July 29th 2014 marks a monumental date for Myanmar’s telecommunications sector. Less than six months after the Myanmar government awarded telecommunications licenses to two foreign companies—Ooredoo and Telenor—out of 91 contestants, Ooredoo Myanmar started its soft launch in the capital Nay Pyi Taw and the second biggest city Mandalay. Within two days, all available Ooredoo SIM cards allocated to mobile stores were sold out, leaving thousands of customers waiting and driving up its SIM card prices by many folds in the market. Nonetheless, people in Myanmar have reasons to celebrate: for the first time in history, they have the freedom of choosing their mobile services provider.
Compared with other countries in the region, the telecommunications sector in Myanmar remains extremely underdeveloped. Before the foreign companies were allowed to enter, the telecommunications industry had been under the monopoly of government-owned Myanmar Post and Telecommunication (MPT), regulated by the Ministry of Communications, Post, and Telegraphs (MCPT), which is now reformed into the Ministry of Communication and Information Technology (MCIT). With no incentive and pressure to compete, MPT was able to charge a large SIM card rental fee to its customers thereby restricting the number of telephone users in Myanmar.
A few years ago, one SIM card used to cost US$ 500-1,500 officially and could be sold for US$ 3,000-4,000 in the black market. Although MPT gradually reduced the official SIM card prices to US$ 200-250 in 2012 and eventually to US$ 1.5 in 2013, even at the beginning of this year, a SIM card could fetch about US$ 150 in the black market. As a result of the price barriers set up by MPT, few people have access to mobile phone services, and the telecommunications industry was hampered. According to a report by the IFC and the GSMA, the mobile penetration in the country is the lowest in the region; only 5.44 million subscribers—less than 10 percent of the population—have access to mobile services in early 2014. In July, the number rose to around 8.5 million. Yet compared with regional countries, the telephone density in Myanmar remains remarkably low. According to ITU, even the teledensity rate of Cambodia, the second lowest in ASEAN, was 70 percent in 2013.
After President Thein Sein’s government had come into power, improving the telecommunications sector became one of the government’s top priorities. To reduce the country’s giant mobile coverage gap, the government has set highly ambitious goals to increase the teledensity rate to 50 percent in FY 2013 - 2014 and 80 percent in FY 2014 - 2015. Also, the existing network system—with around 2,000 tower sites set up by MPT—covers only major cities such as Yangon, Nay Pyi Taw, Mandalay, etc. and along major highways, so MCIT requires the network operators to expand the country’s network coverage to 70 percent by 2017 and 95 percent by 2020 at the end of their license terms. In February 2014, the government gave 15-year operating licenses to two foreign telecommunications operators. Together with two licenses set aside for local telecommunications companies—the incumbent leading operator MPT and the newly reformed Yatanarpon Teleport (YTP), Myanmar will see four telecoms operators vying for the substantial potential market of approximately 51 million people.
A Qatari telecommunications company, Ooredoo has a global customer base of 96 million and operating in 15 countries as of December 2013. With the entry to Myanmar, Ooredoo has expanded its Southeast Asian presence which now includes Myanmar, Indonesia, Laos, the Philippines, and Singapore. The company plans to invest US$ 15 billion in Myanmar and will build a nationwide 3G network system using UMTS 900 and 2100 frequencies. According to Ross Cormack, CEO of Ooredoo Myanmar, the company has appointed 6,500 SIM card dealers and 30,000 top-up dealers in Yangon, Nay Pyi Taw, and Mandalay. Its network covers 68 towns in Myanmar in August and 23.4 million people in 100 towns at the end of 2014. Within five years, the operator aims to provide mobile access to 95 percent of Myanmar’s population. Ooredoo is selling its SIM cards for 1,500 Kyats and charging 25 Kyats per minute for intra-network calls, 35 Kyats per minute for inter-network calls, and 25 Kyats per SMS. As for the internet usage, it has designed three data plans: one-day plan of 30MB for 500 Kyats, one-week plan of 200MB for 3,000 Kyats, and a one-month plan of 1GB for 12,000 Kyats. It is also offering a pay-as-you-go plan of 10 Kyats per MB.
Although Ooredoo might gain first-mover advantages by being the first company to announce operation in Myanmar’s newly reformed telecommunications sector, challenges await the Qatari company. Due to its Middle-eastern background, the company is facing protest movements from some of the anti-Muslim Buddhist groups within the country. Also, the company’s internet plan is criticized as too expensive. Since Ooredoo’s network is compatible only with UTMS-900 3G handsets, those who are already using other types of phones will need to buy new ones.
One of the world’s major mobile operators based in Norway, Telenor is operating in 12 countries with more than 160 million subscribers. Its Asian presence will now include Myanmar, Malaysia, and Thailand in Southeast Asia and Pakistan, India, and Bangladesh in South Asia. The company plans to invest US$ 1 billion initially. Like Ooredoo, Telenor will sell its SIM cards for 1,500 Kyats. It focuses on appealing to mass customers with affordable services. Petter Furberg, CEO of Telenor, states that he is “confident that Telenor will become the most affordable offering in the market.” The inclusion of both 2G and 3G systems for network means that Telenor’s users can keep their current GSM handsets. Telenor is charging 25 Kyats per minute for any call and 15 Kyats for SMS. As for the internet, it offers two different plans: 6 Kyats per MB on MY plan with speed up to 300 Kbps and 10 Kyats per MB on SMART plan with speed up to 2Mbps. Within five years, it aims to build a network system that covers 90 percent of the population in Myanmar. Its distribution network will include 12,000 points of sales at launch in three major citiesand will expand to around 100,000 nationwide. The company started its launch on September 27th in Mandalay, followed by Nay Pyi Taw and Yangon.
