6bn
network
Source :ONE
Important customers are
from government side
Several of these companies have long-term projects with ONE, such as EVN and its affiliated
companies (PC1, PC2, and PC3) with their optic cable systems and networks; Ministry of Public
Security (MoPS); VNPT's major telecommunication enterprises, such as VMS, VTN, and VDC,
and provincial and city post-offices with their operator systems and contact centers. The contracts
with those customers are done through bidding process where ONE has advantages of experience
and technical capacity in the previous projects. The timeline of project is normally about 3-6
months. In practices of deals with government sides, especially with MoPS, after the initial
bidding, the renewal contract or next phases of project expansion is continued with ONE.
As for PABX systems and solutions, ONE has a wide range of customers, from Ministries (Public
Security, National Defense) to local enterprises (aviation companies, telecommunication
corporations, and banks), overseas organizations, 5-stars hotels, and universities.
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TELECOMMUNICATIONS
1st in Contact Center
system
ONE technological expertise and prestige have been proven through a number of complicated
telecommunication projects, such as submarine cable systems, Contact Center for 1080 service
operators, VMS.
ONE has early started to approach communication systems (Call centers) business since early
90s. Now the customer service communication solutions (Contact Center) become a strategic
business of ONE. ONE could be considered a leading corporation in Vietnam Contact Center
market with profound experience in extensive, professional system implementation. The target
customers of ONE regarding Contact Center solutions are varied with their high demands of
quality, including major telecommunication enterprises, outsourcing companies specializing in
Call/Contact Center services, and overseas banking institutions.
Empowered by partnership with the major suppliers
Partnership with top
global venders is the
most advantage
One of the company advantages over its competitors is its high ranking strategic partnership with
internationally renowned IT and telecommunication enterprises. Thanks to their partnerships,
ONE Corp. has significantly enhanced its technological expertise, and consequently, gained
fruitful collaboration from their partner's business projects. ONE's brand names and market
positions have been developed along with these partners' reputation.
Nortel Networks: ONE Corp. is the only Silver partner of Nortel in Vietnam with leading sales
revenue. As a matter of fact, ONE Corp. supplies almost all of Nortel products and solutions,
from transmission systems (MAN-E, SDH), soft switch operators, PABXs, Contact Centers to
Security and WAN, LAN, Wireless networking solutions etc. Nortel is also one of top 5
telecommunication giants of switch and telephony solutions. In Vietnam, Nortel has entered the
telecommunication market for years and gradually strengthened their position. Nortel's Contact
Centers are considered as most adaptive solutions with highest quality for Vietnam market.
However, it's Nortel Networks staying at the edge of bankruptcy that has left critical effects on
ONE businesses recently. ONE now has to cope with increasing difficulties in its development of
Nortel products. ONE will have to turn into other suppliers for an alternative to Nortel in order to
secure its market shares and brand names.
Alcatel Lucent: ONE is the Premier Partner of Alcatel Lucent with SDH, PABX, WAN, LAN,
Wireless, and Security products and solutions
Especially, ONE has become Genesys' exclusive Business Partner in professional Contact
Centers. However, Genesys' brand names have not been well-positioned yet
Keymile: as an exclusive Business Partner of Keymile AG in Vietnam, ONE is providing them
with its DSLAM and MSAN IP product line.
ZTT: ZTT is considered as a leading enterprise in fiber optic cable industry in terms of output
volume, and ONE Corp. has become one of ZTT's Premier Partners in fiber optic cable cores,
OPGW, ADSS, and F8 fiber optic cable markets.
Verint: ONE is currently one of Verint's Business Partners, specializing in Contact Center's
supervising recording and staff scoreboard, and Workforce Management solutions.
How to ride the economic wave?
The slowdown hits
global technology
giants; the sector growth
is about 2% in 2009
Under critical effects of the recently widespread financial crisis, high-tech industries find
themselves at the edge of a real economic abyss. According to Gartner's surveys, the enterprises
and governments worldwide have spent approx. USD 1,750 bn for their technology needs. The
average CAGR ratio of IT and telecommunication equipment market would be at approx. 7% in
the 2007-2012 period (Deutsche Bank February 2008, exclusive of global crisis impacts). This
industry is recognized as an important driver of productivity enhancement, and increasing
investments in high-tech business is a positive of economic growth. Once facing financial crisis,
several corporations tends to cut off their expenditures and the first victims are consequently the
high-tech enterprises. Since the near-devastating effect in 2000's dot.com bubble, the high-tech
industry has partially recovered through increased demands in personal electronic devices.
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TELECOMMUNICATIONS
However, the commercial users are sharing its difficulties with civil users with more tightened
policies towards personal consumption credit. Business loss or bankruptcy, massive labor laidoff, and factory closing have added more shadows to the dreary picture of the high-tech industry.
Even key players in high-tech market was struggling with financial loss and seeking aids from the
governments, or worse, becoming targets to be taken over, such as Sun, Nortel, Motorola, and
Sprint. With these gloomy predictions, according to IDC and Gartner, the growth rate of hightech industry will be very low, remaining at 2-2.6% in 2009 and 2010, and will be restored by
2011, which will hopefully reach 6% by 2012.
Vietnam could be an exception?
Thanks to spending on
government IT, there is a
tail-wind in Vietnam
Strategy for Development of Viet Nam’s Information Technology towards 2010 and orientations
towards 2020 approved by Prime Minister in the Decision No. 246/2005/QD-TTg, which clearly
defined "Telecommunication and IT industries shall become spearhead economic sectors with
privileges, supports and encouragement from the Government." As stating in this paper, the
telecommunication and information technology have become a pioneer industry with annual
growth rate of 20-25%, resulting in revenue of USD 6 - 7 bn per year by 2010; and a growth rate
above 20% with USD 15 bn revenue expected in 2020. In 2007, the strategy for development of
Viet Nam’s Information Technology towards 2010 - 2020 has been approved by Prime Minister,
in order to establish and develop e-Government, e-Citizen and e-Commerce applications as other
developed countries in the Asia. According to this plan, IT investment would account for 1% of
the State's budget and 2% of the overall capital of all other sectors.
The above strategy was outlined in 2005, and in fact, we all witnessed the booming period of
Vietnam telecommunication and information technology industry in 2005 - 2008. And thanks to
the mobile technology market, Vietnam telecommunication and information technology industry
has a growth rate of 28% in 4 years, and a market value of USD 5.5 bn. However, facing the
menace of global economic crisis, the growth rate will be slow down as mentioned above.
