Myanmar Telecom Market Overview

Market to witness tremendous growth

October 2014
 Myanmar: Country Overview

Country Overview Social and ICT Indicators2

Myanmar is the second largest
country in Southeast Asia, and 24th Total Population (2013) 53.3 mil
most populous country in the world.
Due to recent economic reforms, it • Age 0-14 (%) 25.28%
Myanmar is one of the fastest growing • Age 15-64 (%) 69.56%
economies
• Female (%) 51.48%
Economic and Business Indicators1 No. of Households 11.2 mil
• Avg. HH Size 4.72
GDP (PPP), 2013 $111.1 bn Internet Users 2012 (Penetration) 1.07%
GDP Growth, 2012/13 +6.5%
Fixed BB Subs 2013 (Penetration) 0.04%
GDP per Capita (PPP), 2013 $1,700
Mobile Subs 2012 (Penetration) 13%
• Industry sector share of GDP (%) 20.3%
• Services sector share of GDP (%) 41.7% Political Stability
• Agriculture sector share of GDP (%) 38%
Technology Readiness
HH consumption expenditure, PPP, 2012 N/A
Employment to PP ratio, 15+ 75.4% Regulatory Attractiveness
• Male, 15+ (%) 79.2%
• Female, 15+ (%) 71.8% Investment Climate
Number Consumer Price & Rent Index N/A Legend: Most Attractive Least Attractive
Ease of doing business Index Rank 182 Source:
1. World Bank, F&S Estimates, WEF, Number
WEF Network Readiness Index Rank 146 2. Myanmar Central Statistics Organization)
http://www.myanmar.cm/myanmardata2007/22.htm
PPP: Purchasing Power Parity, HH: Household, WEF: World Economic Forum, BB: Broadband

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Myanmar Telecommunications Market Overview
Mobile and internet penetration is poised to surge

Mobile Overview Broadband Usage

• Since the political reforms of 2011 and 2012 in Myanmar, Fixed Broadband Subscriptions, Myanmar, 2012-
many sectors have been liberalized, including the
2017
communications sector.
0.50 0.45
• The Myanmar government has set an aggressive target of

Million
50% mobile penetration by 2015 and 80% by 2016. In order 0.40 0.37
to achieve this target, it has awarded telecommunications 0.30
0.30
licenses to two foreign operators and encouraged local 0.20
players to seek foreign partners. 0.20
0.11
• Penetration in the broadband and internet user market is low 0.10 0.05
and is expected to grow steadily. However, there are
regulatory and other hurdles to overcome and large capex 0.00
investments are required. 2012 2013 2014 2015 2016 2017

Mobile Subscriptions and Mobile Penetration,

Myanmar, 2012-2017
Internet Users
60 100%
48.5
Million

50 42.6 80% Number of Internet Users, Myanmar, 2012-2017

40 2.50
27.2 60% 2.1
30 Million 1.7
40% 2.00
20 14.4 1.4
10.1
5.4 20% 1.50
10 1.0
- 0% 1.00 0.8
0.7
2012 2013 2014 2015 2016 2017 0.50
Mobile cellular subscribers Mobile Penetration
0.00
Source: Business Monitor International, World Bank, and Frost & Sullivan
2012 2013 2014 2015 2016 2017

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 Recent Key Industry Developments

Key Industry Developments

• The economic and social reforms planned by the government emphasize the development of an Information and
Communications Technologies (ICT) Master Plan. The government targets 50% mobile penetration by March 2015 and
80% by March 2016, which translates into a very rapid growth.

• As a key initiative of the plan, the government is developing an e-Government national portal and is forming a steering
committee and task force to implement these plans.

• Foreign mobile operators Telenor Group (Norway) and Ooredoo (Qatar) were awarded telecom operator licenses in
January 2014. Meanwhile, Japan’s KDDI Corporation has formed a joint venture with incumbent Myanmar Post and
Telecommunicatons (MPT), while Thailand’s True Corporation Public Company Limited is expected to partner with
Yatanarpon Teleport Public Co. Ltd., a local ISP, who will be awarded a telecom license.

• The government is drafting the new Telecommunications Law and Cyber Law, which is expected to separate the policy,
regulatory, and operational roles of the government in the telecommunications sector. An independent telecommunication
regulator is expected to be formed in 2015.

• The Telecom Law was signed in Oct 2013. The law is focused on modernization and development of Myanmar by means
of telecommunications technology. To accelerate growth in this sector, the law has been designed keeping the foreign
investors in mind

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Myanmar’s New Telecommunications Law , 2013
Implications for incumbents and new entrants

Telecommunications Licenses Fees

• The government licenses issued so far are integrated • The new law authorizes the MCIT to collect fees,
licenses, allowing the existing holders to operate both including:
fixed and mobile telecommunications services. • License fees
• The penalties for operating services without a license • Renewal fees
are harsh, with offenders risking heavy fines and • Usage fees
prison sentences. • Technology fees
• Although the government will not issue new mobile • Other associated fees
licenses, the Ministry for Communications and • The quantum and period of such fees are not stated,
Information Technology (MCIT) has said it will nor are the fees currently subject to any statutory
consider limited licenses for activities like internet limitations
service provision and operation of telecom towers1.
• Vendors working on behalf of license holders do not
Price Regulation and Consumer Protection
require additional licenses.
• A new, independent regulatory body will be set up in
• The Telecommunications Department mandates
2015, taking over from MPT, which will continue as a
consumer protection standards.
state-owned telecom operator.
• All licensees must submit tariff schedules to the MCIT
for approval.
• The law prohibits price-fixing and formation of cartels.

