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CAMBODIA, LAOS AND MYANMARTELECOMMUNICATIONS REPORTINCLUDES 5-YEAR FORECASTS TO 2019

ISSN 2041-9619Published by:BMI Research



Cambodia, Laos and Myanmar

Telecommunications Report Q3 2015INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: May 2015

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CONTENTS

BMI Industry View ............................................................................................................... 7

SWOT .................................................................................................................................... 9 Mobile SWOT .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 9

Wireline SWOT ........ ........ ........ ......... ........ ........ ........ ........ ......... ........ ........ ........ ......... ........ ........ ........ .... 12

Operational Risk ......... ........ ........ ........ ......... ........ ........ ........ ........ ......... ........ ........ ........ ......... ........ ........ . 14



Industry For ecast ............................... ............................................................................... 20

Cambodia .............................................................................................................................................. 20Table: Telecom s Sector - Historic al Data & Forecasts (Cambodia 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Laos . .. .. .. .. .. . ..................... ..................................................................................................................... 25Table: Telecom s Sector - Historical Da ta & Forecasts (Laos 2012-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Mobile . .. .. .. ................................................................... ...................................................................... 25

Fixed Line .. ............................. ............................................................................................................ 26

Broadband ............. ............................................................................................................................. 26

Myanmar .. ................................ ............................................................................................................. 28Table: Telecoms Sector - Historical Data & Forecasts (Myanmar 2012-2019) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 28

Mobile .. .. . ...................................... ...................................................................................................... 29

Fixed-Line ............................................................................................................................................ 30 Broadband ............................................................................. ............................................................... 31

Industry Business Environment Overview ...................................................................... 32 Industry Risk Reward Index ....................................................................................................................... 32

Table: Asia-Pacific Telecoms Risk/Reward Index, Q315 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Market Ov erview ............................................................................................................... 38Cambodia ..... ................ ......................................................................................................................... 38

Regional Per spective .. . .......................................................................................................................... 38Table: Cambodi a Mobile Market Regional Comparison, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Key Developm ents ........................................................................ .......................................................... 39 Mobile Gro wth . ..................................................................................................................................... 40

Market Shares ................................................................................... .................................................... 40Table: Mobile Market Shar e (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table: Activ e Mobile Operators (May 2015) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 44

Usage .................................................................................................................................................. 44

4G ....................................................................................................................................................... 46

Mobile Content .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 48

Fixed-Line Market ........ ......... ........ ........ ........ ......... ........ ........ ........ ........ ......... ........ ........ ........ ......... ...... 49

Broadband Market .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 52

Cambodia, Laos and Myanmar Telecommunications Report Q3 2015

© Business Monitor International Ltd



Asia Mobile Content .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 58

Laos . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 62

Regional Perspective . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 62Table: Laos Mobile Market Regional Comparison, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Key Developments ........ ......... ........ ........ ........ ......... ........ ........ ........ ........ ......... ........ ........ ........ ......... ...... 63

Mobile Growth .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 64Table: Mobile Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Mobile Market Shares . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 66 Table: Laos T elecommunications Subs criber Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Usage ...... ............ ................................................................................................................................ 68Table: Vimpel Com Operational Data, 2012-2 014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Mobile Co ntent ........................... ........................................................................................................... 68

Fixed-Line Market ........ ......... ........ ........ ........ ......... ........ ........ ........ ........ ......... ........ ........ ........ ......... ...... 69

Broadband M arket ....................................... .......................................................................................... 71

Myanmar .. .. .. ..................................................... .................................................................................... 74Key Develo pments . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . ................................................................................................ 75

Mobile Growth .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 76

Mobile Prices .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 77 Table: The Com petitive Dy namics Of Myanmar Mobile Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Networks .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 81

Industry Tr end s And Developments ................................................................................ 91Cambodia ... .............. ............................................................................................................................ 91

Laos .. .. .. .. ............................. ............................................................................................................... 92

Key Marke t Developments ......................... .............................................................................................. 93

Cambodia ............................................................................................................................................. 93

Myanmar . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 96

Regulatory Development ....... ........................................................................................... 99 Regulatory Ov ervie w ................................................................................................................................ 99

Cambodia ... .............. ............................................................................................................................ 99

Laos .. .. .. . ................................................................... ........................................................................ 101

Myanmar . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 101Table: Myanma r: Regulato ry Bodies And Their Responsibil i t ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Licensing . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 104

Myanmar Regulatory Developments .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 105

Competitiv e Landscape .................................................................................................. 106Table: Key Pl ayers - Cam bodia Telecoms Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Table: Key Pla yers - Laos Telecoms Se ctor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Table: Key Players - Myanmar Telecoms Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Company P rofiles ...... ...................................................................................................... 108 Lao Telecommu nications ............ ......... ........ ........ .. .................................................................................. 108

Mobitel .. .. .. .. ......... ............................................................................................................................... 112

Telecom Camb odia .............................................. .................................................................................. 116





Regional Overview .......................................................................................................... 121Table: Nokia Networks - Selected Asian Contracts/Deals, 2014-15 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 124

Demographic Forecast ................................................................................................... 125Table: Population Headline Indicators (Cambodia 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Table: Key Population Ratios (Cambodia 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Table: Urban/Rural Population & Life Expectancy (Cambodia 1990-2025) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 127

Table: Population By Age Group (Cambodia 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Table: Population By Age Group % (Cambodia 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Demographic Forecast .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 129Table: Population Headline Indicators (Laos 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Table: Key Population Ratios (Laos 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Table: Urban/Rural Population & Life Expectancy (Laos 1990-2025) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 132

Table: Population By Age Group (Laos 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Table: Population By Age Group % (Laos 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Demographic Forecast .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 134Table: Population Headline Indicators (Myanmar 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Table: Key Population Ratios (Myanmar 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Table: Urban/Rural Population & Life Expectancy (Myanmar 1990-2025) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 136

Table: Population By Age Group (Myanmar 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Table: Population By Age Group % (Myanmar 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Glossary ........................................................................................................................... 139Table: Glossary Of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Methodology .................................................................................................................... 141 Industry Forecast Methodology .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 141

Sources ....... .................................. ..................................................................................................... 143 Risk/Reward Index Methodology .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. . 143

Table: Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Table: Weighti ng Of Indi c a t o r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 5





BMI Industry View

BMI View : Our long-held view that consolidation is needed in Cambodia and Laos is beginning to gain

some traction, which bodes well for the future development of telecoms in Southeast Asia. In Q115, one of

Cambodia's smallest operators Beeline was acquired by regional giant Viettel (Metfone). We are gradually

seeing the emergence of three strong mobile companies in Cambodia; Metfone, Smart Axiata and Mobitel

(CamGSM). There remain a few remaining small players but we expect the mobile market will coalesce

around these three, as the smaller become acquisition targets. This should encourage increased investment

from the major players, ending price wars which are hurting company financials. This will mostly benefit

3G technology, which has shown strong growth throughout the region and is driving internet uptake. While

mobile growth is comparatively easier and yields faster returns, expanding fixed broadband in Cambodia,

Laos and Myanmar will be a more costly exercise over a lengthy timeline.

Key Data

■ BMI forecasts growth of 135% in 2014 in Myanmar as a result of the Ooredoo and Telenor launches,with subscribers rising to 16.0mn. By the end of 2019, we see mobile subscriptions reaching 78.6mn.

■ Mobile market in Cambodia grew by just 0.9% in 2014, reaching 20.452mn subscribers.

■ 18.1mn new mobile subscriptions added in Myanmar since August 2014.

Key Trends And Developments

Mobile network operator Sotelco - which has traded as Beeline Cambodia for the last five years - has

agreed to transfer key licences and infrastructure assets to rival Metfone . Beeline's subscribers will be

transferred onto the Metfone network from March 24.

Cambodian internet service provider Chuan Wei and French equipment vendor Alcatel-Lucent will deploy

a 100Gbps fibre-optic data network across Cambodia. The 100G network will pave the way for developing

a 400G capacity in the future. Alcatel-Lucent will build the 100G DWDM/OTN network using its 1830

Photonic Service Switch platform. The nationwide DWDM network will be linked to a submarine cable

landing station.

Myanmar's telecoms regulator, the Ministry of Communications and Information Technology (MCIT), has

issued licences to 11 firms since the beginning of 2015. The MCIT awarded Network Facilities Services

(Individual) licences to Shwe Than Lwin Media , Elite Telecom and Yatanarpon Teleport . Individual





licences allow operators to construct networks, lease access to service providers, and offer any type of

public or private telecoms service. The watchdog issued Network Facilities (Class) licences to firms

including Global Technology , Pan Asia Majestic Eagle , Digicel Myanmar Tower Company ,

Irawaddy Green Towers and Apollo Towers Myanmar . Class licences enable operators to deploy and

maintain passive infrastructure, and lease access to service providers.





SWOT

Mobile SWOT

Mobile SWOT

Strengths ■ Mobile subscriber base in Cambodia and Laos continues to grow, primarily due to

prepaid subscriptions.

■ Mobile markets play host to a large number of major international telecoms operators

including Thailand's Thaicom, Vietnam's Viettel, Malaysia's Axiata and Russia's

VimpelCom, Norway's Telenor and Qatar's Ooredoo.

■ Demand for mobile value-added services is strong and expected to grow, a factor

that bodes well for future 3G growth.

■ Myanmar is a significantly untapped market with a sizeable population of more than

60mn and mobile penetration of less than 10% and the launch of competition in

August 2014.

■ Close proximity to economic giants China and India, while the US is keen to use

Myanmar to strengthen its presence in South East Asia.

Weaknesses ■ The Cambodian and Laotian mobile sectors are dominated by prepaid users, which

provide much lower levels of ARPU for the operators.

■ Mobile coverage and penetration in rural areas remains patchy.

■ The governments have shown a willingness to intervene in the telecoms sector.

■ Enforcement of regulatory policies remains a problem.

■ Foreign investors are looking to exit the markets due to intense competition.

■ Investment approval will be the domain of the Myanmar Investment Commission, a

relatively opaque committee of 16 government-appointed individuals.

■ Growth in Myanmar will be largely limited to urban cities such as Yangon, Mandalay

and Naypyidaw, as slow tower rollouts will curb demand.





Mobile SWOT - Continued

■ High level of inactive SIM cards across the three markets.

Opportunities ■ Inflated subscriber figures suggest that the markets still possess organic growth

opportunities.

■ Much scope for investing in the development of next generation network technologies

and 3G services.

■ As the mobile data services sector develops in Cambodia and Laos, this will create

considerable opportunities for content providers. Developments in mobile commerce

have been positive in Laos, such as the anticipated launch of 4G in Vientiane.

■ Foreign investors continue to eye Cambodia as a potential investment destination

despite the overcrowded market.

■ Mobile market seeing some consolidation in Cambodia between 2014-2015.

■ Nationalisation of networks in Cambodia could lead to an improved competitive

environment.

• The new consensus on minimum prices should help to increase ARPUs and margins

for operators in Cambodia.

• Strong demand for ICT services from enterprises in other industries such as

infrastructure, mining and financial services.

• Pent-up consumer demand for basic telecoms.

Threats ■ Threats abound for established mobile network operators with Cambodia and Laos

having recently seen the arrival of new operators to their mobile markets.

■ However, international players such as VimpelCom have looked to exit these highly

competitive markets.

■ A robust and forward-looking regulatory framework is needed to encourage positive

developments, but the Myanmar government has fallen behind due to years of

isolation.





Mobile SWOT - Continued

■ The consumer story could start to play out after the necessary infrastructure such as

power grids have been deployed, which could happen only in the next decade.

■ Slow decline in SIM card prices would significantly hamper subscriber growth.

■ No indication of how the nationalisation of Cambodian infrastructure will play out

including compensation for operators. Seems likely it will allow the government to

increase control over data, censorship and internet connectivity in times of crises.





Wireline SWOT

Wireline SWOT Analysis

Strengths ■ There is a strong recognition by the Cambodian and Laotian authorities of the need to

develop fixed communications infrastructures.

■ The Cambodian and Laotian wireline markets have provided investment opportunities

for several major foreign investors including Vietnam's Viettel.

■

Healthy competition exists in Cambodia's broadband sector, where a large number ofservice providers have emerged offering internet access via a range of technologies.

■ Alcatel-Lucent and Chua Wei bringing first fibre optic network to Cambodia.

Weaknesses ■ The fixed-line market in both countries is starting to exhibit weak growth and

Cambodia's appears to have peaked.

■ Fixed-line market is dominated by state-controlled operators, Telecom Cambodia,

Lao Telecommunications (in which the Laos government has a 51% stake) and

Enterprise of Telecommunications Lao.

■ Despite recent investments in alternative infrastructures - broadband growth

continues to be dependent on DSL.

■ Overall underinvestment in the sector as there are diminishing prospects for a return.

■ Extremely low fixed-line penetration rates limit the scope for DSL broadband growth.

■ Large number of internet service providers limits investment and causes

overcrowding in the market.

■ Lack of competition and investment in Myanmar in broadband and fixed line.

Opportunities ■ The privatisation of Telecom Cambodia, and the further privatisation of Lao

Telecommunications, could help to bring about increased investment revenues and

the arrival of new skills.





Wireline SWOT Analysis - Continued

■ Internet penetration rates are extremely low, designating internet services as a market

with major growth potential.

■ Significant opportunities exist to develop a wide range of alternative broadband

technologies, including LTE and fibre.

■ In Cambodia, regulator Ministry of Posts and Telecommunications (MPTC) is

formulating a national broadband plan with the International Telecommunication

Union (ITU), which could see uplift in the nation's broadband penetration rate.

■ MPT and China Unicom have signed a deal to build a fibre-optic cable linking the two

countries and international submarine networks.

■ New investors entering the Cambodian internet market promising huge capital

expenditures on network coverage and development.

■ YPT in Myanmar looking to partner with international firm.

Threats ■ Fixed-line sector may enter a period of decline, with potentially negative

consequences for ADSL growth.

■ As the market for mobile data services grows, this could have potentially negative

consequences for the growth of fixed broadband services.

■ Demographic challenges to the growth of internet and broadband services, including

low literacy levels and low GDP per capita, will take a long time to overcome.

■ Errors made by the government in the allocation of wireless spectrum for the use of

WiMAX could see one or two operators being removed from the market.





Operational Risk

Aggregate SWOT Analysis

Strengths ■ Cambodia has an open and liberal investment regime.

■ Cambodia's rate of violent crime is generally low, and foreigners are unlikely to be

targeted.

■ The country has eight national highways that are in good condition and capable of

transporting heavy loads.

■ Low unemployment rates brought on by a drive in the garment and agricultural

industries have meant that GDP has risen in the past decade, increasing consumer

spending power.

Weaknesses ■ Cambodia is one of the most corrupt countries in the world, ranking 156th out of 174

countries in Transparency International's Corruption Perceptions 2014 Index.

■

The police are underfunded and underequipped, thereby reducing its overalleffectiveness, especially outside the major cities.

■ Low education standards have left a severe skills shortage in the labour market,

meaning investors will have to import qualified workers.

■ Corruption drives up the cost of doing business in Cambodia, since 'bribe taxes' are

regularly required to ensure cargo is transported on time.

Opportunities ■ The country is seeking to address access to, and quality of, education.

■ Cambodia is developing a successful garment industry that is well integrated into the

global production network.

■ Imports into Cambodia have been growing over the past decade, demonstrating a

healthy growth in consumer demand.

■ Re-ignition of oil exploration projects may help to drive down the cost of electricity in

the long term and leave the country more capable of meeting energy demands.





Aggregate SWOT Analysis - Continued

Threats ■ Expropriation of land by the government is common and property rights are not

guaranteed.

■ Anti-government violence, as seen in July 2013, could be a harbinger of wider political

and social unrest, especially if Cambodians tire of the widespread corruption of

government officials.

■ Demand for electricity in Cambodia far exceeds the country's supplies leaving it

vulnerable to electricity shortages and disruptions to business activity.

■

The government has oriented its transport budget towards building new roads asopposed to repairing old ones, meaning existing infrastructure may deteriorate further

in the medium term.





Operational Risk

SWOT Analysis

Strengths ■ A low minimum wage helps keep employment costs down.

■ Low electricity costs benefit all sectors of the economy, especially those that are

energy intensive.

■ Laos has a vested interest in seeing foreign investment succeed; consequently it

provides a number of incentives to attract investors.

■ Laos faces a low threat of terrorism, either from domestic or international actors.

Weaknesses ■ A small population of international migrants mean investors face additional costs due

to the need to import labour.

■ Laos' landlocked status means that businesses face higher transport costs when it

comes to importing and exporting goods in comparison to Laos' coastline

neighbours.

■ Laos has some of the highest rates of corruption in the world, driving up business

costs due to bribery.

■ The fact that the government does not publish crime statistics makes it difficult for

investors to accurately assess the security situation.

Opportunities ■ Investment in education will boost the mean years of schooling.

■ Establishment of the ASEAN Economic Community in 2015 will increase opportunities

for international trade.

■ Major infrastructure projects will improve investment opportunities.

■ Membership of international trade associations will bring standards in Laos up to

international standards.

■ Border cooperation with neighbouring states could reduce organised crime, reducing

risk to foreign workers.





SWOT Analysis - Continued

Threats ■ Poor variety in tertiary sector subjects will continue to restrict graduate skillsets.

■ Underdeveloped financial markets mean investors may struggle to finance their

business and find a domestic market to sell to.

■ A rise in violent crime is particularly dangerous for 'wealthy looking' foreigners.

■ Should Laos continue to ignore the concerns of its neighbours over planned

hydroelectric dams, it risks escalating disagreements to armed conflict with a militarily

superior power (Vietnam).





Operational Risk

SWOT Analysis

Strengths ■ No enforced minimum wage and low labour costs and contributions reduce the

labour bill for businesses.

■ Myanmar has the second-largest military among South East Asian states, meaning

that it is unlikely to come under external attack.

■

Competitive levels of FDI as proportion of GDP, which is encouraging to potentialinvestors.

■ Strong inter-regional trade connections, particularly with China and Thailand,

providing business with access to large markets.

Weaknesses ■ Proportion of the workforce educated past primary school is the lowest in the region

which significantly decreases labour force skills.

■ Myanmar has many ethnic separatist rebel groups, meaning that armed conflict and

violence are a risk in the northern and eastern states.

■ Bureaucracy and red tape act as deterrents to investors, with long turnaround times

for opening and closing businesses.

■ Myanmar's shallow ports result in transhipments, limited connectivity and higher

costs for businesses.

Opportunities ■ Large education programmes being implemented by Myanmar government in

partnership with donors will increase labour force skills in the longer term.

