Data monetisation the key as Myanmar exits growth phase

The astonishing recent growth in mobile subscribers in Myanmar is now petering out. Revenue growth has also stalled due to intense price competition and widespread use of IP messaging as an alternative to SMS. With operators continuing to invest in 4G technology and coverage without charging a premium for the service, the financial outlook remains challenging; this will be exacerbated by Viettel’s entry in 2017. To address this, in the years ahead operators in Myanmar will need to more effectively monetise data, particularly as locally relevant content is developed.

Figure 1: Myanmar: year-on-year growth in connections, ARPU and recurring revenues
Source: GSMA Intelligence

Connections growth no longer compensating for price/OTT competition effects on ARPU

Following the liberalisation of the market in Q3 2014, mobile connections in Myanmar increased by a factor of five over two years. However, this expansion is now coming to an end, with Telenor and Ooredoo reporting quarterly connections growth of just 5% and 6% respectively in Q3 2016. Driven by connections growth, recurring revenue in Myanmar grew almost 300% in the year to Q3 2015, but by Q3 2016 Telenor reported a quarterly decline for the first time.

Competition in the market over the last 12–18 months has been mainly price-based. Market-level ARPU declined from $6.47 in Q3 2014 to $4.12 two years later – clear evidence that data is not being monetised. In August 2016, Ooredoo’s chief executive revealed that 4G connections consume between 1.5 and 2 GB of data per month, but neither Ooredoo nor Telenor are charging extra for using 4G. With Viettel entering the market in 2017, pressure on pricing will only increase.

Meanwhile, Myanmar has effectively skipped the featurephone generation. Smartphone adoption stands at 70% in Q3 2016, way ahead of the global average of 49%. This has given many tech-savvy users access to IP messaging; according to our consumer survey, 40% of mobile phone owners use OTT messaging, limiting revenue from SMS.

Effective data monetisation crucial as capex and spectrum costs weigh on bottom line

3G networks already cover much of Myanmar, reaching 85% of the population by Q2 2016. Ooredoo and Telenor have now also launched 4G, while incumbent MPT is testing the technology. This has come at a significant cost; over the past year, capex and spectrum costs have remained at more than 70% of revenues. Spectrum will continue to be a considerable expense; while the 2600 MHz auction in October 2016 failed to generate the expected interest from operators, they will require additional spectrum to complete wider LTE rollout. Thus all are expected to bid in the 1800 MHz auction likely in 2017.

As network investment continues, increasing data monetisation is imperative for operators to generate sustainable ARPU levels. According to our survey, alongside the tech-savvy contingent in Myanmar are 34% of smartphone users that do not use the internet at all, suggesting a lack of awareness or content relevant to local requirements. With limited infrastructure in place in certain sectors, Myanmar is a country with considerable socioeconomic opportunity for value-added services that target the underserved in areas such as financial services and education. Such avenues could offer potential opportunities for operators to differentiate – and effectively monetise – their expanding mobile broadband provision.