A new wave of digital innovation is reshaping Myanmar’s economy, as a remodelled national strategy and increased competition enhance the performance of the ICT sector. Prior to the liberalisation of Myanmar’s telecommunications industry, SIM cards and mobile phones were a luxury only the wealthy could afford, but they are now becoming much more widespread, although there is still progress to be made to extend network rollout.
On the back of a string of significant investments and major reforms, mobile network coverage has reached the majority of rural, previously underserved, communities. As a result, Myanmar’s cash-dependent society is being exposed to a wide variety of new e-commerce products and an expanding technology start-up scene.
Mobile technology is an important element of ongoing efforts to widen financial inclusion and disrupt informal remittance services. This will be essential in achieving the government’s goal of establishing a digital economy.
Despite considerable progress, network rollout in remote areas of the country has been hindered by internal conflict issues, as well as a lack of basic infrastructure and disputes surrounding land rights. Some rural areas have disproportionately higher costs because operators are reluctant to share telecoms towers. Furthermore, tower sites often rely on expensive mobile generators to mitigate the country’s chronic power shortage (see Energy chapter). These shortfalls make tower construction and operation in rural areas more expensive than in major cities like Yangon or Mandalay. However, major investments in infrastructure are expected to reduce long-term costs and improve efficiency.
A Universal Service Fund (USF) was established in 2018 to expand telecommunications services to the most remote regions of the country. This fund, which is the first of its kind in Myanmar, will use fees collected from the market’s main telecoms operators to pay for network expansion. The aim of this is to mitigate the difficulties that firms face in constructing and maintaining telecoms towers throughout remote regions in order to achieve the target of 99% mobile penetration by 2022.
The structure and operation of Myanmar’s telecoms sector has changed dramatically since its inception, when the industry was monopolised by one firm. The awarding of licences to Norwegian firm Telenor and Qatar-headquartered Ooredoo in 2014 has been hailed as one of Myanmar’s most successful liberalisation measures since the democratic transition began in 2011. The granting of the two national telecommunications licences effectively signalled the end of the state-run telecoms monopoly under Myanmar Posts and Telecommunications (MPT).
Until the granting of these licences, the only mobile coverage provider alongside MPT was the much smaller, military-backed operator MEC tel, owned by the Myanmar Economic Cooperation (MEC). In a bid to keep pace with its international counterparts, MPT entered into a 10-year joint venture agreement with KDDI Summit Global Myanmar (KSGM), valued at $2bn in 2014, and the joint operation now trades as MPT-KSGM.
The fourth and most recent National Telecommunications Licence (NTL) was awarded in January 2017 to MyTel, spearheaded by the Vietnamese military-backed Viettel in a joint venture with Star High Public Company – owned by the Myanmar military – and Myanmar National Telecom Holding, a consortium of 11 local companies.
In addition to the four telecoms operators, there are over 140 licensed internet service providers in Myanmar. “The entrance of MyTel to the telecom sector will definitely shake things up. It will create price competition,” Melvin Pun, CEO of Singapore-based Yoma Strategic Holdings, told OBG. “The fight now is around data users and not subscriptions.”
Although there are still structural bottlenecks, progress has been made in several areas at the ministerial level. Notable developments include improvements in technical capacity, bureaucratic structures and information sharing. Following the 2015 general elections, the National League for Democracy (NLD) government reduced the total number of ministries from 36 to 21.
The most relevant change in the ICT industry was the amalgamation of the Ministry of Communications and Information Technology, Ministry of Railway Transport and the Ministry of Transportation into one single ministry, the Ministry of Transport and Communications (MoTC).
In recent years, a number of measures have been taken to strengthen procedures and increase competition. An ICT Master Plan was published in 2015 and in early 2017 a draft Myanmar Communications Regulatory Commission (MCRC) law was issued by the MoTC. According to this draft law, the MCRC is set to replace the existing Posts and Telecommunications Department (PTD) and serve as an independent, autonomous and impartial regulatory body that will govern the telecoms industry going forward. According to an English translation of the draft law, the new watchdog will be responsible for issuing telecoms licences, administering and allocating spectrum and advising the government on all matters related to telecoms.
The MCRC is also expected to promote fair competition. In addition, the MCRC will enable public access to telecoms services while monitoring and enforcing licensee compliance with relevant laws. At the time of writing, the transition of power from the PTD to the new MCRC was yet to be finalised. Simultaneously, the government has been advancing an e-government platform with the end goal of making public institutions more inclusive, effective, accountable and transparent.
