edge review12-18 July 2013

Photo: A shopkeeper chats on a mobile phone near Hledan Junction in Yangon (Alex Bookbinder).

 At last, affordable, nationwide mobile services are in sight

Throughout most of Southeast Asia, being able to buy a SIM card almost anywhere for a dollar or two  – or even picking one up for free – are things consumers can take for granted.

But cheap and ubiquitous connectivity hasn’t yet made it to Myanmar, where just 10 per cent of the population has a mobile phone – a penetration rate below even hermetically sealed North Korea. Much to the relief of Myanmar’s consumers, who have long had to contend with poor telecoms service and astronomical prices, that’s set to change by early next year, when two private, foreign operators are expected to launch new networks.

On June 27, presidential spokesman Ye Htut announced – via his Facebook page – that Norway’s Telenor and Ooredoo from Qatar had drawn the short straws in a tendering process that began in January, beating out 89 other applicants in the race to secure one of two coveted operator licences. A consortium comprised of Japan’s Marubeni and France Telecom was chosen as a “backup” candidate, in the event that either of the two winners are unable to deliver on the the initial stages of their proposed developments within 100 days. Both firms anticipate that they will have networks up and running by the first quarter of 2014, with nationwide coverage to be achieved within five years, facilitating the government’s stated goal of achieving 80 per cent mobile penetration by 2016.

The tendering process – which relied on technical assessments by German IT consultancy Roland Berger – was surprisingly transparent, and was apparently impervious to the influence of Myanmar’s crony capitalists who still wield influence over Naypyidaw’s corridors of power. This is not insignificant in Myanmar, which has long held the dubious honour of being one of the world’s most corrupt countries.

To the surprise of many, both finalists chosen by the committee (as well as Marubeni/France Telecom) are standalone foreign bidders without local partners. A number of well-connected local businessmen partnered with foreign firms to submit bids, most notably Aung Ko Win’s Kanbawza conglomerate, which partnered with SingTel, and Serge Pun’s FMI/Yoma, which submitted its bid with George Soros’ Quantum Strategic Holdings and Jamaica-based, Irish-owned upstart provider Digicel.

The selection committee had good reason to cut local businessmen out of the spoils. Had the Singtel or Digicel bids been chosen – both of which were widely tipped to be front-runners – the government would invariably have had to fend off accusations of favouritism. And despite the results, it is likely that vested commercial interests tried to influence the outcome.

The day before the announcement, Myo Swe, a member of parliament from the ruling Union Solidarity and Development Party, proposed a motion in the lower house of parliament that would have delayed the announcement until a long-awaited draft telecommunications law goes into effect. He also proposed that any winner have a local partner as part of its consortium. The lower house voted unanimously in favour of the motion, but the licence selection committee – which answers directly to the president’s office – ignored the results, and the announcement proceeded as planned.

Telenor has a proven track record of providing mobile services in the region. It is the largest mobile operator in neighbouring Bangladesh, the second largest in Thailand, and the third largest in Malaysia. Ooredoo – which is owned by the Qatari government – was considered a dark horse contender by most observers, due in part to its lack of international brand recognition and limited marketing efforts. But the most significant factor making it an unlikely choice is the climate of pervasive anti-Muslim sentiment in Myanmar, which extends to the highest echelons of government. Money talks, though: Ooredoo has pledged to invest US$15 billion in Myanmar over 15 years, by far the largest sum proposed by any of the contenders.

As might have been expected, public backlash against Ooredoo was quick and fierce. Ashin Wimala, a monk from the southern city of Mawlamyine and a key figure in the radical Buddhist 969 movement, called for a boycott of Ooredoo’s services; Ye Htut’s Facebook page was peppered with anti-Ooredoo and anti-Muslim messages from detractors. But Set Aung, the minister in charge of the selection committee, was unrepentant, claiming that choosing a player from a Muslim country “just shows how transparent we are and how unbiased.”

The remaining nine finalists can’t be counted out just yet, either, as state-run Myanmar Posts and Telecommunications (MPT) – currently Myanmar’s only service provider – will need technical assistance to improve its network. Yadanapon Teleport, a semi-private firm with close links to the government, has rights to Myanmar’s fourth operator licence, and it is also almost certain to seek out a foreign partner to help it develop its network from the ground up.

Pledging to invest vast amounts of money in Myanmar’s economy before fundamental rule-of-law issues are sorted out exposes the winners to significant risks, but the potential lucre of Myanmar’s “green-field” telecoms market has proven too compelling to pass up. In the run-up to the announcement, Digicel’s chief executive, Denis O’Brien, didn’t seem concerned that the telecommunications law was not yet in place. “I don’t think it’s a risk at all, because the government have put together a very efficient process inviting people to tender and put in [bids],” he told The Edge Review. “We don’t see why a proper regulatory body won’t be put into place very quickly.”

But in the aftermath the announcement, the winners are keen to see the telecommunications law passed as soon as possible. “The telecom law… needs to come in place before the final framework for the licence is spelled out and made clear in this second phase after we won this first round here,” said Jon Frederik Balsaas, Telenor’s president and chief executive, in an interview with CNBC following the announcement.

A number of restrictive laws limiting free speech and dissent remain on the books in Myanmar, although these have not been enforced with the same zeal recently as they were in the past. Human Rights Watch has criticised the draft telecommunications law for  “provid[ing] inadequate protections against abuses in a country with a long history of censorship and surveillance.” Ooredoo’s operations at home have long been subject to political meddling from the al-Thani family that runs the tiny Persian Gulf state, and there is a risk that it may comply with requests from the Myanmar government to provide information that could compromise the security of dissidents and political activists.

For the next few months, at least, acquiring a SIM card in Myanmar will continue to be a frustrating, expensive and convoluted process. Only a few months ago, GSM-standard SIM cards were widely available at a cost of roughly US$225, but MPT inexplicably stopped producing them, making the black market the only way to acquire one. A one-off distribution via lottery in late April of 350,000 CDMA-based SIM cards added a drop of supply to an ocean of demand, and many of these have made their way onto the black market, as well. Given the hunger of Myanmar’s people for better connectivity, affordable and accessible mobile services can’t come quickly enough, despite all the issues that still need to be addressed.