1: Statement released by the MCIT, Oct 2013

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 Myanmar: In comparison to its regional peers

Assessment Matrix

Singapore Malaysia Taiwan Timor Leste Thailand Myanmar Australia

Population 2013
5.4 29.8 23.3 1.4 69.52 53.3 23.1
(Mn)
Internet Users
3.83 27.5 18.1 0.01 19.2 0.8 31.5
2013 (Mn)
Internet Penetration
71% 92% 78% >1% 28% >1% 136%
2013

Mobile Subscribers
8.06 41.32 29.87 0.79 90.0 5.44 30.57
2013 (Mn)
Mobile Penetration
149% 139% 128% 56% 132% 10% 132%
2013
Mobile Data/ 3G
7.06 17.6 24.8 N/A 14.0 N/A 24.3
Users 2013 (Mn)
Fixed BB Subs 1.3 6.4 26.0 0.0 4.5 0.1 12.6

Market Status Developed Developing Developed Emerging Developing Emerging Developed

Source: Business Monitor International, Frost & Sullivan

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 Myanmar: Current Telecommunications Sector Overview

Existing Players New Entrants

The incumbents have state links and are working with foreign In 2013, Myanmar announced the tender of unified telecom
partners. They have existing infrastructure and plan to offer both licenses to foreign operators, and awarded the licenses in January
fixed and mobile services in Myanmar 2014 to Ooredoo and Telenor.

MPT Ooredoo Myanmar

• This state-owned telecommunications firm was, until January • Qatar’s Ooredoo was one of two foreign operators to get a
2014, the sole telecom operator. telecom license in 2014.
• It had the widest existing network by virtue of being the one in • The license permits operation of mobile, fixed, and broadband
operation. internet services in Myanmar.
• It’s role as the industry regulator may give rise to conflict of • Ooredoo has committed to geographic coverage of voice and
interest, however, although the Government plans to create an data of 84% by 2019, meaning large-scale infrastructure
independent regulator by 2015 investment.
• On July 16 2014, Japanese operator KDDI and MPT signed a • Ooredoo officially launched its services in August 2014 across
partnership agreement to jointly operate mobile and broadband three major cities and surrounding areas. It offers its SIM cards
services through 30,000 outlets across the country.
• KDDI and partner Sumitomo will invest $2 billion in
infrastructure developments in Myanmar, with profits to be split Telenor Myanmar
50-50 between KDDI and MPT.
• Norwegian operator Telenor was the other foreign operator
Yatanarpon Teleport (YTP) awarded a telecom license in 2014.
• YTP is a privately owned fixed-broadband and satellite Internet • As of July 2014, Telenor has only signaled intent to operate a
Service Provider (ISP) mobile HSPA+ network, although it can operate fixed services.
• In Feb 2014, the Myanmar Government confirmed it was This is in line with its regional subsidiary strategy.
planning to award a telecommunications license to YTP. • Telenor has committed to 83% geographical coverage for
• Thailand’s True Corp is reportedly in talks to form a joint voice and 78% for data. The network will be HSPA and LTE-
venture with YTP, and will invest around $1.6 billion for enabled
infrastructure development. • Telenor launched its mobile services in Myanmar in September
2014.

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Telenor’s Strategy

Its strategy is based on four strategic pillars

• Mobile Network • Affordable Services

Build a technically advanced Drive significant growth in mobile

and extensive mobile penetration through a rapid
network network roll-out. and
providing affordable
services through a
widespread distribution
network across the
country

• Comprehensive • Excellent
Portfolio Customer
Experience
Become the market
leader in Myanmar by By offering quality
offering the most service and an excellent
comprehensive portfolio customer experience with the aim of
of relevant mobile services creating loyalty and trust with
of high quality to everyone customers in Myanmar

A combination of affordable services with comprehensive portfolio is a strong proposition

to attract customers not only from cities, but also from rural parts of the country.

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Ooredoo’s Strategy

Go beyond Traditional Talk-and-Text Model

Focus on advanced services –over all-IP network

• Ooredoo is focused on bringing advanced services like Mobile Health and Mobile
Money over its all-IP network.

• It strongly believes that the Myanmar market will get used to advanced services much
faster than other markets.

• Ooredoo does not believe that lack of consumer mobile knowledge is an hindrance in
main cities.

