Vodafone, China Mobile Abandon Race for Myanmar Telecom Market License

Vodafone and China Mobile, acting together, were among a dozen companies or consortia that made the final list of contenders to bid for a telecom license in Myanmar.

But Vodafone and China Mobile Vodafone and China Mobile have abandoned the effort to obtain one of two new telecommunications licenses Myanmar is making available.

The winners are scheduled to be announced by June 27, 2013. Among the applicants are consortiums led by Singapore Telecommunications, India's Bharti Airtel, MTN Dubai, Jamaica's Digicel Group, and Japan's KDDI and Sumitomo Corp.

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Malaysia's Axiata Group, Norway's Telenor, Millicom International Cellular, Qatar Telecom and Vietnam's Viettel Group also made the shortlist.

The Myanmar government plans to award two new telecom licenses, each with initial terms of 15 years, to the two licenses already awarded.

Only 5.4 million of Myanmar's 60 million-strong population had a mobile subscription at the end of 2012, a mobile penetration of just nine percent.

But the two telecom giants seems to have concluded that the conditions under which the licensees would have to operate make the business case too marginal. Building new networks from scratch, fast, would seem to be an obstacle.

The Myanmar government wants to increase the percentage of the population owning a telephone to between 75 percent and 80 percent by 2015 to 2016. That’s a lot of potential revenue growth in a very short time.

Also, retail prices might have to be quite low.

Myanmar has one of the lowest per-capita gross domestic products in Asia, standing at $855 last year compared with $5,851 for Thailand, according to International Monetary Fund estimates.

Beyond that, some would cite a potentially-significant amount of political risk, given Myanmar’s historically tightly-controlled government, fear of dissent and potential nationalism issues were a foreign-owned company to become too successful.

Whether the Vodafone-China Mobile doubrs are simply a matter of financial return, based on market conditions, or something else, perhaps government requirements that made the business case worse, is not yet clear.

A statement from Vodafone confirmed that the two operators had decided “not to proceed with the process as the opportunity does not meet the strict internal investment criteria to which both Vodafone and China Mobile adhere.”

The bad news is that whatever convinced Vodafone and China Mobile that the business case was marginal, might also be issues for at least some of the other contenders.