(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

 

MUMBAI - Foreign investors had rushed into Myanmar’s frontier economy over the past seven years, so their reaction to deadly clashes triggered by February’s military coup could set the business tone for the fragile nation for years to come. The telecommunications sector is the one to watch.

Financing already appears to have stalled for CVC Capital’s $700 million purchase of the owner of Irrawaddy Green Towers, the country’s largest cell phone tower company – the second-largest deal involving Myanmar assets. Elsewhere, Japanese drinks group Kirin terminated its partnership with a military-linked conglomerate and Australian oil-and-gas giant Woodside is reviewing its nascent activities.

The stakes are higher for telecoms operators already invested. Norway’s Telenor, for example, has helped lead a huge uptake in mobile communications and internet usage since it won a licence to operate back in 2014; smartphone penetration is now amongst the highest in the world. Telenor started generating cash faster than expected and the country accounted for 7% of its EBITDA in 2019. Japan’s KDDI and trading house Sumitomo partnered with state-owned MPT around the same time. And U.S.-based private equity fund TPG Capital became a top investor in towers.

Now, in addition to the business risk of prolonged economic instability, the promising sector must grapple with military-directed internet shutdowns and consider the cost of an intrusive new cybersecurity bill. The junta has already restricted access to Facebook FB.O , used by more than half of the 54 million population.

The timing is unfortunate. The market had just stabilised after a painful price war led by new entrant Mytel, backed by Vietnam’s state-owned Viettel. Even before the coup, Ooredoo ORDS.QA from Qatar was a mooted seller given its Muslim background plays poorly in majority-Buddhist Myanmar, and it has struggled to scale its network.

Any sweeping sanctions could force Western players to abandon the market to Chinese rivals. Barring that, they may look past a reversion to authoritarianism. After all, Telenor’s top revenue-generating Asian market in 2019 was Thailand, where the prime minister is a former general who also overthrew an elected government. The officials that Myanmar’s military have put in charge of economic policy served prior to the democratic transition in 2015, and did a decent enough job to lure in investors. That makes leaving - or staying - a difficult call.

 

CONTEXT NEWS

- Myanmar security forces cornered hundreds of young protesters in a district of Yangon and threatened to hunt for them door to door as the United States and United Nations appealed for them to be allowed to leave, Reuters reported on March 9.

- A $390 million, five-year loan to support CVC Capital’s leveraged buyout of Myanmar’s Irrawaddy Green Towers is on hold, Refinitiv LPC reported on Feb. 3. The buyout group agreed in December to buy the country’s largest telecom tower company in a deal that unnamed sources told Reuters was valued at about $700 million.

- Facebook on Feb. 24 said that it had banned the Myanmar military from using its Facebook and Instagram platforms.

- Since the army takeover and arrest of elected leader Aung San Suu Kyi on Feb. 1, protests have been held across the country. The United Nations says security forces have killed more than 50 people to quell demonstrations.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Pete Sweeney and Katrina Hamlin) ((una.galani@thomsonreuters.com; Reuters Messaging: una.galani.thomsonreuters.com@reuters.net))