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Vodafone, CHL Scrap License Bid

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China Mobile Limited (CHL - Free Report) and Vodafone Group (VOD - Free Report) , the world’s largest and second-largest telecom carriers, have opted out of the bidding process for a telecom license in Myanmar. Notably, in Apr 2013 the two telecom behemoths formed a team to bid for one of the two mobile licenses in Myanmar.

The team of Vodafone and CHL was one of the 12 qualified applicants, who were supposed to submit their final applications by Jun 3, 2013. However, the two mobile giants have withdrawn from the process citing that the Myanmar telecom licenses do not meet the strict investment criteria, which they follow.

Investors from all around the world piled up to grab Myanmar’s telecom license as the country provides a large opportunity with 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 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. Some of the big names like France Telecom , Singtel and Telenor are still contending for the telecom license, the result of which will be declared on Jun 27, 2013.

According to the World Bank report, Myanmar’s economy is projected to grow 6.2% in 2013, representing a 12.7% annualized growth. If successful, Myanmar would have given Vodafone and CHL a huge growth opportunity in South East Asia, given the emerging and largely untapped mobile market of Myanmar.

However, on the flipside, Myanmar lacks proper infrastructure and telecom companies over there sufferfrom lack of clarity in the government regulations.

Therefore, we believe that Vodafone and CHL’s decision to quit Myanmar’s license bidding process will be beneficial for them as developing a mobile network in a country with regular power cuts and lack of technical resources could be quite cumbersome.

Currently, Vodafone carries a Zacks Rank #3 (Hold) and China Mobile carries a Zacks Rank #2 (Buy). Among other stocks, Telus Corp. (TU - Free Report) carries a Zacks Rank #2 (Buy) and is worth considering.

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