Telenor sells Myanmar business for a song

Telenor has sold its operations in Myanmar for less than a quarter of the licence fee it paid to enter the market seven and a half years ago.

The Norwegian firm has agreed to hand the business over to Lebanon-based investment firm M1 Group for US$105 million (NOK900 million), $55 million of which is payable over five years. The deal equates to an enterprise value of around $600 million, Telenor said.

M1 Group will acquire all Telenor Myanmar’s shares and will continue to run the business, it added.

That will be no easy task. Myanmar has been in a state of unrest for the best part of six months following a military coup, which – amongst many other things – brought restrictions on mobile phone and Internet usage. In recent days reports have emerged that Myanmar’s ruling military junta is pressuring telecoms executives to install spyware on their networks to help it intercept communications from opponents and resistance groups.

Telenor’s decision to call it a day in Myanmar comes as no surprise. The telco wrote down the value of its Myanmar operations in the first quarter, booking a NOK6.5 billion ($780 million) impairment charge relating to the business that pushed the group to a NOK3.9 billion net loss. On publication of those Q1 numbers in May, Telenor’s group CEO Sigve Brekke described the situation in Myanmar as “deeply concerning…[with] limited prospects of improvement.”

Last week the telco followed up with the announcement that it was evaluating its options regarding its ongoing presence in the market. It was pretty clear what its intentions were.

It’s a far cry from the mood of optimism that accompanied Telenor’s entry into the market – one of the world’s last great growth opportunities, with significant pent-up demand for mobile communications – in 2014. After a high-profile licensing contest in 2013, with many major international telecoms players in the frame, Telenor and fellow licence winner Ooredoo paid $500 million for the right to offer services in Myanmar at the start of 2014 and launched services later in the year.

Reports of strong uptake came almost immediately and the market later welcomed two new players, part state-owned MPT-KSGM and Mytel. The mobile sector was flourishing.

It is anyone’s guess how the market will fare under the current regime, but one thing is clear: while Myanmar was never an easy market in which to operate for a Western player, it is now virtually impossible.

“Further deterioration of the situation and recent developments in Myanmar form the basis for the decision to divest the company,” Telenor said on Thursday. “In the present situation it has not been possible for Telenor to conduct an ordinary sales process.”

Its position was reiterated and fleshed out somewhat by Brekke. “The situation in Myanmar has over the past months become increasingly challenging for Telenor for people security, regulatory and compliance reasons,” he said. “We have evaluated all options and believe a sale of the company is the best possible solution in this situation. The agreement to sell to M1 Group will ensure continued operations.”

Telenor said it has provided funding to the tune of NOK5.3 billion (just over $600 million), but that the business has paid out NOK3.2 billion in dividends since it turned cashflow positive in 2017.

The world’s last great greenfield market was not so lucrative after all.