Jon Fredrik Baksaas: The deployment of telecoms in Myanmar
will probably be as efficient as we have ever seen it before
Telenor is ready to start work on building one of the last greenfield mobile telecoms operations in the world, as soon as the government authorities on Myanmar — still known as Burma by many — complete the final licensing negotiations.
Norwegian company Telenor — almost 54% owned by the state — was one of two companies named in late June 2013 as successful bidders to build completely new mobile networks in Myanmar. A government-appointed consultant named Telenor and Qatar-based Ooredoo as the winners after sorting through 11 shortlisted applicants and an original 91 expressions of interest.
The two companies do not yet have their licences, explains Jon Fredrik Baksaas, president and CEO of the Telenor group. "We are in the midst of getting the final touch to the telecoms law and the regulations. When that is done — hopefully by the end of this year — there is a roll out period until the launch can take place later in 2014," he says.
Baksaas was speaking to Global Telecoms Business only days after he was appointed — in addition to his position with Telenor — to chair the industry-wide GSM Association. He took over from Franco Bernabè, who relinquished the position with the trade association after resigning as executive chairman and CEO of Telecom Italia.
Telenor has had Asian operations since 1996, when it set up Grameenphone in Bangladesh, and it seems likely that its record has helped it succeed where nine short-listed bidders failed.
"Grameenphone stands out as one of the real examples of what modern communication can contribute within society," says Baksaas. "Grameenphone started from scratch and today has 45 million-plus customers. We have invested close to $3 billion in the country and we have delivered more than $3 billion in accumulated taxes and benefits to the state.
"We have created an industrial sector which plays a role in the development of Bangladesh. This is probably one of the very best examples of how the impact of modern communications can contribute to development."
Low penetration
Myanmar, slowly emerging into democracy after years of military government, has a long way to go. Mobile penetration, thanks to two state-controlled operators, is around 10%.
"This is a country of 55-60 million people that really has the benefit of becoming part of mobile communications." As a late-comer it will benefit from concepts that have matured in the industry. "The deployment of telecoms in Myanmar will probably be as efficient as we have ever seen it before."
And Telenor wants the service to benefit everyone. "We were probably among the first who said the mobile phone was something for everyone," says Baksaas. "The mobile phone was not something for the elite or the rich. The mobile phone is not a luxury item. On the contrary, this is something for everyone."
The licence — when it is issued — is technology-neutral, but Telenor aims to start with 2G services. "This is for us a 2G start-up because this is about voice and SMS and basic data service to begin with. From that base, penetration will grow rapidly, it's our belief."
The company has signed two memorandums of understanding with Ericsson and Huawei to supply the network equipment. There are no contracts in place yet — nor will there be until the licence is confirmed. Wipro has also been named as a supplier to the project. Neither the operator nor any of the expected vendors have given details of who will be doing what.
Baksaas raises the possibility that there will be some element of sharing with Ooredoo: "The concept of sharing will be widely used, because the country has a lack of basic infrastructure when it comes to energy. Base stations need to be set up, backhaul to be constructed," he says, adding: "Shared concepts at least in the countryside."
Ericsson and Huawei have also been mentioned in the media as being in talks with Ooredoo's Myanmar operation.
Telenor's deep experience, dating back to Grameenphone, will be invaluable as the Myanmar service is built. "It is a combination of understanding the roll out of the infrastructure, to combine and build up services which are affordable and needed and demanded by the market," he says. "And then to find a go to market model that stimulates penetration. And with these competences in hand from the other five markets in Asia and the scale of the group we feel that Myanmar is something that we could handle."
It is almost the last chance in the world to build a new mobile business in almost untouched market. "There aren't that many greenfields any more. You can say that Ethiopia is one." And Cuba, maybe? "And North Korea," he says.
All three have monopolies with low penetration: Ethio Telecom in Ethiopia, Etecsa in Cuba and Koryolink — in which Orascom has a stake — in North Korea.
The last green field
"In our case we are participating in the last greenfield as such," says Baksaas. "Then of course it's an evolution in many markets, Myanmar included, to be addressed by us in the future."
Myanmar is making a difficult journey towards democracy, but he does not want to talk about the political challenges that Telenor may face. "We don't get involved in the politics in that sense," he says. "However it's a very consistent message from today's government in Myanmar that they want digital communications, mobile communications, to happen. It's to that ambition we have responded."
He returns to the example of Grameenphone in Bangladesh as the model for the new business. "Myanmar will probably also get a lot of services attached to the initial service offering on top of voice and SMS earlier than many other markets got them — particularly financial services and educational services," he says.
"And in the health sector, we are in the enabling capacity for others to deliver their services. The health service for Bangladesh for example is phenomenally helpful for people who do not have easy access to medical assistance."
We turn to Baksaas's new role at the GSMA. As vice-chairman, he took over as acting chair when Bernabè resigned in mid-October — and then was confirmed as the chairman less than two weeks later.
Bernabè led a change of direction at the GSMA just over two years ago, when CEO Rob Conway left the organisation and former Orange executive Anne Bouverot took over as director general. "In the three-year period where I was vice-chair and Franco Bernabè was chair, it has been going in a much better direction for the industry at large," says Baksaas.
"I will stress that the direction setting is OK, and much better," he says. "Now we also need to focus on how we execute."
Brilliant platform
Mobile World Congress in Barcelona is "a brilliant platform", he says: "a phenomenal platform for the exchange in the ecosystem." But underneath all that, there are committees and groups "that address important aspects of interoperability, on how we exchange [calls and data] operator to operator and not least advocacy on the frameworks of industry. This is how we can have an impact."