Frost & Sullivan also believes that consumer mobile knowledge is not an issue, either in
main cities or in smaller towns and villages. Consumers want to take full advantage of
available technology as soon as they can. We have also observed in many other markets
across the region that the knowledge cycle for mobile services is very short. And, when it
comes to using advanced services, the ability to leap frog in a young country is extremely
high. Myanmar is one of the youngest countries in the world: 45% of its population is
under 25 years of age.

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Key Beneficiary Market Segments

Infrastructure and Network Equipment

Total Foreign Telecoms Investment
Commitment in Myanmar, 2014
20
Billions (US$)

15.0
15
10
5 1.0 2.0 1.6
0
Telenor Ooredoo KDDI / MPT True / YPT
(est.)
• With a commitment to rapidly grow infrastructure and wireless capability in Myanmar, telecommunications network
equipment providers will benefit greatly from Myanmar’s rapid expansion.
• The chart above shows the investments committed to Myanmar by foreign telecommunications operators.
• Equipment vendors Alcatel and ZTE have pre-existing relationships with MPT and have been doing business in Myanmar
since 2004. Telenor has chosen to work with Ericsson, while Nokia Networks has recently established offices in Yangon.
• With recent announcements of the KDDI partnership and True expected to announce a partnership soon, there is great
potential for equipment vendors to garner new business.

• Among the industries poised to benefit from this investment are:

• Telecommunications network equipment vendors (base stations, routers, gateways, fiber optics)
• Telecommunications operator software vendors (billing systems, CRM systems)
• Network security equipment and software vendors
• Device partners (smartphones, broadband modems)
• Telecommunications network equipment installers (base station construction, fiber installation)

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Key Beneficiary Market Segments

Smartphones and Connected Devices

Smartphone & Mobile Penetration, Main Smartphone Vendors Active in Myanmar

Myanmar, 2013-2017
100% 92% Vendor Main Product Segments
80% 72%
50% 45% Huawei Entry-level, most phones cost under $150.
50% 27% 28% Technologies Market leader
19% 12%
1% Co. Ltd.
0% SAMSUNG Mid- and Entry-level smartphones, above
2013 2014 2015 2016 2017 $100
Smartphone Penetration (est.), Myanmar
HTC Mid- and Higher-end smartphones, above
Mobile Penetration, Myanmar
Corporation $150
Source:
Frost & Sullivan projections based on mobile penetration and regional smartphone adoption

• With an expected sales of 7 million smartphones by 2017, the device market is expected to go through a major boom.
• Due to Myanmar’s position as a low-income nation, low- and mid-end smartphones are expected to dominate the market,
with low-end Android smartphones (priced US$100-$150) making up the bulk of the market.
• Samsung and Huawei are the market leaders, as of 2013, although there is ample space for new entrants.
• Foreign operators Ooredoo and Telenor have already signed partnership agreements with Samsung. HTC is preparing to
enter the market.
• One challenge for smartphone players is that phone software will need to support the Burmese language and script.

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Key Beneficiary Market Segments

Mobile Money and Global Transfers

Myanmar Est. Population Access to

Banking Services, June 2013
10%
Access to Banking
Services
90% No Access to
Source:
Banking Services Myanmar Govt. Estimate, announced at World Economic Forum on East Asia, 2013

• With a high proportion of unbanked and under-banked population in Myanmar, mobile banking and commerce is
expected to be a major market as physical banking infrastructure and locations are limited.
• The Government has announced a target of providing 30-40% of the population with access to banking services by 2020.
• An expected 4 million Burmese work overseas; money transfers to family members are expected to be a major market
• Both Ooredoo and Telenor have committed to the development of Myanmar’s nascent mobile commerce industry.
• System integrators, equipment providers, and data security system vendors are expected to be key beneficiaries of this
market expansion.

Content
• With a surge in smartphone users and internet connectivity, the demand for content will also see a spike.
• Due to previous low broadband and mobile penetration, very little content currently exists in Myanmar.
• New entrants will need to either create new content in the Burmese language or translate existing content.

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Conclusion

• In conclusion, recent developments in Myanmar point towards rapid expansion of the

telecommunications sector. The country is poised to become one of the fastest growing
telecommunications markets in the world.

• Although the license tenders have been concluded, foreign mobile operators may still enter the market
by partnering or establishing a joint venture with existing local operator Yatanarpon Teleport (YTP),
similar to KDDI’s partnership with MPT.

• Large infrastructure investment commitments by foreign investors, totalling more than $18 billion, are
expected to greatly benefit industry segments like network equipment manufacturers,
telecommunications software vendors, and mobile device manufacturers. In addition, the digital content
industry, particularly for mobile consumption, will experience rapid growth.

• In order to ensure continued growth in the Myanmar telecommunications market, the industry needs:

• Minimal government interference and further liberalization in the telecommunications sector

• Establishment of an independent telecommunications regulator
• Continued foreign direct investment (FDI) into Myanmar’s nascent telecommunications sector
• Increasing affluence and GDP growth in Myanmar’s economy

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