Chinese State, US Billionaire, Irish Tycoon in Telecoms Bid

[News_Editor]

A woman waits for customers at a “public call office†in Yangon on May 27, 2012. Just a few million out of Myanmar’s 50-plus million population have mobile phones and access to an as-yet extremely limited system. (Photo: Reuters)

The biggest and most colorful collection of telecommunications companies assembled in years is waiting for the decision bell to ring in Naypyitaw this week on one of the world’s last untapped mobile phone markets.

Twelve international telecom businesses and consortia are on a government shortlist, out of which only two will be awarded contracts to build networks for potentially more than 50 million new telephone customers.

The decision on Thursday will pave the way to propelling Myanmar into the 21st century, at least in telecommunications terms.

Just a few million out of Myanmar’s 50-plus million population have mobile phones and access to an as-yet extremely limited system.

After years of tightly restricted mobile phone ownership through extortionate prices, the government of President U Thein Sein wants wireless telecommunications to be available to up to 80 percent of the population by 2016.

Some of the world’s biggest telephone network companies and some of the most obscure are on the short list, whittled down from about 90 firms.

They are China Mobile Limited and Vodafone Group in a partnership; Singapore Telecommunications; Bharti Airtel of India; MTN from Dubai; the Irish-owned Digicel Group; KDDI Corporation of Japan; Sumitomo Corporation, also from Japan; Malaysia’s Axiata Group; Telenor of Norway; Millicom International Cellular of Luxembourg; Qatar Telecom; and Vietnam’s Viettel Group.

The world’s two biggest mobile phone service operators, China Mobile and Vodafone, have 1.14 billion subscribers globally between them. They have teamed up to make the most powerful bid.

But probably the most colorful is the joint venture put together by the small Digicel, which operates mostly among the small Caribbean islands, although it is owned by an entrepreneur from Ireland.

Digicel’s joint venture partners in the license bid are Quantum Strategic Partners, owned by American billionaire speculator George Soros, and Myanmar’s Yoma Strategic Holdings, owned by noted Rangoon businessman U Serge Pun.

“The challenge for the winners will be recovering the cost of building and maintaining mobile phone networks in one of Asia’s very poorest countries,†said an industry executive with a large Bangkok-based phone company who spoke on condition of anonymity.

“Burmese are just about the lowest paid people in the region and so although the price of SIM cards and phones has become more universally affordable in recent months, the unanswered question is how will these people pay for phone services?â€

SIM card prices have plummeted dramatically from US $250 just over a year ago to a mere $1.70 today. But they are not yet widely available. About 350,000 cards were issued in April, many on a lottery basis, and similar numbers will be issued in the coming months.

Can the chosen network franchise holders recoup their investment?

“The opportunity is tremendous, but not without risk,†Nomura Securities’ chief of Asian telecoms Sachin Gupta told Bloomberg. “There are 60 million users potentially, but that needs a lot of network investment.â€

Other foreign telecommunications companies are waiting in the wings to offer ancillary services once the network licenses are issued.

Avaya of the US, which specializes in video conferencing and data networking, has teamed up with local firm First Myanmar, which is also in U Serge Pun’s business stable.

“We believe that we are uniquely positioned to offer affordable first-class communications to the people of Myanmar and are looking forward to having the opportunity to do so,†Digicel owner Denis O’Brien told the Irish Independent, which he also owns.

Unlike some of the other bidders which have kept a profile as they quietly lobby behind the scenes to promote their credentials to government ministers and officials, Digicel has pursued a high-profile public image in support of their bid.

The Jamaica-based firm, ranked only 65th in customer size in the global telecoms market, has been sponsoring Myanmar sport, promoting brand awareness among people who don’t yet even have a phone, and surveying sites for transmission aerials across the country.

“The low mobile penetration rate in [Myanmar] presents a significant opportunity for telecoms firms, but the Digicel consortium will face some stiff competition for licenses,†commented the Irish Independent newspaper, pointing out that O’Brien’s telecommunications forays into the Caribbean islands in the past 10 years have made his fortune.

Not bad for someone who started out on his business career selling horse medicines for his father.

The Digicel joint venture is up against the might of the world’s biggest mobile phone service operator, China Mobile, a state-owned enterprise with 97 percent of the colossal Chinese market and over 700 million customers. But perhaps the recent backlash against China’s strong business influence in Myanmar will influence bid decision-making.

Come Thursday, we’ll know whether O’Brien’s background impressed the Naypyitaw government more than the stolid, faceless managers of China Mobile.

A version of this story appeared in the June 2013 print issue of The Irrawaddy magazine.

Source: Irrawaddy.org