20 Jan Vietnam Makes Big Bet on Homegrown 5G | Light Reading
Vietnam’s largest phone company was evidently not kidding last year when it announced plans to build its own 5G network. In an update last Friday, Viettel has reportedly promised to launch a 5G service in June based on its own equipment and software. It has already carried out trials, including a 5G video call last week.
Viettel’s announcement is potentially a big deal. Telecom operators do not typically build the mobile networks they use to provide services. Usually, that job goes to a diminishing number of manufacturing giants, of which the very largest are China’s Huawei, Sweden’s Ericsson and Finland’s Nokia. There is little precedent for what the Vietnamese service provider is attempting.
Its motivation seems partly geopolitical. International concern surrounds Huawei, the world’s biggest mobile infrastructure vendor. Critics see it as a Chinese government stooge and threat to national security, as well as a trade cheat. The Vietnamese may need little persuading: Tension between China and Vietnam has been mounting over territorial claims in the South China Sea. The two countries nearly came to nautical blows last year when Chinese authorities sent ships into Vietnamese waters. A Chinese 5G vendor is unlikely to be a popular choice in Vietnam.
Huawei avoidance is not the only explanation, though. Much like India, Vietnam is becoming newly assertive on the global technology stage as its economy continues to grow. Thanks largely to its abundance of cheap labor, it has already emerged as a tech manufacturing hub in Asia. Samsung, the South Korean electronics giant, makes about one third of its mobile phones in Vietnamese factories. Vietnamese government attention is now turning to homegrown expertise. Widely touted as an essential pillar of the future digital economy, 5G has risen swiftly up the agenda.
That Viettel should take the 5G lead is not altogether surprising. Founded in 1989, it is wholly owned by the Vietnamese state and appears to have close links to the military. Its activities have not been confined to operating telecom networks, either. Indeed, Viettel appears to have started out in construction and today boasts expertise in fields including hi-tech research and manufacturing.
It is also a bigger organization than outsiders might assume. According to its own website, it made about $10.1 billion in revenues in 2018 and now serves more than 110 million customers worldwide, following expansion into several markets in Asia, Africa and the Americas. Its workforce in 2018 included more than 70,000 employees, it says.
Even so, this makes Viettel a lot smaller than Ericsson alone. With its 5G focus, the Swedish equipment vendor had sales of $22.1 billion in 2018 and finished last September with around 96,000 employees. Each year it pumps about $4 billion into research and development. To match that, Viettel would have to commit about 40% of its total revenues to R&D, a sum that no existing vendor could manage. Struggling to remain competitive, ZTE, a smaller Chinese supplier, injected about 15% of its revenues into R&D during the first nine months of 2018. Last week it announced a share offering worth about $1.7 billion to fund additional 5G efforts.
The difference is that Viettel is not necessarily trying to compete on the global 5G stage — at least, not in the first instance. Its statements, as reported by mainstream press outlets, suggest its initial focus is on 5G development for its own service provider business. Sales to other companies are not yet an obvious consideration.
As regards internal R&D, Viettel’s interest might also lie primarily in the “core,” a sensitive, software-based part of the network responsible for traffic routing and other important functions. This would not be such a leap into the unknown because Viettel — unusually for a telco — already sells billing software to other service providers and demonstrated an internally developed 4G core product at last year’s Mobile World Congress. In August 2019, it reportedly said its aim was to produce 80% of its core network infrastructure this year. If Viettel has few worries about the more hardware-based radio access network (RAN), it could strike a 5G deal with Ericsson, Nokia or Samsung for this gear.
This will not silence the skeptics. The lack of alternatives to the big three vendors shows that designing sophisticated network systems is no cakewalk. Elsewhere, operators equally worried about reliance on a few giant kit vendors are backing more open interfaces and software tools as an alternative. Rather than develop these technologies themselves, they are turning to an emerging ecosystem of network startups and software specialists.
To what extent these tools figure in Viettel’s plans is currently unknown. Building traditional gear would be difficult and possibly counterintuitive, given the widespread telco interest in more open networks. With its financial clout and customer base, Viettel could certainly provide some impetus for technologies such as open RAN, which promises to reduce 5G costs and make kit more interoperable. Yet open RAN is still not ready for mass-market deployment in the most demanding conditions. Even its most enthusiastic telco supporters see it as a complement to the mainstream suppliers in specific circumstances — not a substitute for them.
If nothing else, Viettel’s plan is a sign of the 5G-fueled backlash against years of vendor consolidation. Countries and companies do not want to be dependent on two or three foreign players for such a critical technology. A domestic alternative would provide a kind of network security akin to the energy security that has been so important since the Arab oil embargo of the 1970s. That explains why countries such as India, Russia, the US and now Vietnam are trying to foster homegrown champions. Expect others to follow.
Iain Morris, International Editor, Light Reading