Vietnam telecommunication and IT industries are in first stages of expansion with potential
growing possibility.
Vietnam IT industry can
enjoy 10% growth in
2009 and higher in the
next years
According to general assessment made by ICT researchers, the growth rate of IT industry and
telecommunication equipment market would be double the GDP growth. In Vietnam case, that
rate will be approx. 10% in 2009 (5% GDP growth rate as estimated by IMF and HSBC), and
12.4% in 2010.
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TELECOMMUNICATIONS
Five forces analysis
Bargaining power of Buyers – High
Buyers become smarter and on projects purchase model
Intense price pressure
Many choices of technology and solution available
Bargaining power of Suppliers – Medium
Only top suppliers with famous brand can
bring trustable and end -to-end solutions
Partnership types ran ked by suppliers is the
most important factor of capacity
Industry rivalry – High
Trader or integrator just plays intermediary role , there is a lot of IT and
telecom equipment and network traders.
Projects to government agencies must be in bidding mode l that leads to
price competition
Customers consolidating their technology relationships onto loyal
integrators
Threat of substitute products – Medium
Many international suppliers can provide products
and solutions
Solutions are a bit expensive to develop and
maintain
Threat of entry – Medium
Success in deals or tenders requires the
strong capacity in terms of experience and
quality of technical team
Commitment to support by suppliers is
needed, only partnership model with
suppliers can guarantee t he favorable prices
and qualification in technical capacity
Source: Jaccar
Bloom incantation
Specialization vs. Diversification
The first strategy adopted by ONE is diversifying their line of business in IT and
telecommunication fields, along with specializing their existing products and services, to provide
their clients with more choices of system solutions.
ONE consistently focuses its investments only to those areas of their expertise. This is an
appropriate tactic for ONE's scale of business, while its industrial experiences and technical staffs
have been well trained and developed. ONE has successfully secured their image and business
relationships with key suppliers and clients.
Moreover, with their existing client base of long term business tie-ups, ONE is able to offer more
choices to them while ONE 's suppliers, namely Alcatel, Keymile and Nortel, have a wide range
of products and solutions at many different scales.
Maintain the leading position in favorable segment
ONE Corp. affirmed that they will continue to secure their market leadership with their selected
strategic products and solutions, including: switching, Contact Centers, and IT Telecommunication network systems.
The above favorable segment will mainly contribute the income and maintain the profit of
company.
Service-oriented development
As the common strategy adopted by most hi-tech enterprise worldwide in dealing with hardware
profitability coming down or standing still, ONE Corp. aims at leveraging service business ratio
in the revenue structure. From 1% of 2007, ONE Corp. set out a new revenue objective for its
service business, targeting at an annual increase of 10% in maintenance services toward 2011,
75% of earnings originated from equipment installation and service solutions, and 15% from
fiber optical cable products.
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TELECOMMUNICATIONS
With more than 15 years in system solution market, especially after the blooming period with
substantial projects in 2005 - 2007, the warranty period of most systems provided in this period is
coming to an end, and ONE Corp. could count on maintenance services to boost up its sales. But
considering the risk of income decline for fiber optic cable products and of service earnings
recording, Jaccar forecasts the Corp. revenue of its optic cable products and service business
would reach only 11% and 7% respectively. However, a portion of service earnings currently
comes from system solution supply contracts.
One Corp. : change your mind!
Sales breakdown
2009e
Products and solutions, incl:
Optical cables
SDH and Access
Video Conferencing
PCs and IT devices
Others/Software
Services
Total Revenue
Growth
111,860
10,000
31,182
12,315
9,740
36,558
1,100
8,406
2,559
6,954
118,814
9.76%
% revenue
94.15%
8.42%
26.24%
10.36%
8.20%
30.77%
0.93%
7.07%
2.15%
5.85%
2010e
117,622
7,500.00
33,364.52
13,176.54
10,227.26
40,214.22
1,155.00
9,246.64
2,738.22
9,039.78
126,662
6.61%
% revenue
92.86%
5.92%
26.34%
10.40%
8.07%
31.75%
0.91%
7.30%
2.16%
7.14%
2011e
128,620
8,025.00
35,032.74
14,494.19
10,943.17
46,246.36
1,212.75
9,708.97
2,957.28
10,847.74
139,468
10.11%
% revenue
92.22%
5.75%
25.12%
10.39%
7.85%
33.16%
0.87%
6.96%
2.12%
7.78%
Source Jaccar
The overall assessment on ONE business operations and potentiality could be made in two
perspectives: one from its traditional clients, and the other from its service and product segment:
Sharply decline in fiber
optic segment
• Fiber optic to EVN:
There will be the slowdown of fiber optic business since the most important client of ONE - EVN
has finished all major phases of the rural telecommunication projects in Middle and South. On
one hand, although EVN creates a demand of several thousands of kilometers of fiber optic
cables, but these are divided into small project and allocated to its member companies or major
provincial electronic companies.
On the other hand, there are about 11 fiber optic cable manufacturers working in Vietnam. For
the cable types of ADSS and F8 self-supporting supplied by ZTT to ONE, the joint-venture
producers like Focal, LS Vina now can manufacture and offer similar one to the market. There is
not much difference of price while the quality of domestic products has been improved.
That's why there will be a sharp decline in its earnings on fiber optic cable products in 2008 2009. In 2008, it moved down by 90%, holding only 7% of the revenue, and equivalent to 56% of
2007's. The forecasted earnings from fiber optic cables and accessories of 2009 is resumed at
VND 10 bn, accounting for 8% of the revenue structure. For the coming years, when the local
fiber optic cable markets begin to grow up, the sales revenue of this sector will still slow down,
ranging from VND 7 - 8 bn, equivalent to approx. USD400,000 (5 - 6% of the revenue).
Low investment in
network infrastructure of
MoPS because Vinasat
took the most concerns in
2009-2010
• Ministry of Public Security:
This is key client of ONE in terms of PABX, optical transmission systems and other IT
infrastructure solutions, such as WANs, LANs and switches.
With its prestige and experience, ONE had won 80% of IT expansion and upgrading contracts
from Ministry of Public Security. But in the gloomy economy of the year 2009, the Ministry's
investment on the system expansion or purchases has been cut off. Along with the launch of
VINASAT satellite, Ministry of Public Security is now enjoying an extra bandwidth and has
focuses most of its investments in 2009-2010 to ground infrastructure facilities compatible with
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TELECOMMUNICATIONS
the new satellite networks instead of the traditional landline cable ones. Sales income from
Ministry of Public Security's equipment supplies will decline, but there will be new earnings
from service contract on maintenance, replacement for warranty expired systems that ONE
provided this client.
