TowerXchange’s first visit to Myanmar was in 2014, when the tower market was just beginning to take shape with the opening of the market to foreign operators. In March 2017, TowerXchange’s Head of Asia hit the ground in Yangon and took 13 meetings over the course of the week, connecting with industry stakeholders who are preparing for the next defining period of growth in the country. From a single operator, to a three and soon to be a four operator market, Myanmar will see strong tenancy ratio growth, organic tower growth, new market entrants, as well as two or three tower transactions within the year. Read on for the comprehensive guide on everything you need to know about Myanmar towers right now.
Operator landscape
MPT: Since the entry of Telenor and Ooredoo in 2014, incumbent Myanmar Posts and Telecommunications (MPT) has managed to remain the number one MNO in the country by number of subscribers, network coverage, and service. However, Norway-based Telenor has been closing the gap, displaying business savvy accumulated from its many years of experience as a global MNO with a strong foothold in emerging markets.
In the first half of 2016, MPT started to share its infrastructure with the other MNOs. It has also changed its capex model, shifting to build-to-suit (BTS) with the towercos rather than building through turnkey providers such as Huawei and ZTE. As it awards BTS contracts to various towercos as a test, awarding more orders subject to proven success, MPT was also described as likely to do more co-locations down the road. Since partnering with Japan’s KDDI and Sumitomo (MPT-KSGM) in 2014, MPT has built approximately 1,200 to 1,300 new towers.
Telenor: Telenor Myanmar’s new CEO Lars Erik Tellman was appointed in August 2016, though he has been in Myanmar since July 2013 as the organisation’s previous CFO. Given the background of its new leader, Telenor is said to be critically eyeing all investments. It currently has a network of 7,400 towers that covers roughly 90% of the country’s population and township, with plans to add another 10,000 sites by 2018. It also has retained assets of 1,200 sites, which are predominantly rooftops and currently up for sale. Total investments in the country are said to be over US$1.5bn.
Ooredoo: Ooredoo remains the number three operator and has been relatively inactive in terms of expanding its tower network in the past six months. It hasn’t been doing many co-locations and is very much focused on cost optimisation. It spent almost double than Telenor on its operator license (blind bid) and also invested more in getting its towers built (which is not necessarily a bad thing). Compared to Telenor, Ooredoo did not build as many of its own sites, with what we understand to be around 300 rooftop structures on its balance sheets, with under 20% of it as RDUs (rapid deployment units). Ooredoo initially chose to retain ownership pf power assets when having sites built by third party towercos, although it eventually adopted a full service tower+power contract structure, similar to Telenor. Rumours Ooredoo may consider exiting Myanmar have been circulating for a while now, though it remains to be seen whether this will materialise.
Mytel: Announced last year and formally awarded in January, the fourth and final operator license went to Myanmar National Tele & Communications (MNTC), which is a joint venture between Vietnam’s Viettel and a consortium of 11 local companies (Myanmar National Telecom Holding Public Limited). MNTC has announced it will invest US$1.3bn and focus more on rural coverage. The license is for 15 years and the MNO will operate in the 900MHz and 2.1GHz bands. MNTC will be operating under the Mytel brand and is expected to have at least 2,500 co-locations plus up to another 2,500 to 3,000 new builds to launch its network. The approach is likely to incorporate all the rollout options available – co-locations with towercos and existing MNOs, as well as BTS with towercos and building on their own. Most towercos have been in discussion with Mytel for the past few months though negotiations have yet to finalise and no contracts have been signed. The management team is in place for Mytel, with a CEO, CFO, CCO, CIO, CTO, and CERO (chief external relations officer), while there will be eight board of directors, with at least two representatives from Viettel and two representatives from the local consortium.
Spectrum
There have been multiple delays to the 1,800MHz spectrum auction, expected for late 2016 at one point, then March 2017. However, in late February the government published a consultation paper on a direct allocation of the highly desired frequency instead of an auction. All the operators are looking to further expand and improve their 4G coverage through the 1,800MHz spectrum. The Post and Telecommunications Department (PTD) is looking to offer all existing MNOs the option to acquire 2x10MHz at a pre-determined price, with a chance for additional 2x10MHz on a first come, first serve basis until all of the available spectrum (2x75MHz) are allocated. With SIM penetration flattening out, MNOs are looking to grow through data and all are expected to take part.
Industry tenancy ratio and lease rates
On average, most of the mature towers that are two-plus years old would have a tenancy ratio around 1.6, with some as high as the 1.8 to 1.9 range. One interesting point raised by an industry source was that the towercos who initially built for Ooredoo have thus far fared better as Telenor was fairly aggressive in adding co-locations as it built out its network while Ooredoo was slower to do so. By 2018, the Myanmar market will certainly have some portfolio tenancy ratios growing to 2.0 once Mytel goes online.