Myanmar Post and Telecommunications
Over 130 years, Myanmar Post and Telecommunications (MPT) has enjoyed a monopoly in Myanmar’s telecommunications industry for more than forty years. It still is the biggest telecommunications operator in Myanmar with over 8,000 staffs. Owning most of the country’s telecommunications infrastructure, MPT is still a force to be reckoned with. However, it is facing fierce competition from the two new entrants. In order to remain competitive, the company announced its partnership with Japan’s KDDI and Sumitomo on July 16th, which will invest about US$ 2 billion to improve the incumbent’s infrastructure and services. MPT is also trying to retain its customers, many of whom have been dissatisfied with its services and are keen to switch to other operators. For example, days after Ooredoo started its soft launch, MPT set up “Friend and Family” promotion that allows its users to call three selected numbers for 25 Kyats per minute. At the beginning of September, MPT began selling its SIM cards for 1,500 Kyats. Under the new Telecommunications Law, the incumbent operator will also have to reapply for a new telecommunications license. Although the Myanmar government has plans to transform MPT from a state-owned entity to a public company in order to create a level playing field in the telecommunications sector, progress has been slow. According to Director of Posts and Telecommunications Department (PTD) U Than Htun Aung, MPT will remain a state-owned operator at least for the near future.
Yatanarpon Teleport (YTP) is the leading internet service provider (ISP) in Myanmar. The government used to own 51 percent of its shares, but Yatanarpon Teleport has turned the company into a public company in an effort to transform itself. The company is changing itself from simply an ISP to a telecommunications operator as well. Till the time of writing, YTP is discussing with an undisclosed foreign company for partnership and has yet to announce its partner, trailing behind all the other telecommunications operators in actions.
Within the country, healthy competition and foreign investment capital will improve Myanmar’s telecommunications sector and the economy as a whole. For the first time in Myanmar’s history, the general public can obtain mobile phone services easily at an affordable price. According to Deloitte, every 10 percent increase in mobile penetration can lead to 1 percent increase in the national GDP growth. Deloitte and Ericsson forecast that the mobile telecommunications sector in Myanmar will lead to about US$ 3 billion of direct and indirect contribution and over US$ 1 billion of multiplier effect in the economy within three years. By the second year, they estimate that the sector will generate over US$ 2 billion on the supply side and create around 90,000 direct and indirect employment opportunities. Already, Ooredoo has recruited 800 Myanmar employees among its 1,000 strong staff, and Telenor is trying to increase its staff size to 1,000 by the end of 2014. The successful development of the telecommunications sector will have spill-over effects in other sectors as well such as banking, health, and education.
The immediate beneficiaries will be mobile handset manufacturers and vendors. By 2017, IDC estimates that the mobile phone market in Myanmar would require additional 6 million smartphones and 5.5 million feature phones. In the Financial Year 2013-2014 alone, over 3 million phones were smuggled into the country, as reported in Myanmar Business Today. Better mobile internet services will drive smartphone sales because most internet users in Myanmar (over 1.8 million) are relying on mobile phones for internet access. Currently, Huawei is leading Myanmar’s smartphone market due to its affordable handsets. Shortly after Ooredoo had started selling its SIM cards, smartphone prices—low-end models in particular—increased by about 10 percent. Both Ooredoo and Telenor have announced partnership with Samsung to provide handsets to Myanmar customers. Ross Cormack, CEO of Ooredoo Myanmar, stated that his company will work together with telephone manufacturers to sell 1 million low-cost 3G mobile phones.
Externally, the success of the telecommunications sector will have a symbolic meaning to the holistic investment environment in Myanmar as well. So far, it is one of the most prominent sectors in which international investors are investing heavily and competing against a state-owned monopoly. The successful rollout and operation of the foreign telecommunications companies will help the government convince potential foreign investors in other sectors that the country has not only the will but also the capability to provide a level-playing field for all players.
On other hand, many challenges exist for Myanmar to achieving its telecommunications goals, especially in the tower sector. Deloitte estimates that 15,000 towers need to be installed by 2015 in order to meet the government’s goals, and IFC and GSMA estimates that 17,300 sites need to be set up by 2017 to cover 70 percent of the population. As of now, MPT has set up around 2,000 towers in the country. According to TowerXchange, Telenor plans to set up 1,000 towers at launch and about 8,000 within five years. Telenor has assigned Apollo Towers to build 1,001 towers and Irrawaddy Green Towers to build 1,500 towers. On the other hand, Ooredoo has teamed up with Digicel’s Myanmar Tower Company and Pan Asia Towers and assigned each of them to build 1,250 towers. Every month, about 250 sites are being set up by the tower companies.
A number of factors are hindering the successful setup of towers. In an interview by TowerXchange, CEO of Irrawaddy Green Towers, John Stevens stated that towering companies cannot own land and thus can only lease lands to build towers. However, the confusion in the land ownership—agricultural lands in particular—is obstructing the speedy buildup of towers. Transportation is another major challenge since outside of major cities, roads are inadequate. Stevens claimed that in some cases, “oxen and mules” will have to be used to move construction materials to remote sites. Apart from it, inadequate electricity supply and network have always been a perennial issue in Myanmar. As a result, two-third of tower sites in the country will be off-grid and have to rely on their own power solutions instead. Since 66 percent of Myanmar’s population lives in rural areas, according to the UN’s 2014 World Urbanization Report, majority of towers will need to be built in those areas where infrastructure is even less adequate.
Despite these challenges, the telecommunications sector in Myanmar will turn a new page with the entry and subsequent operation by new telecommunications operators. By creating a level-playing field and allowing the best players to win, the government can prove to its own people that the reforms are real and will truly change their lives for the better. Also, with the success of the telecommunications industry as an example, the country can in turn convince potential investors that they can truly benefit from investing in the last frontier in Asia.