China Mobile Limited (CHL - Snapshot Report) and Vodafone Group (VOD - Analyst Report), the world’s largest and second largest telecom carriers, announced that they have agreed to form a consortium to bid for mobile license in Myanmar. The telecom giants are aiming to secure one of the two telecom licenses to rollout a nationwide telecom network in Myanmar (Burma).
Investors from all around the world are piling up to grab Myanmar’s telecom license as only 10% of the country’s 64 million populations 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.
However, the government of Myanmar wishes to increase the wireless penetration to 80% by 2016, thus wants to increase the number of telecom carriers from 2 to 4. Myanmar provides a new growth opportunity for Vodafone, which has been struggling in the ongoing economic instability in Europe.
Myanmar government has received expressions of interest (EOI) from 91 entities, which include bids from SingTel, Qatar Telecom and Telenor. Though tough competition awaits Vodafone and China, if successful the mobile operators will get the license to operate a nationwide network for 15 years. The name of the winning bidders will be announced on Jun 27, 2013.
In its recently concluded quarter, Vodafone faced a customer loss of 1.5 million in Europe. The company also underperformed in Africa, Middle East and Asia Pacific, losing 2.5 million customers.
According to the World Bank report, Myanmar’s economy is projected to grow 6.2% in 2013, representing a 12.7% annualized growth. We believe that an emerging economy and the highly-literate young population of Myanmar offer great growth opportunity for Vodafone and CHL in South East Asia.
Currently, Vodafone carries a Zacks Rank #4 (Sell) while China Mobile carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Other stocks worth considering in this sector include Liberty Global Inc. (LBTYA - Analyst Report) and Rogers Communications Inc. (RCI - Analyst Report), which carry a Zacks Rank #2 (Buy).