•
Light decline in network
sales to VNPT…
… but a boost in Contact
Center for telecom
service providers
Transmission systems, telephone operators, Contact Centers, switches for agencies and
companies of VNPT:
ONE keeps 20-25% market share as a supplier of the mentioned devices for VNPT. There are
two contradicting trends in telecommunication system supplying market, with decreasing needs
of SDH and Access (which are suffering a great fall in market shares, approx. 95% compared to
2007), and the Network and Transmission (carrier) sectors tends to grow dramatically. In fact,
SDH and Access sales was not much lowered, since most of the contracts of these products have
been come into effect by the end of last year, and its revenue was included in 2009 sales.
However, the sales revenue will soon restored in 2009, but only at 65% compared to 2007. In
addition, the proper explanation of these two trends of consumption is that the telecommunication
network infrastructures of Vietnam and VNPT have been moving towards fiber optic networks.
Vietnam infrastructure facilities is growing, especially with the participation of VNPT and its
members, such as VDC, VTN and other provincial telecommunication companies (customers of
ONE), with projects of expansion and upgrading their infrastructure systems to increasing high
demand in this field. In next 3 years, the ONE sales income rate driving from telecommunication
equipment and systems might reach 8-10% as for access and network carrier, 25-26% for
enterprise WAN. In 2009, the actual growth rate of its telecommunication products and solutions
will remain high, thanks to the supplying contracts signed in late 2008. Those projects, which
take half of its revenue in this field, usually are bid and entered into contracts in November and
December 2008, then recorded and handed over in 2009.
One business advantage that contributes to the leadership of ONE in system solutions is its
Contact Center products. Its Contact Center services is expected to greatly expand in mid 2009
with outsourcing needs from telecommunication solution providers. IDC's forecast implies a
CAGR of 17% of service sectors for this Asia - Pacific region (exclusive of Japan) towards 2012.
In Vietnam, the number of telephone subscribers is 82 million, of which 85% are mobile
telephone subscribers, and is moving toward 100 million by 2010. The committed FDI volume in
2008 has been realized with a prospect of many international companies, contributing to the
emerging retail banking sector with key players as HSBC, ANZ, and Standard Charter. This is an
important opportunity to ONE Along with projects completed for VMS, EVN, 1080 Service
Operator and some local post-offices in 2007 - 2008, ONE has also handled a number of
important projects for private Contact Center service providers and HSBC. In 2008, the revenue
of Contact Center in ONE business rocketed up, at 220%. The potential growth of ONE in this
particular segment is quite positive, with its leadership of this market, even thought it has been
critically impacted by recent crises and the banking institutions may not invest in their own
Contact Center system but using outsourcing or offshore services in 2009 - 2010.
Telecommunication support service providers have also limited their growing capacity in service
expansion. The growth rate of 2009 is forecasted to fall by 20% compared to 2008, and then will
be restored and increased by 10% and 15% in 2010 and 2011 respectively. Services of offshore
calls provided by the international operators will develop by that time. With their experience,
ONE keeps the chance to become local partner for local support maintenance of Contact center
system.
For solutions of WANs, LANs, operators, Contact Center, transmission systems, ONE is now
facing critical situation when its primary supplier of this segment - the Nortel Network - has filed
for bankruptcy protection.
With its profound backgrounds of experience, skilled personnel and long-term relationship with
their clients, ONE Corp. could turn to another supplier for alternative partnership to Nortel.
However, in this very first stage of collaboration with its new partner, i.e Avaya, Juniper
Networks, ONE has to make certain concession over the course of negotiation.
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TELECOMMUNICATIONS
IT system at 7% growth
Services targeted at 6-8%
of total revenue over 3
coming years
•
The IT external devices, systems and PC sales are forecasted to decline in 2009 - 2011.
One of its traditional customers is Vietinbank contributing to ONE sales revenue of USD
0.5 - 1 m per year. Adding income from other clients, its sales portion is about 7%. The
financial sector has been influenced by recent global crises, resulting in a decrease in its
network expansion. Yet the sales income for telecommunication solutions and services
for ministry and agencies has increased. This demand will continue to grow with slowing
speed;
•
Video Conference System: this is not a business advantage of ONE Corp. In 2009, the
revenue showed a sharp increase due to a trend of online teleconference in public sectors.
In 2010-2011, an average growth rate of 5% is expected, even though its ratio per the
company gross revenue is quite low, just less than 1%;
ONE Corp. has planned a service expansion strategy through maintenance and servicing
supports for supplied systems. The 2008 and 2009 growth rate of service sector was
more than 170% and 70% (thanks to the maintenance contract of Contact Center with
VMS) and its growth rate is to remain at 30% for the year to come, and 20% in 2011.
That will present 6% - 8% over next 3 years.
•
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TELECOMMUNICATIONS
FORECASTS
Income statement
Sales
Income growth rate will
be 9.8% in 2009, 6% in
2010, and recover at 10%
in 2011
The important sales
contribution is from
Contact Center
Income forecast is defined by each of company services and product segment, basing on 2008
figures. 2009 will be a tough year to ONE, but 2009's revenue growth will remain at 9.8%, thanks
to a series of contracts signed by the end of 2008. The impact of global economic recession and
tighten investment schemes will be clearly reflected in 2010 (since most of project disbursements
are made by year end, and the revenues are recorded in the next fiscal year). Moreover, it's not
easy to find an alternative technology partner to replace Nortel, and in the initial phases of new
partnership, ONE will have less advantages and favorable commercial terms. Jaccar forecasts that
ONE growth rate will remain as low as 6% in 2010. The sales revenue growing rate of 10% will
be restored in 2011 when this country's economy begins to recover, both private and state-owned
enterprises resume their investments in IT-telecommunication network. Also entries of foreign
corporations will boost up the Contact Center services and network business.
However, high-tech solutions and products will suffer from normal decline trend. The product
segment of fiber optic cables, network systems, IT equipments, access systems will be decreased
by 4% - 8% in prices; and network transmission carriers, operators and contact centers 0.5% 2%. Therefore, in average, ONE’s solutions and products prices will fall by 4% in 2009 and
2010, by 5% in 2011. Whereas, its sales volume will rise by 11% in 2009, by 8% in 2010, and
will remain higher than the average sales volume growth of Vietnam IT industry (12.5%),
reaching 15%, thanks to the recovery of Contact Center business in which ONE is a dominant
player.
