Why Viettel could be an emerging challenger to Huawei

January 22, 2020 10:39
Viettel has 60 million Vietnamese users, or 63 percent of the population.  Photo: Bloomberg

Vietnam's largest telecommunications company, Viettel, said it will launch 5G mobile services in June.

Huawei, Ericsson and Nokia are considered frontrunners in the development of 5G infrastructure technology. Among them, Huawei is believed to have the most advanced and cost-efficient technology.

Germany's Interior Minister Horst Seehofer last week warned of the grave risk of falling behind by as long as 10 years if Germany does not use Huawei’s technology in building its 5G network.

Not only is Huawei’s technology crucial, using alternatives could mean higher costs of equipment and network buildout.

Interestingly, Viettel said on Monday that it will launch 5G services in June, following six months of research and development, which cost a few million dollars.

While it can easily cost billions of dollars for the major 5G players to create the technology, how come Viettel is able to easily catch up in half a year, and with a much smaller budget?

Reports say Viettel has been cooperating with Nokia to develop its own 5G device. Therefore, it might have purchased some equipment from Nokia and made some adjustments or enhancements on its own to suit local market needs. Very likely, Viettel would have to pay Nokia royalty fees.

The Vietnamese telecoms giant may also be producing some of the lower-end parts locally.

While Viettel’s 5G technology is not exactly homegrown, the company remains an emerging challenger to established players.

As Vietnam’s largest telecoms operator, it has around 60 million users, about 63 percent of the country’s total population.

Benefiting from the relocation of production facilities by foreign investors amid the US-China trade war, Vietnam saw its GDP growth top the region at 6.6 percent last year.

Apart from dominating the domestic market, Viettel is also expanding overseas, offering services in 10 other countries across Asia, Latin America and Africa.

It has over 40 million users outside Vietnam, and these would also be potential 5G customers for the company.

Viettel is not yet capable of truly coming up with its own technology, but don’t forget, Huawei also started out by reverse-engineering imported products before establishing its own technology years later.

As labor costs rise in China, Vietnam, where wages are only one-fourth of the level of its bigger rival and whose workforce no less creative and hardworking than its Chinese counterpart, does represent a potential threat.

As such, apart from Ericsson and Nokia, as well as Samsung and ZTE, Huawei should also keep a close eye on Viettel.

This article appeared in the Hong Kong Economic Journal on Jan 21

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist