Survival of the fittest: The arrival of international giants poses a challenge for local providers

While consumers are due to see more affordable access to mobile and internet services as foreign firms enter the market, local telecoms licence holders Myanmar Post and Telecommunication (MPT) and Yatanarpon Teleport (YTP) face strong competition, and must use every advantage to retain a profitable market share.

MPT and YTP are in a similar situation. They lack the capital to extend the network and international expertise in improving services and training, all of which Norway’s Telenor and Qatar’s Ooredoo will be able to start afresh. Yet having been operating in Myanmar for many years, they have ready-built towers, established partners and recognised brands. Analysts believe the local providers must leverage their first-mover advantage in every way possible or be cornered by the newcomers. “The entrance of international players gives us the opportunity to work on a collaborative basis in which both sides can benefit,” said U Toe Naing Mann, the chairman of local internet provider Redlink Communication.

The Good

Whichever firm wins out over the life of the 15-year licence, locals are set to benefit from greater access to telecoms services. The foreign players will be able to bring in modern services and train thousands in-country for their own personnel. They will also be investing huge amounts of capital in all manner of infrastructure developments. Ooredoo, for example, has pledged to spend $15bn over the life of its licence.

The foreign entrants will be able to offer higher salaries, and are expected to attempt to acquire high-end mobile customers immediately, as this segment will enable them to achieve the quickest revenue growth. Yet as current prices are only affordable for the richest local consumers, they will encroach on the existing market first, potentially threatening local providers.

The Bad

To have maximum impact on the market as quickly as possible, companies will need to hire local specialists to gain an advantage. These specialists can only be found among the local telecoms providers, so they may have to take talent from existing positions. “Telenor and Ooredoo need to hire experienced local staff,” said Paul Crilley, a founder of Bagan Cybertech and now advisor to YTP. “We will lose staff and customers to the newcomers, and then taking a customer from them will be like taking a bone from a dog.”

Telenor and Ooredoo are international telecoms giants, with public valuations of $33bn and $12bn, respectively. They have extensive resources at hand, and their seasoned multinational operations will be applied to a detailed action plan for Myanmar. Securing a place for local competitors against these giants will require careful strategic planning. “The only hope we have is to radically reform the company and split into different business units to provide services where the foreign players may not want to tread,” said Crilley.

The Ugly

MPT and YTP have a long history in Myanmar, and can use this experience to their advantage, but they will require significant improvements in the sector’s human resources capacity. “This will be our biggest challenge over the coming years,” said U Kyaw Soe, principal of the Telecommunications and Postal Training centre, which trains employees for MPT.

While education and talent sourcing is a problem across all sectors, the torrent of development in ICT will hit the education bottleneck quicker than others. Local firms are often looking to international help for added training, which cannot compare to the in-house training used by foreign providers. But the foreign giants’ investment capital and expertise can only go so far without personnel on the ground to implement their plans. The task for Ooredoo and Telenor is immense, and unlike anything they have yet experienced.

It is expected the international players will face their biggest challenge in the country’s border regions, where conflicts and power struggles are still ongoing. Having pledged to provide mobile access to more than 80% of the country by 2015, they will have to approach these areas with little time for preparation. There are 14 armed groups active in Myanmar, most of which are under a ceasefire agreement, but they may still hamper plans to introduce nationwide telecoms coverage.

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The Report: Myanmar 2014

Telecoms & IT chapter from The Report: Myanmar 2014

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The Report

This article is from the Telecoms & IT chapter of The Report: Myanmar 2014. Explore other chapters from this report.