Sales 2009e
(In m VND)
Optical cables
SDH and Access
Video Conferencing
PCs and IT devices
Others/Softwares
Services
Total Revenue
Revenue 2008 % of revenue Revenue 2009
8,037
27,115
10,262
677
45,698
337
8,006
4,029
4,090
108,250
7.42%
25.05%
9.48%
0.63%
42.22%
0.31%
7.40%
3.72%
3.78%
Growth
10,000
31,182
12,315
9,740
36,558
1,100
8,406
2,559
6,954
118,814
24.4%
15.0%
20.0%
1338.7%
-20.0%
226.4%
5.0%
-36.5%
70.0%
9.8%
Growth
Source: Jaccar
Sales 2010e
(In m VND)
Optical cables
SDH and Access
Video Conferencing
PCs and IT devices
Others/Softwares
Services
Total Revenue
10,000
31,182
12,315
9,740
36,558
1,100
8,406
2,559
6,954
118,814
8.42%
26.24%
10.36%
8.20%
30.77%
0.93%
7.07%
2.15%
5.85%
7,500
33,365
13,177
10,227
40,214
1,155
9,247
2,738
9,040
126,662
-25.0%
7.0%
7.0%
5.0%
10.0%
5.0%
10.0%
7.0%
30.0%
6.6%
Source: Jaccar
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TELECOMMUNICATIONS
Sales 2011e
(In m VND)
Optical cables
SDH and Access
Video Conferencing
PCs and IT devices
Others/Softwares
Services
Total Revenue
7,500
33,365
13,177
10,227
40,214
1,155
9,247
2,738
9,040
126,662
5.92%
26.34%
10.40%
8.07%
31.75%
0.91%
7.30%
2.16%
7.14%
8,025
35,033
14,494
10,943
46,246
1,213
9,709
2,957
10,848
139,468
Growth
7.0%
5.0%
10.0%
7.0%
15.0%
5.0%
5.0%
8.0%
20.0%
10.1%
Source: Jaccar
Steadily falling COGS
Lower raw material per
sales thanks to increase
sales of services
Over the year, the fiber optic cable income will fall sharply, and the service scale-up strategy will
help it lowering COGS rate. In 2009, the COGS/Sales ratio will be 84%, gradually falling to 82%
in both 2010 and 2011.
Stable personnel costs
Personnel costs of more
than 6% for a stable
human resources
ONE is fully aware that its human resources, especially its skillful technical staffs, are a vital
driver to the business success. But as a small size company, ONE Corp. does not have much
advantage in attracting high qualified personnel or talented experts as permanent staffs.
Therefore, in order to ensure the stability of employment and technical capacity, ONE must
assure good benefit packages to its employees in compared with other same size companies in
field. The average monthly income of its employees is VND 7 million, and the ratio of personnel
cost per revenue will be 6.2% in 2009-2010. And with its predicted sales boost in 2011, its
employees' average monthly income is expected to reach VND 7.5 million, and the ratio of
personnel cost per revenue will be 6.5%. Besides, ONE will gradually increase its official
personnel to 100 people by 2011.
Balance Sheet
New investment in fixed assets
USD 600,000 investment
in 2010
ONE fixed assets have been gradually increases over the years, but most of them are office
equipments. At present, ONE is located in leased offices in Ha Noi (since March 2008) and Ho
Chi Minh City. Because ONE Corp. owns no real estate or high value fixed assets, its ratio of
fixed assets per total equity remained at 4% in 2008, which is forecasted to be the same for 2009.
However, The company board of directors is planning to purchase a house or place for head
office at cost of VND 12bn (USD 600,000). The plan will implement by beginning of 2010. The
ratio will be raised to 20% in 2010 and 2011 with a total fixed assets worth VND 17.6 bn and
VND 19 bn.
The intangible fixed assets of ONE are software of business management and accounting
application.
High current assets
Current assets is the big
portion of working
capital
In contrast with its fixed assets, ONE Corp.'s current assets ratio is always high (accounting for
90% of its total assets) - the exact model of a trading business. Most of its annual current assets
are cash and trade debtors. ONE has no plan in securities and financial investments, and its cash
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117
TELECOMMUNICATIONS
flows are gradually replenished. With its project-based business model, the trade debt is delivered
along with project progress, which is normally 2 - 3 months from the contract effective dates to
project hand-over dates. However, because most of its key projects are initiated at year end, and
ONE has to have advance orders prior to the date of financial statement, its reported debit balance
is usually high, resulting longer trade payable, such as 139 days in 2008. It's forecasted that, in
2009 - 2011, the average is 90 days.
Financial structure
No long term debt
Current liabilities and shareholder’s equity is quite similar (47% - 53%). ONE has A-grade credit
scores by banking institutions, so it may be granted short-term loans for its projects (in 2009, it is
enjoying a stimulus loan interest of 4%), and because ONE Corp. has no long-term debts, its
stable financial and substantial development are ensured. Therefore, in 2009, ONE Corp.
shareholder’s equity is expected to gradually increase, reaching 53% of its total liabilities as that
of 2008, and by 60% in 2010 and 63% in 2011.
Free Cash-Flows
Good job in FCF
High FCF in 2009
30% new investment
financed by new
issuance
Without investment plan for new office building in 2010, so a limited annual investment of
approx. VND 1.5 bn (USD 80k) is expected. The free cash flow (FCF) will be high in 2009 with
the amount of VND 16bn (USD 0.9m) and minus due to investment in 2010 at VND -4.5bn
(USD 0.24m). That will recover good status at VND 2.3bn (USD 130k) for 2011. Change in debt
will be the same since most of ONE loans are project-based short-term ones. Thanks to its clients,
including Electricity of Vietnam Corporation (EVN), Ministry of Public Security, banks and
businesses in private sectors, can ensure the on-time payment, ONE can settle its loans upon the
completion of its projects.
In order to finance the new investment, ONE intends a new share issuance that accounts around
30% of investment, equal to VND 4bn (USD 225k). The estimated price is taken from the
average ONE stock price in the recent month, about VND 9,950 (USD 0.56).
The medium project time span (of 2 - 3 months at most) offers ONE better control over exchange
rates. 2008 was a year of great fluctuation in foreign exchange rates, yet leaving no damage to
this company, thanks to its proper approaches to exchange rate control. It is forecasted that, in
2009 - 2011, ONE will be able to manage these changes in foreign exchange rates.
