Myanmar telecoms needs benefactors with 'deep pockets'

Myanmar's efforts to open up its telecommunications market is fraught with uncertainty, not helped by a government that is low on capital and expertise in drafting up the necessary legal and regulatory framework.
In order to succeed, it is going to need benefactors with "deep pockets" and people with technical know-how to help the Southeast Asian market achieve its goal of issuing two telecoms licenses by June, said an industry watcher.
Rob Bratby, managing partner at law firm Olswang Asia, told ZDNet in an interview Monday the situation in Myanmar's telecommunications industry was still unclear and there are not many facts to comprehensively analyze its liberalization progress.
For instance, there is no clear statement from the government saying how its new foreign investment law would impact its telecoms industry, said Bratby. He was not clear of what was in the draft legislation for telecommunications too, and said the end product will likely not resemble the draft policy.
He also noted the Expression of Interest tender issued by the Myanmar government on January 15 this year for telecom operators and vendors to invest in the market was simply an exercise to gauge investors' interest, and details regarding the telecom licenses had a "degree of uncertainty".
The Myanmar government issued a statement saying it will award two nationwide telecommunications service licenses by the first half of 2013 to boost telecom coverage to 80 percent by 2016. Interested parties are to submit their Expression of Interest forms by January 25, 2013. It subsequently issued another statement on the 25th saying it will extend the submission deadline by 10 working days to 3 p.m. on February 8.
According to a Bloomberg report last Friday, the government has received four Expressions of Interest from regional operators. The four are Malaysia's Axiata, Singapore's SingTel and ST Telemedia, and Norway's Telenor, it noted.  
Factoring in risks
As such, Bratby called on the Myanmar government, particularly the Ministry of Communications and Information Technology (MCIT), to have a clear regulatory framework since the industry is moving from a monopoly to a competitive market environment.
"The clearer the regulatory framework, the better it is for companies. Paradoxically, a bad framework is better than an unclear one since companies can price the risk into its products, but they cannot do so if the rules are unclear," he explained.
Furthermore, the country's military is an unknown entity in the whole picture as there is a "big question mark" over its role and how it is involved in network operations currently, he added.
Adding another layer of complexity is the resignation of former telecoms minister Thein Tun last Wednesday and the subsequent graft investigations into his dealings and that of other high-ranking ministry officials, according to Wall Street Journal. Bratby said these developments discredit the goals and announcements which the MCIT had made previously.  
Investing for the long haul
Beyond the numerous market risks and political uncertainty, he pointed out that outside of key commercial markets such as Yangon, Nay Pyi Taw and Mandalay, the average revenue per user (ARPU) for the country is "tremendously low".
This means any investor looking to enter the market will need "deep pockets for a very long time" in order to make a profit. Using a 20-year license period as an example, Bratby said the company's first 10 years will result in losses before breaking even in the next 5. It's only in the last 5 years will it start turning a profit, he projected.

This means any investor looking to enter the market will need "deep pockets for a very long time" in order to make a profit.

These investors should also bring with them people who are experienced in crafting out regulatory frameworks and deploying next-generation wireless network infrastructure. The government does not have the required experts on hand to enact the necessary laws, he said.
The government had recently issued a tender to recruit an international consultant to guide it through the entire process, although no announcements have been made as to who won the contract. Bratby did say that based on the language used for the Expression of Interest tender, it appears that a consultancy is already on hand to assist the ministry.
The World Bank is separately funding consultants to help the MCIT to put in place rules and regulations for the telecommunications reform, he highlighted. In a tender document issued December 27, 2012, the World Bank stated it was receiving a grant from the Public-Private Infrastructure Advisory Facility for consultant services to be provided to Myanmar.  
"The objective of this consultancy is to support the creation of a credible policy and regulatory environment in Myanmar, to oversee the reform of the telecommunications sector currently underway, and to guarantee the establishment and sustainability of fair, competitive conditions in the telecommunications market," it stated.
Its brief is to help develop an operational roadmap so that stated policy objectives by the government can be met, provide support for skill enhancement and institutional capacity building, and support the development of the country's Post and Telecommunications Department (PTD) to be the official regulatory body, the World Bank said.
This project is for six months, and the estimated budget is US$450,000, it added.
 
Asked if the MCIT will be able to deliver on its promise to issue telecoms licenses by the first half of 2013, Bratby said that is his hope. However, the realist in him says this is more likely to happen in "autumn" and the timeframe is deliberately vague given the market uncertainties at play.