In August and September 2014 two new mobile network operators (MNOs) launched in Myanmar, delivering state-of-the-art services to compete with the state’s monopoly. The country is now a fierce telecoms battleground as each company vies to attract Myanmar’s 51m potential mobile users. From under 10% mobile penetration in 2013, the country is due to exceed 97% teledensity in five years, introducing a host of modern services that promise to transform the country. Leapfrogging decades of technological stagnation, the transformation promises to energise the economy, allowing a multitude of avenues for information access, innovation and social growth.
However, the country’s vast infrastructure requirements to make this a reality will require huge capital inflows as well as expertise, and the sudden shift in service expectations may take some businesses by surprise. As of November 2014 the developments were on track, but the telecoms sector will set a tough pace for other industries in the years to come.
In 2012 there were 5.4m mobile phone users in Myanmar, one of the least penetrated countries in the world, representing only 7% of the population. In 2013 this figure had almost doubled to 13% of the population, and as of November 2014 there were an estimated 15m mobile subscribers across the three active MNOs, representing 29% of the population. This made Myanmar the second-fastest growing mobile user base in the world for 2013, and with a year-on-year growth of 160% to November 2014, it will most likely be the fastest-growing mobile nation in the world, well ahead of Somalia’s 119% growth from 2013. Astonishingly, much of this sudden growth in Myanmar came within the final four months of 2014 as the two new entrants launched their services. With this development, the expansive trend has only just begun.
In 2013 the government initiated an international MNO tender process that drew the attention of 91 companies. International giants joined the race to obtain a licence, including Vodafone, China Mobile and financial partners such as George Soros. Eleven consortia were eventually shortlisted and two international players were selected, Qatar’s Ooredoo and Norway’s Telenor, alongside the state-run Myanmar Post and Telecommunication (MPT) and domestic private player Yatanarpon Teleport (YTP).
The competition for a Myanmar telecoms licence led international providers to bid high. International media has reported that Ooredoo has committed to $15bn of investment over the 15-year licence, and Telenor has reported a peak funding cost of $1bn, aiming to break even in three years. In 2014 the two players are expected to have accounted for 20% of total foreign direct investment, but the sector is leading the way for other companies such as Ericcson. The average revenue per user (ARPU) in Myanmar was reported to be $9 before the sector’s liberalisation – a high figure compared to neighbouring countries. India’s ARPU is predicted to remain below $5 in 2015, and Indonesia, the Philippines and Vietnam will be about $3.
The average revenue per user (ARPU) in Myanmar was reported to be $9 before the sector’s liberalisation – a high figure compared to neighbouring countries. India’s ARPU is predicted to remain below the $5 mark in 2015, while Indonesia, the Philippines and Vietnam will all be closer to $3.
However, it is believed that Myanmar’s current ARPU figure represents a high-end segment of consumers as a result of the previous prohibitively high SIM card prices. Myanmar SIM cards at one time retailed for $3000 apiece, severely limiting access, but as of 2014 citizens can connect their phones for just $1.5. Myanmar’s ARPU is expected to drop as a wider portion of the population begins using the services, and the recent government census counted 9m fewer citizens than previously modelled. Despite these changes, the MNOs are committed to the new investment climate and are encouraged by Myanmar’s reforms.
Since the country’s economic and political reform process began in 2011, Myanmar’s Ministry of Communication and Information Technology (MCIT) has undergone widespread changes. In 2013 an internal purge weeded out many officials investigated for graft to make way for a new system that in turn would transform the sector. The ministry then underwent a restructuring and renaming as part of the sector’s planned liberalisation. What was once the Ministry of Communication, Post, and Telegraphs Information Technology (MCPT), founded 130 years ago, was transformed into the MCIT that exists today. Underneath this body are the regulator, the Post and Telecommunications Department (PTD), and the state-run MPT.
Previously founded as part of the MCPT, MPT is the incumbent mobile network operator. But as part of the recent restructuring within the MCIT, MPT has become a more independent body, run under the MCIT and alongside the regulator, the PTD. As a result of this modernisation and the sector’s liberalisation in general, MPT has sought international funding and technology partnerships to compete with the new entrants.
In July 2014 MPT signed a deal with Japanese giants Sumitomo and KDDI, which have a joint market capitalisation of over $100bn, to upgrade the company’s systems and expand infrastructure. A total of JPY200bn ($1.67bn) has been committed by the joint partners over the coming decade to improve marketing, infrastructure and technology in the sector.
MPT was once known as an outdated monopoly responsible for a severe lack of telecoms access in the country, exploiting its dominance by selling a very limited number of SIM cards for over $500 each in 2012, and up to $3000 in 2010. A lack of infrastructure investment and the ministry’s tight grip on the industry was seen as a deliberate obstacle to many looking to connect with the world beyond the country’s borders.