■ Ongoing rapprochement with the US and EU will allow for greater foreign expertise to

modernise the country's law enforcement agencies and armed forces.

■ Booming trade growth leading to increased market size.

■ Improving utilities and IT infrastructure benefit businesses.






Threats ■ Trade Union presence in Myanmar is strengthening which increases the threat of

strike action causing disruption to business operations.

■ There is a small threat of the nationalisation of businesses, which would hamper

private sector investment.

■ Widespread crime and thievery pervading the Myanmar ports and shipping sectors,

particularly with regards to imports.

■ Lengthy delays on large infrastructure developments mean it will be a long time

before the benefits are felt by businesses.





Industry Forecast

Cambodia

Table: Telecoms Sector - Historical Data & Forecasts (Cambodia 2012-2019)

Indicator 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f

Main telephone lines in service,'000 584.5 420.9 361.1 327.5 309.9 298.4 289.1 281.8

Main Telephone Lines/100Inhabitants 3.9 2.8 2.3 2.1 1.9 1.8 1.8 1.7

Cellular Mobile PhoneSubscribers, '000 19,105.0 20,264.5 20,452.0 20,807.8 21,129.5 21,383.1 21,603.3 21,784.8

Mobile Phone Subscribers/100Inhabitants 128.5 133.9 132.7 132.7 132.6 132.0 131.3 130.5

3G & 4G phone subscribers, '000 2,700.0 3,827.6 4,669.7 5,416.8 5,931.4 6,109.3 6,301.8 6,616.9

3G & 4G market, % of mobilemarket 14.1 18.9 22.8 26.0 28.1 28.6 29.2 30.4

Broadband internet subscribers,'000 29.7 38.0 45.6 54.7 62.9 69.2 74.1 79.3

Broadband internet subscribers/ 100 Inhabitants 0.2 0.3 0.3 0.3 0.4 0.4 0.5 0.5

e/f=BMI estimate/forecast. Source: BMI research/ Operators

We have updated our mobile and fixed-line forecasts in the Q3 2015 report, using historical data from the

Telecommunications Regulator of Cambodia (TRC) for the end of 2014. As a result of these figures, we

have downgraded our expectations for both sectors, as mobile saw lacklustre growth in 2014, while fixed-

lines declined at a more rapid pace than we had anticipated.





Mobile

Mobile subscribers grew by just 0.9% in 2014, with

around 200,000 net additions and reaching

20.452mn. This was a large drop off from the 6.1%

subscriptions growth recorded in 2013 and points to

saturation in the market as penetration has long

surpassed 130%. This significant slowdown in

mobile growth has prompted us to downgrade our

forecasts for the next five years to 2019. For 2015,we now anticipate growth of 1.74%, from our

previous forecast of 4%.

We have long highlighted the need and likelihood

for further consolidation during our forecast period,

as companies find themselves unable to compete

with ongoing price wars and continued loss of

revenues. This has played out already in 2015, with

Metfone 's (Viettel ) acquisition of Beeline (Sotelco ). Transactions such as this should benefit the market

over the long-term, as there are still too many players competing over an extremely limited supply of

potential new customers. Metfone, Smart Axiata and Mobitel (CamGSM ) have emerged as the three most

successful in terms of subscriber bases and will be the main drivers of market development. A number of

targets remain following the exit of Beeline, including Cambodia Advance Communications (Cadcomms)

and Excell , the two smallest players by market share. Reducing the market size to just the three main

players would encourage more investment in new technology, end price wars, generate healthier margins

for the remaining operators and provide upside potential to our forecasts.

Net customer losses as a result of inactive accounts are a common occurrence in Cambodia, as subscriber

bases are primarily constituted of low-value prepaid subscriptions and further impacted by the high number

of operators and fierce price wars. This is a further motivation for our Q3 2015 downwards revision as the

loss of Beeline and other M&A activity may fuel subscriber purges, as new owners typically remove

inactive subscriptions upon taking ownership of an acquired unit in order to determine its true size.

However, these are difficult to predict and pose an ongoing risk to our total market subscriber figures.

Industry Forecast - Telecoms

Penetration (%), 2012-2019

Main Telephone Lines/100 Inhabitants (LHS)Mobile Phone Subscribers/100 Inhabitants (RHS)Broadband internet subscribers/100 Inhabitants (LHS)

2 0 1

2

2 0 1

3

2 0 1 4

e

2 0 1 5 f

2 0 1 6 f

2 0 1 7 f

2 0 1 8 f

2 0 1 9 f

0

2

4

6

130

127.5

132.5

135

e/f=BMI estimate/forecast. Source: BMI research/

Operators





Investment in the sector will also decline as a result, as operators see diminishing returns from expansion

into new regions. In rural regions, Cambodians are more likely to opt for a cheaper, more convenient mobile

phone. In urban areas fixed-line services are important for government agencies, hospitals, hotels and

businesses, especially if alternatives such as mobile are not as reliable or suffer from poor quality. The net

result will be a more rapid decrease in the number of fixed-line subscribers in Cambodia during our forecast

period of 2015-2019. Based on this new data, we now forecast 282,000 subscribers in 2019, for a 1.7%

penetration rate.





Broadband

The potential entrance of new players VNPT , South East Asia Telecom Cambodia (SEATEL

Cambodia) and Keybridge International (through its acquisition of 65% of Emaxx) could have significant

upside potential for the internet market. All of these new entrants are promising large investments for the

market, where previously there has been little return. Further Emaxx's partnership with Huawei should

begin to see the deployment of a 4G network around the country to be launched in Phnom Penh in 2015.

SEATEL Cambodia will focus on the use of fibre too, expanding capacity and coverage in late 2015.

We have maintained our growth rates and our forecasts for the number of Cambodian internet users and

broadband subscribers in light of this data. Our current forecast figures for the number of internet users in

Cambodia is based on the latest data published by the country's National ICT Development Authority

(NiDA) and the MPTC, which has provided a breakdown based on mobile and fixed internet subscriptions.

The internet market is clearly being driven by mobile technologies and we expect this to remain the trend in

the longer term, as seen from developments in other emerging and developed countries. Mobile internet

services and devices are typically more affordably priced, which explains their popularity among

consumers, particularly Cambodian consumers who have limited purchasing power. The increasing

affordability of devices and services should help spur growth to 6.6mn in 2019 with mobile solutionsremaining the main driver.

Meanwhile, over the next few years, we expect a small portion of internet user growth to come from the

uptake of fixed broadband services. While mobile broadband technologies are becoming increasingly

popular, we believe that fixed broadband services are still relevant, particularly for businesses. By the end

of 2019, we forecast this figure increasing to approximately 79,300 for a broadband penetration rate of

0.5%.

One reason underpinning the long-term expansion of Cambodia's broadband internet market includes the

extent of new infrastructure investments and initiatives to make broadband services more affordable. One of

the most important factors shaping current subscriber growth is the increased competition, which the sector

has recently experienced; competition helps to lower costs and provide potential customers with more

connectivity options. With regard to infrastructure investments, BMI believes that it may be a while before

new investments are felt within the mass market. Instead, much of the infrastructure development over the

next few years is expected to be concentrated in business and tourist hubs rather than rural regions.





Laos

Table: Telecoms Sector - Historical Data & Forecasts (Laos 2012-2019)

2012e 2013e 2014e 2015f 2016f 2017f 2018f 2019f

Cellular Mobile Phone Subscribers, '000 4,151.6 4,682.9 5,228.5 5,718.7 6,096.1 6,416.2 6,729.3 6,967.5

Mobile Phone Subscribers/100 Inhabitants 62.5 69.2 75.8 81.5 85.3 88.2 90.9 92.6

3G & 4G phone subscribers, '000 350.0 595.0 892.5 1,115.6 1,249.5 1,382.8 1,496.4 1,582.4

3G & 4G market, % of mobile market 8.4 12.7 17.1 19.5 20.5 21.6 22.2 22.7

Main telephone lines in service, '000 112.0 123.0 126.7 130.5 134.4 138.4 142.6 146.9

Main Telephone Lines/100 Inhabitants 1.7 1.8 1.8 1.9 1.9 1.9 1.9 2.0

Broadband internet subscribers, '000 93.2 139.8 181.7 227.2 272.6 313.5 344.9 362.1

Broadband internet subscribers/100Inhabitants 1.4 2.1 2.6 3.2 3.8 4.3 4.7 4.8


Mobile

We have retained our forecasts in the Q3 2015

report, as there have been no major market

developments or data made available since the last

update that would precipitate a change. The market

remains underdeveloped by comparison to the rest of

the region, which should see it grow well to 2019.

We estimate that there were about 5.229mn mobile

subscribers in Laos at the end of 2014, representing

a 75.8% penetration rate. Inactive subscriber

deduction was one of the major risks we have

highlighted to the total market size and this played

out during 2012 on a large scale but is difficult to

predict going forward. In 2015, we should see strong

growth due to the low level of penetration in the

market combined with competition among four

players. By the end of 2019, we forecast Laos' mobile penetration rate will have reached 92.6%, or about

6.968mn subscribers.


(2012-2019)

Mobile Phone Subscribers/100 Inhabitants (RHS)Main Telephone Lines/100 Inhabitants (LHS)Broadband internet subscribers/100 Inhabitants (LHS)

2 0 1 2

2 0 1 3 e

2 0 1 4 e

2 0 1 5 f

2 0 1 6 f

2 0 1 7 f

2 0 1 8 f

2 0 1 9 f

2

4

0

6

60

70

80

90

100

e/f=BMI estimate/forecast. Source: BMI research/

Operators





The MPT's website indicates that there were about 21,702 internet subscribers in the country at the end of

June 2011 (latest available data). Approximately 8,957 people subscribed to ADSL services while another

5,954 were using dial-up. The remaining subscriber base used alternative technologies such as HSPA, lease

line and satellite. The ministry's figures are significantly lower than that of the ITU and we believe that this

is because the ITU counts people who access the internet but do not have an internet subscription (for

example, people using internet cafés).

Broadband subscriptions are costly, which would hinder its prospect of achieving a mass market status in

the short term. However, the introduction of mobile broadband technologies such as WiMAX and LTE bode

well for increasing the penetration rate as expanding into rural regions would be cheaper for telecoms

companies. Consequently, cost savings from not having to roll-out fixed infrastructure could be passed on to

consumers.

We expect about 227,200 fixed broadband subscribers in Laos at the end of 2015, and we envisage this

number to increase to about 362,100 by 2019. We see upside potential to our forecast scenario, but this

depends on operators expanding their network coverage. There is also a downside risk in the form of mobile

broadband, which is becoming increasingly popular. At present, our forecast is still based on the fixed

broadband market, but we will include mobile solutions once more data are made available.





Myanmar

Table: Telecoms Sector - Historical Data & Forecasts (Myanmar 2012-2019)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f

Cellular Mobile Phone Subscribers,'000 5,438.0 6,150.0 16,042.0 32,886.0 52,617.6 63,141.2 72,612.3 78,566.5

Mobile Phone Subscribers/100Inhabitants 10.3 11.5 29.9 60.7 96.4 114.8 131.1 140.9

3G & 4G phone subscribers, '000 738.0 895.0 1,020.3 1,132.5 1,245.8 1,357.9 1,466.5 1,613.2

3G & 4G market, % of mobilemarket 13.6 14.6 6.4 3.4 2.4 2.2 2.0 2.1

Main telephone lines in service, '000 604.5 725.4 870.5 1,001.1 1,151.2 1,266.3 1,329.6 1,396.1

Main Telephone Lines/100Inhabitants 1.1 1.4 1.6 1.8 2.1 2.3 2.4 2.5

Broadband internet subscribers,'000 50.0 110.0 198.0 297.0 371.3 445.5 512.3 563.5

Broadband internet subscribers/100Inhabitants 0.1 0.2 0.4 0.5 0.7 0.8 0.9 1.0






Mobile

We have left our Myanmar forecasts unchanged in

the Q3 2015 report, as the market continues to grow

in-line with our expectations. The competition

between Ooredoo , Telenor and MPT has already

paid dividends since it began in August 2014, with

millions of new subscribers added to the market,

around 5mn in Q115 alone. The potential addition of

a fourth player into the mobile market, Viettel,

through a partnership with Yatanarpon Telecom will

result in an upgrade to our forecasts once moreconcrete information becomes available. As of May

2015, there had been no further announcements

regarding this partnership, which may imply that it

has fallen through and we have therefore not

upgraded our forecasts this quarter.

Obtaining up-to-date and reliable statistics about

Myanmar's telecoms market remains a challenging task. BMI estimated growth of 135% in 2014 as a result

of the Ooredoo and Telenor launches, with subscribers rising from 6.2mn to 14.4mn. In 2015, we forecast

further strong growth of 105%, with subscriptions reaching 32.9mn as competition intensifies and

infrastructure is expanded by the new entrants. By the end of 2019, we see mobile subscriptions reaching

78.6mn for a penetration of 140.9%.

We envisage high growth in Myanmar's mobile sector due to several reasons. Firstly, the country is starting

from a low base - the 6.15mn mobile subscribers in December 2013 represented a 11.6% penetration rate.

Secondly, the market has seen the entry of new competitors; two of which are established international

companies with ample frontier market experience. Ooredoo launched in August 2014 and Telenor followed

in September 2014. Both reported that they had sold over 1mn SIM cards within the first month of

operations. State-owned incumbent MPT has partnered with KDDI and Sumitomo Corporation and will

leverage their technical expertise and financial resources. MPT 's partnership with KDDI and Sumitomo

Corporation has led to a re-examination of its pricing strategy towards the low levels offered by Ooredoo

and Telenor. Thirdly, there is all-round pressure from stakeholders such as the government, foreign

companies and consumers to lower mobile service ownership costs and tariffs which should therefore spur

an increased level of market growth over the next five years, as the fastest growing market in the world.


(2012-2019)

Mobile Phone Subscribers/100 Inhabitants (RHS)Main Telephone Lines/100 Inhabitants (LHS)Broadband internet subscribers/100 Inhabitants (LHS)

2 0 1 2

2 0 1 3

2 0 1 4 e

2 0 1 5 f

2 0 1 6 f

2 0 1 7 f

2 0 1 8 f

2 0 1 9 f

0

1

2

3

-1 0

50

100

150

e/f=BMI estimate/forecast. Source: BMI research





There were 738,000 3G subscribers in Myanmar at the end of 2012, representing 13.6% of the total mobile

subscriber base. There is a lack of historical data from the MCIT, which makes it difficult to predict the

future growth trajectory. Smartphones have started to penetrate the market, which should spur service

adoption. The cost of 3G SIM cards was reportedly slashed in 2013, but without confirmation of this we

hold to our current view for relatively muted interest in 3G. With subscriptions reaching 1.133mn in 2015,

representing 3.8% of the mobile market.

Emerging markets around the world have shown a strong preference for mobile broadband services in light

of their affordability and greater network coverage compared to fixed solutions. Consequently, we expect

strong adoption when Myanmar's mobile sector is fully liberalised. We will start to forecast 3G subscriber

growth once more data are available.

Fixed-Line

Fixed-line adoption in Myanmar is largely limited by a lack of network coverage as the government noted a

scarcity of intercity and inter-regional transmission facilities. Unlike mobile technology, the fixed line

sector does not offer lucrative returns and will not attract the same level of investment from major

international companies. Instead, it may remain within the purview of the government-owned enterprises to

encourage uptake and expand coverage in 2015. We forecast fixed-line subscribers to reach 1.001mn in

2015 up from 871,000 in 2014.

Yangon has the greatest percentage of fixed-line subscribers with 39% of the country's total. We expect

demand for services in large cities such as Yangon, Naypyidaw and Mandalay from businesses, government

agencies and consumers (especially if SIM cards remain highly priced). However, Myanmar's mobile

industry has started to take off, and this will significantly cap long-term demand for fixed-line services.

Although the country's fixed-line sector is underdeveloped, we do not believe that it will be immune from

the mobile substitution effect, which is being experienced by most countries in the world.

A combination of demand from companies and network expansion into underserved rural regions, driven by

the government to achieve its telecoms penetration rate goal, should see stable growth in Myanmar's fixed-

line market. However, we expect the mobile industry to outshine in terms of subscriber growth and market

developments. By end-2019, we envisage 1.396mn fixed-line subscribers in Myanmar, representing a

penetration rate of 2.5%.





Broadband

Like Myanmar's fixed-line sector, we again expect the majority of the demand to originate from the large

cities and businesses. International companies would require stable, high-speed internet connectivity to

facilitate their operations and cross-border communications. A tender to enter the broadband market would

be met with some demand and we expect some international companies may look to enter the country

during our five-year forecast period, although this is not reflected in our figures. For 2015, we see

broadband subscribers reaching 297,000, representing 0.6% of the population.

We believe that Myanmar's internet and broadband markets will perform well in the long run as the

liberalisation continues to gain traction. However, near-term prospects will be hampered by the time neededto expand and upgrade the networks. Additionally, while prices for ADSL services have started to decline,

the total cost of ownership is still prohibitively high, especially when Myanmar's GDP per capita was about

USD1,300.

Myanmar already reports that majority of internet users in the country subscribe to mobile internet services.

Meanwhile, ADSL is the dominant technology for fixed internet connections.

The public and private sectors are working to expand fibre-optic cables across the country as well as linking

up with the international network via more submarine cables. Despite next generation fibre technology,

which will allow sophisticated services, we believe that there is a lack of near-term need from the average

consumer. Instead, the majority of internet users have already opted for mobile technologies, and we believe

that this will remain the situation in the long run, as seen by trends around the world.

At present, our broadband forecasts encompass only fixed technologies as there is an absence of historical

data for mobile broadband solutions. We do not foresee the fixed broadband market to experience rapid

growth unless there is greater network coverage, a combination of lower prices and higher purchasing

power, and the availability of relevant bandwidth-intensive services such as IPTV. Similarly, the majority of

the growth will be powered by mobile broadband solutions. By 2019, we expect 564,000 fixed broadband

subscribers, representing a 1.0% penetration rate.





Industry Business Environment Overview

Industry Risk Reward Index

Minor improvements to the average Country Rewards and Country Risks scores for the 28 countries

surveyed as part of BMI 's Telecoms Industry Risks/Rewards Index are recorded this quarter. A number of

countries moved up or down the ranking table according to their changing economic, political and

demographic fortunes, but those movements are generally fairly limited. The most remarkable changes see

China fall four places to ninth position, while New Zealand climbs three places to fifth place. Amended

Industry Rewards scores were also recorded by several countries this quarter as a result of market

consolidation reducing the number of effective players and heightened price competition that continues to

drive down revenues and profit margins.