Significant efforts are also under way to bolster the country’s nascent digital economy and boost digital inclusivity, with the launch of the Digital Economy Development Committee (DEDC) in 2017 and a draft Digital Economy Development Master Plan circulated in early 2018.
While progress has been made in fostering development, work remains to strengthen the sector. “The call by the Yangon Regional Government for telecoms companies to obtain permits before installing equipment or constructing infrastructure in the city is unnecessary,” U Lwin Oo, managing director of Shwe Pyi Tagon Telecommunication, told OBG. “The recently passed Union Tax Law has put a lot of pressure on local telecoms companies.” As a solution, he suggested that the government facilitate better access to financial resources for local companies.
Since the liberalisation of the telecoms sector in 2014, Myanmar’s ICT sector has expanded at an unprecedented rate, spearheaded by the mobile and broadband market. Growth is expected to continue, with estimates in the 2018-19 National Planning Bill projecting 15% growth between October 1, 2018 and September 30, 2019.
Given the maturity of the market, investment in network expansion has eased considerably. As of August 2018 a total of $270m worth of foreign investment had been approved for the transport and communications sector for FY 2018/19 compared to $901.6m approved in FY 2017/18.
Myanmar has experienced significant growth in SIM penetration in the last five years. In 2013 this rate was reported at 10%, grew to 86.2% in mid-2016, and as of 2018 stood at 105%, with a unique mobile subscriber rate of 50%. At the same time, internet penetration has expanded. In 2010 internet penetration was under 0.3%, or 130,000 users. By 2017 this figure rose to 17m, accounting for 26% of the population. Despite these improvements, the MoTC estimates that 5.2% of the population will remain without access to telecommunications services in the first quarter of 2019.
The four main operators have experienced mixed results in an increasingly competitive market, with expansion into remote areas pushing up operating costs. For the first nine months of 2018, Ooredoo Myanmar saw its revenue increase by 10% year-on-year from $263.3m to $301.4m. Its customer base grew by 23% to 9.4m during the same period. As of November 2018, MPT had not yet released its financial results for the fiscal year.
Telenor reported a fall in revenues in Myanmar year-on-year between the first quarter of 2017 and that of 2018, along with a drop in average revenue per user (ARPU). The company’s revenue in Myanmar fell 11.2% over that period, from MMK282.3bn ($200m) in 2017 to MMK259.2bn ($183.3m) in 2018. Over the first quarter of 2018 Telenor had a global capital expenditure to sales ratio of 11%, with Myanmar accounting for MMK34.4m ($24.4m) of total capital expenditure. Telenor Myanmar’s ARPU declined from MMK4880 ($3.34) in 2017 to MMK4510 ($3.19) in 2018. Telenor’s performance reflected rising operating costs as it expanded into remote areas but has also been affected by falling ARPUs, a weakening of the kyat and increased competition.
When it launched in mid-2018, Mytel set the price for its data plans at half that of its competitors. By August 2018, it had attracted 2.4m subscribers, representing 4% of the market share. This competition has benefitted consumers as mobile data costs have fallen across the board.
The average price for mobile data across all four networks in Myanmar was MMK1 ($0.0007) per MB in September 2018, 30% lower than the price charged before Mytel’s arrival.
Mytel has already invested more than $1bn of its planned $2bn in capital expenditure to establish a network of over 30,000 km of fibre-optic cable and 5000 base transceiver stations, each of which contain the necessary antenna and radio equipment to communicate with a GSM mobile station. In November 2018 Mytel’s 2G and 4G network covered 70% of Myanmar, with 50 Mytel shops and 50,000 reseller shops nationwide and 3m SIM cards in the market. Having only commenced operations in Myanmar in June 2018, Mytel was yet to break even as of November 2018.
“The future of the telecoms sector looks promising,” Daw Aye Aye Aung, managing director of Asia Mega Link, told OBG. “The entrance of Mytel will enable Myanmar to catch up with other more developed countries. Before doing that, however, more investment in ICT infrastructure is needed, such as the upgrading of fibre-optic cables.”
Mobile Internet Users
With 105% SIM penetration and 80% smartphone penetration, Myanmar has one of the fastest-growing mobile internet markets in the region and performance figures reflect the sector’s strength. In early 2018 Myanmar’s average 4G download speed was well ahead of global figures.
Mobile analytics firm OpenSignal found in February 2018 that Myanmar’s average LTE download speed surpassed 28 Mbps, which is well ahead of the global average of 11 Mbps. Telenor had the fastest download speed at 29.2 Mbps, in comparison to MPT and Ooredoo, which both had speeds of 28.1 Mbps. Telenor and Ooredoo both had 71.2% signal availability – the average across Myanmar – compared to MPT’s slightly lower rate of 68.1.
