Since its liberalisation in 2013, there have been unprecedented levels of investments and subscriber growth in Myanmar’s telecom industry, driven primarily by mobile connections. In addition, the entry of foreign entities like Norway-based Telenor and Qatar-based Ooredoo has resulted in significant foreign direct investment (FDI) in the industry. During 2013-14 and 2014-15, FDI in transport and communications stood at $1,190.23 million and $1,579.30 respectively, a significant increase over that of previous years.

The two foreign entities, along with state-owned telecom service provider Myanmar Posts and Telecommunications (MPT), have brought about a considerable increase in telecom penetration from 10.1 per cent as of March 2014 to 35 per cent as of March 2015. During the same period, the wireless subscriber base grew from 5.4 million to 18.1 million.

tele.net takes a look at the developments in Myanmar’s telecom industry…

Market structure

The market structure of Myanmar’s telecom industry has undergone a rapid transition over the past year as a result of changes in the regulatory environment. Until August 2014, MPT was the only telecom operator in the industry, 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.

As a result, MPT’s market share, which used to be the highest in Myanmar’s telecom industry, has been reducing over the past few quarters. It declined from 66.6 per cent for the quarter ended December 2014 to 46.4 per cent for the quarter ended March 2015. Meanwhile, Telenor’s share increased from 20.5 per cent to 35.4 per cent and Ooredoo’s from 13.3 per cent to 18.2 per cent during the same period.

Telenor has been adding more subscribers than Ooredoo, even though the latter launched its services first. Telenor added 3 million subscribers in the quarter ended March 2015, taking its total subscriber base to 6.4 million as of March 2015. Ooredoo added 1.1 million subscribers during the same period, which made its total subscriber base 3.3 million. MPT’s subscriber base, on the other hand, declined from 11 million in the quarter ended December 2014 to 8.4 million in the quarter ended March 2015. MPT is now planning to roll out a 3G network in 2015 to reduce subscriber churn.

The higher growth in Telenor’s subscriber base as compared to Ooredoo can be attributed to the greater amount of investments made by the company to improve network coverage and decrease 2G service tariffs. In 2014, Telenor invested $550 million in the country’s telecom market while Ooredoo put in $292 million.

As they continue expanding their networks, both companies are likely to increase their capex for 2015. Under the terms of the 15-year licences given to them, they must provide voice services to 75 per cent of the country’s population and data services to at least 50 per cent by 2019. However, the operators are more focused on establishing a 3G network that will cover up to 90 per cent of the population.

With regard to tower deployment, in the first and second phases, about 4,650 towers were set up by tower companies like Apollo Towers, Digicel Myanmar Tower Company, Irrawaddy Green Towers (IGT) and Pan Asia Majestic Eagle Limited. These are being used by Telenor and Ooredoo as both companies had undertaken their deployment with the option of co-location. However, in the third phase, the companies will be deploying towers separately. In addition, the tower companies will take on the responsibility for acquiring and operating power systems. In the third phase, Eco-Friendly Towers and Apollo Towers will set up 700 towers each for Telenor, while IGT and Myanmar Infrastructure Group will install 1,000 towers and 500 towers respectively for Ooredoo, which will be the anchor tenant for 15 years.

Issues and challenges

One of the biggest difficulties for both Ooredoo and Telenor has been the lack of reliable data sources for parameters like population and physical infrastructure availability. Inadequate infrastructure and the dearth of skilled labour have also been big hurdles. According to GSM Association (GSMA) estimates, Myanmar’s electrification rate of 25-29 per cent was one of the lowest in Southeast Asia in 2013. Although the electrification rate of major cities like Yangon and Nay Pyi Taw is more than 50 per cent, many consumers keep diesel generator (DG) sets as back-up due to the number of unscheduled outages. This issue is likely to become more challenging as power demand continues to exceed supply. According to the Green Power for Mobile report by GSMA, the telecom industry’s demand for power is expected to reach 455 GW by 2017, which cannot be met by the current installed and planned capacity. As a result, operators and tower companies will have to resort to power back-up solutions like DG sets and off-grid green energy solutions. According to the study, around 9,990 tower sites will be powered by green energy sources by 2017, and only 4,162 sites will source energy from the grid.

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 approval 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

Myanmar’s telecom industry is poised for significant growth as the expansion of both voice and data networks continues, supported by rapidly increasing smartphone penetration. In addition, the government is making concerted efforts to provide more clarity on policy and regulatory issues. It is reportedly devising a new spectrum allocation policy for the provision of additional frequency airwaves to address spectrum shortage. It is also planning to issue a fourth telecom licence to ensure more competition in the industry, with internet service provider Yatanarpon Teleport (YTP) being the most likely contender. YTP, which currently offers internet services through Wi-MAX technology, had been granted a limited private operator licence in February 2015.

Myanmar’s telecom operators are initially targeting customers in major cities, and the rise in competition could lead to a tariff war despite a large proportion of the country’s population remaining unserved. The two foreign operators have already engaged in one in the data segment. In June 2015, Telenor reduced tariffs for data services from MMK 6 per MB to MMK 5 per MB. Ooredoo followed suit and reduced its data tariffs from MMK 10 per MB to MMK 6 per MB.

Tariff wars could have adverse effects on operators’ bottom lines as well as their ability to make investments in network expansion, particularly in rural regions. As such fierce contests are not sustainable over a long period, telecom companies would be better off focusing on marketing, branding and improving and innovating on their voice and data services in order to differentiate their offerings.