Commercialization of 5G in Vietnam: Development opportunities and investment challenges

DNHN - 5G services in Vietnam are entering the commercialization phase, but telecom operators face significant challenges regarding investment costs and profitability.

Joining the global trend of widespread 5G deployment, Vietnam officially entered the game with the launch of Viettel's 5G network on October 15. 

This marked a critical step in the official commercialization of 5G services. Back in 2019, Viettel Telecom was also the first network provider in Vietnam to successfully test a 5G NSA (Non-Standalone Access) call. The group has since developed 5G chips and 5G Open RAN (Radio Access Network) base stations that meet national standards. Beyond securing the rights to the "golden band" B1 (2500-2600 MHz), Viettel remains the largest mobile network in Vietnam, holding 56.5% of the market share in 2023. It aims to provide 5G services nationwide and plans to cover all 63 provinces and cities within October.

VNPT VinaPhone, holding the C2 band (3700-3800 MHz), started offering free 5G trials to users in areas with 5G coverage from October 13. After receiving official licensing, VNPT has been deploying infrastructure and installing VinaPhone 5G base stations across the country. Currently, many provinces and cities already have VinaPhone 5G coverage. By the end of 2024, VNPT plans to complete the installation of over 3,000 5G base stations, ensuring strong, stable, and continuous coverage, especially in urban and key economic centers nationwide. Meanwhile, MobiFone, which owns the C3 band (3800-3900 MHz), is set to allow customers to trial 5G services starting in November. To enhance 5G rollout efficiency, MobiFone is also collaborating with other carriers to share infrastructure.

Viettel's official 5G launch on October 15 marked a milestone, yet it is notable that all three major carriers have been testing 5G since 2020 without full commercialization. It wasn’t until March of this year that Viettel and VNPT completed 5G spectrum auctions, with MobiFone following in July.

Globally, 5G technology has been widely adopted for some time. Therefore, the Ministry of Information and Communications (MIC) has set high standards for Vietnam's digital infrastructure to align with this global trend. These include requirements for high capacity, broad bandwidth, as well as universal, sustainable, eco-friendly, smart, open, and secure infrastructure. This will facilitate the nationwide 5G rollout, thereby accelerating national digital transformation and promoting the growth of the digital economy and society.

According to the roadmap set by the MIC, by 2025, 5G mobile services will be available in 100% of provinces and cities, high-tech zones, information technology hubs, research and innovation centers, industrial zones, train stations, seaports, and international airports. The minimum 5G speed is set to be 100Mbps. Mr. Le Van Tuan, Director of the Department of Radio Frequency (MIC), emphasized: "The time is ripe for 5G deployment. Vietnamese carriers have been testing 5G for several years, and all major networks are ready for commercialization in 2024."

According to mobile chip developer Qualcomm, 3G brought mobile data, and 4G opened up the era of mobile broadband. 5G, a unified wireless interface, enables greater connectivity and scalability for user experiences, new deployment models, and the provision of new services.

Qualcomm estimates that 5G will generate $13.1 trillion in economic value and create over 22.8 million jobs globally by 2035, impacting sectors such as manufacturing, healthcare, and education. 

In the Asia-Pacific region, 5G is expected to contribute approximately $113 billion in economic value by 2030. Specifically in Vietnam, the Information and Communications Strategy Institute projects that 5G could contribute around 7.34% to GDP growth by 2025.

However, realizing these economic benefits requires significant investments from network providers. The higher the frequency band, the more base stations are needed, driving up infrastructure investment costs. Conversely, while lower frequency bands save on infrastructure, their auction prices are often prohibitively high. For instance, Viettel spent over VND 7,500 billion to acquire the 2500-2600 MHz band, three times what VNPT paid for the 3700-3800 MHz band.

The Vietnam Digital Communications Association (VDCA) has pointed out that carriers face difficulties in optimizing 5G spectrum auction costs and infrastructure investments while still providing competitively priced and attractive services.

Besides initial investment costs, 5G commercialization also encounters challenges from consumers. Many users still have older devices that only support 3G or 4G, requiring them to upgrade their equipment to access 5G. This may affect the public's readiness to adopt the new technology.

Additionally, much of the current infrastructure used by enterprises relies on older technology. To adopt 5G, these businesses will need to upgrade their systems, incurring significant costs and potentially slowing the deployment process.

Regarding 5G content services, current offerings mainly include 4K, 8K videos, and live streaming, while applications like AR and VR remain limited, presenting challenges in the transition from 4G to 5G.

According to Mr. To Dung Thai, Chairman of VNPT's Board of Members, the biggest issue for carriers in rolling out 5G lies in developing an effective business model rather than spectrum or infrastructure. While 5G deployment requires substantial investment, the crucial question remains whether there will be revenue and profits—not just for VNPT but for all carriers.

These challenges are not unique to Vietnamese telecom operators; global telecom companies also grapple with similar concerns. McKinsey & Company notes that when 4G launched in 2009, carriers did not see the same high returns as with previous generations. Despite investing in 4G infrastructure, revenue growth was slow or negligible, and in some regions, such as Europe and Latin America, revenue even declined after 4G was deployed.

Currently, as telecom operators worldwide prepare for 5G, they do so with a mix of hope and apprehension. They recognize that 5G opens up opportunities to tap into new applications and the development of the Internet of Things (IoT). However, they are also aware that investment in 5G infrastructure will significantly increase. Simultaneously, they must continue to upgrade 4G networks to meet growing demand. In one European country, McKinsey & Company predicts that network investment costs will rise by 60% between 2020 and 2025, nearly doubling the total expenditure during this period.

In Vietnam, telecom providers cannot delay 5G investments due to regulatory requirements that mandate 5G auction winners to deploy services within 12 months of receiving a license. In the first two years, businesses must commit to deploying at least 30% of the planned base stations and installing a minimum of 3,000 5G base stations. 

Failure to meet these commitments will result in a 50% bandwidth reduction for 12 months, and if unresolved, the license will be revoked.

Mai Anh