Myanmar: The Final Frontier for Asian Telecoms Growth

A friend of mine visited Yangon recently and observed that while most taxi drivers in the Burmese capital carry a mobile phone, none had a SIM card inside!  When a taxi driver wants to make a call, he grabs his handset and goes out to find someone with a SIM he can borrow.  Why is it while in India even the poorest individuals are “multi-SIM”, in Burma even the wealthiest ones share a handful of SIMs between them? Well, because until recently a SIM card in Burma cost $450.

None of this is as bizarre as you may think.  The SIM pricing reflects the Government’s desire to ration the distribution of connections since Burma’s telecoms network has a limited capacity to carry a large volume of communications traffic.  The fact that some of Burma’s citizens are prepared to pay almost half the national average annual earning for a scissored-off plastic chip illustrates just how much they value connectivity.

Such pricing extremes are the freaky prerogative of the closed and highly protected economy, where the gross scarcity of available goods and services often results in skewed outcomes.  A relative waited 10 years for an upgrade to a digital landline in Bangladesh.  Meanwhile I came across the first telemedicine project not in the US or Switzerland, but while advising on telecom sector reform in Ethiopia.  In the USSR, people used to order a state-made Lada car and then wait four years for it to be delivered.  It is odd that years before 'Mobile Health' became widely known, the Ethiopians were pioneering technology to remote-read X-rays in the rarefied air of Addis Ababa.  They had to, because there were so few hospitals to handle the demand for healthcare outside the capital.  (Rarefied indeed, since Addis is the world’s second highest altitude capital after Bogota.  I was relieved when I found that out, because until then I was worried as to why I was out of breath the whole time.)

Rather like its admirably belligerent East African counterpart, Myanmar represents one of the last frontier telecoms markets on earth.  This is a country with 60m population and well over $1,000 per capita GDP yet, according to Government estimates, only 5.4m mobile subscriptions.  There are only some 500,000 fixed lines and just 40,000 internet connections, less than the number of internet-enabled devices at Eden Gardens on an IPL night.

But the sector has been heating up recently.  Over the past year the Government has been developing plans for regulating the sector more consistently than before, and for opening up the market to new investors who will partner with the state to develop the network and connect more customers.  Last week, the Government accepted bids from around a dozen international bidders competing for two licences to partner the state and build and operate a mobile telecommunications network. The bidders include Bharti Airtel, Telenor Group (the parent company of Uninor), Axiata (which has a stake in Idea) and MTN of South Africa.

Since this is likely to be Asia’s last telecoms bonanza, many of the “usual suspects” of international and emerging markets mobile telephony have looked seriously at the opportunity.  Interestingly while some have bid, others have not – why the difference in perspective?

The potential upside appears evident: Myanmar is a market with 55 million unconnected citizens, and will probably experience rapid economic growth and increases in social freedom over the next decade.  With widespread pent-up demand for communications, growth in voice services in particular can be expected to be rapid.  However, I suspect it is the two potential downsides of entering Myanmar that separate the bidders from the non-bidders:

• Each licensee will have to accept a target to cover a majority of the population with network coverage by 2016.  In Burma almost all mobile penetration is urban, and 65% of the population live in rural areas.  So, meeting such a penetration target will be a tall order when it comes to network rollout and investment.  Add to that Burma’s mountainous terrain, and it is evident that delivering widespread connectivity in a few years could be difficult.
• It may not be easy to predict or navigate Burma’s policy and regulatory scenario over the coming years.  Any country emerging from a long period of closedness to a new period of openness is likely to present challenges for the economy and investors. It is actually the transition period between closedness to openness which is likely to be the most turbulent, more so than the democratic end-game.  So there are bound to be regulatory surprises for any investor to consider, as well as currency risks and legal and tax uncertainties which accompany this.Definitely not for the faint-hearted, and so the operators who have put forward bids must believe that in Burma they can secure new growth through doing what they know best: building well-functioning networks quickly across a virgin country, understanding the customer base and learning more about them so as to offer and price services cleverly to drive adoption and usage, and building a brand which is exciting and reliable.  The question is, can they do it in the local context and how much can they draw upon their experience and assets from elsewhere.  In telecoms, the last frontiers are always the hardest to conquer.

The thoughts and opinions shared here are of the author.