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Research Report

Executive summary After a number of decades of having to struggle with a poorly performing economy and a commercial environment that was in desperate need of reform, in the last four of five years there has been a noticeable shift in the outlook for Laos with positive news being reported on many fronts. Most importantly, a significant number of hydro-electric power projects and mining ventures have already become or are moving closer to a reality, with more possible projects in the pipeline. Laos is at last moving forward in what might be described as a confident fashion. It is also moving forward in its efforts to strengthen both its telecommunications infrastructure and its regulatory regime, in its efforts to attract more foreign investment into the sector and in its efforts to introduce the latest telecom technologies. The slowest of these is arguably reform to its regulatory regime, although even on that score progress is being made. With the building of the country's infrastructure continuing to be a priority, by early 2010 fixed-line teledensity was still low at around two telephones per 100 people, with limited growth occurring in that segment of the market; however, growth in the Lao mobile market has continued to surge in a sustained fashion over the last five years. Coming into 2010, mobile penetration had passed the key 50% milestone with the annual growth rate having reached 66% in 2009. This was largely on the back of a particularly strong performance by Unitel, the military-owned operator that has been reinvigorated by the formation of a joint venture with Vietnam's Viettel. In the meantime, Internet services in Laos continue to lag badly, this being a major concern in terms of the overall social and economic development of the country. While more foreign investment is needed to boost the telecom sector, the government must also be judicious in selecting and licensing new operators to ensure that it gets the best value out of the investment. The joint venture formed by the government with Thai company Shinawatra back in 1996 let the five year period of market exclusivity granted to Lao Telecom pass without any serious attention to infrastructure building. When the market was finally opened up to competition in 2002, foreign capital finally started to flow. The mobile phone market took off in early 2003, with the number of subscribers increasing sevenfold in the two years following. The Lao telecom sector still has many issues to address. The rate of regulatory reform continues to lag well behind industry development and has the potential to derail the progress already made if the reform is not speeded up. Market highlights: The mobile market in Laos continued on its positive expansion path in 2009, with annual growth in excess of 60% for the year; growth was continuing at a similar pace early in 2010; Mobile penetration had reached the important 50% milestone by end-2009; With the Lao government having licensed six mobile operators, competition had really heated up over the 2008/2009 period, initially putting considerable downward pressure on ARPU; The market became even more competitive following Vietnam's Viettel forming a joint venture with the military-owned Lao Asia Telecom which was rebranded as Unitel in 2009; Russia's Vimpelcom brokered a deal in late 2009 to acquire Millicom's 78% stake in Tigo; however, the acquisition was still awaiting regulatory approval in June 2010; The launch of Lao Telecom's 3G service in late 2008 had been an important move for the local telecom sector, but by early 2010 growth in 3G subscriptions remained modest; Lao Telecom's Wireless Local Loop (WLL) offering has continued to provide some fresh impetus in the fixed-line market, although overall subscriber growth remains modest; The low penetration and sluggish development of Internet services continues to be a problem for both the local telecom industry in particular and the country in general, especially given how crucial online access is to national growth.Laos - key telecom parameters - 2009 - 2010 Category20092010 (e) Fixed-line services: Total number of subscribers1132,000141,000 Annual growth5%7% Fixed-line penetration (population)2%2% Fixed-line penetration (household)11%12% Internet: Total number of subscribers15,60018,800 Annual growth18%20% Internet subscriber penetration (population)0.2%0.3% Internet subscriber penetration (household)1%1.5% Proportion of broadband subscribers (% of total Internet subscribers53%56% Mobile services: Total number of subscribers3.2 million4.4 million Annual growth66%33% Mobile penetration (population)50%68% (Source: BuddeComm) Notes: 1These figures include Wireless Local Loop (WLL) subscribers This report provides an overview of the trends and developments in the telecommunications markets in Laos. Subjects covered include: Key Statistics; Market and Industry Overviews; Major Operators (Mobile and Fixed) Regulatory Environment; Infrastructure; Mobile Market; Internet Market, including Broadband.

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