Industry Rewards

The regional average score for Industry Rewards declined by 0.5 points this quarter, to 43.7. Countries'

Industry Rewards scores consider factors such as recent and forecast subscription and revenue growth in the

mobile and wireline voice and data markets, with ARPUs also used as a guide for market headwinds. Eight

countries had their Industry Rewards scores downgraded this quarter as market saturation led to flat or

negative mobile subscription growth while ARPUs were impacted by price competition and/or the dilutive

effects of bundling multiple low-value products alongside higher value offerings.

China fared poorly in our latest assessments as certain operators proved reluctant to disclose ARPUs for

various reasons including, but not limited to, the migration of customers to new 4G networks. Less

transparency in the reporting of key revenue streams, including mobile data usage, also weighed on our

view of the Chinese market. Operators' profitability was also impacted by the high cost of building the new

4G networks.

Neighbouring Mongolia lost five points this quarter, as mobile subscription growth was found to have

stalled in 2014 and the expansion of the wireline broadband market underperformed expectations. Few data

are available regarding the financial performance of Mongolia's telecoms companies, but information

disclosed by the regulator implies that price competition caused ARPUs to decline last year.

Australia, which is the fourth most attractive Asian market overall, also saw its Industry Rewards score

decline, by 5.5 points, to 52.3. With a mobile penetration rate of close to 132%, market saturation is

expected to weigh on growth momentum over the next five years. That said, the mobile market





demonstrated better than expected subscriptions growth in 2014 as a whole, aided by consolidation amongst

the smaller alternative wireline carriers, many of whom act as mobile service resellers or virtual operators.

The emergence of larger, more potent alternative players creates more opportunities to sell mobile to a

wider audience.

Of the four markets that recorded improvements to their Industry Rewards scores, the most notable are

Myanmar and Vietnam. We now have two quarters of data to analyse for Myanmar's two new mobile

operators and uptake rates are within the ranges we had been expecting for a frontier market being exposed

to very cheap services for the first time. With actual ARPU figures now incorporated into our analysis and

forecasting models, our outlook for Myanmar is much brighter than before. Its Industry Rewards score

increases by 7.5 points to 52.5, well above the regional average, and indicative of Myanmar's long-term

appeal as an investment destination.

Vietnam's score improves by 2.8 points to 52.3, also above the regional average. Further consolidation in

the mobile market diminishes consumer choice, but the winnowing-out of underperforming players,

particularly those that base their business models around unsustainably cheap voice and data services, is to

be welcomed. Clearer market data from the regulator show that mobile and broadband subscription growth

improved in 2014 versus 2013, allowing us to upgrade Vietnam's score. However, the country is still a long

way off from fulfilling its potential and there are still many risks and outright impediments to foreign

investors working in the country, not least of which is the deep influence the state wields over mass media

services, including telecommunications. As a member of the Trans-Pacific Partnership (TPP), Vietnam's

government must take a less central role in the business sector; whether it will do so remains to be seen ( see

'Limited Impact On ICT From Trans-Pacific Partnership', April 13 2015 ).

Country Rewards

The regional average score for Country Rewards improves by 1.1 point to 51.3 this quarter, with 12

countries seeing amended scores in this category. Improvements were recorded by six countries, with the

most dramatic improvement being the nine-point increase applied to Malaysia, raising its score to 54.0.

New demographic data - including new information on population distribution, access to power, age ranges

and consumers' disposable incomes - have been incorporated into our forecasting model, yielding a much

more positive view of the country's potential with regards to adoption of advanced telecoms services.

Although mobile and wireline growth trends continue within expectations, consumption of mobile non-

voice, non-messaging services and utilisation of broadband accesses for more than Internet browsing led to

higher incomes from value-added services, justifying operators' investments in 4G and fibre-optic





technology. On a related note, strong growth in data centre and the provision of cloud computing services

shows that more businesses are leveraging the increased power of the country's telecoms infrastructure.

Australia sees a 10-point increase to its score, taking it to 80 points, putting it on a par with Singapore and

Macau. The country's robust economic performance led to an appreciable increase in disposable incomes

while the rollout of the National Broadband Network (NBN) to rural areas and the consolidation of minor

alternative wireline players brings advanced infrastructure and services to more Australians, rural and urban

alike.

Indonesia, meanwhile, recorded a 3.3 point reduction to its score, putting it well below the regional average,

at 42.7 points. There has been an easing-off of economic growth in recent months and consumers'

disposable incomes have been hit. New data show that GDP per capita has declined while the average ageof the population has increased; this can make it difficult to sell advanced new products and services. This

should concern operators investing heavily in advanced fibre-optic backbones and 4G mobile broadband

platforms alike.

Mongolia's score declined by three points this quarter while that of Vietnam fell by 3.3 points. In both

cases, new economic data showed that disposable incomes were now lower than before and, as operators are

striving to encourage subscribers to make greater use of value-added services, this poses a moderate

downside risk that must be considered when planning infrastructure or service-led investments in these

markets.

Industry Risks

The regional average score for Industry Risks - which focuses on regulators, the extent of their powers, their

inclination towards passivity or proactivity when encouraging investment or the development of new

networks and services, as well as the degree to which they are free of government interference - remains at

64.5 points this quarter. No changes were recorded for any of the 28 markets in our survey owing to the

well-established regulatory regimes in developed markets, the continued enhancement of industry policies

in middle-tier markets and progress in transforming the regulatory regimes in frontier markets such as

Myanmar.

The highest scoring countries continue to be Singapore, Hong Kong and New Zealand, each recording 90

points. The Commerce Commission of New Zealand continues to amend pricing for physical infrastructure

access in favour of the country's service providers; this weighs on infrastructure owner Chorus ' ability to

invest in advanced fibre-optic infrastructure as it is required to maintain its legacy copper access network in





the interim. It could be argued that the Commerce Commission is being over-zealous in its treatment of

Chorus while it pursues diversity in the retail services arena. As a result, it may be necessary to mark down

New Zealand's Industry Risks score in the near future.

Country Risks

The average Country Risks score for the Asia Pacific region fell by 0.1 point this quarter, to 59.6 points.

This masks the fact that 16 markets had their scores revised, of which seven were downwards in nature.

Perhaps the most notable of the downgrades were those applied to Malaysia and Pakistan. The former

recorded a 4.3 point reduction while the latter saw 10.8 points wiped off its score.

As already noted, Malaysia's demographics are in good shape. Over the next decade the active population is

projected to grow by 1.6%, which is among the highest in the region. This will provide a natural tailwind to

the economy, particularly when compared with Thailand, whose active population is projected to stagnate

over the next decade. That said, when we compare active population growth over the next decade with that

of the past decade, Malaysia performs relatively poorly. Holding all other factors constant, this should result

in slower real GDP growth over the coming decade (although it should be noted that Taiwan, China,

Vietnam and Singapore are in a worse position in this regard).

In line with consensus expectations, Malaysia's real GDP grew at a slower rate of 5.6% y-o-y in Q314

compared to the previous quarter's 6.4% y-o-y. We believe that the slowing money supply growth and

weaker export demand suggest a further deceleration in Q414 and forecast real GDP growth to come in at

5.8% for the full year. We are less sanguine on Malaysia's growth outlook in 2015, noting that government

measures, such as the implementation of new taxes and reduction of subsidies, will lead to a reduction in

disposable income. Persistent weaknesses in Malaysia's main trading partners will also weigh on growth.

Accordingly, we forecast real GDP to grow by 4.2% y-o-y in 2015.

Pakistan's fiscal position continues to improve. The government ran a fiscal deficit of 5.5% of GDP in the

2013/14 fiscal year, marking a strong improvement on the 8.0% of GDP deficit seen in FY2012/13. Total

revenues surged by 22.0%, while expenditure grew by just 4.7%. This was the largest percentage point gap

between revenues and expenditure growth on record, and is a clear sign that reform measures are bearing

fruit. We are forecasting further progress in FY2014/15 as reform and privatisation measures roll on, which

should take the fiscal deficit to 5.1% of GDP. This compares with the IMF's estimate of 4.8% of GDP, as

we expect military spending to increase in the wake of increased counter-terrorism efforts.





Two countries that saw significant improvements to their Country Risks scores this quarter were Nepal and

Laos, both of which nevertheless remain at the lower end of the overall ranking table.

Being located in close proximity to both China and India, Nepal will be able to reap substantial benefits

from the improving economic growth prospects in India as well as the ongoing power struggle between

Beijing and New Delhi for dominance of South Asia. We expect these economic gains to come mainly in

the form of greater trade and inward investment flows from China and India over the coming years.

Meanwhile, strong remittance inflows will remain supportive of private consumption growth (which

accounts for about 80% of nominal GDP). As a result, we have raised our FY2014/15 (16 July 2014- 15

July 2015) real GDP growth forecast for Nepal to 4.0%, from 3.5% previously. That said, we note that

domestic political challenges and continued business environment weakness will continue to weigh on the

pace of Nepal's economic development.

We believe stronger real GDP expansion in India (we forecast an acceleration of India's real GDP growth to

5.6% in FY2014/15 [April 2014- March 2015] and 6.3% in FY2015/16 from 4.7% in FY2013/14) will yield

a positive impact on the Nepalese economy over the coming years, given the extensive economic linkages

between the two countries. Indeed, India is a key source of remittances for the Nepalese economy,

accounting for about 33% of total inflows in 2012 according to data from the World Bank.

Ongoing efforts by the Laotian government to develop the hydropower and tourism sectors, and attract

Japanese manufacturing companies, should help Laos to garner greater foreign investor interest over the

coming years. Ongoing ASEAN economic integration, which will generate more trade and investment

opportunities in the region, will also help to bring more foreign direct investment (FDI) inflows to Laos.

Larger FDI inflows will improve Laos' economic growth prospects, bolstering our view that the economy

will be able to sustain its current strong growth momentum over the medium term despite potential

headwinds stemming from slowing mining sector growth and the country's poor fiscal health. We maintain

our largely positive growth outlook for the Laotian economy, and are forecasting real GDP growth to

increase from an estimated 7.4% in 2014 to 7.6% in 2015.

Table: Asia-Pacific Telecoms Risk/Reward Index, Q315

Rewards Risks

Country Industry Rewards

Country Rewards

Industry Risks

Country Risks

TelecomsScore

Rank PreviousRank

Japan 65.0 70.0 80.0 69.2 69.1 1 1

Singapore 47.5 80.0 90.0 79.1 66.6 2 2





Asia-Pacific Telecoms Risk/Reward Index, Q315 - Continued

Rewards Risks

Hong Kong 45.0 76.7 90.0 70.9 63.4 3 4 Australia 52.3 80.0 70.0 62.6 63.3 4 3

New Zealand 47.5 72.0 90.0 68.8 63.1 5 8

South Korea 52.5 63.0 80.0 70.8 61.9 6 6

Macau 42.5 80.0 70.0 75.9 60.8 7 9

Taiwan 50.0 60.0 80.0 74.1 60.6 8 7

China 63.3 33.3 70.0 81.8 59.7 9 5

Malaysia 50.0 54.0 70.0 67.9 56.7 10 10

Indonesia 55.0 42.7 60.0 60.2 53.5 11 11

India 52.5 32.1 65.0 68.7 51.8 12 12

Philippines 45.0 46.7 60.0 65.1 50.7 13 13

Pakistan 47.3 42.0 60.0 50.1 48.3 14 14

Afghanistan 35.0 66.7 45.0 57.0 47.6 15 17

Mongolia 32.5 51.0 65.0 65.2 46.8 16 15

Brunei 20.0 80.0 65.0 52.7 46.4 17 16

Thailand 49.5 29.3 50.0 58.0 45.9 =18 18

Vietnam 52.3 30.0 30.0 68.3 45.9 =18 19

Fiji 35.0 53.3 65.0 38.9 44.6 20 23

East Timor 25.0 46.7 80.0 64.7 44.5 21 20

Myanmar 52.5 32.7 30.0 50.4 44.0 22 24

Bangladesh 47.5 36.7 60.0 21.9 42.9 23 21

Nepal 37.5 33.3 60.0 52.3 42.1 24 22

Bhutan 24.8 36.0 80.0 46.0 39.0 25 26

Cambodia 35.0 38.3 40.0 50.7 38.9 26 25

Sri Lanka 35.0 30.0 60.0 27.1 36.3 27 27

Laos 27.5 39.0 40.0 50.7 35.7 28 28

Average 43.7 51.3 64.5 59.6 51.1 - -

Scores are weighted as follows: 'Rewards': 70%, of which Industry Rewards 65% and Country Rewards 35%; 'Risks':30%, of which Industry Risks 40% and Country Risks 60%. The 'Rewards' score evaluates the size and growth potential of a telecoms market in any given state, and country's broader socio-demographic characteristics that impact the

industry's development; the 'Risks' score evaluates industry specific dangers and those emanating from the state's political/economic profile, based on BMI's proprietary Country Risk Index that could affect the realisation of anticipated returns. Source: BMI





Market Overview

Cambodia

Regional Perspective

The Telecommunication Regulator of Cambodia (TRC) has started publishing market level data on the

telecoms sector in Cambodia. The body was established by the Ministry of Posts and Telecommunications

(MPTC) to be an independent, transparent regulatory authority and the public availability of this data

suggests it is moving in the right direction.

Cambodia's mobile market has experienced significant growth in the last few years, but the momentum hascome at the cost of one of the lowest ARPU levels in the Asia Pacific region. The lack of growth

opportunities, coupled with intense price competition and a crowded market has seen prominent companies

exit the market. We believe that the subscriber mix mostly consists of prepaid subscribers, and that there are

lot of inactive subscriptions in the market. While mobile data is starting to gain traction, we expect

operators to continue to struggle while competition remains so fierce, posing problems for investment.

Cambodia Mobile Market Regional Comparison

Mobile Penetration (%) (LHS), Others, 2014

f = BMI forecast. Data from 18 countries when available. Source: BMI, regulators, operators





Table: Cambodia Mobile Market Regional Comparison, 2014

Cambodia Asia Pacific

Mobile penetration (%) 138.2 120.5

Blended ARPU (USD) 2.1 14.5

3G as % of entire mobile market 21.9 49.0

5-year CAGR (%) 24.4 8.9

Data from 18 countries when available. Source: BMI, Regulators, operators

Key Developments

■

In March 2015, mobile network operator Sotelco - which has traded as Beeline Cambodia for the lastfive years - agreed to transfer key licences and infrastructure assets to rival Metfone . Beeline'ssubscribers will be transferred onto the Metfone network from March 24.

■ Cambodian internet service provider Chuan Wei and French equipment vendor Alcatel-Lucent willdeploy a 100Gbps fibre-optic data network across Cambodia. The 100G network will pave the way fordeveloping a 400G capacity in the future. Alcatel-Lucent will build the 100G DWDM/OTN network using its 1830 Photonic Service Switch platform. The nationwide DWDM network will be linked to asubmarine cable landing station.

■ Singapore-registered South East Asia Telecom Group's unit South East Asia Telecom Cambodia(SEATEL Cambodia) plans to invest USD500mn to roll out and operate a 4G network in Cambodia overthe next few years. The investment is divided into three phases over the next two-to-three years. In the

first phase, which started in August 2014, around USD100mn was spent to build the group's Cambodianheadquarters and purchase 5,500km of fibre-optic cables. The second phase, which includes increasingcapacity and coverage, will commence in late 2015. Phase three will start at the end of 2016.

■ In September 2014, Emaxx signed a contract with China's Huawei for the development of thisnationwide 4G network. Huawei will roll out LTE base stations in eight cities, including Phnom Penh,Siem Reap, Sihanoukville and Battambang and is expected to be completed within the next two years.Emaxx intends to launch services in the capital in early 2015.

■ Sotelco will begin deploying 3G services for all subscribers in Cambodia in 2014. Sotelco will alsolaunch 4G services in 2014 with the support of ZTE. Smart Axiata announced in January 2014 that it hadplans to introduce LTE network to Cambodia on a system-wide basis. The initial rollout locations will betargeted to 'LTE experience zones' where young professionals frequent, and thereafter, the coverage willbe rolled out to the whole of Phnom Penh in Q214.

■ Vietnam Post and Telecommunications Group (VNPT) has opened an office in Phnom Penh, ahead of a launch of internet services. The company has reportedly been researching the market for two years andis hoping to gain 25% market share by the end of 2014, increasing to 50% by the end of 2015. A pressrelease on the company website indicates the company intends to make a 'huge investment' in thisexpansion, while also planning further launches in Thailand and Myanmar.





Mobile Growth

BMI uses figures published in local media reports

and by the TRC to better understand the current

status of the Cambodian mobile market. The TRC

reported that there were 20.452mn mobile

subscribers at the end of Q414, up by 0.9% from

20.265mn at the end of Q413.

Prior to Q413, reports in the local press quoting the

MPTC, state that the Cambodian mobile market

reached 19.105mn subscribers at the end of 2012, up22% y-o-y from 15.7mn to end 2011. The market

has seen periods of net losses, most likely due to

operators cleaning up their base, removing inactive

subscribers, particularly given the high prominence

of prepaid subscriptions in the market.

Much of the reason behind the rapid take-up of mobile services relates to the introduction of several new

players, which had the positive effect of bringing prices down, but also artificially boosting take-up rates as

subscribers took advantage of introductory pricing promotions to obtain multiple SIMs or handsets for

particular calling needs.

BMI has long questioned whether the market can support the seven mobile operators currently present

(after the merger between hello and Smart Mobile , Mfone filing for insolvency and the exit of Vimpelcom .

This is a view we continue to uphold from our previous quarterly reports and is also a common trend in

other Asian markets. We have seen similar destructive scenarios play out in other Asian markets, notably

India, where operators have lost the ability to profit from their activities.

Market Shares

There are five operators in Cambodia's mobile market (following Mfone filing for insolvency, the

acquisition of Smart (Latelz) by hello Axiata and the buyout of Beeline (Sotelco) by Metfone), and only

Axiata report subscriber data on a regular basis. In the past, the MPTC has provided mobile operator market

shares for 2009, 2010 and Q311, and we believe the TRC may provide that information in the future.

We estimate the following shares for December 2014, based on local news reports, market growth rates and

data from Smart Mobile (Axiata):

Mobile Market Growth

2012-2014

Source: BMI, operators, MPTC, TRC





Table: Mobile Market Share (%)

Q414 %

Mobitel 4,622 23

Smart Mobile 6,650 33

Beeline (part of Metfone as of April 2015) 440 2

Metfone 8,115 40

qb 625 3

Total 20,452 100

Source: BMI, operators, MPTC, TRC

According to the MPTC, Vietnam-based Viettel 's Metfone was the market leader with a 47% share at the

end of Q311, an equivalent of 6.5mn subscribers. The operator saw a meteoric rise in the market

considering that it had only a 20% market share in 2009, representing 1.4mn subscribers. Metfone claimed

the top spot in 2010 with a 40% market share or 4.0mn subscribers. We believe that the strong growth

momentum was due to a combination of aggressive tariff rates and rapid deployment of network

infrastructure, a strategy that Viettel has used in other overseas markets. Metfone reportedly has 9mn

subscribers as of April 2015 and a 50% share of the market following its acquisition of Beeline.

