Telenor Myanmar’s investment plans to strengthen market position-

Since its liberalisation in 2013, there has been unprecedented growth in Myanmar’s telecom industry, driven primarily by a surge in mobile connections. Mobile penetration in the country has increased considerably from around 7 per cent at the end of 2011-12 to around 90 per cent as of May 2016. Moreover, the number of internet subscribers also rose from less than 2 million in the pre-reform period to 39 million during 2015-16. This growth can be attributed to the deployment of a robust telecom infrastructure across the length and breadth of the country; with the number of towers growing from 3,000 in 2013 to 11,700 today, and the national fibre backbone growing from 7,600 km in 2013 to 31,000 km.

The liberalisation process opened up the country’s telecom sector to foreign players, which, apart from bringing in significant foreign direct investment into the country, also transformed the industry’s market structure. Until August 2014, state-owned telecom service provider Myanmar Posts and Telecommunications (MPT), was the only telecom operator in the industry, due to which network coverage was limited and only a few people owned SIM cards. However, the launch of wireless services by foreign entities like Norway-based Telenor and Qatar-based Ooredoo in the latter half of 2014 changed market dynamics completely, with MPT’s market share reducing drastically over the past few years.

Of the two foreign players, Telenor has experienced much higher growth as compared to Ooredoo, even though the latter launched its services first. Telenor Myanmar is now the county’s second largest operator with 16 million connections and a 37 per cent share, and has a footprint of around 5,800 towers across the country. Ooredoo, on the other hand, has a market share of around 17 per cent.

Ever since the companies started their operations, Telenor has been able to add more subscribers than Ooredoo. For instance, Telenor added 3 million subscribers in the quarter ended March 2015, taking its total subscriber base to 6.4 million. In contrast, Ooredoo added just 1.1 million subscribers during the same period, which increased its total subscriber base 3.3 million.

The growth in Telenor’s subscriber base as compared to Ooredoo’s can be attributed to the greater amount of initial investments made by the former to improve network coverage. In 2014, Telenor invested $550 million in the country’s telecom market while Ooredoo put in $292 million. Telenor has been able to maintain and widen this initial lead and is now only a few steps from displacing the market leader MPT from its position.

A look at Telenor Myanmar’s recent operational and financial performance, its foray into the 4G space, future plans and outlook…

Operational and financial highlights

Telenor Myanmar reported a significant increase of 64.17 per cent in its net operating profit from NOK 374 million during the quarter ended June 2015 to NOK 614 million during the quarter ended June 2016. This was on the back of an increase of 57.79 per cent in its total revenue from NOK 1,142 million to NOK 1,802 million. Higher revenues resulted in an increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) by around 72.65 per cent from NOK 479 million in the quarter ended June 2015 to NOK 827 million in the quarter ended June 2016. The company’s EBIDTA margin also improved by 3.9 percentage points from 42 per cent to 45.9 per cent.

Meanwhile, the operator’s monthly average revenue per user declined from NOK 46 for the quarter ended June 2015 to NOK 36 during the corresponding quarter in 2016. This, according to the operator, was due to the increased penetration in rural areas and the various promotional schemes being offered to boost uptake in these areas.

Further, Telenor Myanmar added 1.4 million new subscribers during the quarter ended June 2016, taking the total subscriber base to around 16.9 million. Moreover, the operator deployed 820 additional sites during the quarter. The operator’s capex stood at NOK 766 million for the quarter ended June 2016.

4G foray

Like most operators elsewhere, Telenor has been riding on the data wave to propel its revenues. It initially started with a mix of 2G and 3G technologies, deploying them in rural and urban areas respectively. However, realising that the data demand was significantly higher even in rural areas, Telenor started migrating all its towers to 3G. The operator soon achieved the distinction of having the biggest 3G network in the country in terms of 3G sites.

In July 2016, Telenor Myanmar forayed into the 4G space, with the launch of services in the capital city of Nay Pyi Taw, two months after Ooredoo Myanmar launched the country’s first 4G services in three major cities – Yangon, Nay Pyi Taw and Mandalay. The operator has also carried out 4G tests in four other major cities – Yangon, Mandalay, Myawady and Muse – and plans to soon launch commercial services in these areas. The aim of the operator currently is to provide 4G internet services, which it feels are the most relevant for the Myanmar mass market, based on current handset capabilities. Going forward, the operator plans to introduce other 4G services such as high definition voice and advanced messaging applications.

Future plans

Telenor Myanmar has set ambitious targets for the next five years. The company wants to cover around 90 per cent of the population through a network of more than 9,000 sites. Moreover, it plans to deploy 100,000 points of sale across the country and generate employment opportunities for local citizens.

The operator is looking to expand its spectrum holdings in a bid to further consolidate its position in the market. To this end, it has submitted an expression of interest to bid in the country’s upcoming auction of 2600 MHz spectrum. A total of 40 MHz of spectrum in the 2600 MHz band will be available for sale in the auction, which could be used only for the provision of broadband services. The auction process is scheduled to begin in October 2016. Further, in order to support its growing 4G footprint, Telenor Myanmar is also looking forward to the auction of spectrum in the 1800 MHz band, which is likely to be conducted by the end of 2016.

Besides, Telenor Myanmar is planning to enter the mobile payments space with the launch of a mobile money service in collaboration with the Yoma Bank called “Wave Money”. The service will allow customers to transfer and receive money through local storefronts named Wave Shops. The companies have already tested the service and are waiting to receive regulatory approval for a full-scale launch.

Challenges and outlook

Myanmar’s telecom industry is poised for significant growth as the expansion of both voice and data networks continues, supported by rapidly increasing smartphone penetration. In addition, the government is making concerted efforts to provide more clarity on policy and regulatory issues. This augurs well for all incumbent operators.

However, the way ahead is likely to be a little challenging for Telenor Myanmar as well as its other two peers in the industry as the country looks forward to the entry of a fourth player in the telecom space. This would intensify competition and take the war of market shares to a new level.

Given Telenor Myanmar’s concerted efforts to expand its spectrum footprint and its strong investment push, the operator is well placed to defend its current market position.