Understanding the new landscape of Myanmar’s tower industry

A lot has changed since TowerXchange’s last visit to Yangon back in March 2017. Over the course of a year, Myanmar’s tower industry has seen a notable shift as the market has welcomed a new operator as well as several new towercos, and witnessed a game-changing tower transaction. I took a long flight to Yangon and met with a dozen industry stakeholders who are currently reshaping Myanmar’s telecom market. This article explores the opportunities that Myanmar holds for infrastructure developers, investors and solution providers, while offering a comprehensive analysis of one of the most dynamic and interesting tower markets in Asia. 

As a good indicator of Myanmar’s market evolution, back in 2012 a SIM card would have cost US$500. Yes, that same SIM card now costs a mere US$2. Last year, Myanmar’s internet market experienced 97% growth and mobile phone penetration has now surpassed 90%. The monopoly that MPT once led has now disappeared and the fierce competition within this new four-operator landscape has driven prices down, providing internet and mobile phone access to more than 50mn users.

The National Planning Bill approved by Myanmar’s parliament a few weeks ago projects an extra 15% growth in the telecoms industry for next year, and the government expects to increase the growth of GDP from 6.8% to 7.6% Despite humanitarian and politic conflicts, Myanmar has undoubtedly became a very promising markets for investors, infrastructure developers and operators in the region.

Orange posters and signs are bringing colour to Yangon’s cityscape while announcing the cheapest prices that customers have ever seen in Myanmar’s mobile market. Mytel has changed the game, and is now offering a 30-day, 5Gb data plan for 3,500 kyat (US$2.31), which is less than half the rate set by State-owned market leader MPT. Thanks to this aggressive pricing strategy, Mytel has managed to secure more 2.6mn subscribers since July - which represents 4% market share - and the MNO has set the ambitious target of five million connections by the end of the year according to Zaw Min Oo, the company’s Chief Executive Relations Officer. Mytel’s irruption has already made a huge impact and will keep transforming Myanmar’s telecom landscape. 

Initially, the company focused on providing rural coverage but it has decided to explore new commercial routes as it aims to deliver bundled internet services targeted for businesses to keep increasing its market share. Their new offer will combine high-speed Fibre To The Home (FTTH) internet, Internet Protocol television (IPTV) and Voice over Internet Protocol (VOIP) as they believe that this multi-service packages will bring more loyalty across customers.

The fourth operator, which is backed by Vietnam’s military-linked Viettel Group, will be one of the biggest drivers for infrastructure development as the company is set to invest US$2bn within its 15-year license period to deploy and improve its network. Mytel has already invested more than US$1bn and has deployed 5,000 Base Transceiver Stations (BTS) as well as rolled out 30,000km of fibre-optic cable. Despite the progress, Mytel executives explained to TowerXchange that the network capacity has not reached the expected level and the company will keep installing BTS to maintain bandwidth. 

Mytel has been exploring different strategies for its network development. The company is working closely with local and international towercos and they have sealed a build-to-suit deal with MNTI – one of the latest towercos to enter Myanmar – for 400 sites, of which 370 have already been built, according to a MNTI executive. edotco also informed us that they already have around 500 co-locations with Mytel across the country. On the other hand, Mytel is also looking at acquisitions and they are evaluating investment in existing assets. Finally, Viettel’s global expertise and financial strength is allowing Mytel to deploy their own towers directly. The company has not confirmed the number of towers they plan to build, but they have announced an “ambitious” infrastructure rollout to improve their nationwide coverage and network quality that will include traditional macro towers as well as innovative urban solutions.

Besides Mytel’s entrance and its consequent impact, the rest of the operator landscape has not changed much since TowerXchange last visited Myanmar. Tenancy ratios are over 2.0 now, the highest in Asia (apart from the mature Indian tower market), and Mytel’s aggressive strategy is putting downward pressure on lease rates. The three established MNOs have been focusing on co-locations, efficiency and cost optimisation. Opex reduction, power supply, coverage expansion and the weather are the main operational challenges for Myanmar telcos.

Myanmar Posts and Telecommunications (MPT) is still the biggest MNO by number of subscribers, coverage and service. The company owns around 2,000 towers and has a further 2,000 tenancies on the main towercos’ sites including those of IGT, Apollo, edotco and OCK. 

