Myanmar awaits the entry of a new operator-

The telecom industry in Myanmar has shown a phenomenal growth trajectory since its liberalisation in 2013. This is because opening up of the country’s telecom market has provided the much needed push to investments. In addition, the entry of foreign entities like Norway-based Telenor and Qatar-based Ooredoo attracted a significant amount of foreign direct investment (FDI) into the industry. According to the Myanmar Mobile Symposium held in January 2017, the telecom sector attracted a total FDI of $2.8 billion from countries including Japan, Norway and Qatar during the two years after liberalisation.

This surge in investments enabled the two foreign entities, along with state-owned telecom service provider Myanmar Posts and Telecommunications (MPT), to bring about a considerable increase in telecom penetration from 35 per cent in 2015 to 99 per cent at present. Further, cut-throat competition in the industry compelled operators to make efforts to jump on to the 4G bandwagon earlier than their peers. As a result, 4G services were introduced in Myanmar in 2016, bringing it on par with telecom industries in other Southeast Asian regions. The most recent telecom licence granted to Vietnam-based Viettel along with a consortium of domestic firms is going to further intensify competition in the rapidly growing telecom market.

A look at the key developments in Myanmar’s telecom industry…

Evolving market structure

The market structure of Myanmar’s telecom industry has undergone rapid transition over the years due to changes in the regulatory environment. Until August 2014, Myanmar’s telecom industry was monopolised by MPT, due to which network coverage was limited and only a few people owned SIM cards. However, the launch of wireless services by new licensees Telenor and Ooredoo in the latter half of 2014 changed the market dynamics completely. After the entry of the two new operators, the telecom penetration in Myanmar increased substantially.

To further enhance telecom penetration in the country, the Ministry of Communications and Information Technology (MCIT) recently decided to grant a 15-year licence to a fourth operator to meet the growing demand for mobile services. Under the plan, 11 domestic companies were selected to be part of a special purpose vehicle (SPV) along with a foreign operator, to be chosen by the government. As per MCIT, the winning bidders would form a consortium to establish the nation’s fourth mobile operator. Further, the joint venture would be 51 per cent owned by the SPV, while the foreign partner would hold the remaining 49 per cent stake.

After conducting talks with various stakeholders, MCIT formally awarded the country’s fourth telecom licence to Myanmar National Tele and Communications (MNTC) in January 2017. The company is a JV between Vietnam-based Viettel; Star High Public Company, a subsidiary of Myanmar’s military-backed Myanmar Economic Corporation (MEC); and Myanmar National Telecom Holding, a consortium of 11 domestic firms. MNTC paid $300 million for the licence and is expected to commercially launch its services by 2018. Further, the new licensee will operate under the Mytel brand name and concentrate on extending 2G, 3G and 4G coverage in rural areas.

Foray into 4G

Ooredoo launched the country’s first commercial 4G long term evolution (LTE) services in selected parts of Nay Pyi Taw, Yangon and Mandalay in May 2016. Following Ooredoo, Telenor started testing 4G services in June 2016 in the Yangon, Mandalay, Nay Pyi Taw, Myawady and Muse regions and finally launched the services in the Nay Pyi Taw region in July 2016. State-run telecom operator MPT was a relatively late entrant in this space and soft-launched its 4G LTE services in the Yangon and Nay Pyi Taw regions in October 2016.

The current coverage of 4G services by the three operators has been limited to only a few regions, primarily due to spectrum constraints. The operators could only launch services using either the 900 MHz or the 2100 MHz frequency band available with them.

In order to help operators’ expand their 4G reach and make them more commercial, MCIT issued licences for using frequencies in the 1800 MHz band to the three existing operators in May 2017. As per MCIT, the operators were issued a 12-year licence for 2×10 MHz frequencies in the 1800 MHz band at a price of $80 million, using the direct allocation method. Further, a 2×10 MHz block was also reserved for newcomer MNTC.

In May 2017, MPT commercially launched LTE services in the Nay Pyi Taw, Yangon and Mandalay regions, using the frequencies it received in the 1800 MHz band. Further, Telenor Myanmar recently extended its LTE network to six new cities. Owing to this, the operator’s 4G network is now available in 17 cities.

Role of tower companies

The efforts of operators to expand network coverage have been successful due to the support extended by telecom tower companies. At present, the market is served by seven major tower companies, which operate around 7,900 towers. The total number of towers including operator-captive towers stands at approximately 12,030. This number is expected to increase considerably during the coming years, on account of growing smartphone penetration and the entry of new telecom operators in the market.

Tower companies have stepped up their investments to install additional towers to serve the growing needs of the market. To this end, Irrawaddy Green Towers secured a loan worth $122 million in January 2016 from a group of Europe-based development finance institutions. The funding is a part of the tower company’s investment plan worth $230 million, which includes the deployment of more than 2,000 towers across the country. Further, the edotco Group has earmarked investments of around $200 million over the next eight years to add telecom towers in Myanmar. The group will utilise this investment to install approximately 5,000 towers in the country. Further, the company also plans to introduce a host of services that it already offers in other Asian markets. Owing to these efforts, the company expects the number of towers operated by tower companies in Myanmar to increase to approximately 29,000 by 2024. According to industry experts, the telecom tower market in Myanmar is expected to grow at a compound annual growth rate of over 28 per cent between 2015 and 2020, the fastest rate among Indonesia, Malaysia, Cambodia and Myanmar.

Issues and challenges

Despite considerable efforts made by stakeholders, the telecom industry in Myanmar is still in the early stages of development. This is because of several factors that impede the growth of the industry. First, the lack of reliable data sources for parameters like population and physical infrastructure availability is one of the difficulties often faced by telecom operators. Further, inadequate infrastructure and the dearth of skilled labour have also been big hurdles. Besides, providing adequate power supply to telecom towers is a major challenge. According to the GSMA’s Green Power for Mobile report, the telecom industry’s demand for power is expected to reach 455 GW by 2017, which cannot be met by the currently installed and planned capacity. As a result, operators and tower companies resort to power backup solutions like diesel generator sets and off-grid green energy solutions. Another major obstacle in the way of network roll-outs has been the limited skill sets of most potential workers. The operators have to make them undergo extensive training, which results in delays in the installation of base transceiver stations as well as in carrying out civil work. Securing land acquisition and right-of-way approvals are other hindrances for foreign telecom companies. In addition, there are uncertainties regarding land ownership and lease structures, which are likely to be resolved only after the country’s regulatory environment gains maturity.

Future outlook

Challenges notwithstanding, Myanmar’s telecom market presents significant growth opportunities for various stakeholders in the industry. The reforms undertaken by the government to create a competitive market structure have encouraged operators to invest in network roll-out and provide better services to their customers. The recent entry of a new operator will further increase this competition and pave the way for enhanced telecom services in the future.