Myanmar's Telecom Landscape Gets Complicated With A Military-Backed Joint Venture Set To Compete With Telenor And Ooredoo

 @SophieXSong on August 01 2013 1:52 PM
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Ross Cormack, CEO of Ooredoo Myanmar, talks during a news conference in Yangon July 5, 2013. REUTERS/Soe Zeya Tun

Ooredoo and Telenor, two foreign companies that won the lucrative telecom licenses in Myanmar, may face tough competition from a little-discussed domestic Myanmar company jointly owned by the army-backed Myanmar Economic Corporation (MEC) and the state-backed Myanmar Posts and Telecommunication (MPT).

The joint venture was announced in the statement that granted the licenses to Qatar’s Ooredoo and Norway’s Telenor, but which attracted little attention, the Myanmar Times said Thursday.

“It is planned to grant licenses to two local operators -- Myanmar Posts and Telecommunications and Myanmar Economic Corporation as a joint venture and the other Yatanarpon Teleport Co which will reshape itself as a public company,” the announcement said.

The announcement brought greater clarity for investors and consumers in regard to what form the local competition for Ooredoo and Telenor will be. However, in light of Myanmar’s long history of authoritarian rule under the military junta, the joint venture raises some concerns about the future role of military-backed companies in Myanmar, and the implications for foreign investors in the country.

MEC, the military firm, was an important player in Myanmar’s military-era economy and was regularly granted lucrative import or domestic production monopolies, including on edible oils, vehicles, beer and alcohol.

“If they are getting preferential treatment, seeing deals no one else sees, getting better terms, you're creating an environment that deters foreign investment,” said Jeremy Rathjen, vice president of Thura Swiss consulting in Yangon.

Ooredoo and Telenor have not commented on the joint venture, but an international telecom consultant said it is unlikely the companies would be concerned about the competition, according to the Myanmar Times.

A government source, who declined to be named, said the committee that was charged with the award of the licenses was not aware of the planned joint venture and that this would not have affected the decision. He added that the government wants to create a fair and level playing field, and expressed confidence that the new telecom law, with input from the consultants from the Asian Development Bank on ensuring it meets international standards, would support a competitive market.

Even before the official announcement, there were indications that the MEC planned to enter the telecom sector. When cut-price SIM cards were released in April, many were surprised to find they had been manufactured by an unheard-of company named MECTel. The company sold about one million cards in the subsequent months, at 1,500 kyat ($1.53) each.

For the MEC, the decision to enter the industry could be “strategic rather than financial,” said independent analyst Richard Horsey.

The company has “mainly focused on securing access to key products that are of strategic importance to the military,” Horsey added, and mobile communications could also be seen as key strategic resource.

The MEC, along with another military firm, the Union of Myanmar Economic Holdings Limited (UMEHL), which is a major shareholder in the controversial Letpadaung copper mine project, continue to play an important role in the country.

“If MEC and UMEHL continued to dominate the new economy as they did the old, this would be to the significant detriment of the country,” Horsey said, according to the Myanmar Times. “[But] they have accepted to pay tax, and to lose all of their lucrative monopolies.”

The foreign telecom operators, in the meantime, have made major strides in Myanmar following their successful bid for licenses. Telenor announced that it will charge 25 kyat per minute for calls, while Ooredoo will charge 35 kyat per minute for on-net calls and 45 kyat for off-net calls, according to Investvine, a news portal covering investment opportunities in Southeast Asia.

Prices for SIM cards will also drop significantly in Myanmar, where SIM cards and mobile phone calls were exorbitantly priced previously, from the current 200,000 kyat to 1,500 kyat at both companies, with plans to launch free SIM card offers, Investvine reported.

 

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