Telcoms race in Myanmar intensifies; Vodafone and China Mobile bid for licences

The communications industry in Myanmar is set to rapidly expand as the government looks to award two 15-year licences to build, own and operate a mobile network in Myanmar. 

It is one of the first sectors to be liberalised following the sweeping political reforms that resulted in the easing of restrictive trade sanctions last year. 

The government is hoping to boost the 'tele-density' of the country to 75-80 per cent by 2015-16. Mobile penetration in Myanmar is currently considerably lower than in neighbouring countries, with penetration of just nine per cent, government statistics show.

The sector has received significant interest from foreign operators, with more than 20 applicants understood to have submitted pre-qualification proposals for licences.

The race has now intensified as Vodafone and China Mobile—two of the world’s largest telecommunications players—have signed an agreement to form a consortium to bid for a licence in the market.

They said in a statement that the licensing round would allow for the mass-market adoption of mobile services.

“With a comparatively young and highly literate population of around 60 million, a GDP growth rate of 5.5 per cent per annum and mobile phone penetration currently below 10 per cent—significantly lower than in many other emerging economies—Myanmar will be an important new market for the global mobile industry,” it said.

State-owned operator Myanmar Post and Telecommunications currently has the monopoly in all telecommunication services in Myanmar, including fixed line and mobile. Yatanarpon Teleport, a joint venture between local private companies and the government, also offers internet services.

John Goodman, regional president of Ogilvy Action Asia-Pacific, told Campaign that the communications sector in Myanmar is currently dogged by connectivity issues and is in desperate need of development.

But despite the healthy opportunities for foreign companies, Goodman expects it will take time to transform the sector.

“The issue is whether the government will issue licences for private operators, which inevitably is quite a cumbersome process because you have go through auctions and you have to try and prevent corruption during the auction,” he said.  “And without that it is very difficult for people like the handset manufacturers to really go in.”

Operators granted a licence will also likely face substantial cost pressures, with the government outlining plans to make the telecommunications services available to the public at affordable prices in both urban and rural areas.

Myanmar was ranked 132 out of 169 countries in the United Nations Development Programme's 2010 Human Development Index Report, with the national poverty rate estimated to be 25 per cent.

Matthew Godfrey, president of Y&R Asia, also points out that telecommunication operators around the world have historically overpaid for new licences. 

“If history repeats itself then we can expect a high price and some time before shareholders see a return,” he said. "But the real winners here will be the people of Myanmar who will get all the benefits of world-class mobility, connectivity and information for the very first time.

"If there is take-up comparable to, say, Vietnam, which according to reports has 145 mobile phones per 100 people, we should see a boom in this sector for both operators and handset manufacturers," he added.