New low-cost SIM cards launched. The Myanmar government announced the launch of low-cost SIM cards to the public on April 3 2013 after several months of market speculations on the price, with estimates ranging from a few up to tens of thousands Kyats. In the announcement the SIM card price has been set at MMK1,500 (approx. US$2), with sales scheduled to commence on April 24, a week after the Myanmar New Year. The new price is cut over 99% from the last year price which was MMK200,000 (approx. over US$227) and US$2,500 two years earlier.
The telecoms sector is one of the most untapped industries in Myanmar, garnering significant changes over the past year including the recognition and vocalization of the need for low-cost mobile communications by President U Thein Sein, and the international bidding of two mobile operator licenses. With a goal of meeting the purchasing power of an average citizen (with a GDP per capita income of over US$900), this new price will revolutionize the communications sector in rural regions. The regulatory frameworks for the sector are still in progress with the telecommunications law currently being drafted.
Global majors rushing for mobile operator license in last frontier market. Last year, the government invited international mobile players to bid for 2 operator licenses for an initial period of 15 years for infrastructure development, maintenance, distribution and customer services. As of February 13, a total of 91 applications were received according to a government announcement. Pre-qualified companies will be announced in mid-April and the two winners will be awarded by the end of June. Companies that have expressed interest in participation include a consortium of China Mobile and Vodafone, the world’s largest and second largest mobile operators respectively, Southeast Asia’s largest mobile operator Singtel, Malaysian Axiata, Norwegian Telenor, Africa’s largest mobile company MTN Group and many others (see Annex). Some pre-qualification requirements for an operator are annual gross revenues exceeding US$400mn as of December, 2012, and a 4 million subscriber pool in its primary country. Among the four operators to eventually be allowed, two licenses were given to the state owed Myanma Post and Telecommunications and the semi-governmental Yatanarpon Teleport, both of which will be transformed into public companies or consortia.
Greenfield opportunity. In a speech given by the President on March 30, he noted that the current mobile penetration rate in Myanmar was only 7% in FY2012. The government has set goals to expand by an additional 8 million lines in FY2013, and 18 millions in FY2014 with the aim of increasing the penetration rate to 27% and 50% respectively. The currently low penetration rate as well as a 60 million population presents an unparallel growth opportunity for investment. Along with the telecoms sector, the financial sector also will experience a more sophisticated market to expand its services and outreach.
SIM-card usage terms. Initially, SIM cards will be offered for the CDMA 800 MHz network, later to be followed by cards based on the WCDMA 3G and GSM 2.75G networks. In the absence of the CDMA 800 MHz network, WCDMA 3G network based cards will be provided. There are a few limitations imposed including nationwide monthly sales of 350,000 lines, a monthly user spending of MK2,500 (approx. US$3) or 50 minutes, and a requirement to use the card within 15 days after purchase. The line will be cancelled if these restrictions are not met, or the card is not recharged within 15 days. Regardless of the restrictions, the new and more affordable price is particularly good news for the country’s rural communities, which comprise 70% of the total population.
Mobile majors customizing to Myanmar market. Ongoing liberalization efforts have attracted global players such as Google, Samsung and HTC into Myanmar. HTC has launched new smart phones integrated with the Myanmar language, and will later launch fully localized mobile phones. Samsung has also established its presence in Myanmar along with low-cost handset manufacturers ZTE and Huawei. The Google search engine portal localized to the Myanmar language has been launched and the Google Play store has also been opened for Android phones users. Google is also planning to unlock its electronic payment platform, Google Wallets, to establish a networked banking system with the Myanmar banks.
In our view, the affordable new SIM card pricing marks the beginning of a new age in telecom for Myanmar, incentivizing market reforms. The economic and social benefits from widespread access to mobile communications will be extraordinary for both domestic and international communities. The new reform will bring forth mobility and efficiency in the Myanmar’s already fast-growing economy, which is increasingly equipped for industrialization and investments. Therefore, we reiterate our recommendation for international investors to gain early exposure to the country’s fast-improving business and regulatory environment and frontier market opportunities.