As Myanmar continues to progress towards more liberal political institutions, one of the key demands President Thein Sein has made to foreign investors and governments is that they deliver a quick “democratic dividend” to build support for further reforms. Previously dominated by a few military elites, Myanmar is emerging from decades of a centrally planned economy, so foreign investors face almost entirely greenfield opportunities in many sectors. The previous system of institutionalized cronyism led to dominant, but lumbering, monopolies that failed to deliver even the most basic services effectively. Electricity is sparse and the state’s only telecommunications firm, Myanmar Post & Telecommunications (MPT), is so inefficient that until recently, it could cost up to $2,000 just to purchase a SIM card. Naturally, this led to very low cell phone penetration rates and has made mobile the preserve of the well-connected.
In other developing economies, mobile phones have provided a broad-based growth potential in both public and private sectors, and have led to a huge increase in business development and opportunities. An early pioneer in mobile payments, the M-PESA system from Kenya’s Safaricom, has become a household term, even beyond the world of development practitioners, for its success in providing modern banking services to marginal populations. Even in the most far-flung regions of the developing world, people can be seen on their mobile phones: coordinating businesses, checking market prices for agricultural goods, or simply staying in touch with families after migrating to seek work in cities. It is unsurprising, then, that the World Bank economist Zhen-Wei Qiang has estimated that a developing country can increase their GDP by 0.8% for every 10% increase in mobile penetration among their populace.
While the rest of the world is witnessing this revolution in mobile penetration, Myanmar lags way behind. The mobile provider Ericsson estimates that by 2017, 85 percent of the global population will have access to 3G coverage, and that for many, this will be their primary means of access to the internet. ASEAN countries are no exception to this phenomenon. Mobile penetration rates in even the most underdeveloped and closed nations — such as Laos and Cambodia — boast rates of 87 and 70 percent, respectively. Myanmar, by comparison, sports a paltry 3 percent.
However, that figure may soon change. Thanks to a revised Telecommunications Law, Myanmar seems poised to reap the benefits of 3 and 4G technology. Under the new legislation, 4 telecoms licenses were issued: one to MPT, one to Yatanarpon Teleport, a public-private partnership, and two to foreign firms, all in the name of increasing competition and technology transfer. Recognizing the important economic benefits of connectivity, the government has decided to stipulate 3G penetration targets of 50% by 2014, rather than charge foreign firms for the licenses. While this may seem unrealistic, it is not far out of line with growth rates already recorded in other parts of the world.
Fortunately, Burmese consumers began to feel the impact of increased competition even before the foreign licenses were awarded. On April 25th, MPT conducted a lottery for 350,000 SIM cards, each selling for about $2 — 0.1% of their previous price. This should only progress further with the entrance of foreign firms. After a highly competitive and largely open process that included over 90 bidders, Norway’s Telenor and Qatar’s Ooredoo became the two foreign firms that won 15-year licenses in late June. In a joint statement on Monday, Telenor announced that peak airtime costs would be around 25 kyats (~ 3 cents) per minute — half the current price charged by MPT — and Ooredoo said it would have an offer with a free SIM card. In response, MPT announced in Parliament that it would reduce fees by between 15 and 25 kyat per minute. Now that the power is back in the hands of consumers, the race is clearly on to win their hearts and handhelds.