Stable Dividend but a half paid in shares
Dividend paid 10% in
cash, 10% in stock
In 2008, ONE dividend currently has a yield of approximately 20%, in which 5% paid in cash
and 15% paid in stocks. In 2009, the dividend will be 15% in cash and 10% in stock. With its
stable financial status, ONE may ensure an annual dividend rate of 20%-25% per share in both
cash and stocks. In considering ONE practice, Jaccar forecasts that ONE dividend will be paid
with 10% in cash and 10% paid in stocks in 2010 and 2011.
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TELECOMMUNICATIONS
Company Profile
Risks
Found in 1994, ONE Corporation is a commercial company specializing in telecommunication and
information technology. ONE provides equipment & services of consultancy, integration, installation
and maintenance. Major products and services of ONE are optical transmission network, access
system, PABX/PBX, soft Switch, Call Center/Contact Center and IT network. Mostly sales are on
project base, so, the key factors of success are its own technical capacity (with strong supports from
the suppliers) and customer relationship. Recently listed in June 2008, ONE would like to get the
strong image of transparent finance status that faciliate ONE in relationship with banks and suppliers.
Website: www.one.com.vn
Internal
Key Figures
What's Up
Geographical breakdown (sales)
External
• Slowdown of economy and reduce in ICT investment of both public and private sector in 2009-2010
• Serious impacts of world recession to big technology companies, including key suppliers of ONE (Nortel
Networks)
• Dependant in reputation and commercial conditions of suppliers
Company
Division breakdown (sales)
5.9%
• The company is small, local and private, ONE is not able to attract more qualified or better human resources
• Diversification in VoIP, web2.0 or Contact Center outsourcing services while internal resources are incapacity
•
• On November 10, 2008, 300,000 new shares was listed in Hanoi Stock Exchange
• After getting partnership with Juniper, ONE is approaching another top global vender - Avaya for new partnership
agreement to replace Nortel
• Out of VNPT, ONE starts deals with VTC and EVN Telecom for core network and transmission carrier.
8.4%
8.0%
Sector
32.9%
T
I
P
S
18.6%
100.0%
• Vietnam ICT expenses in 2009 is forecasted about USD 2.3bn
• About USD 200mil investment in ground system for working with Vinasat satellite in 2008
• 2009 is expected to have a race of infrastructure expansion of telecommunication service operators.
• Contact Center Services is expected to grow at 25% in Asia-Pacific for next 4 years.
26.2%
E
Q
U
I
T
Y
Fiber optic for telecommunications
Enterprise LAN, WAN
Network, transmission (Carrier) and Acce
PABX/PBX, Contact Center, related softwa
Video Conference and Computer, IT device
Vietnam
Efficiency profile
VND bn
In %
14
12,000
12
10
8,000
8
6,000
6
4,000
4
2,000
2
0
0
2006 2007 2008 2009e 2010e 2011e
EBIT
Op. margin
Peers Comparison
Profitability profile
14,000
10,000
VND bn
In %
80,000
180
75,000
160
70,000
140
65,000
120
60,000
100
55,000
80
50,000
60
45,000
40
40,000
20
35,000
0
Company
Afone
NEC Network and SI
Dimension Data Hld
Unisys
Median
Market
Cap
17
382
881
133
EV/Sales
2009e
0.17
0.09
0.17
-
EV/Sales
2010e
0.08
0.14
-
0.17
0.11
EV/EBIT EV/EBIT2
PE2009e PE2010e
2009e
010e
11.40
5.23
8.32
3.32
3.32
21.21
6.89
9.66
7.45
8.56
6.39
2.99
1.30
2.99
-20
30,000
2006 2007 2008 2009e 2010e 2011e
Assets
ROCE
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119
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Sales
% of growth
Price (%)
Volume (%)
Organic growth (%)
External growth (%)
Other income
Total Sales
Income Statement (VND bn)
-
-
95
0%
0%
0%
0%
0
95
142
50%
-5%
55%
50%
0%
0
142
108
-24%
-3%
-16%
-24%
0%
0
108
119
10%
-4%
11%
10%
0%
0
119
127
7%
-4%
8%
7%
0%
0
127
139
10%
-5%
15%
10%
0%
0
139
COGS
Gross Income
% of growth
-
-
0
87
8
-
0
122
20
158%
0
87
21
6%
0
100
19
-11%
0
104
23
20%
0
114
25
10%
Taxes
Personnel costs
EBITDA
% of growth
-
-
3
0
4
1
-
1
1
5
13
1,963%
1
1
8
12
-10%
1
0
7
10
-15%
1
1
8
13
30%
2
1
9
14
5%
Depreciation
Reported provisions
EBIT
% of growth
-
-
0
0
(0)
0
-
0
0
(1)
12
51,880%
1
0
(1)
11
-11%
1
0
(1)
9
-16%
1
0
(1)
12
30%
1
0
(1)
12
5%
Interest income
Interest expenses
Interest balance
Pretax Income
% of growth
-
-
0
3
(3)
(3)
-
0
2
(2)
10
n/m
0
1
(1)
10
1%
0
0
(0)
9
-10%
2
1
1
13
40%
2
1
1
14
8%
Income taxes
Tax rate
Minority interest
Associate income
% of growth
-
-
0
-12%
0
0
(3)
-
2
23%
0
0
8
n/m
3
27%
0
0
7
-5%
2
18%
0
0
7
2%
3
25%
0
0
9
28%
3
25%
0
0
10
8%
Extraordinary items
Net Income
% of growth
-
-
0
(3)
-
0
8
n/m
0
7
-5%
0
7
2%
0
9
28%
0
10
8%
Enterprise LAN, WAN
-
-
-
471%
-45%
-36%
-90%
69%
-48%
24%
15%
102%
-25%
7%
6%
7%
5%
9%
Vietnam
-
-
-
-
142,385%
-
-24%
-
10%
-
7%
-
10%
