31 March, 2012

 

Recent press reports suggest that Myanmar is planning to pass a new law to liberalise its telecoms market to both private domestic and foreign operators and investors. Prior to this new law coming into effect, there is also a proposal to firstly allow private domestic companies to provide telecom services.
 
Myanmar has a population over 53 million and yet the 2010 statistics of the International Telecommunication Union (ITU) show that the fixed telephone subscription rate, mobile cellular subscription rate and internet penetration rates of Myanmar are 1.26%, 1.24 % and 0.2% respectively. The market is currently dominated by the Myanmar Posts and Telecommunications which has monopoly in all telecom services in Myanmar, including fixed and mobile services.
 
The Myanmar Government is keen to promote the development of these untapped telecoms markets, and has set the targets of achieving a 50% wireless penetration rate by 2015. To catch up with the demand for new telephone lines, it was estimated back in 2010 that more than 500,000 new telephone lines would need to be installed. This represents a capital investment of around US$600 million, which can only be available if foreign investors are involved.
 
Against this backdrop, the director-general of Myanmar's Post & Telecommunications Department ("PTD") recently revealed that a new telecoms law had been sent to Myanmar's attorney general for review. Under the proposed new law, four telecoms licences will be granted to both domestic and foreign investors to provide telecoms services in Myanmar. This is a breakthrough to the existing regulatory framework as currently the State-owned Economic Enterprises Law (The State Law and Order Restoration Council Law No. 9/89) provides that telecoms services can only be provided by the Myanmar Government.
 
As it is anticipated that it may take some time for the proposed new law to become effective, the Myanmar Government intends to promulgate notifications and special orders to allow private domestic companies to provide telecoms services. It should be noted that no specific timeline has been provided by PTD.
 
PTD indicated that domestic and foreign investors would be treated on equal terms under the proposed new law although the approval processes would slightly differ. A domestic operator telecoms licence will be subject to ministerial approval only whereas a foreign operator telecoms licence will be subject to both ministerial and government approvals.
 
A couple of questions however remain unanswered:
 
  • Foreign ownership restrictions: Whilst foreign investors may be able to participate in the Myanmar market, it remains to be seen if they will nonetheless be subject to ownership restrictions.
 
Myanmar has not made any specific WTO commitments for the telecoms sector. Its existing foreign investment laws (which may also be changed shortly) allow a foreign investor to hold 100% ownership in the form of a sole proprietorship, partnership or a limited company. If a joint venture is to be formed, the foreign investor is required to contribute at least 35% of the total capital requirement.
 
In addition to equity restrictions, it is unclear at this stage if restrictions in terms of foreign control or the number of telecoms markets which a foreign investor may be allowed to participate in may also be imposed on the foreign investors.
 
  • Foreign investment restrictions: Although press reports have suggested that four licences will be issued, again, it is unclear at this stage whether a foreign investor will be allowed to participate in the more lucrative facility-based telecom market, in particular, the mobile market, or whether foreign investors are only permitted to participate in service-based telecoms market (e.g. provision of VoIP or internet access).
Perhaps the special orders which are intended to facilitate the liberalisation of the market for private domestic companies may shed some light on the potential restrictions which foreign investors may ultimately be subject to.
 
 
For further information, please contact:
 
Michelle Chan, Partner, Herbert Smith
michelle.chan@herbertsmith.com
 
Clarice Yue, Herbert Smith
clarice.yue@herbertsmith.com
 
Mark Robinson, Herbert Smith 
mark.robinson@herbertsmith.com

 

Leave a Reply

You must be logged in to post a comment.