In Yangon, signal availability was higher, with Telenor and MPT both receiving an LTE signal over 81% of the time. As of May 2018 Ooredoo had the most 4G connections, followed by Telenor and then MPT with 6.6m, 1.5m and 800,000 users, respectively.
According to company officials in February 2018, Ooredoo spent nearly $200m on the upgrade of its 4G network across 200 townships, enabling more than 15m people to access potential download speeds of up to 500 Mbps. Officials from the Qatar-headquartered company estimated their network covered 87% of Myanmar.
Meanwhile, Telenor rolled out LTE services to seven more cities in January 2018: Meiktila and Kyaukpadaung in Mandalay, Loikaw in Kayah State, Tachileik in Shan State, Thandwe in Rakhine State, and Pathein and Myaungmya in Ayeyarwady. This expansion brought Telenor’s 4G network to more than 180 cities and townships.
Advancements in LTE technology continue to be made. In April 2018 Telenor and partner Ericsson of Sweden announced a breakthrough for Myanmar’s telecoms industry: download speeds of 1 GB per second in a joint network trial of LTE technology. The test utilised the latest technology, including carrier aggregation, licensed assisted access, four-by-four multiple-input and multiple-output and 256 quadrature amplitude modulation.
Meanwhile, Mytel began selling SIM cards shortly after it established its LTE network in areas of Naypyidaw, East Bago and Kayin State in March 2018. The new entrant also announced in mid-2018 that it had selected Com & Com to deploy a satellite backhaul solution in an effort to narrow the gap on its competitors and provide the best price-performance ratio, bandwidth efficiency and reliability. Com & Com’s system will use Newtec’s Cross-Dimensional Multiple Access bandwidth allocation technology, which combines a single channel per carrier system with the bandwidth allocation of multi-frequency time division multiple access. The investment in satellite communication is expected to improve cost-effectiveness and assist with national efforts to bridge the digital divide.
In addition to the four main mobile operators, Amara Communications (ACS) began promoting its 4G+ data-only service under the Ananda Infinity brand in early 2018. Established under the umbrella of local conglomerate IGE Group in 2011, Amara began providing network rollout services such as tower foundation civil works, the installation of power and radio communications equipment, and operation and maintenance of towers. By the end of 2016, ACS had started its transition to become a wireless broadband service provider by winning licences for the 2600-MHz spectrum in Region Two – Yangon, Ayeyarwady and Rakhine – and Region Three – Mandalay, Sagaing, Chin, Shan, Kachin and Kayah.
In an effort to bolster the foundations of the telecoms sector, the PTD under the MoTC published a draft Universal Service Strategy in early 2018. This draft five-year strategy aims to make telecoms services more widely available, accessible and affordable, as well as to improve ICT literacy. To achieve these targets, the PTD designed three programmes. The first programme, funded by the USF, will finance infrastructure projects and provide up to 99% coverage for basic voice and broadband services by 2022.
The second programme is centred on broadband connectivity and the development of basic digital skills and literacy at high schools and training-focused digital learning centres.
Lastly, the third programme will be centred around improving the availability of and access to basic voice and broadband services for households and enterprises in low-income and rural communities. This will include promoting relevant local and minority-language content and applications, as well as catering to the accessibility requirements of people with disabilities. According to the draft strategy the programme will also support the development of pilot projects and increase ICT and broadband access within certain sectors, such as health care. The funding to carry out these plans is expected to be raised within two years from USF collections, which will be monitored and disbursed by the MoTC.
To improve ICT skill sets and awareness, a key focus of the five-year strategy is developing digital skills. According to the ministry, there is a major gap between the ownership of data-capable mobile phones, and the awareness and ability to take full advantage of the internet services available. It is estimated that only 22% of people with access to mobile internet in 2016 possessed the skills necessary to fully utilise the tool. The low penetration of devices such as laptops, notebooks, tablets or desktop computers further hinders internet and technology literacy, with only 6% of households having a computing device.
Internet Penetration Rates
While mobile services have expanded rapidly over the last five years, fixed broadband penetration rates remain low in comparison to other ASEAN member states. In 2017 internet penetration was at 26%, or 17m users. Although it is low, this figure is significantly higher than the 0.3% in 2010.
An uptick in the amount of companies providing fibre-to-the-home (FTTH) services has led to increased access and decreased costs. As the sector liberalised, increased investment in fixed broadband infrastructure transformed the domestic broadband market, leading to faster download speeds and a reduction in data prices.