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
Net Income
Others
Cash Flow Statement (VND bn)
-
-
(3)
0
0
0
8
0
0
0
7
1
0
0
7
1
0
0
9
1
0
0
10
1
0
0
Gross CAPEX
Net CAPEX
Dividends paid
Dividends received
Others
FCF
-
-
(3)
(2)
(1)
0
0
0
0
(0)
0
0
3
(4)
8
(11)
19
0
0
107
86
21
0
0
0
(2)
8
24
(16)
1
1
0
0
0
1
0
0
(19)
8
(15)
22
2
2
0
0
0
3
0
0
18
10
2
8
14
14
0
0
0
3
0
0
(8)
11
2
9
2
2
0
0
0
3
0
0
4
Excess Cash Flow
-
-
4
(1)
14
11
0
(19)
0
18
4
(4)
0
4
-
-
(2)
0
(2)
(21)
0
(9)
(2)
0
(21)
0
0
18
0
0
(4)
0
0
4
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120
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
% of growth
Balance Sheet (VND bn)
-
-
1
0
0
-
1
1
0
-11%
3
1
1
241%
4
1
3
97%
18
3
15
443%
19
3
16
7%
of which goodwill
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
% of growth
-
-
0
-
0
-
0
-
0
-
0
-
0
-
Long term deposit
Long term assets
% of growth
-
-
0
3
0
-
0
1
0
-
0
1
0
-
0
1
0
-
0
1
0
-
0
1
0
-
Fixed Assets
% of growth
-
-
3
-
1
-69%
2
114%
4
60%
16
338%
17
6%
Inventories
Trade debtors
Prepayments
Provisions
Other debtors
-
-
8
14
0
0
6
30
10
0
0
10
8
42
0
0
7
9
30
0
0
8
10
32
0
0
8
11
35
0
0
9
Cash Bank
-
-
3
0
16
0
4
0
22
0
22
0
24
0
-
-
0
0
0
0
0
0
Current Assets
% of growth
-
-
30
-
66
116%
62
-6%
68
11%
72
5%
79
11%
Shareholders Equity
% of growth
Minority interest
-
-
4
0
25
494%
0
31
24%
0
35
13%
0
46
31%
0
53
15%
0
Training funds
Other funds
Provisions - total
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Debt - long term
Debt - short term
Debts
% of growth
-
-
0
21
21
-
0
0
0
-100%
0
7
7
13,986%
0
7
7
0%
0
7
7
0%
0
7
7
0%
Accounts payable
-
-
8
0
42
0
26
0
30
0
31
0
34
0
-
-
0
0
0
1
0
1
Total Liabilities
-
-
34
67
64
72
84
94
Treasury shares
Working capital
% of growth
-
-
0
19
0
0
8
-59%
0
0
32
308%
1
0
17
-46%
3
0
19
11%
15
0
21
10%
16
-
-
22
9
34
21
35
38
Off-Balance Sheet
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2004
2005
2006
2007
2008
2009e
2010e
2011e
EV/Sales
EV/EBITDA
EV/EBIT
PE
PEG
Valuation (x)
-
-
-
-
0.3
2.6
2.9
3.9
-
0.1
1.5
1.6
4.0
3%
0.2
1.5
1.6
3.6
-10%
0.2
1.8
2.0
4.1
15%
P/Book
Dividend yield (%)
-
-
-
-
0.9
4%
0.8
12%
0.7
8%
0.8
8%
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121
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Per Share Data (k VND)
-
-
1
1
2
2
2
2
2
3
3
3
3
4
-
-
(3)
(3)
(3)
(3)
4
4
4
4
4
4
3
3
3
3
3
3
4
4
3
3
3
3
3
3
Latest price
High price
Low price
Average price
-
-
-
-
7.7
22.6
7.5
14.1
12.8
14.1
8.0
12.8
12.8
12.8
12.8
12.8
Dividend per share
-
-
0
4
0
12
1
15
2
15
1
17
1
16
-
-
(3)
(1)
4
9
4
(8)
3
10
4
3
3
3
-
-
(4)
(1)
(9)
8
(3)
1
2004
2005
2006
2007
2008
2009e
2010e
2011e
Gross Margin
-
-
8%
14%
20%
16%
18%
18%
EBITDA Margin
Operating Margin
-
-
1%
0%
9%
8%
11%
10%
9%
8%
10%
9%
10%
9%
Net Margin
-
-
-3%
5%
7%
6%
7%
7%
EBITDA Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
Operating Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
Net Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
EBITDA Margin
Vietnam
-
-
-
-
-
-
-
-
-
Operating Margin
Vietnam
-
-
-
-
-
-
-
-
-
Net Margin
Vietnam
-
-
-
-
-
-
-
-
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
ROE
ROCE
-
-
-68%
-1%
31%
111%
24%
24%
21%
36%
21%
25%
20%
24%
Gearing
-
-
422%
12%
-65%
37%
9%
48%
-42%
48%
-32%
55%
-33%
56%
Pay-out Ratio
Interest cover
-
-
0.2
0%
5.4
13%
11.9
47%
21.3
36%
21.6
35%
18.5
-
-
31.2
51.3
32.0
50.5
76.1
24.2
105.6
(5.3)
28.1
139.4
86.1
81.4
28.1
90.0
90.1
28.0
28.1
90.0
88.0
30.1
28.1
90.0
88.0
30.1
Sales / Employee
EBIT / Employee
Salary / Employee
-
-
60
1,583.9
0.4
61.8
0.0
65
2,192.1
185.4
76.7
0.0
80
1,352.4
134.6
94.3
0.0
75
1,584.2
120.4
97.4
0.0
82
1,544.7
143.5
95.8
0.0
90
1,549.6
136.8
100.7
0.0
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TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Sales
% of growth
Price (%)
Volume (%)
Organic growth (%)
External growth (%)
Other income
Total Sales
Income Statement (USD m)
-
-
5.70
0%
0%
0%
0%
0.00
5.70
8.55
50%
-5%
55%
50%
0%
0.00
8.55
6.49
-24%
-3%
-16%
-24%
0%
0.00
6.49
7.13
10%
-4%
11%
10%
0%
0.00
7.13
7.60
7%
-4%
8%
7%
0%
0.00
7.60
8.37
10%
-5%
15%
10%
0%
0.00
8.37
COGS
Gross Income
% of growth
-
-
0.00
5.23
0.47
-
0.00
7.34
1.21
158%
0.00
5.21
1.28
6%
0.00
5.99
1.14
-11%
0.00
6.23
1.37
20%
0.00
6.86
1.51
10%
Taxes
Personnel costs
EBITDA
% of growth
-
-
0.20
0.00
0.22
0.04
-
0.08
0.04
0.30
0.80
1,963%
0.07
0.04
0.45
0.72
-10%
0.06
0.03
0.44
0.61
-15%
0.07
0.03
0.47
0.79
30%
0.09
0.04
0.54
0.83
5%
Depreciation
Reported provisions
EBIT
% of growth
-
-
0.02
0.00
(0.02)
0.00
-
0.03
0.00
(0.05)
0.72
51,884%
0.03
0.00
(0.04)
0.65
-11%
0.03
0.00
(0.04)
0.54
-16%
0.05
0.00
(0.04)
0.71
30%
0.05
0.00
(0.04)
0.74
5%
Interest income
Interest expenses
Interest balance
Pretax Income
% of growth
-
-
0.01
0.16
(0.15)
(0.15)
-
0.02
0.15
(0.13)
0.60
n/m
0.02
0.06
(0.04)
0.60
1%
