Viettel picked for fourth telecoms tie-up with military partner

Hanoi-based telecoms operator Viettel has been granted the right to negotiate with a local consortium, including a military-run partner, with a view to receiving a minority stake in a company that is likely to be awarded Myanmar’s long-anticipated fourth telecoms licence.

Viettel, which is owned by Vietnam’s defence ministry, was one of seven foreign companies to express interest in a tender launched at the end of last year.

Of the five companies deemed suitable to apply, the Vietnamese operator was the only one to submit its proposal by the deadline on March 18, said a source with knowledge of the matter.

“They passed the eligibility criteria and confirmed they were willing to pay their share of the licence fee price,” they said, asking not to be named.

 “Following negotiations with the domestic special purpose vehicle and the government partner, they can apply to PTD [the communications ministry’s Posts and Telecommunications Department] for a licence.”

Those that have watched the telecoms sector over the last few years may feel a sense of déjà vu.

This is not the first time Viettel has come close to signing a deal for the licence – in late 2014 it planned to sign an $800 million contract with local firm Yatanarpon Teleport, according to Reuters, but the deal fell through.

If the tie-up is approved, the company will join a local group of 11 public Myanmar firms and a subsidiary of military-run Myanmar Economic Corporation, to form a joint venture that should receive the market’s fourth licence for nationwide services.

The United States Treasury includes Myanmar Economic Corporation (MEC) on its list of specially designated nationals, an inventory of individuals and organisations that Americans cannot engage with except in special cases.

The military-owned shareholder was nominated by the Ministry of Defence and is called Star High Public Company, according to a document seen by The Myanmar Times. The company is not yet listed on the Directorate of Investment and Company Administration website.

Myanmar Economic Corporation also owns an operator known as MECtel.

“MECtel is a brand, not an entity, so it was not technically possible for it to become the government partner [in the fourth telco],” said the source.

Star High Public Company was chosen because it offers access to 1000 towers and more than 13,000 kilometres of fibre, among other telecoms assets, making the business case for the fourth operator viable, they added.

Joint venture commission and tender selection chair U Zaw Oo said the military company was chosen in part because it could offer support for the fourth telco.

Governmental enterprises were invited to participate in the fourth operator business, and MEC took a shot, he said.

“Other government entities … also recommended MEC would be the most suitable government shareholder because they are already operating telecoms-related services in the country and have an infrastructure network.”

The new operator could do with a launchpad, as it will enter a tough market where competition is already fierce. Around 70 percent is occupied by foreign entrants Ooredoo and Telenor and state-owned incumbent MPT.

If negotiations are successful, Viettel will pay 49 percent of a US$300 million licence fee, equivalent to its prospective holding in the company.

This is lower than fees paid by the two foreign operators already in the market, which both own 100pc of their operations – Norwegian operator Telenor paid $500 million and Qatar’s Ooredoo was reported to pay more than $1 billion.

Myanma Posts and Telecommunications (MPT) declined to comment on the amount the operator paid for its licence.

Both Ooredoo and Telenor earlier in the year approached the government over the issue of a “level playing field” for all players in the telecoms market.

Telenor CEO Petter Furberg told The Myanmar Times in February the government had to ensure the new operator would enter the market with the same rollout requirements and licence fee payments.

However an industry insider at that time said the new player would probably pay a lower licence fee as it would arrive late to the market and expect to make less profit.

Recent figures provided by the top three telcos put SIM card subscriptions in the country at around 39 million. A MECTel company official reported in August 2015 that the operator had 3.8 million customers.

Ooredoo CEO Rene Meza put real penetration in market at about 45 percent, as many users carry more than one SIM card.

Myanmar’s telecoms industry looks drastically different than even five years ago, when SIM cards were lottoed off and could cost thousands of dollars on the black market.

U Zaw Oo said that the fourth operator is being encouraged to provide affordable and accessible telecoms services to the public – especially the almost two-thirds of the country that lives outside its urban centres.

“We outlined that perhaps the fourth operator can focus more on rural areas as a way to narrow the digital divide,” he said.

Value-added services were also sought, with U Zaw Oo highlighting fixed-line internet and mobile money.


Source: Myanmar Times

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