Oct 16, 2014

When a SIM Card Goes From $2,000 to $1.50

Five years ago, buying a cell phone SIM card in Myanmar could set you back more than $2,000. It was an extravagance available only to the rich and well-connected—and even they couldn’t buy good reception. At the time, the country was just beginning to emerge from decades of isolation imposed by its military dictatorship. Only North Korea had fewer cell phones per capita.

As the former Burma shifted to a nominally civilian government, its monopolistic state-owned carrier, Myanmar Post and Telecommunications (MPT), knocked down SIM card prices, to $250 by last year. But that was still a fortune in Myanmar, where the average annual income was and is less than $200, and service remained poor. The government, which says its goal is for 74 percent of the country to have access to cell service by 2016 (the current figure is about 12 percent), began last year to seek bids from foreign investors willing to shoulder some of the costs. The state received a massive outpouring of interest from businesses seeking entry into one of Asia’s last mobile frontiers and its 51 million potential wireless customers.

In the hotly contested bidding war, two companies won. In August, Qatar’s Ooredoo began selling data-enabled cards with a 3G connection for $1.50; within days, many shops sold out. By the end of September, Norwegian company Telenor (TEL:NO) is expected to start selling 2G and 3G services across a bigger piece of the country for a comparable price. Both companies charge 2¢ to 4¢ per minute.
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“We have been waiting so long for this—a lifetime,” says Aung San Thu, 19, a zoology student browsing the counters at a busy phone store in Mandalay, Myanmar’s second-largest city. “Our country is finally coming out of the darkness. This will have a big impact on how we live and grow.”

Ooredoo’s service works only in Yangon (formerly Rangoon), Mandalay, and Naypyidaw, the military-built capital. The cities have dead zones, and large sections of the country, including restive states on the periphery, have to rely on the state carrier and its patchy service. Japanese carriers KDDI (9433:JP) and Sumitomo Corp. (8053:JP) have signed deals with the Myanmar government to invest a combined $2 billion over the next 10 years to upgrade MPT’s network.

Ooredoo and Telenor are running into some problems as they expand their coverage. In August, Telenor announced it had found five examples of contractors, hired to help build its network of cell towers, employing children aged 12 to 14, and 19 instances of teenagers working on potentially hazardous construction jobs. The revelation didn’t surprise human-rights advocates, who have warned investors about cronyism and rights violations—and predicted that many infractions will go unreported. Sean Turnell, an expert on Myanmar’s economy at Macquarie University in Australia, says the government will eventually increase its monitoring of the cell networks, adding that technology’s ability to democratize the country is “overrated.”
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On a recent day in Mandalay a telecom store framed with billboards for Ooredoo is packed with smartphone shoppers, including about a dozen robed Buddhist monks. Although the Apple (AAPL) iPhone 5 is available for $650, by far the most popular options are Asian brands such as South Korea’s Samsung (005930:KS) and China’s Huawei, which offer models with comparable features for less than $300. “It’s like this every day,” says manager Daw Zin Ma Ma.

Out on the sidewalk, Wi Htit Hta, a 33-year-old monk, tested out his new Samsung Galaxy S3. His first call didn’t go through, but “it feels good to have this,” he said. Others were less enthusiastic. U Win Aung, a 53-year-old taxi driver, watched customers stream in and out of the store, waiting for a fare, with an old Nokia (NOK) brick in his hand. Asked if he had plans to purchase a smartphone, he shook his head: “What for? It costs too much, and I wouldn’t know how to use it anyway.”

Source: Bloomberg Businessweek