Myanmar never gets old

Five years ago, Myanmar had no towercos on the ground and buying a SIM card was a prohibitive privilege. Now, the country has 56mn mobile subscribers and a 110% mobile penetration. Moreover, the Post & Telecommunications Department (PTD) reports 23,381 towers across the country’s diverse geography with a tenancy ratio of 1.35, which varies from 1.1 to 2.2 between different players. This dynamic and evolving towerco playground has benefited from the implementation of a modern regulatory regime, which has facilitated the entrance of independent infrastructure players while turning a monopolised, outdated telecom market into one of the most competitive MNO landscapes in Southeast Asia. Market leader Irrawaddy Green Towers (IGT), regional innovator edotco and latest MNO entrant Mytel came together at the 6th TowerXchange Meetup Asia to discuss the evolution of Myanmar’s tower market and what the future holds for investors and towercos.

In 2018, the entrance of fourth operator Mytel reshaped Myanmar’s telecom market and stirred a new wave of organic growth after the initial Ooredoo and Telenor deployment frenzy. Although 2019 didn’t deliver as much organic growth as the previous years, Mytel continued building new sites at a considerable pace. In a very Viettel fashion – the company tends to self-build most of its sites in the markets where they operate – Mytel has developed many small infrastructure subsidiaries across Myanmar to satisfy its growing BTS needs. However, the country has set an exception in the telco’s international strategy: in Myanmar, Viettel has massively relied on independent towercos as the company recognised it would not be able to achieve its coverage commitments without their support and expertise. So far, Mytel has built and owns 3,207 new towers and co-located on over 5,000 sites.

As of January 2020, the MNO holds around 20% of the market share after less than two years of activity, which, as per Mytel’s comments, would not have been possible without its infrastructure partner’s support. For Mytel, dealing with towercos is still a learning process, and not necessarily an easy one, but it has indeed been fruitful.

During the plenary panel at the TowerXchange Meetup Asia, Mytel’s Chief External Relations Officer U Zaw Min Oo recognised the value of their partnerships and politely demanded patience from their infrastructure counterparties on this process. As per its initial three-year plan, Mytel estimated the need of 10,000 BTS or points of coverage in order to meet their regulatory requirements and the MNO strategy was to deploy and own 40% of the total new sites while co-locating the remaining 60%. The company has worked with panel participants IGT and edotco while also giving new business to smaller players such as Eco Friendly Towers and MNTI among others.

How do you manage to become and remain the tower market leader in a country like Myanmar? To answer that, IGT’s CEO David Venn highlighted the critical role that regulator PTD played in the country’s tower success story. The opening of the once monopolised telecom market as well as the recognition of towercos in the legislation allowed them to enter the market.

Venn, an experienced telecom executive, mentioned one of the most critical aspects that massively paved the way for IGT and other infrastructure providers. PTD introduced an anti-parallel infrastructure law that doesn’t allow towercos to build sites too close to each other. The law avoids overlaps, drives a healthier competition and pushes new tenants to the existing towers, since towers need to be built 200 metres away from existing ones. Therefore, all new sites being deployed have a strong co-location potential, which also requires them to be technically strong and respect high engineering standards. In David Venn’s words “in Myanmar, each tower is a monopoly within 200 metres” – a factor which allows towercos to build with a long-term vision in mind and operate with certain commercial warranties.

Regulation was the first step, but IGT was very clever in carving out operational its niche. Ooredoo and Telenor’s entrances drove many new orders for the first towercos in the market, but IGT didn’t catch that early wave. After that, most of the remaining demand came from rural and rough locations and IGT turned that handicap into its unique selling point. As Venn noticed, IGT’s team mastered the art of building reliable and shareable towers in very tough, remote places under logistically challenging circumstances. Now, 60% of its 3,234 self-build towers portfolio is still off-grid.

Commercial and financial savvy is also key to succeed in Myanmar and elsewhere. In fact, once a towerco becomes the largest in a given market, the challenge is to maintain that lead against the competition. “We don’t only have great shareholders, but also very good commercial relationships with the four MNOs and broadband operators. At the end of the day, they are your tenants and the main driver for new orders,” Venn added. One of the company’s principles is not to speculate hence IGT does not build any site without a solid master agreement, at least one anchor tenant and the required funding.

As previously mentioned, 2018 was a very dynamic year for MNOs in Myanmar. Both Telenor and Ooredoo were rushing to meet their obligations while MPT fought hard to retain its leading position. The emergence of Mytel was also a huge driver for new rollouts. However, 2019 was much quieter and edotco decided to focus on what the company does best: innovate. Renewable energy generation is a key priority for the infrastructure provider and last year its Myanmar team deployed the first integrated solar and wind tower in the country, generating 10kW of electricity. The country’s first bamboo tower and a shareable BTS hotel, both in Star City, were some of the other pioneering innovations that edotco developed in Myanmar over the last year.

Myanmar is a very data centric market, more than any other in the region, and around 80% of the consumption comes from internet use. Therefore, capacity is still a priority even though demand to increase coverage through macro-sites is slowing down. Amended revenue as well as new urban sites are in demand and edotco is seizing this wave to offer innovative solutions able to take prices down. Cities require less equipment but larger coverage and BTS hotels are a great fit. Further, edotco is also exploring two-tenant poles. On the business front, Ooredoo remains edotco’s best partner and the company helped them in hitting the MNO’s target of 6,000 tenancies while taking over the management of power across Ooredoo’s 1,000 sites.

Although 5G is definitely spreading as a buzzword across the country, Myanmar is not quite ready yet, as MNOs still need much more urban coverage to complete their 4G rollout. Yangon is still procrastinating the decision on how to split the city between the four MNOs and the process has been stopped and now reinstated. Mandalay seems to be one-step ahead and it has already agreed on a smart city plan. Organic growth will be limited until the government allocates the 5G spectrum, but in the meantime existing urban sites will fill up with co-locations.

On its part, Mytel still needs over 2,000 sites in both rural and urban areas to meet its 10,000 towers target and the company will rely even more on third-party support for those new deployments.

Consolidation is the natural step for a fragmented market with over a dozen of towercos, many of which with very small portfolios.

The local tower industry is still fairly young and MNOs own around half of the existing towers, which could lead to exciting sale and leaseback opportunities in the future. The 5G spectrum price will be a crucial factor as operators might require cash to participate in the upcoming bid. Mytel’s portfolio could go on sale, but only 20% of the company’s towers can welcome more than one tenant, which will indeed affect its valuation. edotco is there for the long run and even though the company’s priority is to grow organically, they are open to explore potential acquisition. The company is currently managing power in Ooredoo’s sites so it would make sense for the towerco to acquire those assets if and when Ooredoo decides to release them, just as the MNO recently did in Indonesia. In the meantime, IGT is actively seeking new investors.

The potential for future SLBs combined with the 5G spectrum auction and the subsequent deployment plans of local MNOs could lead to the entrance of new international investors into the market. After all, Myanmar remains an exciting platform for innovation, organic growth and strategic acquisitions.