Winners and Losers of Burma’s Looming Mobile Phone Boom

By William Boot 21 March 2013

The scramble for a slice of what is seen as one of Asia’s last big untapped mobile phone markets has scores of firms from Norway to Singapore and Russia to South America queuing for the ear of the Minister of Communications.

But the potential market of more than 55 million unconnected people may be missing a vital ingredient.
Where do the vast majority of Burmese get the money to buy the phones and service packages that are expected to come flooding on to the market?

When mobile phones networks were introduced in neighboring Thailand at the beginning of the millennium, the Thai economy was at a much more developed level than Burma’s today. Ordinary unskilled workers earned liveable wages with some disposable income.

In Burma, millions are still at a minimal subsistence level and phones, whether mobile or fixed line, are beyond their pocket.

Yet the Ministry of Communications and Information Technology (MCIT) has said that to improve Burma’s connectivity it plans to make 30 million mobile phone lines available by 2016, when it also aimed for telecommunications services to reach 80 percent of the country. Starting from almost zero, this will be a tough task for the four companies likely to be awarded operating licenses, now expected to be announced in June after numerous delays.

Working on much longer time frames, similarly poor Cambodia has so far managed 70 percent telecommunications coverage and Laos over 80 percent.

Ownership and use of mobile phones in Burma at present is only a little more than 5 percent of the population, and beyond the main conurbations of Rangoon and Mandalay regions most of the population lives in great poverty.

“The record of economic reforms actually implemented in [Burma] is a mixed one so far, and one that is rather less stellar than some breathless reporting would suggest,” said economist and Burma specialist Sean Turnell. “Certainly, at the broad, macroeconomic level there has been much progress.”

But despite the considerable improvements in the management of Burma’s national economy and reforms in banking and other national monetary affairs, the finances of the vast majority of Burmese “remain dire,” said Turnell in an assessment in February.

Turnell, who is based at Macquarie Univeristy in Australia and co-produces the Burma Economic Watch bulletin, wrote for the Asia Society of a “swelling tide” of Burmese “unable to make a living, of rising indebtedness, of increasing landlessness, and of broad despair.”

There’s a danger that when mobile phone services take off in Burma a lot of people will get themselves in debt to get connected, as happened for a time in Thailand among rural poor who borrowed from money lending sharks.

Today in Thailand, office clerks and shop girls and small town workers can aspire to the latest Apple iPhone—costing 20,000 baht (US $686) or more—because of easy bank credit. Even house-cleaning maids sport fancy phones and tweet one another as they work.

The average annual pay in Thailand is $5,850. The average in Burma is less than 15 percent of that, figures from the International Monetary Fund say.

But what will happen in Burma? For many people, the key will be buying a SIM card, the mobile operating chip which even now is restricted and can cost 200,000 kyat ($226). In an open market, Burma should be flooded with tens of thousands of cheap and second-hand mobile handsets. There’s a possibility that some or all of the network licensees will bid to attract customers by offering smart phones as part of packages which will include calls and some Internet access.

“The challenge for new operators [in Burma] will be to recoup the cost of building a network in a country the size of Texas that is one of Asia’s poorest,” said Bloomberg in a special report on the market potential. “The winners will be those that have the financial muscle to stay in the game for the long-haul.”

The Burmese government might be talking about making telecommunications nationwide, reaching into every corner of the country but even in Thailand, with 100 percent market penetration, 3G access remains patchy.

“Whoever gets the franchises in Burma, they will focus on the big cities first because that’s where the richest and densest concentration of customers are,” Pilailak Lertprasertkong, a Bangkok telecommunications consultant, told The Irrawaddy. “Once they move into more rural regions the profitability drops and the risks rise.

“If the Burma government really wants to give everyone access to mobile telephony and not just the better off and the business community, it needs to have a system in place to manage money supply, by that I mean a reliable and safe credit system to keep the loan shark operators out of the villages.”

Until the long-delayed phone network franchising is finalized, though, it doesn’t make much difference whether you are rich or poor. Neither an iPhone nor the latest Blackberry is much use in Burma at present.