- It was reported in the news this morning that Axiata is among the parties prequalified to bid for Myanmar’s two telco licenses - each with an initial term of 15 years.

- The prequalified applicants will be required to submit their applications to the committee by June 3rd 2013. The committee expects to announce the 2 winners that would receive the licenses by June 27th 2013.

- We understand that the Myanmar government has shortlisted 12 applicants who can formally bid for the 2 licenses up for grabs, eliminating 10 other participants from the tender process.

- The new licenses to be awarded will lift the number of operators in Myanmar to four. The move is part of the government’s effort to liberalise the country’s telco sector.

- Other shortlisted applicants include a consortium comprising the world’s two biggest celcos, China Mobile and Vodafone Group and another consortium led by SingTel, Bharti Airtel (India), MTN Dubai, Digicel (Jamaica), as well as Japan’s KDDI Corp and Sumitomo Corp.

- Telenor ASA (Digi’s parent company), Millicom International Cellular SA, Qatar Telecom QSC and Vietnam’s Viettel Group are also among the shortlisted.

- We view this development positively, as Myanmar’s nascent telco market is a very lucrative one, with only a 9% mobile penetration rate currently (5.4mil subs versus 60mil population). The government aims to increase mobile penetration rate to between 75%-80% by 2015-2016 (within 2-3 years).

- However, we note that competition looks tough with some of the world’s most established celcos participating in the bid.

- Maintain BUY on Axiata at unchanged fair value of RM6.90/share. An entry into Myanmar could attract higher capex projections, but earnings potential is huge as Myanmar is a greenfield market and entails one of the largest population in IndoChina with the lowest mobile penetration rate.

Source: AmeSecurities