Myanmar's opening offers risk and opportunity

Long cloistered Myanmar offers companies opportunities as it opens up its economy but bottlenecks in the award of telco licenses already highlight the challenges.

Myanmar, "the golden land", is in the midst of opening its doors after decades of isolation. Hotels are springing up in the capital city of Yangon and investors are flocking to the country. However, its opening offers both big opportunities and big risks.

Qatar-based Ooredoo, which is controlled by Qatar Telecom, was one of two companies to win a coveted telco licence in Myanmar in late June, after a competitive auction that drew bids from the likes of SingTel, India's Bharti Airtel and Malaysia's Axiata, among others.

The company, along with Norway’s Telenor, won a 15-year telecom licence to build out a mobile network in Myanmar. But the subsequent granting of these licences has been delayed.

“We have been told [we would get] licences by the end of the year [2013], and it’s the 16th of January, so we are a few weeks late, but the information we have suggests that we have got days, weeks, not months to wait,” Ooredoo's chief strategy officer in Myanmar, Nick Swierzy, said on Thursday at a panel discussion at the TMT Finance & Investment Asia Pacific conference in Hong Kong.

Myanmar, long cloistered from the rest of the world, is more than a quarter larger than Thailand and remains one of the world's few genuinely untapped markets. It doesn't even have a McDonald's or Starbucks, which is not a criticism but nonetheless underlines the degree to which global commercial trends have passed the country by.

That might change soon. The predominantly Buddhist country is expected to hold elections in 2015 and pro-democracy leader and Nobel prize winner Aung San Suu Kyi is among those who are expected to stand.

So with the country preparing to open up, investors are jostling for a piece of the action. Bankers expect deal flow in Myanmar to pick up this year, as the country opens its doors to foreign enterprises. "Myanmar is similar to how Mongolia was a few years ago," said one Hong Kong banker. "We're expecting more deal activity this year," he said.

Myanmar will need to build out its infrastructure and, as it does so, foreign companies such as Ooredoo and Telenor will be hoping to establish a foothold in the nascent market, which has a population of 64 million people. (Mobile penetration rates in Myanmar are below 10%, far lower than the rest of Asia).

For now, though, the country remains one of the most restricted in Asia. Journalists for instance, have difficulties getting visas to enter the country, and there are nagging concerns over the rule of law and how foreign investors will be treated by the military government. 

Investors are closely watching the dispute over Myanmar Brewery between Singapore's Fraser & Neave (F&N) and its opaque government-linked partner Myanmar Economic Holdings.

The dispute unfolded after companies controlled by Thai billionaire Charoen Sirivadhanabhakdi took over F&N and, consequently, its 55% stake in Myanmar Brewery. Myanmar Economic Holdings claims it should have had the option to buy F&N's 55% stake in Myanmar Brewery and launched arbitration proceedings against F&N last year.

Judging by the growing mobile phone traffic into Yangon, the rewards would appear to justify the risks. Despite the delay, Ooredoo's Swierzy praised the telco auction process for being a clean one, and noted that given the complicated nature of the process, it would be "commendable" if the licences were awarded by the end of January or early February.

A number of bidders had thought that it would be better to partner a local group but the two selected bidders were wholly international, providing testament to the running of a "straight process," he said.

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