0.03
0.03
(0.00)
0.54
-10%
0.09
0.04
0.05
0.76
40%
0.13
0.04
0.09
0.82
8%
Income taxes
Tax rate
Minority interest
Associate income
% of growth
-
-
0.02
-12%
0.00
0.00
(0.17)
-
0.13
23%
0.00
0.00
0.46
n/m
0.16
27%
0.00
0.00
0.44
-5%
0.09
18%
0.00
0.00
0.45
2%
0.19
25%
0.00
0.00
0.57
28%
0.21
25%
0.00
0.00
0.62
8%
Extraordinary items
Net Income
% of growth
-
-
0.00
(0.17)
-
0.00
0.46
n/m
0.00
0.44
-5%
0.00
0.45
2%
0.00
0.57
28%
0.00
0.62
8%
Enterprise LAN, WAN
-
-
-
471%
-45%
-36%
-90%
69%
-48%
24%
15%
102%
-25%
7%
6%
7%
5%
9%
Vietnam
-
-
-
-
142,385%
-
-24%
-
10%
-
7%
-
10%
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
Net Income
Others
Cash Flow Statement (USD m)
-
-
(0.17)
0.02
0.00
0.00
0.46
0.03
0.00
0.00
0.44
0.03
0.00
0.00
0.45
0.03
0.00
0.00
0.57
0.05
0.00
0.00
0.62
0.05
0.00
0.00
Gross CAPEX
Net CAPEX
Dividends paid
Dividends received
Others
FCF
-
-
(0.15)
(0.09)
(0.06)
0.01
0.01
0.00
0.01
(0.01)
0.00
0.00
0.20
(0.26)
0.49
(0.63)
1.12
0.02
0.02
6.43
5.18
1.24
0.00
0.00
0.00
(0.14)
0.47
1.45
(0.98)
0.09
0.09
0.00
0.00
0.00
0.06
0.00
0.00
(1.13)
0.48
(0.87)
1.35
0.09
0.09
0.00
0.00
0.00
0.21
0.00
0.00
1.05
0.62
0.11
0.51
0.81
0.81
0.00
0.00
0.00
0.16
0.00
0.00
(0.46)
0.67
0.12
0.56
0.09
0.09
0.00
0.00
0.00
0.20
0.00
0.00
0.27
Excess Cash Flow
-
-
0.22
(0.03)
0.82
0.69
0.00
(1.13)
0.00
1.05
0.24
(0.22)
0.00
0.27
-
-
(0.09)
0.00
(0.13)
(1.24)
0.00
(0.56)
(0.11)
0.00
(1.24)
0.00
0.00
1.05
0.00
0.00
(0.22)
0.00
0.00
0.27
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123
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
% of growth
Balance Sheet (USD m)
-
-
0.06
0.03
0.03
-
0.07
0.05
0.02
-11%
0.16
0.08
0.08
241%
0.25
0.09
0.16
97%
1.06
0.17
0.89
443%
1.15
0.20
0.95
7%
of which goodwill
-
-
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
% of growth
-
-
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
0.00
-
Long term deposit
Long term assets
% of growth
-
-
0.00
0.17
0.00
-
0.00
0.04
0.00
-
0.00
0.05
0.00
-
0.00
0.05
0.00
-
0.00
0.05
0.00
-
0.00
0.05
0.00
-
Fixed Assets
% of growth
-
-
0.20
-
0.06
-69%
0.13
114%
0.22
60%
0.94
338%
1.00
6%
Inventories
Trade debtors
Prepayments
Provisions
Other debtors
-
-
0.49
0.81
0.00
0.00
0.33
1.81
0.57
0.00
0.00
0.59
0.51
2.51
0.00
0.00
0.44
0.56
1.78
0.00
0.00
0.48
0.59
1.90
0.00
0.00
0.51
0.65
2.09
0.00
0.00
0.56
Cash Bank
-
-
0.19
0.00
0.97
0.00
0.24
0.00
1.29
0.00
1.29
0.00
1.44
0.00
-
-
0.00
0.00
0.00
0.00
0.00
0.00
Current Assets
% of growth
-
-
1.83
-
3.94
116%
3.69
-6%
4.11
11%
4.29
5%
4.75
11%
Shareholders Equity
% of growth
Minority interest
-
-
0.25
0.00
1.49
494%
0.00
1.85
24%
0.00
2.09
13%
0.00
2.74
31%
0.00
3.16
15%
0.00
Training funds
Other funds
Provisions - total
-
-
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Debt - long term
Debt - short term
Debts
% of growth
-
-
0.00
1.25
1.25
-
0.00
0.00
0.00
-100%
0.00
0.41
0.41
13,985%
0.00
0.41
0.41
0%
0.00
0.41
0.41
0%
0.00
0.41
0.41
0%
Accounts payable
-
-
0.51
0.00
2.51
0.00
1.55
0.00
1.78
0.00
1.86
0.00
2.04
0.00
-
-
0.02
0.00
0.02
0.04
0.01
0.05
Total Liabilities
-
-
2.03
4.00
3.83
4.32
5.01
5.66
Treasury shares
Working capital
% of growth
-
-
0.00
1.13
0.03
0.00
0.47
-59%
0.02
0.00
1.90
308%
0.08
0.00
1.03
-46%
0.16
0.00
1.14
11%
0.89
0.00
1.26
10%
0.95
-
-
1.33
0.53
2.04
1.25
2.09
2.26
Off-Balance Sheet
-
-
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2004
2005
2006
2007
2008
2009e
2010e
2011e
EV/Sales
EV/EBITDA
EV/EBIT
PE
PEG
Valuation (x)
-
-
-
-
0.3
2.6
2.9
3.9
-
0.1
1.5
1.6
4.0
3%
0.2
1.5
1.6
3.6
-10%
0.2
1.8
2.0
4.1
15%
P/Book
Dividend yield (%)
-
-
-
-
0.9
4%
0.8
12%
0.7
8%
0.8
8%
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124
TELECOMMUNICATIONS
2004
2005
2006
2007
2008
2009e
2010e
2011e
Per Share Data (USD)
-
-
1.00
1.00
2.00
2.00
2.00
2.30
2.30
2.65
2.65
3.31
3.31
3.64
-
-
(0.17)
(0.17)
(0.17)
(0.17)
0.23
0.23
0.23
0.23
0.22
0.22
0.19
0.19
0.19
0.19
0.17
0.17
0.22
0.22
0.17
0.17
0.19
0.19
0.17
0.17
Latest price
High price
Low price
Average price
-
-
-
-
0.5
1.4
0.5
0.8
0.8
0.8
0.5
0.8
0.8
0.8
0.8
0.8
Dividend per share
-
-
0.00
0.25
0.00
0.75
0.03
0.92
0.09
0.91
0.06
1.04
0.06
0.95
-
-
(0.15)
(0.06)
0.25
0.56
0.24
(0.49)
0.21
0.59
0.23
0.19
0.20
0.17
-
-
(0.26)
(0.07)
(0.56)
0.46
(0.18)
0.08
2004
2005
2006
2007
2008
2009e
2010e
2011e
Gross Margin
-
-
8%
14%
20%
16%
18%
18%
EBITDA Margin
Operating Margin
-
-
1%
0%
9%
8%
11%
10%
9%
8%
10%
9%
10%
9%
Net Margin
-
-
-3%
5%
7%
6%
7%
7%
EBITDA Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
Operating Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
Net Margin
Enterprise LAN, WAN
-
-
-
-
-
-
-
-
EBITDA Margin
Vietnam
-
-
-
-
-
-
-
-
-
Operating Margin
Vietnam
-
-
-
-
-
-
-
-
-
Net Margin
Vietnam
-
-
-
-
-
-
-
-
-
2004
2005
2006
2007
2008
2009e
2010e
2011e
ROE
ROCE
-
-
-68%
-1%
31%
111%
24%
24%
21%
36%
21%
25%
20%
24%
Gearing