When it comes to lease rates, standard rack rates would be around US$1,400 to $1,500, but with wide variance given discounting of co-locations and/or bulk orders. Some significant discounts were mentioned leading to the notion that the industry needs to start understanding the “equivalent” lease rates, or using revenue per tower as the definitive metric.
Expected tower transactions
While build volumes are unlikely to reach the peak of the past two years, towercos looking to stay in Myanmar are seeking both organic and inorganic growth.
It is fairly well known within the industry that Telenor’s 1,200 site portfolio is up for grabs, with the majority being rooftops; it listed 1,050 rooftops in its December 2016 presentation to investors and analysts. At least three local towercos are said to have expressed interest and likely took part in Telenor’s “show and tell” of some sample sites to see firsthand what the structures and surrounding conditions look like. The successful bidder would have to factor in improvement capex on top of the acquisition price tag to upgrade the towers as we heard most were built for single tenancy. The locations are said to be good so for towercos with ambition, experience, and cash available, they would certainly be keen to get their hands on this portfolio. TowerXchange expects this transaction to close soon.
Discussions regarding the PAMEL sale cooled down in December, though we believe it is still in the works. TowerXchange heard suggestions of valuations between US$300mn and US$350mn. With a portfolio of 1,250, this would be the equivalent of US$240,000 to US$280,000 per tower. For comparison, edotco paid US$221mn in December 2015 for a 75% stake of the Digicel (MTC) portfolio, and roughly one year later another US$35mn for 12.5% of Yoma’s stake. Thus far, edotco has paid US$256mn for 87.5% of the 1,250 tower portfolio, placing cost per tower at US$240,941. The base price of the remaining 12.5% was said to be around US$35mn. TowerXchange is generally bullish on the transaction going through this year and paving the way for further towerco consolidation in Myanmar. There is also rumour that PAMEL is refinancing. Back in October 2014, it secured US$85mn in financing from DBS, ING, OCBC, Standard Chartered and Sumitomo Mitsui.
While some think IGT could be too big for existing players in Myanmar to acquire, it may have the scale that international towercos would like to see to enter a market.
Another potential candidate for acquisition might be Apollo, with backing by US private equity investors who may consider the optimum time to be approaching to exit.
New entrants
During this trip TowerXchange learned of KBZ Towers, which through a partner is making the rooftops of the KBZ (Kanbawza) Bank branches available for the “installation and commissioning of network operator equipment.” According to the KBZ Bank website, it has more than 414 branches across the country. In Yangon alone, it has 125 branches, with another 88 in Mandalay. As the buildings would already have power and backup generators in place, plus backhaul for the bank’s financial data, KBZ is well placed for a venture of this nature.
American Tower Corporation (ATC) has also been reportedly paying visits to Myanmar, at least once a year, and more recently again. ATC so far only has stakes in India and has yet to expand its footprint in Asia. While an acquisition could be at play, for now their focus seems to be around the BTS opportunities associated with Mytel’s launch.
Another company on the radar of the industry is the company who won the bid for the 200 streetlight and pole project in Mandalay last year. From what we understand, quite a few companies participated in an effort to secure the exclusive rights, with the winner chosen based on its agreement to a revenue (not profit) sharing arrangement with the MCDC (Mandalay City Development Council). The percentage of revenue share was described to be very high according to our source. This portfolio would be more of a micro-play than macro, but could lay the foundation for a new towerco to build upon.
EAGER Communications Group is another firm who may be venturing into tower building. It offers fibre and billboard solutions and apparently has a concession from the YCDC (Yangon City Development Council). It has both fiber optic cable (FOC) and fibre optic duct (FOD) networks installed in Yangon and Mandalay, providing wholesale cable and bandwidth services to operator and ISPs (internet service providers). On its website, there is mention of plans to install monopoles “to provide increased coverage for the MNOs to satisfy capacity demands.”
Drivers for growth
Tower building in Myanmar slowed down through Q42016 and remained sluggish through Q12017, with supposedly only MPT being somewhat active. Generally the towercos are expecting co-locations to come through from Mytel, though it appears contracts won’t be signed in the near term. MPT has also shifted gears and started to award BTS and do co-locations. Telenor of course is still on path to grow its network. What they may or may not have factored in is that Mytel is also considering BTS as part of its rollout. And anything that comes through from Ooredoo is increasingly considered ‘nice to have’ by towercos. All in all, towercos will enjoy both organic and tenancy ratio growth. How lease rates and average revenue per tower will be affected remains to be seen, as the second and third tenants will likely be negotiating hard, while some discounts may kick in for anchor tenants on some of the portfolios as new tenants onboard, depending on the structure of the Master Lease Agreement.
