Burma’s State-Backed Telcos Seek Backing to Take on New Rivals
By Jared Ferrie 18 September 2013
RANGOON — Burma’s two state-backed telecommunications operators are seeking investors to put in more than US$1 billion as they prepare to compete with foreign newcomers, Norway’s Telenor and Qatar’s Ooredoo.
Telenor and Ooredoo won the bidding for two new licenses in June to provide telecoms services in the country but are still waiting for final approval, expected this month, so they can start building their networks.
Meanwhile two state-backed firms—Yatanarpon Teleport (YTP) and Myanmar Post and Telecommunications (MPT)—already hold active licenses. YTP functions primarily as an Internet service provider while MPT, a department of the Communications Ministry, acts as both a regulator and operator.
But Burma has the lowest mobile market penetration rate in the world and of its population of about 60 million, 9 percent at most have a mobile phone.
Tin Win, chief executive of YTP, said the formerly state-owned enterprise had recently been privatized, with the government’s stake limited to 5 percent. He did not give details about the privatization process and declined to say who now owns the rest of YTP.
He said he was waiting for the government to announce new licensing and radio spectrum fees before determining the exact amount of capital the company will need to develop its operations.
“We estimate the investment is going to be a minimum $1 billion,” he told Reuters. He declined to say how the company planned to raise the capital.
MPT, which operates the only existing telecoms network, said it was looking for investment but declined to say how much.
The government plans to hive off the regulatory side of MPT and privatize the operator division within two years, with the new company called Myanmar Telecommunications Corporation.
The state will own 12 percent of the new company, said a senior MPT official who requested anonymity as he was not authorized to speak to the media.
He said MPT was discussing partnerships with companies from France, Japan, Singapore and Thailand.
The winners of June auction were selected from a shortlist of 11 bidders, whittled down from more than 90 companies and consortia that had expressed interest.
A partnership between Japan’s Marubeni Corp and France’s Orange was chosen as the runner-up in June’s auction, ready to step in if Telenor or Ooredoo fell at the last hurdle.
Japan’s KDDI and Singapore Telecommunications were among the companies shortlisted.
Tom Wright, a spokesman for Orange, said it had signed an agreement with MPT to connect its customers to Orange’s roaming hub, which covers 150 countries. A spokeswoman for Singtel said the company “continues to seek opportunities in Burma.”
The country’s first telecoms auction had been seen as a test case for economic and political change initiated by the quasi-civilian government that came to power in 2011 after 49 years of military rule.
The huge investment needed and the uncertain returns caused at least one contender, the shortlisted partnership between China Mobile and Vodafone, to pull out.
Telenor told Reuters it was finalizing plans to share the cost of rolling out a network shared with other companies, which it declined to name until deals were signed.
Andreas Hipp, CEO of global communications company Epsilon, said he was surprised when shown a map of Burma’s fiber optic network. “That kind of infrastructure a little village has in the south of England,” he said.
Epsilon has signed a deal with YTP that Hipp said would give international companies higher quality connectivity to Burma. As YTP expands its network throughout Burma, offering faster Internet speeds, Epsilon will help it to connect businesses with the rest of the world, he said.