Norwegian multinational Telenor is cautious about the impact of a new commercial tax planned by Myanmar on the country’s millions of mobile users, its chief executive said Friday.
Myanmar, one of the world’s hottest frontier markets, is launching a 5 percent tax for mobile usage effective Friday, a move that comes amid fierce competition in the growing telecommunication sector.
Telenor claims to possess the biggest 3-G network in Myanmar.
“We definitely told them [the government] to be careful about the tax,” said CEO Sigve Brekke.
The Norwegian company splashed big money into Myanmar when it first launched in 2014. Covering 13 of 14 regions, Telenor is now is expanding into rural and ethnic areas in the hopes of eventually providing mobile coverage to 90 percent of the 53 million-strong population within five years from inception.
Telenor is one of numerous foreign entrants to Myanmar as the nation opens up its economy following years of isolation under military rule. The country made major strides in 2015, with foreign direct investment (FDI) hitting a record $8 billion and the launch of its first stock exchange.
Myanmar’s new president Htin Kyaw (L) receives the presidential seal from outgoing president Thein Sein, during a handover ceremony in Naypyitaw on March 30, 2016
Other foreign telcos in the country are Qatar’s Ooredoo and Vietnam’s Viettel, which only recently received its license.
Proponents of the tax say it’s needed as a source of revenue for the government to fund badly-needed infrastructure, but Brekke hinted that it may hit Telenor’s user intake.
“Unfortunately, this is what we see in all our Asian markets. We’re an easy [tax] target for governments who are trying to deal with deficits and budgets. What we tell governments is that at the end of the day, we need to charge these costs back to our customers.”
Still, Brekke remains bullish on the “exploding” nation, citing a widening middle-class consumer base.
“This market went from nothing to a very advanced market in one year. We added 14 million customers in 15 months, with 60 percent of those customers already active data users, the same percentage we see in Thailand, Malaysia, or more advanced markets.”
In terms of mobile subscriptions, Myanmar was ranked the fourth fastest-growing market in the world, according to an Ericsson report in February.
Users are consuming everything from social media applications, including Facebook and WhatsApp, to advanced data services, such as video and news, Brekke said.
“There is no difference between a mass-market customer in Myanmar to one in Bangkok, or Singapore.”
But with explosive growth comes major risks.
Institutional capacity, corruption and the legal framework, supply chain management and ethnic tensions are some of the biggest obstacles in Myanmar, Brekke said, adding that he hopes the new government will help enforce best practices in these areas.
Htin Kyaw of the ruling political party National League for Democracy (NLD) was sworn in as Myanmar’s first civilian president in fifty years on Wednesday and expectations are high for the NLD to undertake key structural reforms to achieve the country’s full economic potential.
Source: CNBC
