Business In Burma, Cheap SIM Card Draw May Herald Telecoms Revolution

The SIM card lottery is a first tentative step into a telecoms revolution which could be a game changer for economic growth and political reform.

RANGOON—Introduced a decade and a half ago under Burma’s former military rulers, SIM cards sold for as much as $7,000 apiece. Today, they still cost more than $200. From Thursday, lucky winners of a lottery-style sale may get one for as little as $2.

This is telecoms deregulation, Burma-style.

The lottery is a first tentative step into a telecoms revolution that has transformed societies and spurred economic growth across the globe—and could be a game changer for Burma, emerging from decades of isolation and mismanagement that have left it Asia’s second-poorest nation after Afghanistan.

State-owned Burma Post and Telecommunications is selling 350,000 SIM cards through a public lottery, and plans to offer additional batches on a monthly basis. Yatanarpon Teleport, a joint venture between local private firms and the government, holds the country’s only other telecoms license, for now.

On June 27, the government is due to announce the winners of two new 15-year telecoms licenses up for grabs to international companies. Such is the untapped potential—analysts say Burma is the least connected nation on earth, bar maybe North Korea—that more than 90 international companies and consortia expressed interest in tendering for the two mobile licenses.

The Telecommunications Operator Tender Evaluation and Selection Committee whittled that down to 12 applicants to pre-qualify to bid, including India’s Bharti Airtel, Japan’s KDDI Corp, South Africa’s MTN, Singapore Telecommunications, Norway’s Telenor, a group backed by billionaire George Soros, and China Mobile, which has teamed up with Vodafone.

“The bid round is seen as one of the most exciting green-field opportunities available globally in the telecoms sector,” said Marae Ciantar, a Singapore-based lawyer with international law firm Allens, who has advised multinational telecoms companies seeking to invest in Burma.

Getting Connected

Burma’s military rulers neglected the telecoms sector, building only a skeleton infrastructure capable of handling the few subscribers who could afford SIM cards. Sanctions imposed in response to human rights abuses in what is also known as Burma barred western telecoms firms and others from operating there.

But those sanctions have eased since Burma’s government embarked on reforms that include releasing political prisoners and allowing civilians into politics.

The government says mobile penetration is around 9 percent—though Swedish telecoms giant Ericsson last year put the figure at less than 4 percent—and President Thein Sein, a former general and member of the ruling junta, has set a goal of 80 percent penetration by 2015.

“The market potential … is clearly very substantial,” said Allens’ Ciantar.

Ericsson estimated the total economic impact of the mobile sector in Burma could potentially be as high as 7.4 percent of GDP over the first three years after the new licenses are issued.

And telecoms firms are not alone in beating a path to the underdeveloped Southeast Asian nation of some 60 million people. In February, Danish brewer Carlsberg said it was returning to Burma after sanctions forced it to leave in the mid-1990s. Energy companies from Canada, the United States, Britain, Australia, Japan, China and elsewhere are in the running for exploration licenses, and more foreign companies are now visiting the country, sizing up its potential.

Economic, Political Boost

Experience elsewhere shows developing telecommunications can spur economic growth, and may also encourage political reform.

In its report last year, Ericsson said mobile networks “encourage the growth of small businesses and increase their efficiency,” while mobile access “could also play an important role in enabling basic human rights and in driving increased transparency in society.”

David Butcher, a telecoms consultant who last year studied the sector in Burma for the Asian Development Bank, said affordable mobile networks have the potential to boost rural economies. “Some calculations have shown that the impact of having a mobile phone can be to increase rural incomes by about 20 percent,” he told Reuters.

Vodafone said that if it wins one of the mobile licenses it plans to roll out its M-Pesa system, which allows financial transactions via mobile phone. The system provides access to financial services for people in underdeveloped areas with little or no banking infrastructure, and is commonly used by workers in cities to send money back to their home villages.

“In Kenya, mobile money was the game changer in bringing financial services to the middle class and the poor,” said Nick Read, Vodafone’s regional chief executive for Africa, the Middle East and Asia Pacific. “In 2006, only 20 percent of Kenyan adults had access to financial services, but by the end of 2010 that share had jumped to 75 percent.”

The SIM cards to be sold off this week will only be compatible with MECTel top-up cards issued by the military-owned Myanma Economic Corporation (MEC) and distributed through their authorized outlets in big cities. In later batches, SIM cards will change to GSM, the global standard for mobile communications.

Test Case

The bidding process for the telecoms licenses is seen as a test case for the government’s approach to managing investment in other sectors. “Potential investors in Burma, and advisers to international investors … have been watching the bid process closely and with great interest,” said Ciantar, adding it has so far been “very transparent.”

Butcher said that during his research last September there were concerns that some companies were trying to influence the process. “There was a strong suspicion when I was there that people were trying to get at the minister to make them the favored son who would be given the license for a substantial payment,” he said.

In January, the government launched an unprecedented corruption investigation into dozens of officials at the telecoms ministry, including former minister Thein Tun, who stepped down that month for unexplained reasons. Eight senior officials were reconfirmed in their jobs in March.

While the advent of affordable telecoms holds potential for grand social and economic change, people on the streets of Rangoon, Burma’s biggest city, have simpler expectations.

“I can connect with my friends and passengers, and my family can call me if there’s an emergency at home,” said Kai Saw Lin, who earns just 4,000 kyat (about US $4.50) a day driving a bicycle taxi. But he added that even if he wins one of the SIM cards, he might not be able to afford the handset to put it in.

Additional reporting by Aung Hla Tun.