Consortiums submitting final bids this week for two telecoms licences are grappling with a number of uncertainties, particularly over the legislative framework for telecoms liberalisation.
Analysts said these uncertainties could have a dampening effect on how much contenders are willing to offer as a licence fee but have broadly praised the government’s handling of the tender.
“The most important factor is the telecoms law and clarity on the law is really quite important,” said Paul Wilson, the managing director of Myanmar Capital Advisers.
“But I’m actually quite bullish on the government’s approach to this,” Mr Wilson said. “For someone who has been working with [Myanma Post and Telecommunication] since 1998 I can appreciate how new and different this is. I’m very impressed. There are uncertainties and so on but the pace of reform and the openness with which the government has been hosting delegations, answering questions and sharing information – it’s hard for me to find a negative.
“The consortiums that are really committed to the country will factor in some of the uncertainties and I think there is a general appreciation for the complexities of the process.”
The 12 consortiums and companies have to submit their final tender bids by June 3, with the two winners to be announced on June 27. The bids will be ranked out of 1500 points based on both their technical proposal, which is worth 1000 points, and the licence fee offer, worth 500 points.
But the legal environment for the two winning consortiums is far from clear. A new telecommunications law has been drafted but not yet submitted to parliament. With parliament due to meet in late June, the earliest it could conceivably be enacted is the middle of July, although that appears unlikely.
“The companies will factor in the uncertainties,” said Roger Barlow, an independent telecoms analyst and chief executive officer of Hong Kong-based RJB Consultants Ltd. “The lack of telecoms law is a concern but it’s not necessarily unusual; a number of other Southeast Asian countries have done the same with less rigorous legal frameworks.”
After the two winners are selected, there is likely to be a further negotiation process, as some details of the licence will need to be settled once the telecommunications law is finalised, Mr Barlow said.
Andrew Wood, an Asia analyst at Business Monitor International, said the lack of a legal and regulatory framework “certainly presents a more complicated risk outlook” for bidders.
“That being said, foreign ownership restrictions were somewhat cleared up by the adoption of the new Foreign Investment Law in November. Additionally, with news that operators will be granted 15-year licences with the option of 10-year extensions, and that licences will afford the right to offer a full range of telecommunications services, we believe that the regulatory environment appears to have the proper pillars in place at this stage,” he said.
But the law is not the only issue for consortiums, several of which declined to comment on the tender process last week.
The government has said the two licence holders will compete with a privatised MPT and a second local operator, likely Yadanarpon Teleport, which is majority state owned. But recently army-owned MECTel burst onto the scene, selling K1500 CDMA 800MHz SIM cards and K5000 and K10,000 top-up cards. The company appears to be what is known as a mobile virtual network operator; rather than build its own network it rents spectrum from a wholesaler, in this case MPT. The sudden emergence of MECTel took many by surprise and their future role in Myanmar’s telecoms sector is far from clear.
But whether the two foreign operators compete with a state-run or privatised MPT, “the playing field is not quite level”, Mr Barlow said. MPT will not only have far more spectrum but it will be at lower frequencies, which will enable it to place its base stations further apart.
“The impact is MPT will be able to install potentially a more efficient network, with more customers using fewer base stations and less congestion than the foreign operators,” he said. “The two new entrants have recently been given slightly more spectrum but it is still not enough at the lower frequencies … MPT will have a distinct advantage.”
This could prove crucial as the operators roll out infrastructure to meet challenging targets on voice and data coverage. Under the licence terms, the two operators must be able to offer calling services in 25 percent of the country, and data services in 10pc. After five years, this needs to have risen to 75pc and 50pc.
Mr Barlow said meeting these targets will be “a challenge”, and prospective foreign operators, which have already started buying up land for base towers in anticipation of licences being awarded, will likely end up sharing infrastructure.
“It will be expensive in terms of rolling out infrastructure in relatively unpopulated areas,” he said.
Mr Wood agreed that there were concerns over “how exactly the government will look to promote a ‘level playing field’ between all operators”.
“Additionally, with an independent regulator set to be formed only in 2015, there is a risk that processes remain somewhat opaque over the next two years,” he said.
But Deputy Minister for National Planning and Economic Development U Set Aung said the shortlisted firms understood the risks when they entered the tender process.
“If a company is risk averse they do not enter the country,” he said. “Foreign investment never waited until everything was ready.”
Source: Myanmar Times