Vnu journal of Science: Policy and Management Studies, Vol. 3, No. (2017) 21-29

VNU Journal of Science: Policy and Management Studies, Vol. 33, No. 2 (2017) 21-29
21
The Concentration and Competition of Vietnam Mobile 
Telecommunications Market Through HHI
and Elasticity of Demand 
Dang Thi Viet Duc
1,*
, Nguyen Phu Hung
2 
1
Posts and Telecommunications Institute of Technology, Km 10 Nguyen Trai, Hanoi, Vietnam
 
2
VNU International School, Building G7-G8, 144 Xuan Thuy, Cau Giay, Hanoi, Vietnam
 
Received 16 April 2017 
Revised 11 June 2017, Accepted 28 June 2017
Abstract: The article uses the Hirschman-Herfindahl Index (HHI) and the Elasticity of Demand to 
evaluate the degree of concentration and competition of Vietnam's mobile telecommunications 
market. For the HHI calculation, the article uses revenue market share data. For estimation of price 
elasticity of demand, the article uses a regression model with aggregate data of the whole market. 
The estimation results show high HHI, suggesting high concentration of the Vietnam mobile 
market which can harm the competition in the market. The high estimated price elasticity of 
demand indicates that price is actually powerful tool of competition and it is likely difficult for a 
single company to raise the price in the market without facing a decrease in its services demand. 
This gives implications for regulatory bodies for regulation options applied in the market.
Keywords: Market concentration, Price elasticity of demand, Competition, Telecommunications 
market, Mobile telecommunications market. 
1. Introduction
 *
 
Telecommunications services market is one 
of the markets on which the competition 
regulatory bodies focus their attention. This is 
because of the amount of radio spectrum 
available is limited and the fixed and common 
costs 
associated 
with 
mobile 
network 
investments are relatively high which make 
mobile telecommunications markets have been 
argued to be natural oligopolies [1]. Normally 
in competition regulation, the regulatory bodies 
should 
evaluate the degree 
of 
market 
competition and firm’s market power to 
determine if economic regulation is necessary 
_______ 
*
Corresponding author. Tel.: 84-914932612. 
Email: ducdtv@ptit.edu.vn 
https://doi.org/10.25073/2588-1116/vnupam.4087 
and if so what the appropriate form of 
regulations is. 
Many studies put effort to find out the 
methods to evaluate the degree of market 
competition in the telecommunications sector. 
Some overview studies include [2-5]. Although 
the studies are different in their focus, it may be 
possible to point out three sequential steps 
suggested by researchers to determine the 
degree of competition and non-competitive 
behavior of firms in the telecommunications 
market. Step 1: Define the market. Markets are 
defined along both product and geographic 
boundaries. This step is usually related to 
service cross-substitution tests such as SSNIP 
test, but other methods can be used as well [4]. 
Step 2: Assess the degree of market 
concentration to determine whether the market 

 D.T.V. Duc, N.P. Hung / VNU Journal of Science: Policy and Management Studies, Vol. 33, No. 2 (2017) 21-29 
22
dominance exists and the ability of firms with 
market power to conduct non-competitive 
behavior in the market. This step can be done 
through analyzing some indices of market 
concentration or price elasticity of demand. 
Step 3: If the outcome of step 2 confirms 
suspicion of a firm or some firms having 
significant market power, the regulator should 
check that the firms are actually abusing the 
market power whether through analysis of 
surplus profit, economies of scale or barriers to 
entry and exit. This is a decisive step because 
the existence of a dominant market power is not 
as important as the fact that the business is 
actually abusing its power to stifle competition 
in the market. This paper focuses on analyzing 
and evaluating market concentration and the 
existence of significant market power in step 2. 
In Vietnam, the telecommunications market 
dominant position is assessed on revenue and 
subscription market shares. Competition Law in 
2004 and Telecommunications Law in 2009 
agreed to take a benchmark of 30% market 
share to determine the market power and 
market dominant position of the firm(s) in a