Telecoms giant Digicel invests in Myanmar

Telecoms giant Digicel invests in Myanmar

BY VICTORIA BRUCE

Senior Reporter

M-ZINE+

October 11, 2012 

Digicel founder Denis O’Brien makes a point of integrating
with the culture in the countries his company operates.

Digicel, the largest mobile telecommunications operator in the Caribbean, says it’s ready to sink up to US $1 billion into developing Myanmar’s telecommunications network.

Irish entrepreneur and founder Denis O’Brien says Digicel has its sights set on entering the market through a joint venture with state-owned entity, the Myanmar Post and Telecommunications (MPT), which currently enjoys a monopoly on the market. Digicel may be a young firm at only 11 years since its inception but it does have some clout, boasting over 13 million customers in 31 markets.

“We think we could work really well with them,” Mr O’Brien told M-Zine+ in an exclusive interview at the Myanmar Global Investment Forum, hosted by Euro Money in Naypyitaw last week.

Though Caribbean-based (Kingston, Jamaica), the company is by no means limited to those island and Central American markets. Since 2006, it has been expanding eastward across the Pacific. Its Pacific network now extends to Papua-new Guinea, Vanuatu, Nauru, Fiji, Samoa and Tonga. Thus a move into Myanmar seems a logical expansion for the fledgling company.

“We are used to working in countries with different cultures and we’ve made a point of integrating ourselves in all the countries we’ve worked in and bringing local management up through our ranks very rapidly so we think there’s a way of working with MPT,” Mr O’Brien said.

Part of that integration has been a policy of giving back to those communities. For example, in its Pacific network, Digicel has work to aid schools, help children with heart problems, and set up an AIDS hotline, all in Papua New Guinea.

“In order to build a world-class, future proofed mobile telecommunications infrastructure in Myanmar, which will make affordable telecommunications accessible to the people of Myanmar, an initial investment in the region of US$1.2 billion needs to be made,” Mr O’Brian said, adding “as telecommunications penetration and usage increase, the investment will also increase,” he said.

As post-sanction Myanmar takes steps to liberalize its telecommunications industry, many big-name firms are jostling for investment opportunities and Digicel, which has an office in Yangon, is positioning itself at the front of the pack.

The group has invested around US $650,000 into developing an online recruitment site for Myanmar and has already attracted more than 30,000 page views in the past three weeks, said Vice Chairman Leslie Buckley.

“We operate as local as we can,” Mr Buckley said, highlighting the group’s strategy to integrate itself in host investment countries through strong community engagement, such as its sponsorship of Yangon’s football scene.

Sports support has been a feature of Digicel’s community work elsewhere. In Tonga and Samoa, one of its projects is the DigiGames that, in the company’s words is meant “to provide year-round sports training and athletic competition in a variety of Olympic type sports for children and adults with intellectual disabilities, and to give them continuing opportunities to develop physical fitness, demonstrate courage, have fun and participate in a sharing of gifts, skills and friendship with their families, other Special Needs Athletes and the wider community.”

Industry insiders said the Myanmar government is closing the deal on a new international consultancy, and is down to a shortlist of five from some 64 applicants to oversee an upcoming tender where foreign telecommunications firms can joint venture with local firms.

Names such as Indian network services company GTL Limited, China’s Huawei and Thailand’s Symphony Communications are joining consultant hopefuls from China, Japan, Australia, Germany and the United States, insiders said.

“We have been participating for this particular tender for the consultancy,” said GTL’s head of business development, Sanjay Hirpara.

“There are definitely good opportunities here for investment and for business,” Mr Hipara said.

Somchai Treerattanukukool, Symphony’s senior vice president of marketing said the group had put forward a proposal to be the consultant and were hopeful they’d be selected.

Last month U Tin Win, the chief executive officer (CEO) of Yatanarpon Teleport (YPT) told The Myamar Times that two operating licenses could be given to the mobile and fixed line arms of government entity Myanmar Posts and Telecommunications (MPT) and one awarded to YPT.

But new developments announced at a telecommunications and ICT investment forum, hosted by MPT in Naypyitaw last Friday indicate that there could be a few different ways for international companies to enter Myanmar’s untapped telecommunications sector.

