In relation to past promises, USD 1.5 billion may not be much, but I place little weight on promises of investment anyway. More significant is VietTel’s promise to allow roaming at domestic-like prices in the Greater Mekong Region. Now this too has been talked about. But not acted upon so far.
Just over four years ago, in August 2013, Helani Galpaya and I came to Nay Pyi Taw to deliver the regulatory module of a multi-day course offered by a number of different organizations, including the GSMA and the World Bank. For me, it the second visit to Myanmar and the first to Nay Pyi Taw, the mysterious new capital of an enigmatic state. For Helani, it was the first visit the country. It is customary in these kinds of events for the “dignitary” who inaugurates the event to make his speech and then leave. Deputy Minister U Thaung Tin was different.
It’s not possible to give people what they want from ICTs (connectivity, quality, low price) without investment. So we are always happy when investment in telecom increases, especially in countries where the sector has been starved of investment for long like Myanmar. But we have to keep in mind that what the sector produces is not internationally tradeable (except for roaming services). The consumption occurs within the country. It contributes to the advancement of all other sectors, and thus indirectly to growing the entire economy including exports.
Speed is important in entry to competitive markets. The issues have been discussed in the context of other countries. One hopes that the negotiations will be speeded up and that they will make the necessary investments fast. However, according to the Myanmar Times, negotiations are still ongoing, the venture is not yet formally established and as such has not been able to apply for an operating licence. In addition to Viettel, the JV will comprise a government shareholder, known as Star High Public Company, and a local consortium, Myanmar National Telecom Holding.
Even if it took some exchange-rate movements, to do it, it’s still good news. My only concern is that Myanmar lawmakers will see these numbers as an invitation to start milking what they as a cash cow. There is much to be done in Myanmar in terms of translating the reforms into real benefits for people and that requires the investors earning a reasonable return. Ooredoo Myanmar took in QAR334 million (US$91.7 million) in the three months to March 31, up 18pc over the previous quarter and 42pc on Q1 2015.
2016 Q1 financial results revealed by Telenor Myanmar paints a rosy picture: “I think I’ve said for many quarters now that this cannot continue, but it does,” said Group CEO Sigve Brekke during the company’s financial results presentation. “One-and-a-half years into operation … [Telenor Myanmar] is now cash-flow-positive for the first time.” Telenor Myanmar’s operating cash flow margin came to 10pc, according to the results. “And despite the aggressive rollout I expect them to be able to stay in the positive territory,” Mr Brekke said. Meanwhile, the company’s margin on earnings before interest, taxes, depreciation and amortisation – or operating profitability – reached 42pc.
When Japan’s NTT bought 35 percent of the equity of the formerly government owned incumbent operator in Sri Lanka, it radically increased the pace of investment by the company. But this was using funds generated from within the company, primarily from the money earned from its exclusivity over international telecom services. Appears Myanmar’s incumbent has worked out a better deal. Myanmar’s state-owned operator plans to expand its network by increasing the number of base stations from 2,000 to 5,000 by Q2 next year. Its Japanese partners KDDI and Sumitomo will contribute JPY200 billion ($1.
The incredible growth of ICT in Myanmar has been enabled by massive investments, business models and managerial skills. Yet, it appears that FDI in the sector is still not the largest. This is a good sign for the balanced development of the Myanmar economy. In the first five months of the 2014-15 fiscal year, telecoms accounted for 31 percent of total FDI of $3.32 billion, becoming the biggest single component in direct capital inflows, according to data issued by the Myanmar Investment Commission.
Much of our work on infrastructure policy and regulation deals with safeguards for investment. Uncertainty around investments is reduced when international arbitration is permitted. With many governments from the developed-market economies, the US government has been a strong supporter of international arbitration. But when it looks like these safeguards apply to their own country, they are unhappy. “This is really troubling,” said Senator Charles E.
One thinks that the case has been made over and over again that the connectivity made possible by ICTs is a good thing. Governments appear to act on this basis when they formulate telecom and broadband policies and sometimes even direct subsidies to encourage greater connectivity. Yet, whenever there is need for money all that falls by the wayside and Willie Sutton takes over. Willie Sutton was a famous bank robber who was asked why he robbed banks. “I rob banks because that’s where the money is,” he said.
Now that Myanmar is on the move, Cuba’s position in the telecom league tables is likely to decline further. Or will it? Minority partnerTelecom Italia (who says Communists are against foreign investment?) has been given USD 706 million to go away by Raul Castro’s son-in-law’s company. If they have that kind of change, perhaps they are planning to invest in the sector as well?
There is a possible explanation for the confusion around whether the Myanmar operating licenses have been issued or not. It appears that the license reported on by Reuters was a permit relevant to the investment, not the license which is the critical document in telecom policy and regulatory terms. This is still to be issued, since the rules have yet to be finalized. Telenor and Ooredoo were selected as winners of a government bid for two private telecoms licenses in June 2013. They expected to receive their licences by last December, but the government has yet to pass a vital telecommunications by-law which will outline the rules and regulations by which the companies must operate.
We all know the importance of investment in dynamic ICT markets. No investment: no new services, poor quality of service . . . As LTE is being rolled out and the conversation on 5G is gathering momentum,one would think the relationship between investment and taxes would be different from what is being reported as being paid by Vodafone: During the 2013 financial year, in which the group reported pre-tax profits of £3.
It appears that ability to invest was a critical factor in the selection of Ooredoo and Telenor as the first foreign private licensees in the Myanmar telecom sector. Both have committed to low-price mobile services. Telenor has considerable experience in running profitable operations using the Budget Telecom Network business model. Ooredoo can, I suppose, buy that expertise. If they do not succeed in running a BTN model in Myanmar, it will be their money that will go down the drain.
The legislature has completed its work and the bill awaits the President’s signature. But the actual legislation with 70 amendments from what potential investors saw is yet to see the light. And most of the detail (“the devil is in the detail”) will be in subsidiary legislation. Another nugget that has emerged is that Ooredoo is planning to invest USD 15 billion while Telenor is planning to invest USD 2 billion. MP Phone Myint Aung said the move would mean “international operators can launch their operations.
One thing I have learned is not to place too much trust in promises of investment. But USD 15 billion from one company seems in the ballpark for a country that wants to go from 5 to 80 fast (that’s mobile SIMs/100). All good. But why is the thinking fixated on operators who will do everything? They want the operators to build and operate telecenters; provide mobile money and aginfo services.