Fifty years ago Burma was one of the richest countries in Asia. Then the military took over and Myanmar, as the generals renamed the country, became one of the poorest, most repressed and most corrupt countries not just in Asia but in the world.
It became shut off from the rest of the globe and among the phenomena of the modern age that all but passed it by during the past half century was the revolution brought about by telecoms, the internet and the mobile phone.
Burma is one of the few remaining countries on the globe that has a large population that is excluded from mobile phone use (North Korea is another). The civilian government that came to power in 2010 (following controversial elections) sees the liberalisation of the telecoms market as a key staging post in the country’s transformation, not least because of the opening up to the outside world that such a move will involve.
The commercial possibilities for the international mobile network operators who are now being invited to pitch for licences there are such that all of the world’s leading players, including Denis O’Brien’s Digicel, are keen to be part of the action.
It is estimated that more than 60 per cent of the world’s population have a mobile phone subscription. A recent study of Burma by Ericsson has estimated that only approximately one million people in Burma, which has a population of 60 million, have a mobile phone subscription. Others say penetration is in the 5 per cent to 10 per cent range. It is not quite the last frontier, but it is close.
As well as providing an opportunity for the world’s major mobile operators to earn even more money, the licence competition being run by the Burma authorities is being viewed internationally as a test for the new regime there, a massive potential boost for the country’s economy, and an opportunity to allow a hitherto cut-off population to make contact with the outside world.
The country has decided to award two mobile phone licences to international investors, with one already in existence and owned by the Burma post and telecommunications ministry, which is running the licence competition.
The competition is a beauty contest, meaning that rather than issue the licences to the highest bidders, they are to go to whoever can best show that they meet the requirements set out by the Telecommunications Operator Tender Evaluation and Selection Committee established by the ministry.
Digicel, which has extensive experience of successfully establishing mobile networks in less developed countries, including Haiti, is among the 12 bidders that were on a shortlist drawn up by the committee and published on April 11th. To date the competition process has kept to its timeline and the announcement as to which companies have won the licences is scheduled for June 27th.
Green field
Given Burma's size, the fact that the countries that border it all have operating mobile networks with very high levels of penetration, and the green field nature of the economy in terms of mobile coverage, the likely rewards for those who win the licences are huge.
O’Brien’s Digicel, which operates in 24 markets in the Caribbean, El Salvador, Guyana, Suriname and French Guiana, had revenues of $549 million (€420 million) in the last quarter of 2012. Estimates of the potential size of the Burmese market vary but it would provide a very substantial boost to the Irishman’s turnover.
The fact that Digicel's partners in its bid are a fund associated with the family of the famous financier, George Soros, and a Singapore-listed property and general services group associated with one of the most respected business figures in Burma, has led some observers to rate its chances of success quite highly.
O'Brien was in Burma last September, and gave an interview to the Myanmar Times in which he outlined his desire to get involved in the market there. The local newspaper said Digicel was prepared to invest up to $1 billion (€760 million) in developing the telecommunications network, with O'Brien at the time apparently focused on a possible partnership with the telecoms ministry.
“We think we could work really well with them,” Mr O’Brien said while attending the Myanmar Global Investment Forum in Nay Pyi Taw, the country’s new capital. “In order to build a world-class, future-proofed mobile telecommunications infrastructure in Myanmar, which will make affordable telecommunications accessible to the people of Myanmar, an initial investment in the region of $1.2 billion needs to be made,” he said, adding that “as telecommunications penetration and usage increase, the investment will also increase”.
O'Brien's long-time business partner, Leslie Buckley, spoke to the newspaper about an investment he and O'Brien had in Burma in an online recruitment business. "We operate as local as we can," Buckley told the newspaper, highlighting the strategy of integrating in host investment countries through strong community engagement, such as football sponsorship deals in Burma.
The Singapore-listed company that forms the third part of the consortium is Yoma Strategic Holdings, a company associated with its chairman, property billionaire Serge Pun. Pun, who has been described by the Financial Times as one of the most important business figures in Burma, emigrated to Hong Kong aged 20 with HK$5 in his pocket. Born in Burma to Chinese parents, his family left the country in the early 1960s only to get caught up in the Cultural Revolution. He ended up in a "re-education" camp that was home to 1,500 children who were forced to build a dam with their bare hands. In Hong Kong he became an air sanitiser salesman, then a property salesman, and later a hugely successful businessman. Although he has operated for years in Burma, he had a difficult time with the authorities there and has the reputation locally as being a "Mr Clean", according to the Financial Times .
On its website Yoma says it is unique in that it is a Singapore-listed company that is a proxy for doing business in Burma.
In a recent interview with CNBC news, the chief executive of Yoma, Andrew Rickards, said the opportunity that exists for mobile operators in Burma is "beyond your wildest dreams" but that the logistical challenges are "worse than your worst nightmare". The government is asking the companies that are to get the licence to provide 80 per cent cover within three years and this was why, he said, Burma needed "people like Digicel who have done this sort of thing before".
He said the project comes down to a logistical challenge when you are “rolling out 300, 400, 500 towers a month” in an effort to achieve the target set by the government.
Interestingly, Rickards said the statistics about wealth in Burma were “understated by some magnitude”, an insight he said he had due to his company’s extensive involvement in business there. It is a cash economy, he said, and a lot of what is happening is not caught by the statistics.
Rickards said the market would be a predominantly prepaid market but that there would be opportunities for other activities such as data-services and access to the internet. Asked about corruption, he said the competition process was “a real test case for Myanmar’s new civilian government, to show that they are doing things properly.” It was for this reason, he said, that the government had hired international consultants and spent so much time preparing for the competition. “Right up at the top there is intense pressure to make sure to do this properly,” and to ensure that “old ways will have no place in the current process”.
Intense interest
The Telecommunications Operator Tender Evaluation and Selection Committee is understood to be working closely with a German consultancy called Roland Berger, and the licence process is being conducted in an atmosphere of intense international interest.
A few months ago the authorities in Burma launched a highly publicised campaign against corruption, targeting the telecoms ministry in particular. The president, Sai Mauk Kham, heads up a new anti-corruption board and the move against corruption is seen as being designed to send a signal to foreign investors that Burma is open for business and anxious to do all it can to clean out the entrenched human rights abuses and corruption that has held the country back for so long.
The two largest mobile operators in the world, Vodafone and China Mobile, are partners in one of the bids favoured to land a licence. Telenor, O'Brien's former partner in the Esat Digifone bid that won the controversial 1995 second mobile phone licence competition run by the Irish government, is another of the shortlisted firms, and one that he is no doubt hoping he can outshine. He literally put his fist through the ceiling when he won that 1995 competition. If his is one of the two winners announced on June 27th, some more structural damage may well be on the cards.