Meanwhile, Telenor has been using its global experience and strong foothold in emerging markets to close the gap. The Norway-based operator has strengthened its position as number two and have recently appointed Sharad Mehrotra as their new CEO. Today, Telenor operates the largest mobile phone network in Myanmar with 8,000 towers covering over 90% of the population with an estimated 40% revenue market share.

As the third player, Ooredoo is the most threatened by Mytel’s irruption. Like MPT and Telenor, Ooredoo had becomerelatively inactive in terms of tower network expansion since their initial rollout, and cost optimisation is their priority. The company initially chose to retain ownership of power assets when having sites built by third party towercos, outsourcing management of the equipment to ESCO IPT, but recently Ooredoo transferred control of energy management to edotco at their 1,250 sites.

Power remains the main issue for towercos and is also the biggest operational headache for operators, who are seeking innovative and reliable energy solutions for their sites. 

More than 75% of the towers are in remote locations and do not have grid access, hence towercos rely on gensets and batteries in a country where the tower industry consumes around 50MW. 

MNTI, edotco, Apollo Towers and OCK have already explored affordable and sustainable solutions to secure their energy supply, with the former currently combining efforts with Mytel and deploying solar solutions in Mandalay region. OCK has also installed hybrid solar systems on 15% of their off-grid sites and the Malaysian player will keep exploring renewables as they are arising as the best choice for towercos to secure their power and reduce diesel dependence. The company is moving towards decarbonisation and this gensets reduction have improved their community engagement as well as led to achieve cost and operational effieciencies.

Site accessibility and transportation logistics are complicated too, since the country does not have many roads or enough infrastructure in rural areas. The weather makes it even worse, and it is very hard to bring fuel or any equipment to remote sites during rainy season, when floods often cause severe damages to roads and rivers. Having a huge number of sites in remote areas also means that towercos and operators have to deal with land permits and tensions with communities, which often cause delays and increase originally forecasted budgets. The law is very protective and obtaining permits can take months since many different bodies are involved. The Post and Telecommunications Department is expected to take a more active role to standardise the process.

Local company Yoma Micro Power (YMP) is bringing a very innovative approach that have already helped towercos, operators and local communities in securing their energy supply. YMP builds, owns, operates and maintains micro power plants that have telecom tower customers as anchor tenants. Unlike most telecom ESCOs, the company builds its power plants on its own land and not inside the cell site, and achieves economy of scale with larger power plants that also provide electricity to nearby villages. They have already built ten pilot micro power plants in the country and are now scaling up to 250+ sites, with a goal to build a few thousand over the coming years. 

International players with extensive experience in emerging markets such as edotco and OCK also highlighted the lack of qualified workforce as one of the biggest handicaps for the industry.

Finally, currency volatility risk and political instability is a common initial barrier for foreign entrants, although the country’s recent implementation of Companies Law should smooth the situation and drive international investment into the industry.

Myanmar tower industry has seen a lot of consolidation action lately, and we can expect more deals and transactions to become official in the near term.

After many months of rumours and speculation, TPG has finally announced the acquisition of Pan Asia Majestic Eagle (PAMEL), which will create the second biggest towerco in the country. Through a two-step cash and share swap deal, Texas Pacific Group is expected to launch a holding company with common ownership of both Apollo Towers and PAMEL. The American investor will add PAMEL’s 1,300 towers to its existing portfolio of 1,800 Apollo-owned sites, with an enterprise value of approximately US$1bn. However, TPG will manage the two operations separately and both companies will retain their different licenses. Apollo includes power in its services while PAMEL doesn’t, but sources involved on the deal have confirmed that TPG will consider to include energy since that is the direction that the market is heading to. Apollo won its first and largest BTS contract with Telenor, while PAMEL built its 1,300 towers for Ooredoo.

TPG landed in Myanmar in 2014, when the company co-founded Apollo Towers with an initial investment of US$40mn. Apollo’s successful initial rollout attracted the interest of OPIC, and the U.S. government’s development finance arm granted a US$250mn loan to the company. TPG will eventually hold 80% to 85% of the new entity, which will challenge IGT as the leading towercos in the market. TPG’s minority partners in Apollo—co-founder U.S.-based Tillman Global Holdings and Myanmar Investments—will own around 7% of the new entity.

By offering a full tower+power service, Apollo quickly became one of the top independent towercos in the market and the company has successfully built and co-located sites for all four local operators. The company, which has recently appointed its new CEO Simon Perkins, is set to play a key role in the growth and consolidation of the market.