In second place was CamGSM 's Mobitel , which had 21% market share in Q311, down from 26% in 2010

and 40% in 2009. Mobitel was displaced by Viettel as its mobile subscriber base has remained relatively

stable in the last three years. Mobitel saw its mobile subscriber decline from 2.86mn in 2009 to 2.61mn in

2010 before recovering to 2.89mn in Q311. Following Thaicom 's Mfone filing for insolvency in January

2013, the latter's 365,000 subscribers were transferred to Mobitel as part of the proceedings. Cambodia

Daily reported in March 2014 that CamGSM is the largest operator in terms of revenue but the third largest

in subscribers.

Axiata-owned hello was joint third with Latelz (which is branded as Smart Mobile) at the end of Q311,

though Axiata (hello) has since replaced Mobitel in second place as a result of its merger with Latelz

(Smart), now branded as Smart. Both operators had 11% market share, an equivalent of 1.5mn subscribers

each. The acquisition of Smart Mobile by hello in February 2013 made it the second largest operator in

Cambodia by subscriber numbers. Axiata noted that the combined business (now branded as Smart) had

5.4mn mobile subscribers in March 2014, up from 3.7mn in Q113.





Mfone was reported by the MPTC to have 5% market share in Q311, representing 688,000 subscribers,

although its parent company Thaicom said Mfone had 532,910 subscribers, which could be a result of

differences in subscriber definition. Mfone's mobile subscriber base has been declining; from a peak of

948,000 in Q209 it declined to 365,316 in December 2012. In November 2012, Thaicom announced that it

has sold its entire stake in Mfone to local investor INT Management Service for USD100. However, INT

Management Service did not fulfil the condition precedent. Consequently, Mfone filed a petition for the

opening of insolvency proceedings due to the Cambodian operator's deteriorating financial position and

continued operating loss on January 9. As a result of the insolvency filing, Mfone was supposed to transfer

its subscribers to rival Mobitel, but the process was held up after a challenge by Huawei Technologies. The

Chinese vendor is owed about USD65mn and it believes that the transfer would violate an injunction to

freeze Mfone's asset. Huawei agreed to drop its injunction in June, in order to facilitate a quicker asset sale

and thus compensate creditors.

Likewise, VimpelCom, which publishes quarterly results for Sotelco, said its Cambodian operation had

800,000 subscribers in Q311. By comparison, the MPTC's showed that Sotelco had only 550,000, an

equivalent of 4% market share. VimpelCom has announced that Sotelco had just 533,000 mobile

subscribers at the end of Q113, down from the peak of 1.126mn in Q212. The company did not provide

results in Cambodia for Q213, as it exited the market prior the report being published. In April 2013, it sold

Sotelco to its local partner, Mr. Huot Vanthan, for an undisclosed amount. However, the new owner was

unable to turn the company's fortunes around and Beeline was absorbed into Metfone in April 2015 and isnow inactive.

The remaining two operators are CadComms and GT-Tell (which markets under Excell). The MPTC

reported that CadComms had a 1% market share in Q311, unchanged from 2010 and down from 3% in

2009. Meanwhile, GT-Tell had 0% market share, a result of rounding by the regulator.

Consolidation

In March 2014, unnamed sources suggested that Royal Group was reportedly seeking to divest a part of its

share capital. Several trade and private equity parties are looking to acquire a stake in the firm or its 3,000

telecoms towers. Previously, PT Telkom Indonesia and France-based Orange were seeking to acquire a

major stake in CamGSM, but discussions eventually ended during the due diligence process. Indonesia-

based network operator Tower Bersama also conducted due diligence on the towers, although it decided

not to follow through. The reports were subsequently denied by the company, insisting that it was instead in

the process of rolling out the next phase of an additional 300 sites during 2014. Furthermore, CamGSM





confirmed that it had some debt with the Bank of China but that it does not consider it to be a significant

sum.

In March 2015, mobile network operator Sotelco - which has traded as Beeline Cambodia for the last five

years - agreed to transfer key licences and infrastructure assets to rival Metfone. Beeline's subscribers will

be transferred onto the Metfone network from March 24. However, as customers will need to replace their

prepaid Beeline scratch cards with Metfone equivalents, BMI believes few customers will be incentivised to

do so. In consequence, as many as 300,000 subscriptions could be removed from the market.

Two conclusions may be drawn from Metfone's absorption of 'key assets' of Beeline. Firstly, Cambodia's

crowded mobile cannot support more than three players, a view we have long held. Secondly, there is littleintrinsic value in those players that fall by the wayside, as Mfone's demise through liquidation rather than

acquisition demonstrates.

Mobile Market Share (%)

Q311 & Q414e

e=BMI estimate. Source: BMI, operators, MPTC





Table: Active Mobile Operators (May 2015)

Brand Name Parent

Metfone Viettel

qb Cambodia Advance Communications (CadComms)

Beeline - Acquired by Metfone in Apr-15 Viettel

Smart/hello Axiata

Cellcard/Mobitel CamGSM

Excell GT-Tell

CooTel Xinwei

Source: BM, TRC

Usage

VimpelCom was the only operator in the Cambodian mobile market to publish ARPU data. Even so, data

only stretch back to Q409 and it is difficult to use the figure as an estimate for the entire market given that

Sotelco is a relatively minor player. VimpelCom announced that Sotelco had an ARPU of USD1.7 in Q212,

up from USD1.6 the previous quarter but down from USD3.0 in Q211. By Q312, ARPU had fallen to

USD1.5, down from USD1.7 in Q212. VimpelCom reported that its ARPU recovered to USD1.8 in Q412,which could be attributed to the significant decline in the number of subscribers.

In February, Axiata announced that the combined entity between hello Axiata and Smart Mobile, Smart,

had a blended ARPU of USD3.74 in H112, down from USD4.45 in 2011. Meanwhile, the total outgoing

minutes of usage increased from 305mn to 387mn over the same period.

For the full year ending 2013, Smart Mobile reported that ARPU averaged just USD2.2, down from USD4

during 2012. This is a result of the competitive dynamics of the market, where too many players have

increased price competition too much. Similarly, its MOU declined from 352 to 232 over the same period.

Price Wars

Earlier in 2013, the Telecommunication Regulator of Cambodia (TRC) commissioned the ITU to study the

country's telecoms market and mobile call prices. The ITU has recommended that minimum call

prices could be decreased from the floor prices established in a December 2009 edict. The regulator is due

to meet with operators after the July 28 national elections to discuss the change. BMI believes that adoption





of this suggestion would not be advisable, considering the TRC's previous attempts to regulate price

competition in the market.

In December 2009, the Ministry of Economy and Finance came together with the MPTC to tackle price

disputes and set minimum tariffs. The two ministries signed the Minimum Tariffs of Mobile and Fixed

Telephone Services and Interconnection Fees. According to this edict, the minimum cost of calls made

within a network is USD0.045 per minute and for cross-network calls is USD0.0595. The ITU's suggestion

is described as the minimum price at which mobile phone companies could be expected to compete. Its

recommendation is that this be lowered by about 2 cents to USD0.025 or USD0.026, equivalent to a

reduction of 44%.

BMI does not believe that such a cut is necessary, given the declining growth opportunities in the marketfor basic mobile phone services. Figures from the MPTC show that the number of mobile subscribers in the

country reached 19.1mn at the end of 2012, a penetration rate of over 130%. This suggests that there is little

scope for further organic growth, and slashing prices of calls would only encourage a minimal amount of

new subscriptions while further damaging operators' revenues.

Although the minimum price is a guideline, a destructive price war has taken place in Cambodia, due to

the presence of too many players in the mobile market. Operators have worked around the 2009 edict by

offering generous top-up bonuses to increase market share. This has been especially relevant for Smart

Mobile, which advertises a 500% top-up bonus, comprised of 300% for calls/SMS and 200% for internet.

Following its merger with hello, the company has become the second largest mobile company in

terms of subscriber numbers. In April, operators agreed to stop offering these excessive bonuses but

lowering the floor on minimum call prices would undo the agreement, possibly sparking another price war.

Although good for consumers who would benefit from lower prices, adopting the ITU's recommendations

could be a disaster for operators in Cambodia. VimpelCom left the market in April to focus on its more

profitable businesses, following Thaicom's exit from the shares it owned in Mfone after it filed for

insolvency. Figures in 2009 and 2010 for VimpelCom's Cambodia operations showed net losses and a

negative OIBDA, matched by declining ARPU right up until its exit in Q113. The lack of growth

opportunities, intense price competition and a crowded market point to reasons behind the departure of

these two companies. We do not believe Cambodia is a profitable place for most mobile companies, and

reducing call charges further could potentially drive more operators from the market.

In December 2013 the Cambodian council of ministers nullified the law (Prakas 232) which set the

minimum prices for calls in 2009 of USD0.045 per minute for on-net calls and USD0.0595 per minute for





off-net calls. Operator's have criticised the law for years, believing it to be too high, so the decision allows

the TRC to begin redefining the country's telecoms prices at a lower rate. It is unclear when the TRC will

begin restricting the minimum prices though the minister of posts and telecommunications has stressed a

need for expediency.

Mixed Outlook For Infrastructure Appropriation Proposals

Q113 hello-Smart Merger Reduces Pressure On Finances

Axiata Cambodia Financial KPIs (MYRmn)

Source: BMI, Axiata

4G

Smart Axiata announced in January 2014 that it had plans to introduce an LTE network to Cambodia on a

system-wide basis. The initial rollout locations will be targeted to "LTE experience zones" where young

professionals frequent, and thereafter, the coverage will be rolled out to the whole of Phnom Penh in Q214.

The investment in 4G is, in our view, a strategic attempt by the company to consolidate its market

leadership position after gaining majority market share in December 2012 following the merger between

Hello Axiata and Latelz, which operates under its main Smart Mobile brand name.





Evidence suggests a bull market in 4G has not started for Cambodia, at least for now. We look to 3G

development in Cambodia for a proxy of the market potential in 4G investment. In 2008, 3G was introduced

in Cambodia with high speed internet connection, and it has since been the leading form of internet

connection for Cambodian citizens, with Smart Axiata pitting it at more than 90% of internet accesses as of

January 2014. 3G demand has since been growing at high double digits figure, but even then, it only

represents less than 30% of the entire mobile market as of 2013. Furthermore, initial demand appears to be

drying up after evidence of growth slowdown.

As in any market, demand for mobile internet can only been driven by greater penetration of smartphones or

tablets, which even at the average rate of USD50 for the lower-end range, still represents a substantial 5%

of the average Cambodian annual GDP - a figure which priced out all but the most wealthy. Consequently,

only young professionals can afford the switch to the fastest mobile technology. In the most bullish scenario

that 100% of the 3G customers switch to 4G technology, that would still represent 30% of the entire mobile

market. This market size is unlikely to yield the kind of returns needed to cover network investment in the

entire Phnom Penh. Furthermore, Smart Axiata appears to be depriving itself of any upside revenue

potential coffer for 4G by allowing postpaid subscribers to upgrade to LTE at no extra cost. In our view, the

company seems to suggest through its price action there is no viable demand for 4G technology yet.

The ARPU figure in Cambodia in comparison with regional peers suggests mobile consumption largelyremains in basic SMS and voice usage. While the figure should be treated carefully due to its consideration

for rural consumers - which do not represent the 4G consumers Smart Axiata is targeting - they do provide a

sense of willingness to spend on the part of entire Cambodian market as a whole, a factor that helps predict

the viability of rolling out 4G network in the whole of Phnom Penh and beyond, or restricting 4G

investment to key consumption areas first. Low ARPU figures - in line with the rest of the developing

market which has yet to launch 4G - suggests LTE investment should at best be rolled out in hotels, airports

and investment centres where the demand are mostly concentrated.

In terms of the supply side of the equation, Smart Axiata 4G rollout will no doubt put pressure on many

smaller 2G-3G operators to keep pace with the market, running the risk of huge capex investment with little

market demand to speak about in the near term. Already, EMAXX - the nation's smallest operator - has

begun trialling wireless 4G solutions in Cambodia. We believe this could have been the catalyst for Smart

Axiata to follow up with 4G plans of its own. At a time when the market is not ready for multiple 4G

operators yet, a premature leap into the 4G bandwagon could do more harm than good for aspiring 4G

operators.





In April 2014, Emaxx announced plans to invest USD148mn to become a wholesale fibre-optic and 4G

network provider. The move follows the acquisition of a 65% stake in the company by firm, Keybridge

International earlier that month. It plans to deploy 600 4G LTE base stations, 100 of which will be

completed by the end of 2014, and two USD24mn data centres will also be built. It will then become a

wholesale provider to mobile operators and internet service providers in Cambodia, leasing this high-speed

capacity.

Further to this, Chinese telecoms equipment vendor ZTE secured a mobile network contract from the

Cambodian mobile operator Sotelco. Under the contract, ZTE will displace Huawei equipment in hundreds

of sites, covering Phnom Penh and core areas of other provinces. In 2013, Sotelco won 1,900MHz spectrum

enabling it to offer 3G services. The Cambodian operator will begin deploying 3G services for all

subscribers in Cambodia in 2014. Sotelco will also launch 4G services in 2014 with the support of ZTE.

South East Asia Telecom Group's unit South East Asia Telecom Cambodia (SEATEL Cambodia) plans to

invest USD500mn to roll out and operate a 4G network in Cambodia over the next few years. The

investment is divided into three phases over the next two-to-three years. In the first phase, which started in

August 2014, around USD100mn was spent to build the group's Cambodian headquarters and purchase

5,500km of fibre-optic cables. The second phase, which includes increasing capacity and coverage, will

commence in late 2015. Phase three will start at the end of 2016.

Mobile Content

In March 2011, Mobitel was reportedly in talks with the Union Commercial Bank to process Mobitel

mobile subscribers' money transactions, according to The Phnom Penh Post. This was to ensure that the

process was in line with legal requirements from the National Bank of Cambodia. The operator submitted

the documents required for a licence to operate its Cellcard Cash service in May 2011. The NBC has said

Mobitel's application was likely to be approved in the near term as it has now complied with all the

requirements.

Mobile payment and banking services have found significant success in Cambodia after the ANZ Royal

Bank launched its WING services in January 2009. The bank claimed that there were 150,000 accounts as

of September 2010, and it expected the service to reach 200,000 customers by early 2011. BMI recognises

that mobile payment services in emerging markets present huge growth potential due to the lack of access to

traditional banking services, while the demand for basic banking services can be easily fulfilled using

simple technologies. ANZ estimated that only about 500,000 Cambodians have bank accounts, but the

higher mobile penetration rate makes mobile banking services easier to bring to the masses. Further, this

service is offered by Mobitel's four key rivals - hello, CadComms, Metfone and Smart Mobile - and their





low-cost SMS services keep transaction costs affordable. Philippine-based Globe Telecom 's GCash also

uses the popular SMS as its platform for mobile payments.

VimpelCom-owned Beeline announced in March 2011 a mobile payment partnership with WING. Beelineis the seventh mobile operator to sign an agreement with WING. Besides CadComms, hello, Metfone and

Smart Mobile, Star-Cell (which merged with Smart Mobile in December 2010) and Mfone also launched

services with WING.

As of May, F1Soft International has begun operations in Cambodia seeking to develop a mobile money

software platform. The company is still in early talks with potential banks to partner with at the time of

writing.

Wing reported in February 2014 that its transaction volume reached USD1.5bn in 2013, as a result of its

domestic remittance service offerings. In December 2013, Wing's usage volume increased by 400%

compared to the previous year, hitting USD240mn. CEO Anthony Perkins stated that the company was

profitable before taxes in 2013 but expects Wing to make net profits in 2014. This will be helped by an

increase in the number of mobile recharge vendors to 10,000 in 2014 from 6,000 at present. Wing's mobile

top-up service is struggling to compete as the mobile operators attract more vendors with their higher

commissions. The number of Wing Cash Xpress outlets will also be increased from 1,000 to 2,000 in the

following year.

Fixed-Line Market

Unlike the mobile market, Cambodia's fixed-line sector is highly underdeveloped. Fixed-line services are

largely confined to the capital Phnom Penh and major cities. In the absence of fixed-line telecoms

infrastructure, demand for mobile services has been strong, resulting in penetration rates in excess of 100%.

By comparison, Cambodia's fixed-line penetration rate was an estimated 2.3% at the end of 2014.

Furthermore, the market seems to have already peaked despite this low penetration and is now in a

downtrend. Latest data from the MPTC and the TRC, show that the market reached a high point of 578,164

in Q212, and has since lost subscribers each quarter, down to 361,000 at the end of Q414. This is likely to

be a result of fixed-to-mobile substitution, as the latter technology proves to be more dynamic, reliable and

useful.

The dominance of incumbent Telecom Cambodia and a lack of investment in the industry are the main

reasons for the muted fixed-line subscriber growth before 2008. However, the market experienced a surge,

which we attribute to Viettel's Methome service. The service is considered as a fixed-line device but

transmits wirelessly using mobile towers.





The country's smallest fixed-line service provider Mfone provides CDMA-based fixed-line services under

the 'Cfone' brand. According to Mfone, Cambodia started using CDMA in Q404. This enabled the operator

to expand its presence in the country's telecoms sector, offering fixed voice and broadband internet services.

Since peaking at the end of 2007, Mfone has continued to report a decline in the number of customers using

its wireless local loop (WLL) service. By the end of 2009, Mfone had 1,855 fixed lines in service,

representing a fall of 68.7%, and compared to 2007's increase of 91.6%. More recent figures for the operator

are not available. However, in light of recent trends, BMI suspects that its customer base continued to

shrink. The fall in fixed lines is unusual given that there is continued growth in the fixed-line market in

general, and the fact that, in neighbouring Laos, it is CDMA-based WLL services that are driving fixed-line

growth.

Fixed-Line Market Growth

2004-2014

Source: BMI, MPTC, TRC

Telecom Cambodia's services are largely confined to Phnom Penh, while rival operators Camintel and

Mfone offer services in the capital and in some provinces. According to the last reported data, Telecom

Cambodia had a market share of over 56%. It is therefore not surprising that fixed-line services have largely

been confined to the capital and that growth within the sector as a whole has been stunted. However,





Telecom Cambodia has turned its focus on to the country's rural regions to negate the slowdown in

subscriber growth.