Yet, since the reform process began, MPT has undergone a radical transformation, rebranding the company in late 2014 with a new logo, competitive prices and superior service. The old bureaucratic monopoly now advertises 24-hour customer care, affordable $1.5 SIM cards, and a host of special offers to entice new users. Samsung handset rewards and national holiday top-up bonuses help create a national brand that stands strong against international entrants.
The company’s unique experience in the market and existing infrastructure also allow it to step ahead of its new competition. “We cannot underestimate the ‘national brand’ advantages,” U Wai Lin Oo, head of investor relations at YTP, told OBG.
MPT’s network operates on a range of bandwidths, on both the GSM and CDMA bands, and in the 450/800 MHz and 900/2100 MHz frequencies. Despite a history of sky-high fees and sub-standard network quality, the company is now one of three competing brands in Myanmar’s mobile network industry.
Ooredoo, the $12bn Qatari telecoms company previously known as Qtel, was one of two operators that won Myanmar telecoms licences in June 2013. The company was founded in 1999 in Kuwait before expanding through the Middle East and South-east Asia with a number of mergers and acquisitions. From operations in two markets in 2006, Ooredoo grew to operate in 15 countries by 2013, and now oversees 17,000 staff worldwide with almost 100m customers. The company is ranked the 24th-largest mobile network operator in the world. The latest addition for the group was its Myanmar subsidiary, which launched its services in August 2014. The company launched a large-scale marketing campaign in and around Yangon, the country’s largest city, as it began building towers to compete with MTP. As consumer interest hit a peak the company began selling limited numbers of SIM cards at $1.5 each, although due to the high volume of new users on an incomplete network, the quality of service was poor.
Ooredoo now leads other ancillary projects along with its call, SMS and data services, including a tech start-up incubator and a number of corporate social responsibility initiatives. One particular recent joint venture with Rocket Internet, the $2bn, Germany-listed website-building company, is aimed at building online platforms for Myanmar consumers.
Yet, despite Ooredoo’s shotgun entrance, there remain some public relations issues it could struggle to overcome. When the company first won a licence in 2013 some prominent Buddhist spokespeople condemned its Qatari backers for representing a majority-Muslim nation, and therefore advised that it should be avoided by Buddhist consumers, which comprise an estimated 75% of the population. A boycott was called in June 2014 by a group of Buddhist monks, but the company was not fazed by such threats, believing that its services would win over any underlying prejudices.
Through 2014 the company swiftly became one of the best-known brands in Yangon as a sea of marketing appeared on signboards, parasols, t-shirts, buses and many other products and locations. The company has taken a strong stance in its latest frontier and has the budget and momentum to compete.
Telenor, the $31bn Norwegian mobile network operator, launched its services in Myanmar in September 2014, one month after fellow foreign entrant Ooredoo. The company is ranked the 14th-largest MNO in the world, with an estimated 166m subscribers across Scandinavia, Eastern Europe and Asia. Telenor is 54% owned by the Norwegian government and is listed on the Oslo Stock Exchange, where its stocks rose 10% in the three weeks following its Myanmar launch.
Norway has been operating in Myanmar in various renewable power and sustainability projects since the reform process began there. A visit by the Norwegian king in December 2014 also helped cement firm relations between the two nations.
Telenor launched in Mandalay, the country’s second-largest city, on October 26, 2014 before experiencing a two-week delay leading up to its Yangon and Naypyidaw launches. The company announced it would prepare 10m SIM cards on launch, avoiding the supply shortages and price hikes that MPT had experienced.
As a short-term solution for the predicted high data demand, Telenor partnered with Opera browser software in October 2014 to provide a compressed and data-light option for users. Mobile devices act as the primary platform for internet usage in Myanmar, and many new subscribers will be using the internet for the first time through their handsets. Due to this high usage on a weak network, telecoms companies are suffering from low bandwidth capacity, and software solutions are estimated to ease data consumption by up to 80%. Telenor has also signed up for Facebook Zero and Wikipedia Zero, allowing users to access these websites for free from their handsets. Coupled with speedier compression methods, Telenor aims to use these tools to push connectivity out to the most rural regions where currently only the slower 2G connection is available.
YTP is the fourth telecoms licence-winner in Myanmar, but as of November 2014 it remains inactive in terms of mobile network operations. The company is majority state-owned and was established as Bagan Cybertech in 2003 as Myanmar’s sole internet provider. Its operations were restricted to internet service provision and satellite services before the licence was granted in 2013, but given current capacity constraints it is looking to join with an international partner before launching further telecoms services.
Various regional telecoms operators have their eye on YTP. Thai group True Corporation has been in negotiations since early 2014. The company has offered a full range of telecoms services in Thailand but has faced stiff competition in recent years, leading to a Southeast Asia expansion plan that may include Myanmar.
Vietnam’s state-owned Posts and Telecommunications Group is also reportedly discussing cooperation with YTP. Axiata, the Malaysian provider, is also in the running as a potential international partner after its failed bid for its own licence in 2012.
