Telenor Predicts Fivefold Myanmar Wireless Surge

Telenor Predicts Fivefold Myanmar Wireless Surge

Telenor ASA (TEL) Chief Executive Officer Jon Fredrik Baksaas said mobile-phone subscriptions in Myanmar, a new market for the wireless carrier, will surge more than fivefold to about half of the population by the end of 2017. Telenor, the Nordic region’s largest phone company and one of two operators selected to build Myanmar’s telecommunications network, expects the license to be issued formally by the end of the year, Baksaas said. Services will start eight to nine months after that, he said in an interview in Singapore Sept. 28.“Penetration figures will grow from presently below 10 percent to a very visible figure in a very short time,” Baksaas said. “We shouldn’t be far away from 50 percent penetration already three years down the line.”

Telenor, based in Fornebu near Oslo, is seeking growth in Russia, India and other parts of Asia as competition intensifies at home. Myanmar selected Telenor and Ooredoo QSC of Qatar in June, opening up one of the world’s last remaining untapped markets. The expansion in Myanmar will boost Telenor’s sales by 7 percent to 8 percent in 2020, according to an August estimate by Swedbank AB. Baksaas declined to give financial targets for the Myanmar investment.

Telenor and Ooredoo beat nine other bidders including Singapore Telecommunications Ltd. (ST), billionaire George Soros and Bharti Airtel Ltd. in the final stage. The licenses allow the carriers to run a nationwide wireless network serving Myanmar’s about 59 million people for 15 years. The license term will start when the license is formally issued, said Baksaas, who joined Telenor in 1989 and has been its CEO for 11 years.

Mobile Banking

Myanmar, which is a “cash society,” will benefit from the ability to use mobile phones for financial transactions such as money transfers when they become available, said Baksaas, who was in Singapore between visiting Myanmar and Thailand, where the company controls Total Access Communications Pcl. (DTAC)

“This is a population which does not have access to financial services the way we know them,” he said. “The digitalization of cash handling has happened through banks in general but the mobile phone takes it to the next layer.”

Telenor’s unit in Pakistan now handles $2.5 billion of transfers annually on a rolling basis, compared with $1.2 billion last year, Baksaas said. Of 35 million customers in Pakistan, 6 million regularly use financial services, he said.

“These are all people with no access to any bank or any financial services before,” Baksaas said. “So suddenly the mobile phone stands out as a distribution mechanism for funds, as well as a collection or transfer mechanism for funds, and it will facilitate money from one part of the country to another part of the country.”

‘Attractive Growth’

Telenor has gained 24 percent this year in Oslo trading and advanced 0.4 percent to 139.1 kroner on Sept. 27, giving it a market value of 211 billion kroner ($35 billion).

“Telenor remains one of those rare attractive growth stories in the sector, although the growth profile is becoming more challenged,” said Barry Zeitoune, an analyst at Berenberg in London, who recommends holding the stock. “Telenor’s entry into Myanmar is as expected, and Telenor has vast greenfield rollout experience in Asia.”

Baksaas, 58, said the network in Myanmar will rely more on solar power than any of its other grids, both out of necessity and to achieve energy savings.

“This is very important because energy is scarce,” he said. “We need energy on every base station and there is no grid in the countryside, which means that we have to establish and build energy capacities ourselves.”

Solar Grid

Telenor has about 1,500 base stations powered by solar energy in Pakistan and Bangladesh, Baksaas said.

“We will probably see a network built out in Myanmar with the highest degree of solar panels that we’ve seen,” he said. “My vision for the future is basically that a base station can be energy neutral.”

Solar energy and batteries to store the energy is complemented by diesel generators, he said.

When asked about expansion opportunities, Baksaas said Telenor’s management will focus on building out the Myanmar operations and integrating Globul, the second-largest mobile carrier in Bulgaria that Telenor agreed to buy in April for 717 million euros ($967 million).

“We have no specific focus over and beyond the two new countries that come into the Telenor group in 2013,” Baksaas said, referring to Myanmar and Bulgaria. “This is our focus and this has to do with the management attention, the board attention and the overall capacity of the group.”

Outpacing Rivals

The company is also expanding its footprint through VimpelCom Ltd., Russia’s third-largest wireless carrier and a service provider in other former Soviet countries, Italy and Africa. Russian billionaire Mikhail Fridman controls VimpelCom, with Telenor holding a minority stake.

The assets in faster-growing regions such as Asia have helped Telenor outpace Nordic competitors including Sweden’s TeliaSonera AB. (TLSN) The Norwegian company’s sales rose about 2 percent in the second quarter, compared with a 4 percent drop at TeliaSonera. Telenor is also reducing costs and expanding its Nordic wireless network to fend off local competitors such as Sweden’s Tele2 AB and Denmark’s TDC A/S.

This month, Telenor reiterated its goal of 5 billion kroner in cost savings and operating cash flow of 28 billion kroner to 30 billion kroner in 2015.

“Telenor’s expansion and asset base is significantly more attractive and more diverse versus that of the Nordic incumbents,” said Daniel Johansson, an analyst at Fondsfinans ASA in Oslo with a buy rating on the shares. “Risks are more balanced for Telenor.”

To contact the reporters on this story: Sharon Chen in Singapore at; Lars Klemming in Singapore at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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