Although Telecom Cambodia experienced growth in 2008, it appears fixed-wireless operator Camintel has

driven much of the recent growth in Cambodia's fixed-line market. Camintel, the second-ranked operator

behind Telecom Cambodia in terms of subscriber figures, had a 34.8% share of the market in February

2009, according to the National ICT Development Authority (NiDA).

Therefore, it remains Telecom Cambodia's largest competitor. The operator had about 14,500 fixed-wireless

and PSTN customers, an increase of 11.5% since 2007. In 2007 it had 13,000 fixed-wireless and PSTN

customers at the end of the year, with a market share of 32%.

The NiDA reported that at the end of February 2009 there were about 42,000 fixed-line telephones in

service, of which incumbent operator Telecom Cambodia had a 56% share through its 23,500 fixed-line

subscribers. Reports from the Phnom Penh Post suggested the operator managed to gain twice as many

fixed-line subscribers in 2008 than in the previous year. In 2008, the operator gained more than 3,600 fixed

lines, compared to 1,500 in 2007. The operator's subscriber growth reportedly continued to rise in 2009,

with the number of fixed lines rising by 1,337 in the first five months of the year. The remaining fixed lines

(non-TC) were shared between rival telecoms companies Camintel and Mfone. However, local media

reported in May 2011 the Viettel-owned Metfone had 310,000 fixed lines, representing 80% of the market,

but we are sceptical given the contradicting data available in the market.

Although the number of Cambodian fixed lines is expected to continue growing over the next few years,

growth is expected to slow as substitution services such as mobile telephony and VoIP become more

prevalent. In May 2010, it was reported that Cambodian telecoms service provider Digi had contracted

VocalTec Communications , a global provider of VoIP and convergence solutions, to deploy its VoIP

solution as part of Digi's plan to launch Cambodia's first triple-play service. The vendor would provide its

core VoIP solutions and a wide range of supporting applications and prepaid billing solutions to enable Digi

to provide IP telephony services to corporate and residential users in Cambodia.

Among the operators of VoIP in Cambodia include Hiway Telecom Cambodia, DialAny Internet Telecom,

Cambodia Data Communication and WiCam Corporation. The Telecommunication Regulator of Cambodia

(TRC) notified 15 local voice-over-internet protocol (VoIP) service providers over their failure to pay

annual registration fees in August 2014. The TRC has demanded that the firms pay their 2013 fees by

August 30, otherwise their VoIP access codes will be dismissed and removed.





Fixed-Line Market Share

February 2009 (latest data available)

Source: BMI, MPTC

Broadband Market

Data from the TRC showed that at the end of 2014, the number of internet users in Cambodia

totalled 5.026mn, up from 3.865mn at the end of 2013, primarily driven by the growth in mobile internet

users. These figures suggest that the market may be starting to overcome some of the factors that have

traditionally deterred growth: high connection costs, as well as the low level of PC penetration, a lack of IT

human resources and the absence of technically capable infrastructure, such as copper access lines and

wireless connections. However, a problem remains that Cambodia has 27 ISPs as of YE12, creating a

crowded market similar to that in the mobile sector. This holds back investment because it encourages

brutal price wars that do not provide a return for investors. We would expect consolidation to occur in fixed

broadband, similar to that in the mobile market, with companies either going bankrupt or the target of

mergers and acquisitions.

In May 2013, Cambodia regulator Ministry of Posts and Telecommunications (MPTC) was reported to be

formulating a national broadband plan with the International Telecommunication Union (ITU), which could

see uplift in the nation's broadband penetration rate.





The Information and Communication Technology Business Association noted that, although Cambodian

internet costs are still comparatively more expensive than its regional peers, prices are declining. Several

obstacles continue to suppress the take-up of internet/broadband services. For example, electricity costs are

among the highest in the world, with only a small percentage of the population connected to an electric

power supply. According to the World Bank in 2010, only 26% of all households were electrified, while

only 13% of rural households were electrified.

Internet connectivity in rural parts of Cambodia is extremely low. The lack of internet infrastructure means

that the majority of Cambodians still face major problems when trying to obtain internet access. Although

internet access is available in all provinces, the lack of a national fibre-optic cable network means that

service is slow and unreliable. One major cable crosses Cambodia east to west between Thailand and

Vietnam, another links Cambodia to Vietnam and Laos. However, April 2009 saw the inauguration of a new

high-speed cable connecting Cambodia to China's Yunnan Province. The new cable deployment was part of

an USD18mn infrastructure project being implemented by Telecom Cambodia.

Broadband internet services were first launched in 2003 and are even more expensive than internet services,

a factor which has severely restricted their growth. Although broadband prices have declined over the years,

one has to also factor in the cost of purchasing a PC or notebook, as well as the higher electricity

consumption.

In June 2013, Cambodian internet service provider (ISP) Ezecom signed a memorandum of understanding

(MoU) with Telekom Malaysia to construct a 1,425km submarine cable system between the two countries,

in a bid to bring more affordable and better quality internet services to Cambodia. Construction of the

Malaysia-Cambodia-Thailand (MCT) cable is scheduled to begin in September or October 2013, and the

link is expected to be operational by the end of 2014.





Internet Subscriber Growth ('000)

2012-2014

e = BMI estimate. Source: BMI, MPTC, TRC

Broadband services are offered via a wide range of access technologies including DSL, cable TV, fibre,

wireless (WiMAX and WLL) and satellite. According to the TRC, there were 38,000 fixed internet

connections at the end of Q413, up from 28,000 in Q113. Growth in mobile connections is providing the

largest boost to internet connections, up from 3.245mn to 3.865mn over the same period. According to the

ITU, there were 32,648 fixed broadband subscribers at the end of 2013, representing 85.9% of total internet

connections, using the data supplied by the TRC.

The decline in fixed broadband demand could be related to the growing popularity of 3G services. As we

have seen, mobile internet is the overwhelming preference for the Cambodian consumers and we expect the

trend to be present in the broadband market. According to the MPTC, Viettel has 16,000km of fibre-optic

cables in the country, significantly ahead of Cambodia Fiber Optic Cable Network (CFOCN) (5,180km) and

Telecom Cambodia (1,200km). The construction of a national fibre network by CFOCN, which aims to

install 9,000km of fibre cables by direct-burying in rural areas and by underground duct system in urban

streets, was approved by the Cambodian prime minister. According to the investment agreement signed

with Cambodia Development Council, Ministry of Posts and Telecommunications, Ministry of Economy





and Finance and Ministry of Commerce, CFOCN acquired five-year exclusive right to construct the

nationwide fibre network in Cambodia, and it is granted the licence to operate in the telecoms infrastructure

market for a period of 35 years.

CFOCN has said that it has invested USD100mn into the project, with around 5,000km of backbone

network and 150km of telecoms duct route in Phnom Penh completed. The company plans to install about

1,000 km of direct-buried fibre cable and 100km of duct route in metropolitan areas each year by end-2014.

In April 2012, Telecom Cambodia and Vietnam Telecom International announced the launch of the Super

Highway Telecom Network, which aims to improve Cambodia's internet connectivity with the international

community and meet the growing customer demand. The collaboration with Vietnam is important to link

Cambodia with the rest of the world as the latter does not have access to the global submarine cable

network. By connecting to Vietnam, Cambodia will be able to link up with the South East Asia-Middle

East-Western Europe (SEA-ME-WE) 3, Asia-America Gateway (AAG), Asia Pacific Gateway(APG) and

Tata TGN-Intra Asia, which should facilitate international trade and communication.

Competitive Market

According to the MPTC, there were 12 companies providing internet access in Cambodia at the end of

2007. This number has since continued to grow and we believe that there are now more than 20 companies

offering internet services. One of the largest Cambodian ISP is Camnet, the internet arm of Telecom

Cambodia. Camnet is operated by the MPTC with support from the International Development Research

Centre of Canada (IDRC). The company provides a range of internet access services including dial-up,

ADSL, leased lines and wireless access via WiMAX and satellite. By June 2011, a 1Mbps connection from

Camnet was being marketed at USD80, reflecting the competitive pressure under which the business is now

operating. In March, the published rate had dropped to USD35.

Camnet faces competition in the internet access market from Camintel, which is a major provider of fixed

voice services ( see separate section on fixed-line services above ). Camintel was a joint venture (JV)

between South Korea's KTC Cable Co (with a 49% stake) and the Cambodian government (with 51%). In

October 2010, KTC acquired 100% of Camintel's share. The company provides dial-up internet services

(prepaid and postpaid), as well as ADSL, leased lines and wireless access based on the WLL. Also

competing against Camnet in the internet access market are several companies that are also active in the

mobile market. They include Mfone, Metfone (Viettel) and Axiata.





In May 2013, Ezecom , announced that it would be expanding its offices into Bavent and Poipet, bringing its

total up to 8. This shows a growing demand for services in the country outside of the main towns and cities.

This fits with the growth reported by the MPTC in internet users in the country. According to the company

website, Ezecom recently acquired Telcotech , a fibre-optic provider in the country. This brought its

coverage up to 99% nationwide, and chimes with our view of consolidation in the fixed broadband market.

In addition to its 4G LTE network deployment plans, Emaxx will invest in becoming a wholesale fibre-optic

provider. The move follows the acquisition of a 65% stake in the company by firm, Keybridge International

in April 2014. Emaxx has agreed to purchase 3,000km Chinese of fibre optic infrastructure from Chinese-

owned Cambodia Fibre Optic Communication Network.

Cambodian internet service provider Chuan Wei and French equipment vendor Alcatel -Lucent will deploy

a 100Gbps fibre-optic data network across Cambodia. The 100G network will pave the way for developing

a 400G capacity in the future. Alcatel-Lucent will build the 100G DWDM/OTN network using its 1830

Photonic Service Switch platform. The nationwide DWDM network will be linked to a submarine cable

landing station.

Broadband Market Growth ('000)

2005-2013

Source: ITU, BMI





Despite trends towards consolidation, Vietnam Post and Telecommunications Group (VNPT) has opened an

office in Phnom Penh, ahead of a launch of internet services. The company has reportedly been researching

the market for two years and is hoping to gain 25% market share by the end of 2014, increasing to 50% by

the end of 2015. A press release on the company website indicates the company intends to make a 'huge

investment' in this expansion, while also planning further launches in Thailand and Myanmar.





Asia Mobile Content

BMI View: e-commerce, e-banking and digital advertising are expected to grow in Asia, fuelling data

usage. Third parties are better suited for providing these services as they can move across borders to reach

entire regional populations. Limited by their geographical scope, local mobile advertising is a good avenue

for operators to take advantage of this trend.

e-banking has taken off rapidly in Asia and is expected to fuel further consumption of data. Banks, seeking

to offer better customer service, have been launching online portals and mobile banking platforms,

providing additional channels for customers to access financial services without suffering the inconvenience

of long queues at ATMs or bank branches. Security concerns over e-banking have also receded, with a slew

of security measures being adopted by banks such as tokens providing one-time passwords for everytransaction. As a result, user acceptance has been rising.

According to McKinsey research, about 40% of Asian mass market customers now prefer online or mobile

banking; among those under 40 years of age, around 50% prefer digital banking. With 3G/4G networks

being built out across Asia and smartphone penetration rising due to the availability of low cost 3G handsets

for less than USD100, access to e-banking will continue to grow. McKinsey believes that, by 2020, the

number of digital banking consumers will rise to approximately 1.7bn, from 670mn in 2014.





Rising Connectivity Drives Digital Banking, E-commerce and Digital Advertising

Asia 3G & Internet Forecasts, 2013-2018

f = BMI forecast. Source: BMI

E-commerce And Banking

The rise of e-commerce is largely attributed to the ability of the internet to bring suppliers and customers

together. Similar to e-banking, e-commerce is set to increase even further in the years to come, as

smartphone and Internet penetration increase. According to eMarketer, in China, more than 10% of all sales

stem from the Internet despite only 27.5% of the Chinese population having the ability to make an online

purchase. In 2013, social media platform Wechat released an update which added a barcode scanner for

products which directs users to similar products on Chinese e-commerce websites. e-commerce user

numbers are set to rise even further as showrooming becomes more prevalent with increased smartphone

penetration.

Betting that the use of online and mobile platforms will become even more prevalent and accepted in the

future, Tencent launched Webank early in January 2015. Being a fully digital bank, it has lower overhead

costs as it provides all sales online and has no brick-and-mortar branches. Loan applications would be done

using a smartphone camera and matching the face with data provided by the Ministry of Public Security.





Using analytics and data collected through the applicant's online activities, it will decide on the amount of

credit to be extended to the applicant. Tencent hopes to rely on consumption and financial data of its

customers for credit management and leverage on its widely used Wechat to gain customers.

A number of third party players have emerged to develop services capitalising on the rise in e-banking, e-

commerce and the use of mobile platforms.

■ Simple - provides users with data-rich analysis of their banking transactions;

■ Citrus Payment Solutions - streamlines troublesome online payments and provide virtual credit cardservices for mobile wallets;

■ Tradelink - mobile wallet app which uses digital-signatures implanted in handsets to support multiplepayment means in the Greater China region;

■ YSpay - usage of phone numbers to process payments from mobile handsets;

■ MobiKwik - recharges mobile pre-paid balances, pays bills, transfers money via SMS and interactivevoice response (IVR);

■ Apple Pay and Google Wallet - leveraging near field communications technology for contactlesspayments; and,

■ WebEngage - a customer engagement toolkit that lets e-commerce clients target site visitor segments tooffer them online promotions, surveys and offers.

Third party providers are better positioned than mobile operators to provide these services because they are

not limited by geography or market share which would impede the economies of scale needed by apps to be

successful. In recognition of that , Indosat , Telekomsel and XL Axiata have come together to allow

payments across their mobile money platforms, realising that opening their platforms will generate more

revenue by attracting more users.

Digital Advertising

Internet companies such as Google and Facebook still have the edge in digital advertising, with their wide

trove of data helping them form insights into customer's needs. However, mobile operators, being bound by

their geographical boundaries, have access to their customers' browsing habits and website usage patterns

and can use this data to generate advertising revenue or provide businesses with additional insights to what

consumers are looking out for ( see our online service, 'Mobile Advertising: Prospects And Risks',

September 9 2013 ).

In terms of local mobile advertising, by combining geo-positional data with local advertising strategies,

mobile operators can possibly use their knowledge of the market to gain an edge over the major internet





companies. In India, Lookup has created an app which allows users to locate and connect to small

businesses. Other than calling these businesses directly, users can message Lookup to inquire on product

availability, pricing or book appointments. Lookup's call centres will find the answers to those inquiries

directly with stores and type answers to these queries in real time. We believe this service will be well

received by SMEs as such queries have a high conversion rate. According to Comscore , 78% of mobile

searches for local business information result in a purchase compared to 61% on PCs or 64% on tablets.

There are also operational synergies, most operators already have call centres and strong enterprise service

links to many SMEs.





Laos

Regional Perspective

Laos has one of the more underdeveloped mobile markets in the region as is evident from the various

indicators. With the exception of the five-year compound annual growth rate, Laos lagged behind its

regional peers in terms of mobile penetration rate, blended ARPU and 3G as a percentage of the entire

mobile market. Although there are no data on the proportion of prepaid subscribers and mobile data's

contribution to total ARPU, we believe Laos, like many emerging markets, is heavily dependent on basic

prepaid subscriptions.

Laos Mobile Market Comparison

Mobile Penetration (%) (LHS), Others, 2014 (RHS)

e/f = BMI estimate/forecast. Data from 18 when available. Source: BMI, regulators, operators





Table: Laos Mobile Market Regional Comparison, 2014

Laos Asia Pacific

Postpaid as % of market 1.1 29.3

Mobile penetration (%) 69.2 120.5

Blended ARPU (USD) 6.2 14.5

3G as % of entire mobile market 17.1 49.0

e = BMI estimate. Data from 18 countries when available. Source: BMI, regulators, operators

Key Developments

■

The Vietnam Post and Telecommunications Group International (VNPT-I) has opened arepresentative office in Laos located in the capital city of Vientiane. The office will offer VNPT productsand services along with the products of its affiliates on the local market. The office also reaffirms VNPTInternational's commitment to supply international telecom services to Laos. VNPT-I has signedpartnership agreements with Laos operators Sky Telecom and Planet ISP.

■ Following the sale of its stake in the Cambodian mobile market during April 2013, BMI argued thatVimpelcom would look to exit its remaining southeast Asian unit in Laos (see 'Cambodia Market Overview') . This appeared to be playing out in June 2013, when Vimpelcom reported that it was hopingto finalise a deal 'within months', potentially to a local party. There has been little news since then,however, TMT Finance has stated that the company has been unable to gain approval from the Laosgovernment, which holds a 22% stake in the Beeline unit, and has blocked moves with a veto. Valuationis also believed to be a problem, as buyers are not willing to pay more than USD30mn, while Vimpelcomis looking for 'high double digits'. Vimpelcom has yet to make any official announcements on the subject,so it remains unclear at this time whether it will be able to exit the market.

■ In July 2013, LTC announced its plan to launch LTE technology at 60 base stations in Vientiane. Theintroduction of LTE will mean that Laos is the second of the 10 ASEAN member countries afterSingapore to use LTE. The project - a joint venture (JV) between LTC and Huawei - is presently at theequipment and technology installation stage. LTC expects itself to launch 4G services in Laos by the endof August 2013.

■ A senior official in the Lao government confirmed that the country was scheduled to launch its firstsatellite into orbit in 2015. The government has teamed up with China-based Chengdu LinhaiElectronics Company Ltd , to establish the joint company - Lao-Linhai International Satellite

Telecommunication Company - in December 2013 last year to carry out the project. The company willbe investing USD960mn for a 70% stake, and it will decrease Laos' reliance on neighbouring countriesfor internet access.





Mobile Growth

The most recent figures available for the mobile market come from the Lao Statistics Bureau, which

publishes a yearbook with data on the industry. According to the report from the Bureau for 2012, there

were 4.152mn mobile subscribers in Laos, a significant fall from 6.008mn in 2011. This led to penetration

falling from 92.1% to 62.5% according to BMI calculations. Data from the ITU backs up this assertion,

attributing the massive decline to the purging of inactive accounts from operator subscriber bases. In a

market that is low cost and overwhelmingly prepaid, it is unsurprising that there would be instances of

inactive SIM cards. Our data show this rose to 5.229mn at the end of 2014, a penetration of 75.8%.