However, without a technological partner and an injection of capital like its fellow Myanmar company MPT, YTP will lag behind in the race for Myanmar mobile customers. YTP has traditionally focused on phone-line internet services, but its licence allows for a much wider range of services and it is expected to expand services dramatically once a final joint-venture agreement has been secured.
Pricing & Competition
In the race to attract customers, the three MNOs have gone head-to-head in terms of both pricing and service. The two new international operators launched within two months of one another, and the incumbent radically rebranded and modernised shortly before, pushing each MNO to hone its strategy as the local market took off.
Telenor, like MPT, has focused more on total coverage across the country, enabling 2G and 3G access for both modern smartphones and cheaper feature phones. This choice allows all handsets to connect to the network but sacrifices data speed.
Ooredoo, however, has focused on 3G access, banking on the high portion of Myanmar smartphone users that can access this service. All three providers will aim for 4G connectivity and higher data speeds once their initial network has been deployed.
On SIM pricing, all three providers now retail their SIM cards at MMK1500 ($1.5), with top-up scratch cards available at points of sale. All three currently only offer pre-paid plans. With a lack of financial service options from the banks and an almost total cash economy, post-paid plans are not yet feasible.
In terms of voice calls and SMS, international entrants Ooredoo and Telenor have undercut MPT dramatically. Ooredoo and Telenor charge MMK25 ($0.03) per minute for pay-as-you-go voice calls compared to MPT’s MK25-50 ($0.03-$0.05), depending on peak times. For SMS, the international entrants are charging MMK15 ($0.02) per SMS compared to MPT’s MMK25 ($0.03).
But data usage is the companies’ primary concern. Data usage has rocketed worldwide, and is expected to account for 11.2 exabytes per month globally by 2017, or 13 times as much as in 2012. As more content becomes available and services become reliant on data, volumes are set to surge and Myanmar is expected to swiftly gravitate towards this trend.
While 3G and 2G bandwidth options may determine eventual data speeds for customers, MPT trumps its new competition by keeping its data costs at MMK2 ($0.002) per minute for GSM customers and MMK4 ($0.004) per minute for CDMA 800 and WCDMA customers, regardless of the number of MB used. Telenor comes in second cheapest at MMK6 ($0.006) per MB and Ooredoo charges MMK10 ($0.01) per MB for its base rates.
But behind the marketing, strategy and pricing competition for the MNOs, one of Myanmar’s boldest infrastructure projects is underway. At the end of 2013 Myanmar’s 5.4m mobile users were supported by a network of only 1800 towers. By 2015 an extra 5000 towers were planned for construction, with 2500 set to be on-line by January 2015 to support Ooredoo and Telenor’s roll-outs and MPT’s expansion. The Groupe Speciale Mobile Association predicts that 17,300 towers will be necessary by 2017 to meet current targets, with other estimates of up to 25,000 towers – over 16 times the current capacity.
Each new licence holder has committed to push their services to more than 70% of the population by 2017, meaning that a huge network of telecoms towers must be constructed in a very short time frame. Site hunters are constantly searching for new plots, whether on buildings or greenfield sites, and constructors are reported to be rolling out 250 new sites per month as of the third quarter of 2014.
The task has been split between four tower companies: Irrawaddy Green Towers and Apollo Towers will be constructing for Telenor, while Myanmar Tower Company and Pan Asia Towers will be building for Ooredoo. Each pairing is expected to construct 2500 towers by the end of 2014, although due to a number of setbacks the eventual number may be reduced.
Many of the tower locations are in areas that have been off-limits to most companies, some in war-torn areas or where local authorities may not recognise the licence granted by the central government. Furthermore, international companies are unable to own the land used for the towers, forcing either a local partnership or 50-year leases. Yet, despite the harsh monsoon season and a severe lack of reliable road and transport infrastructure, the companies are going all out to meet their targets.
Powering the towers is another major issue to contend with. “In Myanmar it is already much easier to get a smartphone than it is to access electricity,” Brian McMahon, an associate at M Invest, a Myanmar-focused investment company, told OBG.
With only 29% of the country connected to the grid, diesel fuel and alternative power sources are being developed to keep the towers running, with one solar hybrid model reported to rely on 40% solar and 60% diesel by one estimation. A 1.5-KW site is predicted to cover the cost of its extra solar installation after two years, a 2.5-KW site after five years, and a larger 4. 5-KW system after six years of running, making renewables a viable option to offset the cost of diesel fuel.
Myanmar is at the beginning of a telecoms boom, and consumers will soon have access to a plethora of new services that can fully alter the way business, social activities, education and every aspect of society is run. The concerns over infrastructure are swiftly being addressed and new telecoms towers are being constructed at a very rapid pace. With continued momentum, the sector has the power to push other industries ahead, and with the right commitment from the MNOs, infrastructure companies and the government, it could ignite the country’s economic potential.
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