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Orange Looks for Partner in Myanmar

TU CHL VOD

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Orange, a subsidiary of France Telecom is looking for additional partners to set up its operations in Myanmar. The company is one of the companies bidding for Myanmar's telecom license.

In partnership with Japan’s Marubeni Corporation, Orange submitted its Expression of interest along with other consortiums. The result of the bidding process will be declared on Jun 27, 2013.

The French telecom giant believes that it has a good chance of acquiring the license and wants to tie up with a local Burmese partner. Orange wants to partner either with a non-telecom operator or a small operator, which will possess local knowledge and expertise. Nevertheless, Orange is very clear that it wants to lead the partnership agreement.

Myanmar provides ample opportunity as only 10% of the country’s 64 million population has access to mobile communications. Though wireless service in Myanmar was introduced in 2001, high activation cost has kept mobile phones out of reach for most of the people.

The government of Myanmar wishes to increase the number of telecom carriers from 2 to 4, to enhance the wireless penetration to 80% by 2016.Initially, the government of Myanmar received expressions of interest (EOI) from 91 entities, which then came down to 12 hopeful applicants.

Meanwhile, one of the joint bidders, China Mobile Ltd (CHL - Snapshot Report) and Vodafone Group (VOD - Analyst Report), has opted out of the bidding process for Myanmar’s telecom license. Both the companies cited that the Myanmar telecom license does not meet the strict investment criteria which they follow.

Orange has also declared that on acquiring the telecom license, it will invest around $1 billion over the next 5-7 years to build up a telecom network in Myanmar. However, developing a mobile network in a country with regular power cuts and lack of technical resources could be quite difficult. Thus, we remain skeptical about the success of Orange in Myanmar with such a meagre investment as opposed to other consortiums who have vowed multi-billion dollars in investments.

France Telecom currently carries a Zacks Rank #4 (Sell). Among other stocks, Telus Corp. (TU - Analyst Report) carries a Zacks Rank #2 (Buy) and is worth considering.

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