Myanmar’s government on Tuesday took its first big step towards promised liberalisation of the country’s long closed telecommunications market, with a surprise announcement inviting foreign tenders for two national telecoms service licenses.
This is the first big public tender open to international companies under a relatively new reformist government. But it is also the first big test of the government’s resolve – and ability – to conduct a fair bidding process by international standards. The result could significantly affect foreign investor sentiment towards Myanmar which, despite the gushing rhetoric at investment conferences around the world, has yet to earn investor trust and attract big money.

In foreign eyes, the government’s handling of the bidding process will be “an indicator and litmus test of what can be expected with further licencing processes”, said Romain Caillaud, managing partner at consultant Vriens & Partners in Yangon.

Indeed, since President Thein Sein took power in March 2011, Myanmar has been trying to shake off its image of a pariah nation led by a military government with a record of crony capitalism and corruption.
So far, the signs are good. The first two of a planned four licences will be issued by June, according to the government. The licenses could run up to 20 years each, with options to renew. The tender is likely to attract strong interest judging by the stream of big international telecoms companies that have been sending executives on reconnaissance missions to Myanmar. They include Russia’s VimpelCom, Norway’s Telenor, Vietnam’s VNPT-Fujitsu, Malaysia’s Axiata and the Caribbean’s Digicel.

Alongside the tender, Myanmar’s parliament is considering a draft telecoms law which, if passed, will usher in a sweeping overhaul of previous legislation which dates back to 1934.

In the last two years, Myanmar has dropped its longstanding aversion to foreign assistance – and even cabinet government officials are admitting the country’s relative inexperience in fields ranging from drafting policies to drawing up budgets.

Htay Win, chief engineer at Myanmar’s communications ministry, told international media that a telecoms tender had been opened to foreign companies because “their experience in other countries means they are more capable.”

Myanmar’s population is estimated at anywhere between 50m and 60m, but mobile penetration rates remain among the lowest in Asia at just 4 per cent – and fixed line coverage is only about 1 per cent, according to government figures. However, mobile subscribers, while still only numbering around 2m, are increasing rapidly. According to a telecoms analyst at Nomura, targets to raise mobile penetration in Myanmar to 50 per cent of the population could be reached, but the “devil will be in the detail”.

Myanmar is one of the last untapped telecoms markets in the region. Its population is almost as big as Thailand’s, where mobile penetration is around 120 per cent and, according to Nomura, the combined value of the top three telecoms operators is $23bn. But with GDP per capita of $1,300 – 80 per cent lower than Thailand – Myanmar still has a lot to do.

That is why investors will be closely watching the upcoming tender. If it proceeds in a fair and transparent manner, it could provide a welcome boost to investor confidence and help sustain the breakneck pace of government reforms, while enticing foreign companies to bid for future contracts. If not, investors are likely to question the government’s ability to carry out the reform process – and more crucially, may hesitate to commit badly needed funds.