As more companies providing FTTH services took root in the sector, broadband prices have decreased across the board. In addition to the four main operators, notable providers include 5BB, a subsidiary of Globalnet and one of the leading FTTH providers in Myanmar; MPT FTTH; Myanmar Speednet; and Myanmarnet, which has one of the largest broadband customer bases in Myanmar. Each provider has decreased data prices between 2017 and 2018.
In addition to investments in FTTH services, major efforts continue to be made to expand Myanmar’s submarine cable connectivity. Singapore-based Campana Group, which operates international gateways across Myanmar, Thailand and Singapore, has raised $40m in equity and is seeking additional debt for the construction of the Singapore Myanmar Submarine Cable (SIGMAR). This will span 2200 km from Myanmar to Singapore and deliver 32 Tbps.
SIGMAR will complement Campana’s existing 3700-km international fibre-optic network, which uses terrestrial routes between Myanmar and Thailand and submarine routes between Thailand and Singapore offering up to 8 Tbps of capacity. According to Campana MYTHIC, a joint venture of Campana Group, SIGMAR should be complete by the third quarter of 2020. The entire network is managed by a network operations centre (NOC) in Thanlyin, Yangon, with backup network operations centres in Thailand and Singapore.
Myanmar’s ICT growth has led to the establishment of several domestic data centres, including Myint & Associates Data Centre, GTMH Telecom, True Internet Data Centre and Myanmar Yangon Kamayut Data Centre. More are in the pipeline, as officials announced in 2018 plans to build a Tier-3 e-government Integrated Data Centre in Naypyitaw with a backup centre in Thanlyin Township in cooperation with South Korea. The new centre is aimed at upgrading and combining e-government services. The project, which at time of writing was under consideration by Parliament, would create a $104m complex that would provide the public with access to online services, accelerate information flow and improve protection against cybercrime.
Despite the presence of local data centres, many users in Myanmar store data in Singapore and Hong Kong. Continued growth in smartphone and social media use is expected to increase data consumption in Myanmar and the ASEAN countries as a whole, driving demand for data centres in the region. Indeed, the regional data centre market is expected to more than double by 2021, with 14% compound annual growth rate.
Tech Start-up Scene
Despite Myanmar only recently developing modern ICT infrastructure, the local tech start-up scene has grown rapidly and plays an important role in educating potential users and local businesses about using technology to increase efficiency. According to data from Phandeeyar, Myanmar’s first start-up accelerator, 150 tech firms were active in June 2018, more than double the number in 2017.
Bolstered by the liberalisation of the telecoms sector, in recent years Myanmar’s increasingly tech-savvy society has been exposed to a new wave of locally-designed smartphone applications. As a result, Myanmar’s first generation of digital consumers has been spoiled for choice, and the gradual emergence of a middle class has created a fertile ground for tech start-ups to develop. The government has also recognised the potential of the segment to foster economic growth and has drafted legislation to protect start-ups, such as intellectual property laws, which as of December 2018 were awaiting approval from Parliament.
However, while a number of international venture capital institutions have funded local start-ups, the expansion of the tech ecosystem continues to be hindered by a lack of access to finance, due to the limited number of incubators and accelerators. Given the collateral lending requirements imposed on borrowers, accessing finance through the formal banking system is challenging for start-ups and remains in need of reform.
While access to finance remains a difficulty for tech start-ups, Myanmar’s local economy is already reaping the rewards of new technology and it is hoped that this will develop further. “The ICT sector has the power to enable growth across all the other sectors,” Liman Zhang, managing director of Huawei, told OBG. “While some companies in Myanmar have already developed digital transformation strategies, the country in general is still in the very early stages. Those firms able to collect relevant data from consumers are most likely to succeed in the long run.”
Steady ICT growth is predicted over the next few years, albeit at a slightly slower pace than the first few years of liberalisation in light of the relative maturity of the market. Myanmar’s broadband penetration is on track to witness strong growth and as such, internet services and average speeds will continue to improve in the coming years.
The establishment of DEDC will also help to strengthen the government’s underlying IT infrastructure, support more sophisticated policymaking and improve public administration. Myanmar’s digital revolution is expected to continue to be a substantial contributor to economic growth and financial inclusion. The financial technology segment – and app-based payment systems in particular – will continue to increase financial inclusion while transforming the formal banking system.
The USF presents an opportunity to increase access to telecommunications and IT services across the country and build on the sector’s already swift growth since liberalisation. The ability of policymakers to effectively monitor and implement proceeds from the USF will be paramount to solving lingering network challenges, particularly in areas of conflict.