Myanmar awarded highly contested mobile network licenses to Norway’s Telenor ASA (OTCMKTS:TELNY) and Qatar Telecom QSC. The two foreign companies won the rights to develop country’s telecommunications industry, which is considered the most lucrative market in Southeast Asia, according to a report from The Wall Street Journal.
In April, 20 other telecommunication companies submitted proposals to obtain Myanmar’s mobile network license. The state selected nine finalists among the contenders including France Telecom SA (NYSE:FTE) (EPA:FTE), Singapore Telecommunications Limited (SGX:Z74), and India’s Bharti Airtel Limited (BOM:532454) among others.
Telenor ASA (OTCMKTS:TELNY) and Qatar Telecom emerged victorious on Thursday, and both foreign companies will operate their businesses in Myanmar along with the two existing telecommunications operators in the country.
Myanmar selected the partnership of France Telecom SA (NYSE:FTE) (EPA:FTE) and Marubeni Corp (OTCMKTS:MARUY) (TYO:8002) as a backup to replace either Telenor ASA (OTCMKTS:TELNY) or Qatar Telecom if either failed to meet some of the requirements imposed by the government.
Myanmar is a Telecom Frontier
Many investors such as hedge fund managers George Soros and Jim Rogers are convinced that Myanmar offers the best opportunity for investment in Asia. The country is a telecommunications frontier in the region because only 5.4 million out of 60 million population owned a mobile phone last year based on official estimates. Data from the International Telecommunications Union (ITU) showed that the mobile penetration rate in Myanmar is only 9 percent compared with the mobile penetrations rates in Cambodia at 70 percent, Laos at 87 percent, and Thailand at 100 percent.
Analysts believe that foreign telecommunications companies could easily compete with the state-run Yatarnapon and Myanmar Posts and Telecommunications because each has short reach.
The government of Myanmar aims to develop its telecommunications industry and increase the number of individuals who owns a telephone to around 75 to 80 percent by 2016. Lawmakers in the country are hoping to pass a new telecommunications legislation in the next few months. They extended the June deadline for the passage of a bill to consider the feedback of the industry.
Myanmar is Still a Poor Country with Limited Spending
The licenses awarded to Telenor ASA (OTCMKTS:TELNY) and Qatar Telecom are valid for 15 years. They are required to share infrastructure, offer low initial subscription fees, and meet population and geographical coverage targets. The companies must ensure that the country’s large rural areas have coverage.
Telenor ASA (OTCMKTS:TELNY) plans to launch voice and data mobile services in Myanmar next year. The company aims to complete its nationwide coverage within five years.
Aung Thura, CEO of economic research firm Thura Swiss Ltd., commented, “All the excitement shall not cover the fact that the majority of Myanmar’s population is poor. Telecom operators would have to calculate carefully when doing projections. Consumer spending will remain low for some time.”