We now rely on data from the Statistics Bureau, as we expect to see the organisation release a 2013 report

imminently. Further, there has been nothing from the Ministry of Posts and Telecommunications (MPT)

since 2011. Using qualitative information provided by mobile operators in the market which do produce

results VimpelCom and Thaicom, also supports the view that the market saw a huge decline in 2012,

leading to volatility in market shares and overall growth rates.

Data from the International Telecommunication Union (ITU) showed that there were 4.3mn mobile

subscribers in Laos at end-2012, rising to 4.481mn in 2013.

At the end of 2013, Beeline reported that postpaid subscriptions accounted for just 1.6% of its mobile base.

This supports the generally low ARPU level in the country as well as previous data on the subscriber mix

from the MPT in 2011. Beeline, at least, seems to have been unable to improve the dynamics of its postpaid/

prepaid subscriptions since then.





Mobile Market Growth

2009-2014

Source: BMI, MPT

Table: Mobile Market Growth

2010 2011 2012

Mobile 5,811.3 4,194.8 2,598.2

Mobile 3G 7.4 1,813.7 1,553.3

Total 5,818.8 6,008.4 4,151.6

Source: Lao Statistics Bureau





Mobile Market Shares

The Lao mobile telecommunications market has four operators: Unitel , VimpelCom, Lao Telecom and

ETL . Unitel is a joint venture (JV) between Viettel and Lao Asia Telecom . Lao Telecom (LTC) is jointly

owned by the Lao Government (51.0%) and InTouch Group , formerly Shinawatra International Public

Company Limited (49.0%). ETL is 100% controlled by the Lao Government (via the Ministry of

Communication, Transport, Post and Construction).

There has been a great deal of volatility in market shares between 2011-2014, as deactivations of accounts

carried out by all operators have seen the market size fluctuate by 2mn. Between 2012 and 2013, operators

gained as much as 20pps of share and lost 15pps. Nevertheless, the positions have remained the same with

Unitel leading the market, followed by LTC, ETL and finally Beeline (VimpelCom).

VimpelCom-owned Beeline is the only mobile operator in Laos to provide consistent data. While Lao

Telecommunication (LTC)'s parent company Thaicom also publishes its telecoms subscriber figures, the

operator does not generally provide a breakdown. The company reported that it had 263,000 mobile

subscribers in Laos at the end of September 2014, down from 286,000 year-on-year (y-o-y). According to

VimpelCom, its subscriber base of 325,000 at the end of 2013 gave it a subscriber base of 7%, making it the

smallest player in the market. This was a drop from 20.9% in 2012 as a result of its continued loss of

subscribers over the period.

VimpelCom experienced a similar decline in its subscriber numbers in the Cambodian market, which

ultimately ended in its decision to withdraw. We believe it is likely that it will also look to exit the Laotian

market too, if the loss of subscribers continues, as it regularly reports negative EBITDA and declining

revenue.

The decline in VimpelCom's subscriber base since 2011 has been exacerbated by a boycott by rivals Unitel,

LTC and the ETL in October 2011. The three rival operators had refused to interconnect with VimpelCom

as they believed that the Russian operator had continued offering a free call promotion in spite of an earlier

agreement between all Laotian mobile operators to stop such marketing activities. The issue was reportedly

resolved on November 23 2011, but the five week blockade had a detrimental effect on VimpelCom's

mobile subscriber base at the end of 2011.

As of the end of Q314, LTC had total phone subscribers of 1.618mn, increased from 1.415mn at the end of

Q313. LTC's mobile subscribers rose from 1.284mn to 1.365mn over the same period. VimpelCom reports

that LTC was the second largest mobile provider, with 27% market share at the end of 2013.





Mobile Market Share (%)

2011-2013

Source: VimpelCom

Table: Laos Telecommunications Subscriber Mix

Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Prepaid subscribers 692,356 739,628 760,281 798,672 868,622 924,493 1,003,443 1,077,746 1,251,852

Postpaid subscribers 7,950 7,877 7,816 7,676 7,646 9,168 11,456 13,042 13,888

Source: BMI, Thaicom

ETL is wholly owned by the state and had about 960,000 mobile subscribers at the end of March 2012

according to local news sources. Reports from VimpelCom and Thaicom placed its market share between

12%-14% at the end of 2012. However, in 2013, VimpelCom suggested this had fallen to 11%, making ETL

the third largest player in Laos.

Unitel, also known as Star Telecom until October 2009, is a JV between Lao Asia Telecom (LAT) and

Vietnam's Viettel Global . It has become Lao's largest mobile operator due to the support from Viettel. LTC





said Unitel had 36.1% market share at the end of December 2012, matching data from VimpelCom that

gave the operator a 36.1% share of the market in 2012. By the end of 2013, this had risen to 56%, given it

the market lead by 29pps.

Usage

VimpelCom is the only operator to disclose its ARPU data. The firm first started reporting ARPU figures in

the quarter ended June 2011, when it had an ARPU of USD5.1. In 2013, Beeline's ARPU increased by 6.3%

to USD6.0 from USD 5.6 in 2012. The increase was primarily due to a lower average customer base

reflecting the loss of mostly lower value customer. By Q314, ARPU had reached USD5.7.

For minutes of use (MOU) in 2013, Beeline's MOU increased by 9.6% to 106 from 97 in 2012 due to higher

usage. In 2012, mobile MOU decreased by 58.4% to 97 from 233 in 2011 mainly due to a limitation

imposed by Laos government on the company.

In 2013, Beeline's mobile churn rate decreased to 102.6% compared to 141.0% in 2012 due to continuing

impact of the regulatory changes introduced in 2012 which slowed down the market competition on price.

In 2012, mobile churn rate in Laos decreased to 141.0% compared to 258.0% in 2011 for the same reasons.

Table: VimpelCom Operational Data, 2012-2014

Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Mobile Subscribers ('000) 337 318 313 320 286 325 329 303 263

ARPU (USD) 6.8 7.3 7.0 7.1 6.1 6.1 5.4 5.6 5.7

Source: BMI, VimpelCom

Mobile Content

According to the Statistical Yearbook for 2012, the number of mobile 3G users had reached 1.553mn

connections, representing 37.4%. There were actually 1.8mn 3G users in 2011 (for 30.2%), however, the

large discounting on inactive SIMs led to net losses during the year.

LTC was the only Laotian operator to provide 3G services, but rival Unitel launched a competitive offering

in October 2010. LTC's 3G service portfolio, introduced in October 2008, is aimed at young users and

business customers and includes high-speed internet access and video calling. Prior to the launch of 3G,

LTC offered EDGE and GPRS services nationwide. ETL and VimpelCom's Beeline also launched 3G

services in September and December 2011 respectively. The fact that all four operators have commenced





mobile data services suggests that consumer adoption should accelerate in light of strong competition,

which will herald the launch of more value-added services. However, we highlight the need to introduce

localised content relevant to subscriber needs in order to prevent the mobile data service from becoming just

a means to access the internet.

Fixed-Line Market

According to the ITU, there were 107,600 fixed lines in Laos at the end of 2011, representing 1.7%

penetration rate, up from 103,100 in 2010. By 2012, this had risen to just 112,000 for a penetration rate of

1.76%, indicating extremely low levels of growth during the year. LTC reports that there are currently (as of

Q113) three fixed-line operators in Laos, namely LTC, ETL, and LAT (Star Telecom).

Meanwhile, the MPT reported that there were 150,362 fixed-line subscribers in Laos in June 2011 (latestavailable data), up from 135,676 in September 2010. This figure does not include the 41,719 subscribers

CDMA/WLL users in June 2011. However, like the mobile sector, the ministry has a different set of data,

which show that there were 107,658 fixed-line subscribers and 32,719 CDMA/WLL subscribers in June

2011.

Like Cambodia, the Laotian fixed-line market continues to be overwhelmingly dominated by the incumbent

operator LTC. At the end of 2009, LTC had an 82.3% market share. The operator's market share is largely

stable, having fallen only slightly from 82.5% in 2008. LTC reported that it had 91,265 fixed lines in

December 2009, representing an increase of 3.1% in the year from 88,250 in 2008. The operator's parent

company, Thaicom, reported that LTC had 1.336mn fixed-line and mobile subscribers at the end of

December 2012. Thaicom also claimed that LTC had about 1.216mn mobile subscribers, therefore giving

the operator a fixed-line subscriber base of about 120,000. Data from LTC suggest that there were about

110,893 fixed-line subscribers in the country in 2009, which was higher than the 99,413 reported by the

National Authority of Post and Telecommunications.





Fixed-Line Market Growth

2006-2011

Source: BMI, MPT

ETL, which reported revenue of LAK1.17trn between 2008 and 2011, had a 15.1% share of the fixed-line

market at the end of 2009, compared with 14.8% in Q109 and 14.6% in mid-2008, showing that the

operator continues to make slow progress in gaining market share. The operator was established in August

2000 and has provided PSTN services in Laos since 2001. Initially, services were only available for

customers in the capital, Vientiane, and in Bolikhamxay province. In 2003, the availability of PSTN

services was extended to other urban areas and regions, including Khammouane, Savannakhet, Champasak

and Luangprabang. The monthly fee for ETL's PSTN service was USD1.5 per month, with additional airtime charged at LAK210 per minute. We estimate that ETL had almost 16,000 fixed-line customers by the

end of 2008. This increased to 18,000 in March 2011 according to the company, representing an increase of

3% from the previous year. This gives the operator an estimated fixed-line subscriber base of about 17,000

at the end of 2009.

Meanwhile, Thaicom suggests that another state-owned company, Unitel (Star Telecom) accounted for

2.6% of the fixed-line market at the end of 2009, down from 2.8% at the end of 2008.





Broadband Market

It is understood that 12 companies are licensed to provide internet access services in Laos. However, only

nine companies actually provide such services. The five major Internet service providers are LTC, ETL,

Planet Online , Unitel and Beeline with LTC holding 50% market share. They will be joined by the

Vietnam Post and Telecommunications Group International (VNPT-I), which opened a representative office

in Laos in December 2014. The office reaffirms VNPT International's commitment to supply international

telecom services to Laos. VNPT-I has signed partnership agreements with Laos operators Sky Telecom and

Planet ISP .

Potential new entrants are said to face technical, financial and human resource challenges. In addition to the

challenge of deployment, new internet network infrastructure and import tariffs on telecoms equipment are

reported to be a particular barrier.

The majority of Laotian internet users connect to the internet via shared facilities in the workplace

(especially government offices) and at internet cafés. Although universities also have internet connections,

it has been suggested that internet use at universities and colleges tends to be reserved for administration

purposes only and not research.

Purchasing an internet connection remains too expensive for the majority of people, not only in terms of

monthly tariffs but also on account of the cost of PCs and laptops. Meanwhile, outside most urban areas,

internet access infrastructure is extremely limited. Further, Laotian content is practically nonexistent and

relatively low levels of computer literacy and educational attainment mean that internet awareness is low

throughout much of the population.

However, despite these barriers to growth, there is reported to be growing interest in the internet,

particularly among the educated and urban youth. The spread of internet cafés has helped to fuel the interestin using internet services among this particular population segment.

A senior official in the Lao government confirmed that the country was scheduled to launch its first satellite

into orbit in 2015. The government has teamed up with China-based Chengdu Linhai Electronics

Company Ltd , to established the joint company - Lao-Linhai International Satellite Telecommunication

Company - in December last year to carry out the project. The company will be investing USD960mn for a

70% stake. The satellite will decrease Lao's reliance on neighbouring countries for internet access.





Laos Internet Market Growth

2004-2012

Source: BMI, ITU





Internet Share By Technology (%)

2012

Source: BMI, Lao Statistics Bureau

ADSL broadband connections and, to a lesser extent, wireless broadband connections have seen rapid

growth ( see table ). Data from the ITU showed that there were 9,000 fixed broadband subscribers in Laos at

the end of 2013, up from 7,500 in 2012.

The larger internet service providers (ISPs) are the operators LTC and ETL. Both operators offer dial-up

and broadband services based on ADSL and leased lines. ETL reported that it had 3,500 internet subscribers

as of March 2011, an increase of 156% from the same period in 2009.

Remaining providers, according to the National Authority of Science and Technology in November 2010,

are Unitel, VimpelCom's Beeline, Skytel & Net , Plannet , LanexangInternet , NAST and

ChampalaoInternet .

The further expansion of broadband services in Laos will depend on government initiatives to encourage

operators to offer services, as has been witnessed by a number of Asian countries. This can take the form of

funding, while governments have in the past sought to offer e-government, e-medicine and e-education,

among other media, to enable greater social progression.





Laos Broadband Market Growth

2005-2012

Source: BMI, ITU

Deputy Minister of Post and Telecommunications, Thansamay Kommasmith, announced in March, that

Laos is working on several projects in order to meet the demands of the Asean ICT Master Plan 2015.

Thansamay claimed that Laos' fibre optic network connected to all countries in the Greater Mekong region,

with an internet exchange centre to serve as the domestic and international gateway for voice and data

transmission. This has extended broadband access to most towns and gradually to rural areas, with the

current teledensity reaching 86%. It is not clear what the definition of teledensity is that Thansamay uses,

potentially a combination of both mobile and fixed telephony. He also alluded to an e-government project

and the Lao Cert project to deal with network and information security.

Myanmar

2014 marked an historic period for the Myanmar mobile market, as the launch of the first two private

operators, Ooredoo and T elenor took place in August 2014 and September 2014, respectively. Both

launches were met with high levels of demand, outstripping the supply of available SIM cards and leading

to a number of them being sold on the black market before being activated. As of 2014, both operators have





reported that their subscriber bases have surpassed the 1mn mark, playing into our view that Myanmar will

be the fastest growing market in the world over the next five years.

Myanmar, as one of the world's last frontier markets, has the biggest growth potential in the Asia telecom

space. Ambitiously, the government of Myanmar aims to increase mobile penetration from 8.5% to 75%

within three years and has tasked Qatar's Ooredoo and Norway's Telenor to turn this ambition into reality.

With virtually no infrastructure in place, tower companies and network equipment manufacturers will

benefit if they clinch the rights to provide network infrastructure. Handset providers can also stake their

claim in a market where mobile handset usage is still at the nascent stage. Low-cost device manufacturers

from India and China (e.g. Micromax , Lava and Xiaomi ) have the highest chance in a market where GDP

per capita is less than USD1,400. Previously, state-owned enterprise Myanmar Posts and

Telecommunications (MPT) was the only operator licensed in the mobile market. This lack of competitionand investment, as well as the government's cautious attitude towards greater communication among its, has

meant that telecoms penetration rates are amongst the lowest in the world.

Key Developments

■ As of March 2015, Myanmar's telecoms regulator, the Ministry of Communications and InformationTechnology (MCIT), had issued licences to 11 firms since the beginning of 2015. The MCIT awardedNetwork Facilities Services (Individual) licences to Shwe Than Lwin Media , Elite Telecom andYatanarpon Teleport . Individual licences allow operators to construct networks, lease access to serviceproviders, and offer any type of public or private telecoms service. The watchdog issued Network Facilities (Class) licences to firms including Global Technology , Pan Asia Majestic Eagle ,Digicel Myanmar Tower Company , Irawaddy Green Towers and Apollo Towers Myanmar . Classlicences enable operators to deploy and maintain passive infrastructure, and lease access to serviceproviders.

■ In December 2014, Vietnamese state-owned operator Viettel announced it was waiting to receiveapproval to partner with Myanmar's state-backed Yatanarpon Teleport. As of January 2015, Viettel willinvest USD800mn to build out Yatanarpon's infrastructure in Myanmar, with the total investment projectreaching USD1.8bn. Yatanarpon is believed to have very little network infrastructure at present, andwould therefore be starting from a lower base than its rivals.

■ Telenor Myanmar launched mobile services in the city of Yangon, Myanmar, on September 27. The

operator launched its services commercially in Mandalay in late September.■ Ooredoo Myanmar launched 3G services in the country on August 15 2014, but its network is struggling

to cope with heavy demand. With the activation of full commercial services, the operator is offering freeservices to mobile subscribers in Mandalay, Nay Pyi Taw and Yangon. The service covered around7.8mn residents across some 71 cities and towns on its launch.

■ MPT has signed a memorandum of understanding with Japanese joint venture (JV) firm KDDI SummitGlobal Myanmar (KSGM) to develop its business and infrastructure. The consortium comprises localfirms KDDI and Sumitomo Group.

■ A consortium led by pan-Caribbean operator Digicel Group secured a contract from Qatari telecomsoperator Ooredoo to deploy telecoms towers for the latter's Myanmar subsidiary. The consortium,





involving YSH Finance and First Myanmar Investment , is believed to be the first group to start towerconstruction in the country and will accept multi-tenancy agreements.

Mobile Growth

The mobile market is constituted of Ooredoo , Telenor and MPT in collaboration with KDDI and

Sumitomo Corporation. Further, in December 2014, Vietnamese state-owned operator Viettel announced it

was waiting to receive approval to partner with Myanmar's state-backed Yatanarpon Teleport, bringing the

total to four operators. BMI data show there were 20.72mn mobile subscribers at the end of Q115.

Ooredoo launched commercially launched its mobile service on its UMTS900 network as of August 15

2014. Coverage is available in the major cities of Mandalay, Nay Pyi Taw and Yangon, including HD voice

calls and 3G services. A total of 68 cities and towns are expected to be covered by the time of thecommercial launch. The launch was reportedly met with greater demand than anticipated, with SIM cards

selling out within days and the network struggling to cope. At the end of Q115, Ooredoo reported 3.329mn

subscribers for its Myanmar operations, all of which were on prepaid subscriptions.

Telenor Myanmar launched mobile services in the city of Yangon, Myanmar, on September 27. The

operator launched its services commercially in Mandalay in late September. By the end of the quarter (only

4 days later), Telenor reported that its Q314 customer base had reached 281,000. This improved to 6.391mn

at the end of Q115. MPT formed a partnership with Japanese joint venture (JV) firm KDDI Summit Global

Myanmar (KSGM) to develop its business and infrastructure. The consortium comprises local firms KDDI

and Sumitomo Group . In January 2015, MPT noted that it had reached 11mn subscribers.

Ooredoo aims to cover 30%-40% of the population in 2014 and 97% in the next five years. The tower sites

being installed by the two private operators support co-location, so sharing infrastructure will be crucial to

keeping costs down. Risks such as the large rural population, unreliable power infrastructure and regulatory

issues installing towers will present challenges to operators as they look to expand network coverage. A

further risk for Ooredoo is the Buddhist national movement in Myanmar, where radical monks in June

urged a boycott of the company due to it being from Muslim-majority Qatar. Regulatory issues in particular

will be a concern for the two foreign operators, as the government process with regards to land rights, for

example, will likely have more hurdles for the newcomers than for MPT.