-
-
422%
12%
-65%
37%
9%
48%
-42%
48%
-32%
55%
-33%
56%
Pay-out Ratio
Interest cover
-
-
0.2
0%
5.4
13%
11.9
47%
21.3
36%
21.6
35%
18.5
-
-
31.2
51.3
32.0
50.5
76.1
24.2
105.6
(5.3)
28.1
139.4
86.1
81.4
28.1
90.0
90.1
28.0
28.1
90.0
88.0
30.1
28.1
90.0
88.0
30.1
Sales / Employee
EBIT / Employee
Salary / Employee
-
-
60
0.1
0.0
0.0
0.0
65
0.1
0.0
0.0
0.0
80
0.1
0.0
0.0
0.0
75
0.1
0.0
0.0
0.0
82
0.1
0.0
0.0
0.0
90
0.1
0.0
0.0
0.0
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125
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Price Performance - FPT Corporation
300,000
250,000
200,000
150,000
100,000
50,000
0
Mar-07
BUY
Jun-07
Sep-07
ACCUMULATE
Dec-07
REDUCE
Rating History
Date
21. Apr 09
Mar-08
Jun-08
Sep-08
SELL
Dec-08
Mar-09
Jun-09
Mar-09
Jun-09
TARGET PRICE
Rating
BUY
Price Performance - One Corporation
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
Mar-07
BUY
Jun-07
Sep-07
ACCUMULATE
Dec-07
REDUCE
Rating History
Date
21. Apr 09
Mar-08
SELL
Jun-08
Sep-08
Dec-08
TARGET PRICE
Rating
ACCUMULATE
Distribution of Ratings
Investment Rating Distribution: Global Group
BUY
ACCUMULATE
REDUCE
SELL
Count
5
5
8
2
Percent
25%
25%
40%
10%
Investment Rating Distribution:
BUY
ACCUMULATE
REDUCE
SELL
Count
1
1
0
0
Percent
50%
50%
0%
0%
Analyst Certification
I, BARBERY Caroline, NGUYEN Thi Thanh Hoa, certify that all of the views expressed in this research report
accurately reflect my personal views about the subject sector(s) and subject company (ies). The compensation of
the analyst who prepared this report is determined exclusively by research management and senior management.
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Important Disclosures
This report has been prepared by Jaccar Investment Managers (“JACCAR”). This document is confidential and is
intended solely for the information of the person to which it has been delivered. It is not to be reproduced or
transmitted, in whole or in part, by any means, to third parties without the written prior consent of JACCAR.
Information contained herein is not intended to be a complete statement or summary of the securities, markets or
developments referred to in the report. JACCAR does not undertake that investors will obtain profits nor accept
any liability for any investment losses. Investments involve risks and investors should exercise prudence in making
their investment decisions. Prior to entering into any proposed transaction you are advised to engage in your own
tax, accounting, regulatory, legal or other professionals as you deem necessary. The report should not be
regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this report
are subject to change without notice.
Research will initiate, update and cease coverage solely at the discretion of JACCAR. The analysis contained
herein is based on numerous assumptions. Different assumptions could result in materially different results. The
analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel
and other interested parties for the purpose of gathering, synthesizing and interpreting market information.
JACCAR is under no obligation to update or keep current the information contained herein.
Neither JACCAR nor any of directors, employees or agents accepts any liability for any loss or damage arising out
of the use of all or any part of this report.
JACCAR Ratings and Valuation Methodology
Company Rating Definition (within a 12 month period)
BUY: Expected to outperform the market by at least 15% or more
ACCUMULATE: Expected to outperform the market by 5%
REDUCE: Expected to perform in line with the market
SELL: Expected to underperform the market by at least 10%
Valuation Methodology
The target price are based on several methods which include, but not restricted to analyses of market risks, growth
rate, revenue stream, DCF (discounted cash flows), EBITDA, Net attributable profit, FCF (free cash flows),
EV/SALES, EV/EBITDA, EV/EBIT, PE, P/CF, P/Book, ROE (Return on Equity), NAV (Net Asset Value), Dividend
Returns and SOP (sum of the parts).
Risk
Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely
affect the value, price or income of any security or related instrument mentioned in this report. For investment
advice, trade execution or other enquiries, clients should contact their local sales representative.
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The distribution of this document in certain jurisdictions may be restricted by law; therefore, people into whose
possession this document comes should inform themselves about and observe any such restrictions. Any such
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The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.
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JACCAR EQUITY RESEARCH – VIETNAM

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