That was the biggest, but not the only relevant deal that took place in Myanmar this year. In June, KPR TOWERS announced the acquisition of Myanmar Infrastructure Group (MIG) and their 100 towers from majority owners Singapore Myanmar Investco for US$10.8mn, although the deal is yet to close.

Additionally, IGT, OCK and edotco have confirmed to TowerXchange to all be open and evaluating any M&A opportunities in Myanmar, and they all expect the market to consolidate to three to five towercos within the next two years.

Stimulated by the network investment commitments of Mytel and the big data demand that the country is experiencing, several new towercos are now active in the country including New Tower Development (NTD), Myanmar Technology Gateway (MTG), MNTH, DLRE, CommBiz, ITMB, MAPCO, along with a handful more. We can expect many of those to be acquired by rollup players, but portfolio valuation and high expectations from those small, independent towercos can complicate negotiations.

Poor grid accessibility and high diesel consumption are pushing telecom players to explore alternative and affordable solutions for their power supply. Diesel generators are still widely deployed, but renewables are increasingly prevalent. Solar is the preferred alternative to diesel and both towercos and operators are keen to keep integrating sustainable solutions to power their towers.  

Energy storage is also an operational priority and the use of lithium-ion batteries is expanding in Myanmar. Mytel, which manages energy directly or through their contractors, is installing lithium-ion batteries in all their remote sites as they guarantee a longer lifecycle. edotco has also installed lithium-ion batteries in all their new sites and plans to progressively replace all acid-lead batteries in Ooredoo’s 1,250 sites. edotco is actively exploring infrastructure innovations across Asia, and has installed the very first carbon fibre tower in Myanmar, while evaluating the possibility of installing a few bamboo towers using local materials as part of their innovation and sustainability policy.

Towercos and MNOs split energy management in Myanmar but there is room and opportunities for innovative ESCOs, as proved by Voltalia . The French distributed rernewable energy company just signed their landmark first telecom ESCO contract with MNTI covering an initial 171 sites, of which 100 were deployed by September 2018. Diesel costs remain a pass-through on that initial contract, which has a ten-year duration. Voltalia is also exploring opportunities to install large solar farms to provide telecom power under a private PPA at a rate lower than the price of the grid.

The huge data boom is also pushing towercos and MNOs to explore small cells, rooftops, street furniture and any kind of urban solutions, most of which will have to be supported by fibre. 

Chinese fibre network operator MOFCN and local player Eager, who owns most of the metro fibre in Yangon, are the main fibre providers in Myanmar. Operators lease and own some fibre too, but towercos remain focused on macro sites. An independent fibre expert has told TowerXchange that a very low percentage of Myanmar’s towers are fiberised (approximately 10%), and that is not a sustainable situation moving towards 4G and 5G. The country holds enormous opportunities for synergies between towercos, operators and fibre providers, and towercos need to seek a profitable business model that integrates fibre. 

Myanmar is a relatively young, greenfield and very dynamic market. The country needs more infrastructure rollout to satisfy the continuously increasing data demand. The Government has set up remarkable plans to drive infrastructure development and improve geographical coverage, especially in rural areas where operators have ambitious coverage targets. The country is now welcoming international investors and TPG’s journey is just another example of how foreign companies can succeed in Myanmar’s telecom market.

Towercos will find great opportunities in both urban densification and rural network expansion, and can expect new co-locations to come through Mytel as well as more BTS as the new operator expands its presence. The other three MNOs are also expected to grow their network, and both rural and urban areas have potential for traditional towers, new site typologies as well as IBS that will be required in cities like Mandalay and Yangon due to the data boom and in preparation for 5G. Therefore, towercos will enjoy both organic growth and healthy tenancy ratio growth, while we will also see continuing consolidation and acquisitions. 

Both towercos and operators will continue to seek innovative and reliable solutions for their towers. The industry will keep moving towards modernisation by reducing diesel dependence, integrating more renewables, and pursuing operational efficiency though contemporary technologies such as lithium-Ion batteries and monitoring systems.

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. I am grateful for your generosity, hospitality, as well as the insights and intelligence shared. 

For everyone interested in Myanmar, we recommend you join the fifth annual TowerXchange Meetup Asia, taking place in Singapore, 4-5 December, to gain direct insights with many leading players from the country including edotco, Apollo Towers, Irrawaddy Green Towers, TPG, MTP, PTD, KPR Towers, OCK and more. More details here.