Two licenses will be doled out to MPT and YPT and foreign firms can bid to joint venture with them in an upcoming international tender, to be overseen by the government’s new consultant, said U Than Tun Aung, deputy director of the Posts and Telecommunications Department.

Up to two more licenses could be awarded to foreign firms which can then choose to start up a new, green field firm with a local partner, or come in with 100 per cent capital, U Than Tun Aung told a roomful of industry players, including heavyweight Russian venture VimpelCom, the sixth largest mobile network operator in the world in terms of subscribers, Norwegian firm Telenor, which is one of VimpelCom’s major shareholders and Vietnam’s VNPT-Fujitsu.

However the option for 100 per cent foreign-ownership would depend on the terms of the Foreign Direct Investment (FDI) amendment bill, which has been passed by both houses of parliament and is currently being reviewed by the President, U Than Tun Aung said.

As part of the government’s “road map” to telecommunications sector reforms, a 700-staff strong regulator would also be formed to oversee the regulation of telecommunications services, such as network sharing and equipment standards, U Than Tun Aung said.

While Myanmar’s untapped telecommunications sector and local market of some 60 million people make it an attractive opportunity for foreign investors, not all are starry-eyed over their options.

“Is this just an exercise to gleam as much technology from international companies by saying ‘we will partner with you,’” mulled one foreign investor and supplier of international handsets backstage at the forum who requested not to be identified.

“The local firms will want a 50-50 joint venture arrangement or to be the majority shareholder but they won’t match you buck for buck – they’ll match you by allowing you to partner with them and access that operating concession,” he said.

Human rights groups including US-based Conflict Risk Network, have highlighted concerns that investment in the telecommunications sector could fuel repressive tactics of internet control and surveillance.

“The ICT sector is also high risk, as its potential positive and negative roles are heightened in conflict-affected areas,” said Kathy Mulvey, Conflict Risk Network Director.

Ms Mulvey said ICT products and services, when used in the right way, could support free expression and association but can also be manipulated by governments to repress freedom of speech and access to information.

During a crackdown on protests in 2007, Myanmar became one of the first countries to temporarily shut down its Internet, the group said.

But if managed well, the development of Myanmar’s telecommunications industry will be key to the country’s economic growth, said Jared Bissinger, a PhD student at Australia’s Macquarie University who is studying Myanmar’s economy.

“As in many other developing countries, investment in Myanmar's telecommunications industry can decrease the costs of doing business, improve access to information, and facilitate inexpensive and convenient transactions, all of which will help improve the business environment." Mr Bissinger said.

Mr O’Brien said telecoms was the umbilical of any economy. Countries that lag in adopting new technologies or upgrading the ones they have – whether  from bureaucratic infighting, overbearing regulatory frameworks, lack of funding, or fear of how the technology can be used if not controlled – often rue the results and have to redouble efforts to try to catch up.

“Everyone is talking about a hyper-growth economy here but they’re forgetting one thing, that without a telecommunications infrastructure, that just won’t happen,” Mr O’Brien said.

Because its developing its industry so late in the game, Myanmar has the advantage of learning from the lessons of other countries, and can now cherry pick the most advanced technology available on the market and go straight to 4G services, Mr O’Brien said.

“All neighboring countries have 2G or 3G but what Myanmar can do now is just go all the way to LTE and bring broadband to every part of the country to 60 million people and bring them voice and other data services,” he said.

“It could be a quantum leap – Myanmar could jump 50 years all in one move,” Mr O’Brien said.

Johan Adler, country manager for Swedish telecommunications heavyweight Ericsson, which opened their Yangon office in June, is bullish about future opportunities to provide technology and services to the new telecoms operators.

Johan Adler, country manager for Ericsson Myanmar.

“We believe our experience of rapid large scale deployment of mobile networks combined with our services strength would be a strong motivation for any operator to select Ericsson as a technology partner,” said Johan Adler, Ericsson’s country manager for Myanmar, which operates in over 180 countries and is one of the world’s biggest providers of telecommunications equipment and data communication systems and specialising in mobile networks.

Mr Adler said LTE, the fourth generation of mobile technology, offered around three times faster data speed than the latest version of WCDMA/3G.

“In a Myanmar context, with relatively slow data access connections, LTE can be a substitute to the fixed data line and offer superior bandwidth to residential users and small offices.  It's fast to deploy and faster than any other service available today,” Mr Adler said.

ENDS