The mobile industry has "a tremendous impact on society", he says. "Not the least, we invest a lot locally. And we are in that sense the trusted partner — when we are handling your communications to your friends, your business partners, all your relations. This is a phenomenal asset."
Norway is not a member of the European Union, but Baksaas shares the concern of many other leaders of European mobile operators for the state of the industry within the 28-nation EU. "Regulation in Europe has been too detailed and focused on the end user position," he says, meaning prices, "as opposed to incentives for investments."
As a result "the mobile market in the US has developed a lot faster than in Europe. That comes with the [US] national declaration of 700 megahertz as a band for LTE. In Europe we haven't managed to clear the 800 band for LTE as of yet. This is worth thinking about."
The industry is governed by "a set of decisions taken by policy makers and politicians". Does that mean the EU's regulators have got it wrong? "We cannot blame regulators for everything. We can blame ourselves as well," he says. He points to tariffs that cause people to have bill shocks. They are "something that the industry should be taking very seriously".
He compares this with the "super-profit" — his own term — that operators used to make from international calls. Now these super-profits are made from mobile roaming — and the European Commission regulates the price of voice and data roaming between EU countries.
"I don't believe that regulation is the way of doing it," he warns, "because if you regulate end-user activity you then basically kill innovation from a competitor perspective. That's my fundamental belief. There is a lot for the industry to do by itself."
As it has already done by itself over the past few decades, he notes, briefly drifting into nostalgia about telex communications between Asia and Europe 30 years ago. "I was capable of handling the telex machine in the early 1980s. There has been a phenomenal development, and it is the enabling side of this industry that is so fascinating."
Marginalised
Telenor has three clusters of mobile operations around the world — Scandinavia, eastern Europe and Asia. As with many incumbents, it was the advent of competition in its home market that meant the only way to get growth would be to go international. "We understood we would no longer be the monopoly provider in Norway," he recalls. That would mean "we would be marginalised in our home country. If we were to grow we had to look outside Norway and to compete for the number two licences in other countries."
Hungary was its first success in 1993, with Russia in 1994 and Ireland in 1995. "We engaged in a lot of competitions for the second or third licences in many countries. Then when the dotcom bubble burst in 2000 we changed our philosophy — we wanted to sell those assets in which we could not achieve strategic and operational control." And Telenor bought where it could achieve strategic and operational control.
This has given the group "an industrial base of companies, of which today there are 12, and Myanmar will be the 13th next year", he says. "We are serving 161 million customers with connectivity in 12 companies. In rough terms that gives us a 30% market share in the footprint where we operate."
In addition the company has a 33% economic interest and 43% voting interest in VimpelCom, which has its operational headquarters in Amsterdam but its major operations in Russia, Italy and elsewhere.
VimpelCom challenges
"That is a financial position, but it has a long history of strategic and operating challenges and ambitions which have brought VimpelCom to where it is today."
Telenor and its Russian fellow-shareholders have not always agreed. Or, as Baksaas says, "it has been a conflictful kind of route", adding: "The financial side of it is that our carrying value is positive and the book value of VimpelCom has been improving along with the market in general, so from that perspective it has been a very good presence to us in all the years that we have been developing VimpelCom as a player in those markets."
VimpelCom has around 220 million customers. "It is a group that is heavily dependent on Russia as such. However there are other countries, in Asia and Africa and Italy."
There is an element of practical cooperation between Telenor and VimpelCom, except in markets — such as Pakistan — where both exist.
Telenor has already launched LTE in its three Scandinavian markets, Norway, Sweden and Denmark, as well as in Hungary and Montenegro in eastern Europe. "We have 4G under way in Malaysia. We have 3G just being released in Thailand. There is 3G also just launched in Bangladesh and there will be 3G hopefully to come in Pakistan throughout next year."
Telenor had a troubled spell in India in 2011-12, where it owns just over 67% of Uninor, but the company is "settled to the extent that the operating base of the company is good and acceptable", says Baksaas. "However the framework of the industry in India still lacks full clarity on consolidation rules and spectrum rules."
Telenor bought new spectrum in November 2012 for six market areas — "circles", in Indian mobile jargon — but a later government auction failed to release any new spectrum, because the prices were too high.
"We were awarded five megahertz of spectrum in six circles, addressing a little bit more than half of the Indian population. And we have developed a customer base in those circles that will take us to breakeven towards the end of the year — this year."
It's only 2G, but Baksaas insists that 2G is "a phenomenal starting point for getting internet access", and that it gives the company "the ability to address what kind of strategy and what kind of position we're going to take in the Indian market in the long term".
Telenor is "addressing that part of the population for which affordability is low, so we have the best cost point and consequently, hopefully, price point for our customers", he adds.
Industry in hospital
Though 3G in India has been slow to start, Baksaas recalls the European 3G auctions around the turn of the century which "left the industry in hospital for at least three to four years, until the bills for the 3G licences were digested".
He warns: "Governments need to find the balance between incentives for investment in order to reach national coverage, up against the wish for financial proceeds at an early stage."
The high spectrum price in India "created a burden on the licence holders, so investments have been slow, but then also it created a fuss around all other licence processes in India, which has not contributed to the development of the industry as it could have been over the last three or four years."
But "the demand for communication is there", he says. "People ask for communication, rich and poor, countryside or city: communication is important. And the 'internet for all concept': of course everyone is going to get the internet, of course, because that's the entry point to being part of the modern society, and this is where we enable more equality, access to information and education, a higher degree of transparency in society at large and a platform for income distribution.
"And it's income distribution that has the long term potential of taking away extreme poverty."
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http://www.information.myanmaronlinecentre.com/you-are-here-hometelenor-ceo-jon-fredrik-baksaas-plans-launch-in-myanmar/
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