According to the MCIT, there were 5.437mn mobile subscribers in Myanmar at the end of 2012,

representing 9.0% penetration (based on a population of 60.4mn). There were 3.615mn subscribers using

GSM technology, 1.085mn using CDMA and the remaining 738,000 using W-CDMA (3G) services. By

2013, estimates from the government suggested that the penetration was around 10%.





During 2012, the majority of mobile subscribers were concentrated in Yangon (1.795mn subscribers) and

Mandalay (860,000). The regions along the Yangon-Mandaly axis -Naypyidaw, Sagaing, Bago (East),

Magwe and Ayarwaddy - had about 200,000-300,000 subscribers while the periphery regions had the least

number of subscribers. More recent data were not forthcoming at the time of writing.

Myanmar Mobile Subscriber Growth

2006-2014

E=BMI estimate. Source: BMI, ITU, MCIT

Mobile Prices

The introduction of competition by experienced and established telecoms operators such as Telenor should

help to resolve many of the problems plaguing the Burmese telecoms market and make mobile SIM cards

more affordable for all citizens.

Historically, the exorbitant cost of SIM cards was the main barrier to mobile adoption in Myanmar. With

the government in control of the infrastructure and a long-held determination to control the dissemination

among the populace, this was not surprising. Mizzima reported that, by the end of 2012, a 2G SIM card

would typically cost more than USD200, putting mobile telephony well beyond the reach of the average

Burmese. Cheaper - but not much cheaper - 3G SIM cards were supposed to have gone on sale in January





2013, but it is not clear whether this plan went ahead after the government announced plans to open up the

mobile market to competition and that affordability would be key to winning proposals.

This was the case until April 2013, when MPT stopped selling SIM cards on the open market and insteadbegan to distribute 350,000 SIMs per month through a lottery system, priced at USD1.50. It is reported that

many of these SIM cards ended up on the black market, where they retail for USD80-USD130. The lottery

is seen as a way for the state-owned operator to cope with high demand that exceeds its limited supply.

However, with its memorandum of understanding with Japanese JV firm KDDI Summit Global Myanmar

(KSGM), the company announced in July 2014 that the lottery system would come to an end and it has

subsequently lowered its prices to compete with Ooredoo and Telenor.

With its August 2014 launch, Ooredoo has begun to sell its own SIM cards for USD1.50 at over 6,500

dealers across Myanmar, with Telenor expected to offer the same price. Ooredoo's initial promotion

includes free access to its 3G service of up to 1MB a day, as it attempts to create demand for mobile data.

Telenor said it will roll out voice coverage to 83% of the country and data coverage to 78% by 2018.

Ooredoo aims for 84% voice and data coverage within five years. Telenor estimates that the ARPU of

current mobile subscribers in Myanmar is around USD11, which is higher than the company's existing

operations in India, Pakistan and Bangladesh. Ooredoo reported that its Q115 ARPU was USD7.4, while

Telenor's was USD6.7 in the same period. Telenor has been able to spread its lower ARPU over a superior

customer base, allowing it to report its first net profit in Q115.

Telenor will focus on financial and healthcare services, and provide free access to government, public

service, education and health websites. Ooredoo also plans to deliver financial and health services, as well

as local content and a portal for agriculture prices, weather forecasts and equipment rental services.





Mobile Subscribers Net Adds ('000)

2014-Q115

Note: In Q314, neither operator had been active for a full quarter - Ooredoo launched Aug 15, Telenor launched Sep 27. Source:

Telenor, Ooredoo

MPT & YTP Seeking Joint Venture Partners

With the entrance of Telenor and Ooredoo, BMI expects a greater level of competition among operators at

the retail level to launch innovative products at affordable prices for the low-spending masses. Given the

vast financial resources pledged by Telenor and Ooredoo, the MPT needs to defend its incumbent position.

Of interest to potential new entrants are the operational strategies of the mobile operators. As the new

independent players have only just been licensed, we expect a level playing field for any new international

player. The upside to forming a JV with MPT is the lower upfront capital required to rollout new network,

thus reducing the investment risk in this nascent market.

In July 2014, a MOU was signed between MPT, KDDI and Sumitomo Corporation. Leveraging the

technical expertise and financial resources of the latter two, MPT will be well-placed to develop attractive

wireline and mobile services for its existing customer base. MPT plans to sell 5mn SIM cards by the end of

2014 under its partnership with Japanese firms KDDI and Sumitomo. MPT sold 1,500 SIM cards in the

week ending September 6. Demand for MPT SIM cards has been outstripping supply, according to local





reports. While MPT SIMs are officially priced at MMK1,500 (USD1.54), they are selling for more than

MMK20,000 (USD20.56) on the black market owing to their restricted availability.

KDDI offers access to an extensive international submarine cable network, which could considerably lower

bandwidth costs for MPT. Reuters reports that the three companies plan to invest approximately USD2.0bn

over the next 10 years in the joint business.

In December 2014, Vietnamese state-owned operator Viettel announced it was waiting to receive approval

to partner with Myanmar's state-backed Yatanarpon Teleport. As of January 2015, Viettel will invest

USD800mn to build out Yatanarpon's infrastructure in Myanmar, with the total investment project reaching

USD1.8bn. Yatanarpon is believed to have very little network infrastructure at present, and would therefore

be starting from a lower base than its rivals.

Myanmar Mobile Market Share (%)

2013-2015

Source: BMI, Operators, MCIT





Table: The Competitive Dynamics Of Myanmar Mobile Market

MPT Telenor Ooredoo

Products 2G and 3G 2G and 3G 2G and 3G

Price Presently USD1.70 / SIM card. PresentlyUSD0.06 / min prepaid voice call. Planto cut to USD0.03/min prepaid voice call

Plan USD1.53 / SIMcard Plan USD0.03/minprepaid voice call

Plan USD1.53 / SIM card PlanUSD0.04 / on-net call min PlanUSD0.05 / off-net call min

Retail Outlets NA Plan 70,000 SIM card retailoutlets. Plan 95,000 prepaytop-up outlets

Plan 240,000 SIM card retailoutlets. Plan 720,000 prepaytop-up outlets

Infrastructure Presently < 10& mobile coverage Plan for 83% voice coveragein 5 yrs Plan for 78% datacoverage in 5 yrs

Plan for 84% voice coverage in5 yrs. Plan for 84% datacoverage in 5 yrs

Source: BMI, operators

Networks

Network expansion and upgrades are some other key factors necessary for Myanmar to reach its telecoms

penetration rate target. MPT is currently in the midst of upgrading its 2G network after contracting ZTE ,

Huawei Technologies and Alcatel-Lucent Shanghai Bell , and similar contracts are expected once new

operators have secured their licences. We believe that the main focus will be on the more affluent and

populous cities - namely Yangon, Mandalay and Naypyidaw - while expansion into rural regions will be a

more challenging task as it requires improvements in other key basic sectors such as infrastructure and

power.

In late June 2013, MPT contracted Huawei Technologies as its primary supplier of upgraded infrastructure

and technology, according to local media reports. The terms and conditions of the contract were not

disclosed, although Huawei reportedly told Eleven Media that it would be providing financing worth

USD34mn to MPT.

Telenor and Ooredoo are reported to have begun sounding out potential equipment suppliers and related

construction support companies regarding their plans to roll out their new networks across Myanmar. It is

unlikely they will begin the formal tendering process before formally securing and paying for their licences,

an event thought unlikely to occur before the end of September 2013.

However, Business Line reports that Telenor is negotiating with Indian telecoms towers specialist Viom

Networks regarding the construction of its network of transmission towers and repeaters. Reportedly, Viom

would deploy a 5,000-tower network covering 60% of the Myanmar population within five years. Telenor

and Viom have yet to comment on this report.





Meanwhile, Telecom Lead reports that Telenor has signed memoranda of understanding with Huawei

Technologies, Ericsson of Sweden and Wipro of India for its infrastructure requirements while Ooredoo is

negotiating with Ericsson and Huawei. The Chinese company appears set to benefit hugely from operators'

desires to fast-track the rollout of their mobile networks in Myanmar; these deals, if they come to fruition,

should also favourably position Huawei to secure deals from government agencies and large enterprises in

the years ahead.

Prior to being named a winner in the mobile licence auction, Ooredoo said it would invest a total of

USD15bn in developing its network in Myanmar. A network of 10,000 towers was envisaged. It is not clear

if this proposal was included in its winning submission.

A key question would be where 4G will fit in Myanmar. LTE is already gaining mass adoption around theworld, and Myanmar could theoretically bypass 3G and make the leap to 4G, thereby eliminating future

upgrade costs. LTE in lower frequency bands could easily provide mobile broadband services and network

coverage at a more effective manner compared to fixed-line alternatives. Further, prices for consumer

devices will continue to fall as the market matures. Myanmar has yet to unveil its long-term spectrum map,

but launching 4G services in lieu of 3G could be a possibility if there is a business case.

Tower Companies Stake Claim

Tower companies are looking to stake a claim in the Myanmar telecoms business, following Ooredoo's

partnership with Digicel's Asian Holding Company, the Myanmar Tower Company , to deploy and lease

towers. This is in line with our house view that the two new international telecom operators - Telenor and

Ooredoo - need to outsource the build-out and share resources to manage costs and gain strategic synergies.

We highlighted network infrastructure sharing as one of the strategies the operators could adopt for a cost

effective rollout. Our view is appearing to take shape after Ooredoo has partnered with Digicel to develop

tower assets to meet Myanmar's ambitious 75% coverage target by 2017. In July 2013, tower company

Viom Networks reportedly began talks with Telenor to establish towers in Myanmar.

Tower sharing is not uncommon in emerging markets, where operators seek to reduce their capex cost by

leasing tower assets from independent tower companies. Indonesia and India are synonymous with the

concept of tower leasing. In the former, there are players like Protelindo and Tower Bersama , in the later,

Reliance Infratel , Indus Towers and Viom Networks . In the case of Myanmar, it makes a lot of sense for

the telecom operators to share resources given this is a mostly greenfield project in an undeveloped country.

Besides spreading out the risk by working in consortium with other tower companies, the scope to generate





attractive return on invested capital is higher if the telcos do not need to put in the full capital to build their

own tower infrastructure.

Digicel is expected to create multi-tenancy towers in Myanmar and to engage other telecom operators to

lease its tower assets as well. However, BMI expects at least two tower companies to build a presence in the

country, as establishing towers for the undeveloped market is certainly a lucrative business that would

certainly attract investors. There would be no lack of demand as the industry is likely to adopt tower

leasing, yet at the same time, it would give too much bargaining power to tower owners if there is only one

tower company in the market. Our prediction is a two tower competitor system with operators leasing the

assets from them.

In October 2014, independent Myanmar telecom infrastructure firm Pan Asia Majestic Eagle Limited(PAMEL) reported that it has lined up USD85mn in financing to help fund its deployment of cell towers

across the country, in collaboration with DBS, ING, OCBC, Standard Chartered and Sumitomo Mitsui. The

funding will finance the construction of more than 1,250 telecoms towers for Ooredoo Myanmar.

EBITDA By Company (USDmn)

2013-2015

Source: BMI, Ooredoo, Telenor





4G

Yatanarpon Teleport was reported in September 2012 to be trialling 4G LTE services in Yangon. It was

anticipated that the tests would later be expanded to other large cities such as Naypyidaw and Mandalay.

Reportedly, the long-term plan envisioned commercial services being made widely available once Myanmar

was connected to the SEA-ME-WE-5 through MPT, Yatanarpon Teleport and small companies such as

Red Link Communications . The launch was expected to come before the 27th Southeast Asian Games,

scheduled to be held in Naypyidaw in December 2013.

In the event, the two newly-licensed mobile network operators owned by Telenor and Ooredoo are able to

use LTE technology in the 900MHz and 2.1GHz bands and BMI expects they will be in a better position to

use their infrastructure to connect to international cable networks as well as the mooted nationwide fibre-optic network than either MPT or Yatanarpon.





Mobile Content

Ooredoo has identified Myanmar as a potential mobile banking market with an estimated 60mn unbanked

population. At present, Myanmar has less than 10% mobile penetration, a figure that is likely to increase

sharply with the entry of Norway's Telenor and Qatar's Ooredoo. We believe that, with better market

conditions, mobile banking could succeed in Myanmar, albeit only in the long term.

Mobile banking is not a new concept in emerging markets, where the bulk of the population has no direct

access to banking facilities. However, mobile banking requires several conditions for it to reach mass

market status. The most obvious is wide mobile coverage and penetration among the rural consumers - the

main target segment for mobile banking. Second, regulators have to facilitate the development of electronic

banking systems, by allowing telecoms firms to introduce these products without the hassle seen in the case

of India. The Reserve Bank of India has labelled mobile money a banking - rather than telecoms - product,

and therefore requires strict rules. Any mobile company wanting to enter must also partner with a bank.

Third, a well-managed agent network - which can conduct cash-in and cash-out functions, enabling

customers to convert cash into electronic money and back again in convenient locations - is essential.

Because of the difficulties of performing all these requirements to perfection, only a handful of mobile

banking deployments have reached a sustainable scale.

Ooredoo has estimated it will have a potential market of 60mn unbanked rural customers in Myanmar once

its network is fully deployed. The operator currently offers mobile financial services including money

transfers, account top-ups, and bill payment to subscribers in Qatar, Indonesia, and Tunisia. Despite

Ooredoo's extensive experience, BMI believes Myanmar still has a long way to go before the concept of

mobile banking sets in. This is because the country lacks all three necessary conditions needed for scalable

mobile banking business, and the trickiest of the three could be the inadequate regulatory framework.

Poorly-defined or continually revised regulatory frameworks are the most notorious barriers to the

development of many promising mobile markets in Asia.

Myanmar Mobile Money Co announced the launch of its mobile wallet (m-wallet) services in major cities

during January 2014. The majority of mobile markets have only recently launched m-wallet and other

mobile financial services (MFS) after several years of growth and competition bringing down prices.

However, Myanmar looks set to leapfrog several stages of development, bringing new services straight to

consumers. Fellow new operator Ooredoo also plans to roll out mobile money services in the market,

capturing the potential of the vast unbanked population among Myanmar's 61mn inhabitants.





Myanmar Mobile Money Co's initial services will include P2P transfers, airtime top-ups, salary payment

services and payments to retailers. M-wallet users will also be able to use cash in and cash out services with

specified agents. BMI believes m-banking could become one of the country's major banking platforms and

there are plenty of further developments that can be built on these developments such as paying bills,

insurance services and savings accounts.

The new service is launched in partnership with France's Oberthur Technologies with consulting partner

Mobilemate Telecommunication . The m-wallet was launched with permission from the Central Bank of

Myanmar, which will help generate confidence in the service. It is not clear if the service will be available

over the networks of the newcomers to the market; existing operators Mectel and MPT are included in the

m-wallet launch. BMI believes m-banking services have greater growth potential if they are interoperable.

If the Myanmar Mobile Money Co's service proves popular, BMI believes Telenor and Ooredoo will launch

platforms that link to this to encourage greater growth.

Fixed-Line

According to the invitation to submit an expression of interest for two telecommunications licences,

published by Myanmar's Ministry of Communications and Technology on January 15 2013, there were

604,500 fixed lines in the country, approximately 1% penetration.

Distribution is concentrated in larger cities such as Yangon (3.4% penetration) and Naypyidaw (2.8%)

while fixed-line services are non-existent in most villages in rural areas. Yangon had 39% of the country's

total fixed-line subscriber base, or 237,600 subscribers, while Mandalay had 70,700 subscribers, or 12%.

The remainder is spread across other regions. Additionally, the government added that there is a scarcity of

intercity and inter-regional transmission facilities.

The MCIT has not provided more historical data. The International Telecommunication Union reported thatthere were 523,900 fixed-line subscribers in Myanmar in 2011, up from 493,300 in 2010 and 444,300 in

2009. Its recently-announced figure for 2012 is very close to that posted by the MCIT, but is rounded-down.

We continue to defer to the MCIT data in this report.

Although the number of fixed lines is trending upwards, we believe that the long-term growth potential is

hampered by the hefty cost of network expansion and consumer preference for mobile services, as seen in

developments in other emerging markets such as Vietnam and Cambodia.





Myanmar Fixed-Line Subscriber Growth

1997-2012

Data from 1997-2011 are provided by the ITU. 2012 figure is provided by the Ministry of Communications and Information

Technology. Source: BMI, ITU, MCIT

Broadband

The Ministry of Communications and Information Technology (MCIT) has not released detailed data

regarding the number of internet users and broadband subscribers, although it reported in January 2013 that

there were about 678,000 mobile internet subscribers, accounting for the majority of internet subscribers in

the country. In October 2012, local media citing official data reported that there were more than 333,548

mobile internet users in the country while the number of ADSL internet users was 46,710.

According to the International Telecommunication Union (ITU), there were 5,400 fixed-broadband

subscribers in Myanmar at the end of 2012, representing a penetration rate of 0.01%. This was down

markedly for the second consecutive year. The reasons are unknown. The ITU also claimed there were

15,300 fixed-internet subscribers at the end of 2011 (latest data), representing a penetration rate of 0.03%.

Based on an internet user penetration rate of 1.07% in 2012 from the ITU, we calculate that there were

about 681,300 individuals using the internet in 2012, up from 543,900 in 2011 and 115,000 in 2010.





The MCIT reports that majority of the country's fixed internet connections are ADSL-based, while the rest

are powered by dial-up, satellite and WiMAX. Barriers to higher internet penetration are network

infrastructure scarcity and high tariffs. Myanmar also has a DWDM fibre optic backbone network with a

total route distance of 2,812km and 242 fibre stations. Existing microwave infrastructure comprises 342

microwave stations and 184 microwave routes.

Myanmar is connected to the international telecoms community through the SEA-ME-WE-3 submarine

cable, cross-border fibre links with India, China and Thailand, and satellite communication system. In

December 2011, MPT announced that the country could be connected to either the SEA-ME-WE-4 or 5 as

reliance on the SEA-ME-WE-3 was insufficient to cope with the data traffic and left the country vulnerable

to outages. This proved to be the case in July 2013 when a fault on the connection to the SEA-ME-WE 3

cable slowed internet traffic markedly.

In April 2012, local media reported that plans were underway to connect Myanmar to the SEA-ME-WE-4

cable via Bangladesh. Later the same month, Singapore-based International Telecommunication Holding

reached an agreement with the MPT to help deploy fibre cables across the country. In September 2012, the

Myanmar Times citing the MCIT reported that Myanmar planned to connect to the SEA-ME-WE-5 cable.

