• Vietnam shut its 2G telecom operations in October 2024, encouraging consumers to switch to more advanced telecom networks like 4G.
• Telecom operators and retail outlets helped in the migration by offering various subsidies on 4G smartphones, feature phones and 4G data plans.
• The share of the <$200 smartphone price band reached 51% in Q3 2024, the highest since Q1 2022, as entry-level smartphone users increased.
• 66% of new Android smartphones launched in Vietnam in Q3 2024 were non-5G smartphones.

Vietnam’s Ministry of Information and Communications (MIC) announced in December 2023 that it planned to start shutting down the country’s 2G network starting September 2024, excluding some remote locations where 4G penetration is low. However, the government postponed the 2G shutdown deadline by a month to avoid disruption in communication activities, following the Yagi Typhoon, the strongest storm to hit the country in 70 years.

The MIC had already prohibited the import of 2G devices since 2020, but such devices have been imported through grey markets and there were still more than 10 million 2G subscribers in Vietnam by the end of Q2 2024. The phasing out of older technologies like 2G network is part of Vietnam’s goals of digital transformation. The Vietnam Telecommunications Authority (VNTA) stated that the 900/1800MHZ band, currently used for 2G, will be repurposed for the country's 4G and 5G networks in the future.

Source: Vietnam Handset Market Tracker, 2024

Stakeholder Efforts in Transition from 2G Network

During the transition period, network operators implemented various strategies to move 2G-only subscribers to newer networks, ensuring the smooth shutdown of 2G services. The Government of Vietnam along with telecom operators were quite aggressive in their marketing and implemented methods such as call waiting notifications and loudspeaker advertisements. Operators offered financial support for 4G-only phones, combined with subscription packages for those transitioning from 2G. Some also provided 100% financial aid for 4G devices to assist 2G-only subscribers.

State-owned Viettel Telecom implemented support plans for consumers to switch from 2G- to 4G-enabled phones at no cost when committing to Viettel’s 4G package for six months or more. The phones provided by the telecom company at its stores were 4G feature phones and entry-level smartphones like Samsung Galaxy A04e and Galaxy A05. The other option that the telecom operator provided was to purchase the 4G smartphones at 50% off with a maximum discount of VND 1.1 million (~$44). Viettel Telecom established 10,000 exchange points nationwide and partnered with retailers like TGDD. Furthermore, the operator spent VND 300 billion (~$12.2 million) to gift 4G phones to 700,000 of its 2G subscribers.

Mobifone, another leading telecom operator, had a program called "Change 2G device, unexpected incentives" to support the switch. The incentives included free 4G SIM exchange, free data package and free 4G feature phones.

On the retail side, this was an opportunity not only to increase sales but also to clear the stocks of older 4G entry-level smartphones and 4G feature phones. One of the biggest retailers in the country, TGDD, encouraged customers to bring their old 2G phones and exchange it for a 4G SIM voucher worth VND 480,000 ($19). This voucher could be used to buy a data SIM that provides access to unlimited popular social networks such as Facebook, YouTube, and TikTok, along with 1GB of data per day during the first three months.

FPT Shop introduced a program to support the collection of old 2G devices in exchange for new 4G devices with consumers receiving gifts of up to VND 600,000 ($24). The shelves of the shop also displayed more 4G smartphones and entry-level smartphones than before.

Impact on Vietnam Handset Market

The joint efforts by the government, telecom operators, and OEMs successfully brought down the country’s 2G subscriber count to less than 800,000 connections as of October 2024, according to the data provided by telecom operators.

The 2G network shutdown and the non-widespread availability of 5G network means Vietnam is now highly reliant on its 4G network. This also acts as a stepping stone to move on to 5G network once the technology’s reach increases throughout the country. To address this, OEMs and the government have been encouraging 4G smartphones as well as 4G feature phones in the market, increasing the penetration of 4G network in the handset market.

The move to shut down 2G have also benefitted Vietnam’s telecom operators, as more people shifting from 2G to 4G subscription helps improve the Average Revenue Per User (ARPU). In Q3 2024, Viettel Group reported a pre-tax profit of over VND 6,037 billion (about $250 million), reflecting a significant 162% YoY increase. The top smartphone retailers in the country like TGDD and CellphoneS reported a 30%-40% MoM growth in low-cost smartphone sales in some of their stores.

Source: Vietnam Handset Market Tracker, 2024

OEMs emphasized on 4G smartphone launches – 66% of the new Android smartphones launched in Vietnam in Q3 2024 were non-5G smartphones. OEMs are working towards making more 4G options available to customers. In the smartphone market, the <$200 price band witnessed a 38% YoY growth in volumes in Q3 2024. The price band also registered a 51% market share in Q3 2024, its highest since Q1 2022.

The 2G shutdown has added new users to the entry-level smartphone market. Within this price band, Xiaomi had the highest share of 27% driven by the Redmi 13 and Redmi 14C. OPPO was also a major gainer in this price segment with a 96% YoY growth in this segment driven by the OPPO A3x.

Economic factors have also been favorable to consumers in Vietnam for most of the year. The country’s economy has been on track and striving to achieve GDP growth of 7%, higher than the National Assembly’s target of 6%-6.5%. Vietnam’s total retail sales of consumer goods and services rose 8.5% YoY to exceed VND 5,246 trillion ($207.5 billion) during the January-October period. These favourable conditions also offered operators to launch the much-awaited 5G network service in Vietnam with Viettel being the first operator to do so.

Conclusion

The 2G shutdown was a milestone for Vietnam’s digital ecosystem. The favorable economic conditions along with OEM, telecom operator and government efforts, ensured a smooth transition. The share of 4G smartphones will remain high in the coming months in Vietnam and OEMs will look to clear off their 4G inventory stock in the entry-level segment.

Vietnam has set a goal of 99% 5G coverage by 2030. The commercialization of 5G is also expected to fuel the digital economy and drive OEMs to launch more 5G-variant smartphones soon.