NEW ANALYSIS: New GSMA Intelligence research highlights how Ooredoo and Telenor are targeting Asia’s last untapped mobile opportunity.

Myanmar is poised to rapidly become a modern competitive mobile market following the successful allocation of new licences to international players and a planned relaunch by the country’s long-standing incumbent operators. Norway’s Telenor and Qatar-based Ooredoo secured licences earlier this year in a ‘beauty contest’ process, which garnered international attention as a route into one of the world’s last untapped mobile markets.

Meanwhile, Myanmar Posts and Telecommunications, or MPT, which has been the incumbent telco in Myanmar since 1884, and a second licensee – the Yatanarpon Teleport Co (YTP) – are both believed to be looking for investment from foreign operators as they evolve from state-controlled entities. It was reported last week that MPT is in JV talks with “several international telecoms firms” – highlighting Orange as a likely partner.

The Myanmar government has set a target of 22.8% mobile phone penetration by the end of its current fiscal year in March 2014, rising to 50% by March 2015 and 75-80% by March 2016. This would see the market nudging the 40 million connections mark, bringing it on par with where neighbouring countries such as Thailand, Vietnam and Malaysia are today. Additional licences are expected to be allocated in due course.

According to our data, Myanmar is the third least penetrated mobile market in the world, and one of the few located outside of the low-income markets in Eastern Africa (see table).

Myanmar’s turbulent recent history  – colonial rule, civil and religious conflict, and several military juntas – has meant that MPT has been unable to capitalise on its century and a quarter of monopoly power. Only around one in ten of the country’s 50 million population are subscribers to MPT’s mobile service; the number of fixed-line and internet subscribers on MPT’s books is thought to be lower still.

The military generals that ran the country under various guises for most of the last 50 years tightly controlled media and communications. While mobile phones were not banned outright, ownership costs were so high as to be prohibitively expensive for most Burmese. An MPT SIM used to cost as much as $2,000, almost twice the average annual salary. Such pricing was possible due to the complete absence of competition. YTP has little infrastructure and a negligible share of the market – and no foreign players were allowed. Today, a SIM card still costs about $200, in addition to device and service costs.

A pro-democracy government finally assumed power in 2011 and began implementing a number of much-needed political and economic reforms, including opening up its markets to foreign investors. Over 90 expressions of interest were lodged by operators for the two 15-year nationwide mobile licences, which was whittled down to a shortlist of 11, culminating with the licences being awarded to Telenor and Ooredoo in June. Among the shortlisted operators that missed out were Singapore’s SingTel, India’s Bharti Airtel, Japan’s KDDI, Vietnam’s Viettel, and Caribbean provider Digicel. Orange was selected as the ‘back up’ option if either Telenor or Ooredoo fail to meet licence conditions.

The decision to allocate licences via a ‘beauty contest’ rather than auction process has allowed the government to select the operators it deems will deliver long-term growth and investment. Other successful ‘beauty contest’ allocations in the region include the award of 3G licences in the Philippines and Vietnam in 2006 and 2009, respectively, and the 4G awards in Malaysia last year. In such cases, governments are able to set down strict conditions on investment, retail pricing and coverage targets, while operators avoid fierce bidding wars. This is in contrast to the problems faced by recent bidding auctions in places like India, where high base prices have led to unsatisfactory outcomes.

Telenor says it will build “a state-of-the-art mobile network using HSPA and LTE-ready technologies for Myanmar to match the sophistication of leading networks around the world today” when it commercially launches next year. Ooredoo, meanwhile, is promising to deliver “innovative solutions across 3G networks using 2100 and 900 frequencies, bringing data services to where there has previously only been voice.”

Both winners are already established in the region: Telenor is in Thailand (dtac), Malaysia (DiGi), India (Uninor), Bangladesh (Grameenphone) and Pakistan (Telenor), while Ooredoo is in Indonesia, Singapore, Laos and the Philippines.

According to an official filing by the Myanmar regulator, Telenor has committed to achieving nationwide geographic coverage of 83% for voice and 78% for data after five years. Ooredoo has committed to geographic coverage of 84% for both voice and data within the same timeframe. There are also commitments on distribution networks: Telenor has pledged 70k points-of-sale for SIM cards and over 95k top-up locations in five years. Ooredoo is planning an even larger network, committing to 240k SIM points-of-sale and 720k points-of-sale for top-ups.

In addition, both players have pledged to develop mobile services that will contribute to the social and economic development of the country – something Ooredoo is billing as a “people-focused approach.” Mobile-based services targeting financial services, health, agriculture and e-government initiatives are in the pipeline.

The price of buying a SIM card for either of the two new networks has been capped at MMK1,500 ($1.50); the price of making peak-time voice calls has been capped at MMK25 per minute (excluding taxes) at Telenor; and at MMK45 per minute (off-net) and MMK35 per minute (on-net) at Ooredoo. Neither operator has published full tariffs and offerings as yet.

Top ten least penetrated mobile markets, Q2 2013 (countries >1m population)
Source: GSMA Intelligence estimates, 1United Nations Statistics Division, 2011