Myanmar Telco

Myanmar Telco: CIMB has report on the current bidders for Myanmar’s Telco license. House note that the potential for growth is large. With a population of 60m and mobile penetration of only 9%, Myanmar is probably the only country with a sizeable population that is largely untouched by mobile telephony. However, do not expect earnings contributions from Myanmar to be very substantial for either Axiata or SingTel as: 1) the country has a low GDP per capita of only US$854, and 2) both Axiata and SingTel have large earnings bases. Assuming a similar net profit as Bangladesh operators Robi’s US$28m and Grameenphone’s US$228m in 2012, a Myanmar operation could contribute 2-16% of Axiata’s CY12 earnings and 1-8% of SingTel’s. Moreover, this is achieved after 16 years of operations. Lastly, there is no certainty that the govt will not heavily tax the sector in future. Grameenphone and Robi are the largest and third-largest mobile operators with 42% and 21% market share respectively in Bangladesh, a country with a similar income level to Myanmar. House believe start-up losses in Myanmar would weigh down any telco’s near-term earnings. Overall, SingTel remains a Neutral as it lacks rerating catalysts, with the strong performances by Telkomsel and AIS offset by regulatory and currency risks in India.