The enterprise ICT opportunity for Myanmar telcos

by Sam Deb.

With Myanmar’s telecom penetration rate already above 75%, operators should focus on the enterprise segment for continued growth. In the first installment of this three-part report, we look at the growing size of Myanmar’s enterprise sector and the opportunity it presents for telcos 

Until recently, operators globally were hardly interested in the enterprise business, given the rapid growth they experienced in the B2C space. However, costly spectrum purchases, high debt burden, saturating urban mobility markets and depletion of VAS revenue due to ever-growing commoditization of voice and data plans have shifted their focus to the previously unattractive enterprise segment.

This trend is global. If operators do not find new retail uses for their expanded capacity, they will suffer significant losses. However, the convergence of IT and telecom has opened another avenue for the telco operators in the enterprise ICT space.

For some of the regional markets, the opportunity is already huge. In India, DNA estimated the enterprise telecom ICT market to be $4 billion in 2014. For some of the regional operators, the enterprise segment has already become critical. An example would be Tata Teleservices in India, whereby the enterprise segment accounts for 30% of the company’s revenue and is growing 15% year on year. Another India operator, RCOM, has an enterprise clientele base that includes over 39,000 Indian and multinational corporations, including SMEs. The enterprise segment contributes a substantial amount of revenue for many regional operators (see Figure 1).

Nascent telecoms markets like Myanmar are by no means excluded from this opportunity. Indeed, as the initial euphoria settles down in the Myanmar telecom market with a penetration rate already approaching 77%, Myanmar operators should focus on continued growth by putting emphasis on their efforts in the enterprise segment.

In Myanmar, consumer mobile ARPUs range from $5.00 to $6.50 a month, which is remarkable considering that only couple of years back, connection fees of $150 -200 were the norm. The trend is obvious that ARPU is sliding downwards (see Figure 2), and with the advent of a fourth operator, ARPU is expected to come down even further.

However, Myanmar’s enterprise ICT market outlook seems to be positive thanks to two factors.

First, the number of enterprises in Myanmar is set to increase exponentially (see Figure 3). While the reliability and availability of data is of some concern in Myanmar, a 2010 field study conducted by University of the Thai Chamber of Commerce and Union of Myanmar Federation of Chambers of Commerce and Industry reports that the number of enterprises in Myanmar remained almost same between 2001 and 2009. The numbers increased marginally from 35,684 in 2001 to approximately 43,345 in 2009.

However, a separate study conducted by in 2014 estimates the number of SMEs to be 126,237. That’s a huge jump – and that number is just the registered entities. The trend is expected to continue in near future, given the latest push for liberalization measures.

We have also observed that the number of enterprises in comparable countries such as India and Indonesia have also been growing since the early 2000s following the economic liberalization and telecommunication reforms of those countries. A recent study conducted by the Indian government found the number of enterprises showed a steady rising trend post economic and telecom reforms. We observed a similar trend for Indonesia immediately following economic reforms in 2002-2003.

The second factor indicating a positive outlook for Myanmar’s enterprise ICT market is that spending on ICT is set to increase until it reaches the level of regional ASEAN peers. Current ICT spending for Myanmar corporations is extremely limited. However, as soon as the corporations initiate their transformation journey coupled with the advent of new SMEs, ICT spending should start picking up. Again, taking India and Indonesia as examples, both markets have seen a sharp and steady increase in ICT spending following economic liberalization. This throws some light on the potential of the enterprise ICT market for Myanmar in the days to come.

The spending increase will be driven by a sea change in mobility and cloud computing needs, as well as the desire for unified communication and IT services. As of today, it looks like services such as MPLS, VPN, internet leased lines, managed internet data center services, E1, conferencing, CRM solutions and cloud based services such as online data storage, Software-as-a-Service (‘SaaS’) andInfrastructure-as-a-Service (‘IaaS’) are set to be the more prominent enterprise services in near future. Myanmar operators are well positioned to leverage their infrastructure to create their own cloud solutions for enterprise customers.

At the same time, competition will intensify. OEMs, system integrators (especially Accenture, Wipro and TCS, who have already made their presence felt in Myanmar), and software and online companies such as Google and Microsoft will seek to grab a share of Myanmar’s fast-growing enterprise ICT opportunity.

Telecom operators, however, have several distinct advantages in this regard. They already have established customer relationships, large-scale project management experience, multi-platform network infrastructure and reach (which can be especially game-changing in the Myanmar environment). In addition, compared to potential competitors, telecom operators in Myanmar enjoy strong brands and government connections. Overall, after taking into account these factors and challenges, the enterprise ICT outlook for the telecom operators in Myanmar looks positive.
Tomorrow: we deep-dive into the advantages telcos have to compete and win in Myanmar’s burgeoning enterprise sector.

Samit Deb is a senior consultant with over 12 years of experience and based out of Singapore.

 

Source: Telecom Asia

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