Myanmar’s new telecom operators may find building their networks and dealing with bureaucrats a lot harder than they thought.
While Myanmar’s two international telecom companies have yet to receive their operating licences from the government, experts say the real — and possibly crippling — challenges as they move into the virgin market of 60 million consumers will be site acquisition and navigating state regulations.
On Oct 4, the draft Telecommunications Bill was sent back to parliament’s lower house. Until it is revised and signed by President Thein Sein, Norway’s Telenor and Qatar’s Ooredoo cannot receive licences to operate. However, this has done little to hold back their aggressive plans to begin network rollouts.
“We all know what’s going to be in the law anyway,” Edwin Vanderbruggen, a partner at the Yangon office of VDB Loi told Asia Focus. “The discussion is on two or three conflicts, not the other 97% [of the law]. I don’t think any of these points are alarming for the operators.”
Vanderbruggen said that the struggle to secure infrastructure in a country where connectivity is woeful — mobile penetration is about 9% and internet access about 1% — will be the telecom companies’ biggest hurdle.
“To be a telecoms operator in Myanmar you need to meet [a requirement] of about 10,000 towers. These towers cost anywhere between US$60,000 (1.89 million baht) to $100,000 per site. It’s going to cost a lot of money,” he said. “Obviously, if you need to build 10,000 towers, it makes sense to do it together. This is exactly what will happen.
“For a lot of this kind of activity, you don’t need the operating licences.”
In a statement e-mailed to Asia Focus on Oct 9 from Telenor Myanmar, the company said it “will adopt an infrastructure sharing approach with all mobile operators in Myanmar”.
The statement continued: “We are progressing with the development of our rollout plans in Myanmar to ensure that we will be able to hit the ground running following formal agreement with the government on our licence. Our plan to launch mobile services in Myanmar within eight months of securing an operating licence remains unchanged.”
Ooredoo could not be reached for comment, although executives in the past have indicated a possibility of network sharing with other operators to be able to meet the government’s deadline.
“The challenge now shifts to implementation,” said Rob Bratby, a specialist in international telecoms law at Olswang Asia. “One of the things the bidders will no doubt have thought about is fulfilling the promises they’ve made of achieving coverage. Myanmar’s a very young country in terms of addressing these issues.”
And outside of infrastructure hurdles, domestic competition against Telenor and Ooredoo looms strong. Government-owned Myanmar Post and Telecommunications (MPT) will become the country’s third operator, while Yatanarpon Teleport, a state-owned internet service provider, will become the fourth.
MPT is actively looking for a strategic partner to outsource technology and infrastructure, while YPT partnered with UK-based Epsilon’s Singapore operations on Sept 25 to expand its international network.
Insiders close to the domestic telecoms sector speculate that MPT is looking to sign with France Telecom Orange, which in a consortium with Japan’s Marubeni won the “reserve” spot in June’s tender to replace Telenor or Ooredoo should either company fail to fulfill the terms of the operating licence.
A press release from Taiwan-based Chunghwa Telecoms last month said that it had expressed interest in joining Orange and Marubeni along with HTC to back MPT’s expansion.
“It will be easier at least in theory for MPT to roll out its network because there are rules for foreign companies and land, all of the land,” said Vanderbruggen. “It’s more difficult and more complicated for foreign companies to use land in Myanmar than it is for MPT. They have that advantage.”
Already, MPT has engaged Myanmar Economic Corporation (MEC) in a joint venture as part of its plan to corporatise: an agreement stipulating that the government will reduce its shareholding from 100% to 12%, with no specific timeframe.
The MEC is a major economic holding group of the military; it has come under fire recently for sparking violent controversy over the Letpadaung copper mine in Monywa, the fallout of a troubled joint venture with the Chinese state-owned arms manufacturing subsidiary Wanbao.
“MEC is the vehicle the military has long used to enrich themselves based on engagements with national and international business,” said Phil Robertson, the deputy Asia director of New York-based Human Rights Watch. “When MEC becomes involved, essentially what you’re talking about is connecting the military with one of the fastest-growing parts of the economy, which is the telecoms sector.”
YPT has a controversial history under the military government. While lauded by Epsilon in a release last month as “the right partner” and a “newly launched facilities-based info-communications operator”, the company was forcibly nationalised by Than Shwe in 2005.
Originally Bagan Cybertech, a private company, its former owner — Khin Nyunt, a military intelligence officer — was removed from office during the brigadier general’s purge and placed under house arrest. Along with his son who co-owned the company, he was forced to relinquish it; the government then doubled its prices for internet connection and set-up.
In a report last month on risks in Myanmar’s telecoms sector, released by the UK-based risk analytics company Maplecroft, analyst Daniel Gray wrote: “Myanmar’s judicial system is woefully inadequate to deal with disputes in a fair and timely manner. An Arbitration Bill — an attempt to update legislation last amended in 1939 — is pending in parliament.”
Both Gray and Robertson pointed to Fraser & Neave’s clash with Union of Myanmar Economic Holdings Limited (UMEHL) over F&N’s majority 55% stake in Myanmar Brewery as an example of the regulatory framework lacking legitimate mechanisms for dispute resolution. UMEHL pushed to acquire F&N’s shares in the brewery in August on allegedly bogus claims that F&N had breached the joint-venture agreement.
“Further, Myanmar poses a somewhat unique dilemma to companies, as they could be required or pressured to collude in depriving the government’s political opponents of telecoms services,” Gray wrote. “The MPT has been known to selectively and deliberately provide slow internet speeds for opposition politicians and independent organisations critical of the government. Association with such activities would clearly be discriminatory and expose businesses to severe reputational risks.”
Robertson warned that Telenor and Ooredoo may have jumped too fast into a country that has long had an opaque economy entangled with the military and remain unprepared to grapple with the government.
“How are they going to respond to government requests — particularly when it is not clear why the government wants that? And I don’t think these companies have good answers yet. Instead, we’re getting feel-good assurances that they’re going to take care of it,” he said.
“That’s their whole modus operandi while they’re waiting for the licences.”
And while Telenor and Ooredoo press on despite the licence limbo, Robertson said their entry into a market where the telecoms law is yet to be finalised should raise an alarm over potential violations of civil rights.
“There are issues of surveillance. [Myanmar] has long had an extensive monitoring networking establishment and it still has very Draconian laws on the books, like punishing people who own an unauthorised fax machine,” he said.
“Obviously these companies decided this was too rich an opportunity to miss. Now it’s the equivalent of whistling past the graveyard.”