It’s never a good sign when a government steps in to block internet access, or bans a communication platform such as Twitter, and unfortunately such practices are not unheard of in the markets we cover at Developing Telecoms.
For seven months between summer 2021 and early 2022, Nigeria’s government enforced a high-profile ban on Twitter, while just days before an election in January 2021, Uganda’s longstanding ruler Yowere Museveni imposed an internet blackout ahead of voting. Museveni’s rule continued; his leading challenger was placed under house arrest.
While these actions are indefensible in terms of freedom of expression, we can at least take comfort in the fact that in these examples, services were eventually restored and communication has been allowed to continue unabated - although Facebook remains banned in Uganda, to the detriment of the country's telecoms sector and economy - in an apparent acknowledgement by these countries’ governments of the role that the telecoms sector plays in the development of their economies.
The same cannot be said in the case of Myanmar, which has become something of a basket case economy since a coup d’état enacted in February 2021 by the military junta that once ruled the country. After seizing power, the authorities immediately began restricting access to internet services and social media, demonstrating their understanding of the role that free communication plays in resisting oppression. While the situation was undeniably bad, it only worsened as the junta resisted calls from telecom operators and internet providers to lift the blackouts and allow access to communication services.
In the months since the coup, the junta has made it clear that internet freedom will not be restored in Myanmar despite pressure from both the country’s populace and private companies operating in the market. In June 2021, the junta issued a directive to operators, giving them just weeks to install full intercept technology that would allow the authorities to track users and monitor voice, SMS and data traffic. The restrictive measures forced many subscribers to switch off. Understandably, this was the final straw for the two international players in the market, Ooredoo and Telenor.
Telenor was the first to depart by selling its unit to Lebanese investment company M1 Group for US$105 million, pointing to increasing human rights concerns in the country since the junta took over. Telenor Group President and CEO Sigve Brekke said the economic situation in Myanmar was “extreme and deteriorating” and that an exit was the “most realistic alternative” to ensure employee safety. Telenor’s Myanmar unit was deemed an impaired asset recording a loss of NOK6.5 billion (US$606 million) in its Q1 2021 results released weeks after the government takeover, prompting the group to commence its search for a buyer. Since launching operations in 2014, Telenor had invested around NOK5.3 billion into its Myanmar unit.
Ooredoo soon followed suit, selling its Myanmar unit for US$576 million to Singapore-based Nine Communications. Group CEO and managing director Aziz Aluthman Fakhroo stated the move was a regular shift in strategy to remain competitive.
Speaking to Developing Telecoms, S&P Global Market Intelligence associate research analyst Zhu Xiuxi said that the departures of these international groups will “limit” Myanmar’s efforts to expand fixed and wireless broadband coverage. Zhu pointed out there are “concerns” around whether the current crop of operators will be able to keep connectivity services affordable due to the military junta raising taxes from 5% to 15% and directly hitting profits.
“We expect the previous infrastructure for internet networks to remain in use after Ooredoo is handed to Nine Communications and Atom is handed to M1 and local partner Shwe Byain Phyu, but the cost of buying up the businesses and management integration will impact R&D efforts, infrastructure upgrades and promotion campaigns,” said Zhu.
“That also brings up a concern of whether the newly formed entities can carry out the same technologies used in the remaining infrastructure deployment as Ooredoo and Telenor did, which involved communication chip acquisitions and fibre lines development.
“Mobile and wired internet penetration in Myanmar are both below 50%, and we were expecting fast growth in the country’s telco industry with foreign capital injection since the first entrance of a foreign telco giant in 2014. The foreign carriers started to build telco infrastructure from scratch but the transition of ownership in the two telco businesses posts a question mark on whether such development will continue.”
The current landscape of Myanmar poses the risk of low profitability for operators despite there being room for growth as around half of the population is connected. Myanmar is also in the midst of migrating to 4G/4.5G and rolling out more fibre.
“Both projects require a great amount of investment. Given the low penetration of both mobile and fixed internet, high taxation and unstable political environment, whether they are able to earn a return on their investment would be a practical concern,” said Zhu.
By pursuing an agenda of oppression, Myanmar’s junta has pushed international telecom providers – and their associated investment – out of the market just as it was preparing to capitalise on its potential. While there is popular demand for the expansion of Myanmar’s telecoms sector, the junta’s actions show that it does not govern in the interests of the public – and indeed the strains that it has placed on Myanmar’s telecoms sector are actively stymieing the country’s development.
This article was updated on 14/10/2022 to specify that Uganda has not yet lifted its ban on Facebook.