Operators are focused on data and for good reason. As mobile phones become more entrenched and network capacity and quality improves, consumers will end up investing with their wireless carriers to access data for various social media, entertainment, communications, and even payment portals. Fixed internet penetration is very low in Myanmar so the MNOs are in just the right place at the right time to meet the massive data demand.
With gratitude
I would like to extend a big thank you to old and new friends of TowerXchange who took time to meet with me in Yangon. Many introduced me to other members within their organisations or referred me to others at companies that were on my hit list. I am grateful for your generosity, hospitality, as well as the insights and intelligence shared.
Ownership of Myanmar’s new fourth operator
Myanmar National Telecom Holding Public Limited: domestic special purpose vehicle of 11 companies
- Myanmar Technologies and Investment Corporation
- Myanmar ICT Development Corporation
- Myanmar Agribusiness Public Corporation
- Shwe Pyi Tagon Telecommunication Public Company
- Golden Land East Asia Development
- Myanmar Edible Oil Industrial Public Corporation
- Myanmar Industries Alliance Public
- Myanmar Agriculture and General Development Public
- International Power Generation Public Company
- Royal Yatanarpon Telecom Public Company
- Mahar Yoma Public Company
Breakdown of ownership of the 13,478 towers TowerXchange estimates have been built to date in Myanmar
New Myanmar towercos to watch out for
- KBZ Towers (rooftops)
- MCDC streetlight and pole winner
- EAGER Communications Group
- American Tower Corporation?
Snapshot: KDDI Summit Global Myanmar (MPT) CTO opens up on his challenges, concerns, and expectations
TowerXchange: Could you please introduce yourself and your company?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
My name is Masahiro Tada, I joined Myanmar as Chief Technical Officer in February 2016. Previously I was working for KDDI in Japan, mainly dedicated to the general network operations for “au” network, a KDDI mobile operation in Japan.
TowerXchange: When Telenor and Ooredoo were first licensed, a lot of analysts felt MPT would be swept away by the competition, but you’ve maintained and expanded your customer base and maintained market leadership. What have been the keys to your success?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
One key element is we are engaged in a joint operation with MPT, and together we bring a vast wealth of local market knowledge and over 130 years of telecom operations experience in Myanmar. To this KSGM introduced cutting-edge technology and creative commercial activities, which were previously successful in Japan. This winning formula has allowed MPT JO (joint operation) to maintain its number one position, whilst offering our 23million subscribers excellence in terms of service and quality of network.
TowerXchange: What are some of the main challenges you face as a CTO right now? What keeps you up at night?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
We are noticing a significant improvement in engineering competencies in Myanmar, as we support capacity building across our sector. However, driving and sustaining ongoing quality improvement is our most challenging KPI’s, and this challenge is never-ending.
TowerXchange: How does MPT go about making technology decisions? What are some of the key factors for consideration?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
We gather market insights from all levels of our joint operation, particularly with our Regional Teams. This coupled with our network nominal planning shapes the future technology strategy for MPT JO.
TowerXchange: As the country gears up for 4G rollout and increasing data usage, what does that mean for your towers/network?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
Once 4G implements, there will be a significant increase in power demand and consumption. We need to ensure we are prepared for this and have sufficient battery capacity in place to cope with the usual periods of prolonged power outages experienced in Myanmar.
TowerXchange: How would you characterise the challenges maintaining uptime, particularly for sites outside of Myanmar’s three main cities and beyond the reach of the grid?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
Under the current situation, there are many off-grid areas in Myanmar, therefore diesel refueling and generator maintenance is the key challenge, and also site build and operation in the rainy season is also very important.
TowerXchange: Who is responsible for installing and maintaining energy solutions at MPT’s cell sites?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
Our vendors and subcontractors are taking care of this, with the support of our O&M divisions. There a number of initiatives to reduce the energy opex on a site-by-site basis.
TowerXchange: How can MNOs tap into data and analytics to better improve O&M?
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
Currently we are conducting analysis on a micro (site) and macro (region and whole country) basis. Our strategy is to drive continuous improvement in quality of service for customers.
TowerXchange: Finally, please sum up how you see the future of MPT’s network evolution.
Masahiro Tada, CTO, KDDI Summit Global Myanmar:
Data usage is increasing day by day, and MPT will grow to meet this demand and provide fully fledge service to all corners of Myanmar. In the future transmission redundancy and capacity expansion will the key focus areas for MPT.
