New players entering Myanmar’s telecom market-

Myanmar’s mobile market has witnessed a major change with the launch of Ooredoo, the country’s second operator, in mid-August 2014. The launch brings new cheer in the country’s telecom market as Ooredoo offers access to high speed mobile broadband services to new parts of the country and also much-needed competition to the hugely underpenetrated market. According to Ovum’s research, Myanmar’s total mobile subscriptions will grow at a 29.3 per cent compound annual growth rate (CAGR) to reach 32.3 million by the end of 2019. Mobile revenue will grow at a similarly rapid rate as a result of the new competition: Ovum forecasts that it will reach $1.2 billion in 2019, up from $691 million in 2013.

Decades of military dictatorship crippled Myanmar’s telecom sector, and mobile access was restricted to a handful of elite groups in power. The state-owned operator, Myanmar Post and Telecommunications (MPT), monopolised the sector and the junta imposed extremely stringent controls on SIM cards, pushing prices as high as $4,500 in 2011. Since April 2013, the quasi-civilian government via MPT has stopped selling SIMs in the open market and instead offers 350,000 SIMs per month across the country through a lottery system. The SIM cards are priced at about $1.5 under the lottery. However, many of these SIM cards end up in the black market and cost anywhere between $80 and $130. As a result, Myanmar’s mobile penetration had grown to just 12.3 per cent by the end of 2013, which is still considerably low, given that the country has a population of around 60 million.

The entry of a private player has opened up  Myanmar’s mobile market to a new level of competition, greater investments, an increase in mobile penetration, and rational service pricing. From the country’s standpoint, the launch defines a big step towards liberalisation of the telecom sector.

From the consumer side, there is already a vast pent-up demand for mobile connections; the low-cost SIMs from MPT have been sold on the black market at over $80 and MPT’s legacy mobile network cannot support the number of people who want to use mobile services. Ooredoo’s new mobile service will address this repressed demand in an underpenetrated market as it offers SIM cards for as low as MMK 1,500.

Unlike other markets that saw wireless technological evolution from 2G to 3G, Myanmar’s late entry into the information and communications market means it can leapfrog straight to 3G, which supports high speed data and internet as well as voice. Ooredoo users are being offered data services right from day one, which will boost smartphone uptake in the country. This also means that Ooredoo is positioned to offer advanced data services, such as video and music streaming, as well as social media and instant messaging packs in the near future.

What’s next

Telenor is next in queue to roll out mobile services in Myanmar. Competition arising from the entry of these new players will bring down SIM prices further, making mobile communication within reach of the low-income population. It is evident that players will now be willing to make mobile a mass-market service in their bid to grab the maximum share of that pie.

At a macro level, a properly functioning telecom network – almost from scratch – will lay the foundation for Myanmar to grow into a modern economy. It will spur innovation in other critical industries – such as education, health care, and finance – and contribute to overall socio-economic development. In addition, the job creation will help lift many people out of poverty. We expect Myanmar’s gross domestic product to grow at more than 6 per cent per annum in the next few years fuelled by greater investment, expenditure, and consumption.

How players will prepare for competition

Ooredoo will need to begin partnering with more tower companies and backhaul infrastructure providers as it tries to expand its network into the rural parts of Myanmar. This will require more capex, planning, and patience. Interestingly, the biggest city in the country has just over 5 million people and 75 per cent of the population lives in rural areas.

Ooredoo’s service launch has set the clock ticking for Telenor, the other licensee, to launch its 2G/3G mobile service as soon as possible. Telenor will not want to lose high-value customers to Ooredoo while the latter’s coverage is limited to urban centers.  In addition, Telenor will need to comply with its licence obligation to launch services within six months from the date of issuance.

To remain competitive with the new private players, the state-owned operator will need to evolve its services and devise new strategy by partnering with foreign telcom company KDDI Corporation. It will be essential that the existing bureaucracy and “red tape” do not delay MPT’s development into a competitive mobile player. To this end, it may be useful to rebrand MPT as a new company, detaching itself from its previous image of a tightly controlled government agency.

Vivek Roy

Principal Analyst, Ovum