Local consortium to claim Myanmar’s fourth telco licence

Yatanarpon Teleport (YTP) is working with a management committee to form a consortium of local partners, which will bid jointly for Myanmar’s coveted fourth telecommunications operator licence, according to YTP chief executive officer U Shane Thu Aung.

After years in which the telecommunications sector was dominated by state-owned monopoly Myanma Posts and Telecommunications (MPT), in 2012 officials confirmed plans to reform the industry.

In June 2013, following an international tender, licences were granted to Norway’s Telenor and Qatar’s Ooredoo. State media announced that the government would also “grant license to two local operators – Myanma Posts and Telecommunications and Myanma Economic Corporation as a joint venture and the other Yatanarpon Teleport Co which will reshape itself as a public company”.

Since then, despite widespread speculation, there has been no official announcement either to confirm or deny that there will be a fourth operator – a fifth if MECTel, a partially army-owned operator, is also counted.

Throughout 2014, YTP held discussions with a number of potential international partners, including Malaysia’s Axiata Group and Thailand’s True Corporation Public Company, according to sources close to the negotiations, but no deal was signed.

Then, toward the end of last year, Reuters reported that YTP planned to sign a US$800 million deal with Vietnam’s Viettel Group, which is owned by the Vietnamese government via the Ministry of Defence.

Six months on, there has been no announcement by either Viettel or YTP, leading to rumours that the deal will not go ahead.

“We are founding a new consortium under the direction of a management committee, which includes the deputy minister of the Ministry of Communications and Information Technology [MCIT], and we are working to make sure the steps are correct and transparent,” said U Shane Thu Aung.

Details about the structure will be made public soon, he said. “The second stage will be forming a joint venture with a foreign partner, which will be done through a transparent selection process, according to the guidelines of the management committee,” he said.

He did not comment on whether or not Viettel would be involved in this process. Viettel could not be reached for comment by press time yesterday.

A consortium is necessary to ensure the fourth operator will be highly efficient in terms of decision making and corporate governance, said U Shane Thu Aung. This is particularly important as it will be entering the market at a late stage. “The airplane has already taken off and the only option is to land it safely at the next runway,” he said.

The consortium will not be under the name of YTP. It will be partly government-owned, and will also sell shares to the public. Negotiations are still ongoing as to whether the government will hold a majority stake, he said.

Access to Myanmar’s underdeveloped telecommunications market is much sought-after. In 2013, when the government invited expressions of interest (EOIs) from international firms for two operator licences, a total of 91 foreign companies and consortiums submitted proposals.

However, while the international licences allow 100 percent ownership, the fourth licence is thought to be reserved for a local company, meaning that international investors may only hold up to 49pc.

Furthermore, the new operator will need to raise between $1 billion and $2 billion to compete seriously in the market. Estimates place the cost of the licence alone at around $450 million.

“In YTP’s case, the investment structure would have required the foreign partner to provide more than $1 billion in financing, in return for a 49pc stake. It was difficult, because anyone investing that amount would naturally want a serious degree of control and comfort,” said a source close to one of YTP’s prospective international partners.

Few local companies are able to raise this amount of capital without an international partner. Those who can lack the technical expertise to compete seriously in the market.

It is likely to take some time for the consortium to be formed and approved, the joint venture partner to be secured, and the licence to be awarded. Meanwhile, after launching just last summer, Telenor Myanmar announced a total of 6.4 million subscriptions by the end of the first quarter 2015, of which 58pc were active data users, and Ooredoo Myanmar reported 3.3 million customers by the same date.

“The results coming out for the international operators are very encouraging, so the fourth operator should be keen to get in gear, given the growth of the market. Clearly everyone else is making money,” said a Telenor equity analyst at an international bank.

But U Shane Thu Aung is confident it won’t be too late. “Many countries have latecomers. We will use latecomer strategies – we will come in very fast and use the existing infrastructure,” he said.

He has had discussions with tower companies, but has not yet commissioned any sites, he said.

Others agree that the fourth operator has a decent chance at success. “Concerns about losing the first-mover advantage are not entirely warranted. A fourth operator coming in at a late stage could get up to 20pc market share if the company was well managed,” said a director at a Myanmar telecoms tower company.

YTP is an internet service provider. It was originally known as Bagan Cybertech and was later renamed Myanmar Teleport. In 2007, as the result of a joint venture between MPT and a number of private companies, it was rebranded as Yatanarpon Teleport.

Japan’s KDDI Corporation and Sumitomo Corporation signed a joint operating agreement with MPT in July last year, to become Myanmar’s third operator, with a view to investing up to $2 billion over ten years.

The consortium includes two local partners: Myanmar Information and Communication Technology Development Corporation, and A1 Construction Company.

Source: Myamnar Times

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