Jon Fredrik Baksaas, CEO of Telenor Group, reckons a low-cost operation in Myanmar will enable it to breakeven, on an EBITDA basis, within three years of launching service.
Baksaas was speaking at a press conference alongside Petter Furberg, CEO of Telenor Myanmar, where he argued the group’s scale and long experience in neighbouring countries with low GDP per capita – Bangladesh, India, Malaysia, Pakistan and Thailand – put it in good stead to get a return on investment.
Telenor, along with Ooredoo, emerged as winners from 91 interested companies – making it the world’s toughest licence competition, according to Baksaas – looking to secure a cellular licence in Myanmar.
Telenor announced on 30 January it had formally signed an agreement with the Union Government of Myanmar for a nationwide telecommunications licence.
It plans to launch commercial services within eight months.
Baksaas was nonetheless candid about the risks. He talked about Myanmar’s weakness in “institutional capacity” and a legal framework still in development.
The Telenor chief also drew attention to land issues, where lack of a comprehensive registry made it difficult to establish ownership – that, he said, would likely cause difficulties in locating base stations.
And while Baksaas acknowledged welcome signs of greater political stability, he said there were still “areas of conflict”.
Furberg, in his presentation, pointed to other concerns. Three-quarters of Myanmar’s 60 million population have no access to electricity and around half of the country’s roads are not accessible during monsoon season. Getting energy to base station sites will be a logistical challenge.
By focusing on the prepaid market and establishing a widespread distribution network, however, Baksaas and Furberg both reckoned they could profitably roll out affordable services in one of the few remaining undeveloped mobile markets in the world.
Mobile penetration in Myanmar is still only around 10 per cent.
Furberg said Telenor Myanmar planned 25,000 points of sales at service launch with plans to extend that to 100,000 within five years. This number will include 70,000 points of sales for SIM cards.
And to lower costs, Telenor Myanmar will look to tower sharing and the outsourcing “as much as possible of other functions”.
The operator is also counting on device costs continuing to fall in order to stimulate demand. Handsets, said Furberg, can now be bought from $10 and smartphones from $35.
Telenor’s licence in Myanmar, which is technology neutral, covers 900MHz and 2.1GHz spectrum. It lasts for 15 years but is renewable for another 15 years
Baksaas said the spectrum fee for renewal would be based on market size in the last three years of the first 15-year period.
Telenor intends “peak funding” of $1 billion in Myanmar, of which the licence fee makes up $500 million.