In January 2013, Mizzima reported that China Unicom had signed an agreement with the Burmese

government in late 2012. Under the terms of that agreement, the Chinese operator will invest USD40mn in a

1,500km fibre cable, which will first be built on land at the Muse-Ngwe Saung network and channel before

connecting to the international network. It subsequently transpired, in July 2013, that the new infrastructure

would connect the MPT's backbone to the SEA-ME-WE 5 cable.

Later in July 2013, Indonesian telecoms operator PT Telekomunikasi Indonesia (PT Telkom) reportedly

secured a contract to manage key international connections and facilities for the MPT. Terms of the deal

were not disclosed, although Telkom indicated that it would manage the facilities via Mumbai in India.

Separately, Hong Kong-based Hutchison Whampoa has indicated that it has been authorised to manage

certain international facilities on behalf of the state operators. Again, few details have been disclosed.

According to the MCIT, a domestic satellite communications system was implemented to extend telecoms

services to more remote region of the country. Besides two international satellite earth stations, there are

domestic VSAT satellite earth stations, connected to Thaicom's satellite, servicing isolated areas.





Myanmar Internet User And Broadband Subscriber Growth

(2003-2012)

e=BMI estimate. Source: BMI, ITU, MCIT

New Broadband Operator Licences?

In June 2013, Livemint quoted the minister of communications and information technology as having said

that further telecommunications licences might be issued in the near future and that one for the construction

and operation of a nationwide fibre-optic next-generation access network was being considered quite

seriously. More licences would likely be offered to prospective internet service providers, data centre

operators and value-added services providers. However, much depended on the content and reach of the

new Telecoms Law, which received government approval at the end of August 2013 and which was

expected to be adopted in September; the new law would need to accommodate a broad range of potential

future-looking services and applications in order to be relevant. Full details of the new law had not been

circulated at the time of writing. The licence would likely be to establish a national fibre-optic next-

generation access network (NGAN).





Yatanarpon Teleport

Yatanarpon Teleport, a JV between local private companies and the government, is the main internet service

provider in Myanmar. The company was established in December 2001 to fulfil the growing demand for

data communication services. In October 2012, it was reported that Yatanarpon Teleport will be privatised

as part of the telecoms sector liberalisation process.

Thailand's telecoms operator True Corp and Myanmar-based operator Yatanarpon Teleport put their talks

on hold regarding a potential tie-up to launch mobile services in Myanmar in September 2014, citing True's

Chief Financial Officer Noppadol Dej-Udom. Both operators have not been able to reach an agreement due

to some conditions, Dej-Udom stated. True has established a subsidiary, despite any progress with YTP, tooffer some services in Myanmar soon, Dej-Udom mentioned.

In September 2012, U Win Than, deputy minister of communication, post and telegraph announced that

ADSL speeds for subscribers would increase when monthly tariff rates would fall. MPT said ADSL speeds

would increase from 256kpbs to 512kbps, 512kbps to 1Mbps and 1Mbps to 1.5Mbps. Meanwhile, monthly

fees would be reduced to about MMK700,000. Similarly, prices for Yatanarpon Teleport's ADSL fees

would be reduced to MMK500,000. In December 2012, Eleven Myanmar reported that Yatanarpon Teleport

had further reduced ADSL fees to MMK100,000.





Industry Trends And Developments

Cambodia

3G

Mobitel and Mfone were the earlier providers of 3G services in Cambodia. Mobitel has been offering 3G

services since October 2006, while Mfone launched its services in October 2007. In January 2013, Mfone,

which has filed for bankruptcy, agreed to transfer its mobile subscribers to Mobitel.

Mobitel said in February 2012 that 3G was the fastest growing market in Cambodia in 2011, and it expects

the momentum to continue in 2012 given operators' efforts to expand network coverage, the comparatively

higher cost of fixed-line internet services and the increasing affordability of smartphones. ( ZTE HKCambodia reported that smartphone sales increased by 60% in 2011 while LG Cambodia 's smartphone

sales grew by 30%). Data services generate significantly higher ARPU, according to Smart Mobile 's CEO,

Thomas Hundt. The operator also said that 20% of its subscribers subscribe to mobile internet services

while the Phnom Penh Post reported that industry insiders place the sector's average to be as high as 30%.

On July 31 2011, Smart Mobile officially announced the launch of HSPA+ services in Cambodia, allowing

users to benefit from maximum data download speeds of 21Mbps and upload speeds of up to 5.7Mbps. The

actual data throughput speeds will, however, depend on subscriber's device, location and network

utilisation, it said on its website. At launch, Smart Mobile's 3.75G network was available in Phnom Penh

and Sihanoukville, with plans to extend service coverage to Siem Reap, Battambang and Kampong Cham

within the following weeks. In June 2012, Smart Mobile announced that its 3.75G network is available in

all 24 Cambodian provinces. In February 2013, Malaysia's Axiata Group announced the completion of the

merger of its Cambodian subsidiary Hello Axiata Company with larger rival Latelz Company (Smart

Mobile), after the deal received approval from the Cambodian government.

4G

Because of Cambodia's poor infrastructure and remote rural areas, wireless technologies are emerging as a

solution for reaching the mass market with internet access.

BMI remains cautious as we believe that the Cambodian market is still not ready for high-speed mobile data

services. We believe that 3G services are more than adequate to meet the needs of Cambodian consumers

and it is unlikely that a significant number of subscribers would engage in data-intensive activities such as

online gaming or video streaming. While Digital Star Media's strategy is forward looking and future

proofing, it may not reap rewards in the short term.





In January 2013, the Phnom Penh Post reported that Cambodian ISP MekongNet is unable to use its entire

allocated spectrum for WiMAX services due to overlaps. This prompted the Information and

Communication Technology Association of Cambodia's chairperson, Ken Chanthan, to say that the

Cambodian telecoms sector lacks a clear rule concerning the licence issuance and frequency allocations.

However, the secretary of state of the MPTC has said that the ministry has not received any complaints

from the ISPs.

Smart Axiata announced in January 2014 that it had plans to introduce LTE network to Cambodia on a

system-wide basis. The initial rollout locations will be targeted to "LTE experience zones" where young

professionals frequent, and thereafter, the coverage will be rolled out to the whole of Phnom Penh in Q214.

The investment in 4G is, in our view, a strategic attempt by the company to consolidate its market

leadership position after gaining majority market share in December 2012 following the merger between

Hello Axiata and Latelz , which operates under its main Smart Mobile brand name.

In March 2015, mobile network operator Sotelco - which has traded as Beeline Cambodia for the last five

years - agreed to transfer key licences and infrastructure assets to rival Metfone. Beeline's subscribers will

be transferred onto the Metfone network from March 24. However, as customers will need to replace their

prepaid Beeline scratch cards with Metfone equivalents, BMI believes few customers will be incentivised to

do so. In consequence, as many as 300,000 subscriptions could be removed from the market.

Laos

3G

Laos has seen fast growth of 3G coverage, with 3G mobile phone signal covering all the country's

provinces, and 110 of the total 147 districts as of June 2013. The rapid 3G expansion is due to competition

among the telecom firms in Laos. At present, there are four telecom firms namely Lao

Telecommunications (LTC) , Enterprise of Lao Telecommunication (ETL) , Unitel , and Beeline .

Laos first saw the launch of 3G mobile telephony in October 2008 in the capital of Vientiane. Services were

launched by the Laotian incumbent operator LTC. LTC was mainly targeting the corporate sector and

young people with its high-speed internet access and video calling services. LTC has said it was committed

to driving 3G networks into other regions as it sought to sign up an increasing number of subscribers to its

new service. It was likely to promote 3G services as a way of offsetting its declining postpaid base.

Alongside the deployment of 3G services, LTC has continued to invest in expanding its network

infrastructure. Continued investments by LTC would be needed to help it withstand the competition from

Vietnam's Viettel, which is expected to significantly increase its presence in the Laotian mobile sector.





Unitel launched its 3G services in 17 cities and provinces of Laos, according to general director, Nguyen

Duy Tho, on October 15 2010. According to Unitel, the firm had 500 BTS and 13,000km of fibre-optic

cables, which provide a download speed of up to 7.2Mbps.

ETL announced in July 2011 that it would officially launch 3G services in August 2011. Services would be

provided through USB modems and mobile SIM cards and it said that its 3G network would be able to

accommodate 400,000 subscribers. Meanwhile, the network expansion project has also increased ETL's

overall mobile network capacity to 1.5mn subscribers. Since the launch of 3G services, ETL noted strong

demand for its 3G USB and SIM cards with almost 1,000 subscriptions a day. The firm expected to sell

about 15,000 USB-based 3G internet modems in 2011. As of September 2011, ETL had invested about

LAK96bn in its network and services.

On December 31 2011, VimpelCom 's Beeline launched 3G services, offering consumers data bundles. The

operator announced that the launch of 3G services has boosted the adoption of value-added services.

4G

In July 2013, LTC announced its plan to launch LTE technology at 60 base stations in Vientiane. The

introduction of LTE will mean that Laos is the second of the 10 ASEAN member countries after Singapore

to use LTE. The project - a joint venture (JV) between LTC and Huawei - is presently at the equipment and

technology installation stage. LTC expects it to launch 4G services in Laos by the end of August 2013.

Beeline was granted a commercial licence to offer 4G services in May 2012. Although Beeline now markets

itself as a 3G/4G mobile operator and internet service provider in Laos, reports suggest that commercial

services have not been made available.

Key Market Developments

Cambodia

SEATEL Cambodia Plans USD500mn 4G Investment

Singapore-registered South East Asia Telecom Group's unit South East Asia Telecom Cambodia (SEATEL

Cambodia) plans to invest USD500mn to roll out and operate a 4G network in Cambodia over the next few

years. The investment is divided into three phases over the next two-to-three years. In the first phase, which

started in August 2014, around USD100mn was spent to build the group's Cambodian headquarters and

purchase 5,500km of fibre-optic cables. The second phase, which includes increasing capacity and

coverage, will commence in late 2015. Phase three will start at the end of 2016.





Emaxx Partners With Huawei To Become Wholesale Internet Supplier

Cambodian broadband company Emaxx will invest USD148mn to become a wholesale fibre-optic and 4G

network provider. The move follows the acquisition of a 65% stake in the company by Chinese firm,

Keybridge International in April 2014. Emaxx has agreed to purchase 3,000km of fibre optic

infrastructure from Chinese-owned Cambodia Fibre Optic Communication Network , and further plans to

deploy 600 4G LTE base stations, 100 of which will be completed by the end of 2014, and two USD24mn

data centres will also be built. It will then become a wholesale provider to mobile operators and internet

service providers in Cambodia, leasing this high-speed capacity.

In September 2014, Emaxx signed a contract with China's Huawei for the development of this nationwide

4G network. Huawei will roll out LTE base stations in eight cities, including Phnom Penh, Siem Reap,

Sihanoukville and Battambang and is expected to be completed within the next two years. Emaxx intends to

launch services in the capital in early 2015.

VNPT Entering The Cambodian Internet Market

Vietnam Post and Telecommunications Group (VNPT) has opened an office in Phnom Penh, ahead of a

launch of internet services. The company has reportedly been researching the market for two years and ishoping to gain 25% market share by the end of 2014, increasing to 50% by the end of 2015. A press release

on the company website indicates the company intends to make a 'huge investment' in this expansion, while

also planning further launches in Thailand and Myanmar.

CamGSM Refutes Claims It Plans To Sell

In March 2014, unnamed sources suggested that Royal Group was reportedly seeking to divest a part of its

share capital. Several trade and private equity parties are looking to acquire a stake in the firm or its 3,000

telecoms towers. Previously, PT Telkom Indonesia and France-based Orange were seeking to acquire a

major stake in CamGSM , but discussions eventually ended during the due diligence process. Indonesia-

based network operator Tower Bersama also conducted due diligence on the towers, although it decided not

to follow through. The reports were subsequently denied by the company, insisting that it was instead in the

process of rolling out the next phase of an additional 300 sites during 2014. Furthermore, CamGSM

confirmed that it had some debt with the Bank of China but that it does not consider it to be a significant

sum.





Mixed Outlook For Infrastructure Appropriation Proposals

In July 2014, Cambodia's Ministry of Posts and Telecommunications (MPTC) issued the draft text of a new

law that would force mobile network operators to sell their infrastructure to a state-owned investment

vehicle, effectively transforming them into dedicated retail service providers. Assets to be appropriated by

the government include valuable transmission towers and cables, in which operators have invested heavily

over the last 20 years and which have provided useful supplementary revenue streams through the

wholesale capacity and tower leasing sub-markets.

Regulator To Revoke Inactive Licences

Cambodia's telecoms operators have been given until February 28 2014 to inform the Telecommunication

Regulator of Cambodia (TRC) of their current operations or face the revocation of their licences if they are

not providing any services. 'The TRC will withdraw the licence of companies that have a licence, but are

not operating and do not complete the form with updated information on time,' according to a TRC

statement.

Cambodia Nullifies Prakas 232

In December 2013 the Cambodian council of ministers nullified the law (Prakas 232) which set the

minimum prices for calls in 2009 of USD0.045 per minute for on-net calls and USD0.0595 per minute for

off-net calls. Operator's have criticised the law for years, believing it to be too high, so the decision allows

the TRC to begin redefining the country's telecoms prices at a lower rate. It is unclear when the TRC will

begin restricting the minimum prices though the minister of posts and telecommunications has stressed a

need for expediency.

Laos

VNPT Enters Laos

The Vietnam Post and Telecommunications Group International (VNPT-I) has opened a representative

office in Laos located in the capital city of Vientiane. The office will offer VNPT products and services

along with the products of its affiliates on the local market. The office also reaffirms VNPT International's

commitment to supply international telecom services to Laos. VNPT-I has signed partnership agreements

with Laos operators Sky Telecom and Planet ISP .





Vimpelcom Looking To Exit Laos

Following the sale of its stake in the Cambodian mobile market during April 2013, BMI argued that

Vimpelcom would look to exit its remaining southeast Asian unit in Laos (see 'Cambodia Market

Overview') . This appeared to be playing out in June 2013, when Vimpelcom reported that it was hoping to

finalise a deal 'within months', potentially to a local party. There has been little news since then, however,

TMT Finance has stated that the company has been unable to gain approval from the Laos government,

which holds a 22% stake in the Beeline unit, and has blocked moves with a veto. Valuation is also believed

to be a problem, as buyers are not willing to pay more than USD30mn, while Vimpelcom is looking for

'high double digits'. Vimpelcom has yet to make any official announcements on the subject, so it remains

unclear at this time whether it will be able to exit the market.

Prepaid Registration

Thaicom reported in February 2013 that the Ministry of Post and Telecommunications announced in Q312

that all mobile prepaid subscribers had to register their services. As a result, most subscriptions were

churned out as subscribers opted for one regular number.

Lao PDR Promotes Mobile Banking

The World Bank Group, the UN Capital Development Fund and the Bank of Lao PDR are promoting

payment systems, including mobile banking, to provide entrepreneurs in rural areas with access to finance,

in support of private sector growth and poverty reduction. The development of a national payment system

will be achieved through the First Initiative, a trust fund managed by the World Bank. It supports the

following areas: development of a legal and regulatory framework, development plan and a roadmap for

introduction of retail payment mechanisms.

Myanmar

Viettel To Partner With Yatanarpon










Telenor Launches Mobile Services In Yangon

Telenor Myanmar launched mobile services in the city of Yangon, Myanmar in September 2014. The

operator launched its services commercially in Mandalay in late September. Telenor has already sold 1mn

SIMs in Mandalay and Nay Pyi Taw, although this does not reflect 'active' subscriber figures, as several

SIMs were initially purchased to be re-sold in the black market. The operator says its next step is to start

expanding its network into rural areas to reach the mass market.

Ooredoo Launches Commercial 3G Services

Telecoms operator Ooredoo Myanmar launched 3G services in the country on August 15, but its network is

struggling to cope with heavy demand. With the activation of full commercial services, the operator is

offering free services to mobile subscribers in Mandalay, Nay Pyi Taw and Yangon. The service covered

around 7.8mn residents across some 71 cities and towns on its launch. The operator is installing new base

stations and towers on a daily basis to meet the excess demand. Ooredoo is offering a monthly package for

30MB of data at MMK500 (USD0.001) and 1GB of data at MMK12,000 (USD0.024).

MPT Enters Partnership With KDDI

State-owned telecoms provider MPT will enter into a partnership with Japanese telecoms operator KDDI by

the end of May 2014. Under the deal, KDDI will take control of MPT's routine operations. The procedure

has been delayed for several months as numerous legal procedures are required to negotiate with the MPT,

since it is a state-owned firm, according to the Ministry of Communications and Information Technology.

The MPT has been seeking a foreign firm to manage its business in the run-up of the entry of two new

overseas players that would launch their mobile networks later in 2014.

Ericsson To Support Telenor's Network Rollout

Telenor Myanmar has contracted Swedish vendor Ericsson to provide network equipment and managed

services for the former's mobile network. Under the contract, the vendor will install 2G and 3G equipment,

while providing multi-vendor managed services for a five-year period to facilitate Telenor's network launch.

Telenor, which secured its mobile licence earlier in 2014, expects to cover 90% of Myanmar's population

within five years.





MPT Launches International Roaming

MPT, in collaboration with France-based telecoms operator Orange, launched the trial of international

roaming services in Myanmar after securing approval from Myanmar's authorities, reports Xinhua News,

citing unnamed local media sources. Under the agreement signed on December 20 2013, the two operators

will enable subscribers to 64 operators in 33 countries to access roaming services in the country. During the

trial, Orange is intending to cover more than 100 international countries. In December 2013, SingTel

launched international SMS roaming services in Myanmar.

Digicel-Led Consortium Wins Ooredoo Deal

A consortium led by pan-Caribbean operator Digicel Group secured a contract from Qatari telecoms

operator Ooredoo to deploy telecoms towers for the latter's Myanmar subsidiary. The consortium, involving

YSH Finance and First Myanmar Investment , is believed to be the first group to start tower construction

in the country and will accept multi-tenancy agreements. Earlier in 2013, Digicel failed to obtain a mobile

operating licence, these were acquired by Ooredoo and Telenor.





Regulatory Development

Regulatory Overview

Cambodia

In September 2012, the Telecommunication Regulator of Cambodia (TRC) was established. The TRC has

the authority to inspect and oversee the telecommunications and information technology sectors. The

regulator's director general, Mao Chakrya, said the TRC will look to strengthen existing laws, while

introducing new rules and regulations to keep pace with the dynamic nature of technologies, as well as

ensuring a fair and transparent environment.

The TRC will be responsible for regulating the following policies:

■ Oversee tariff regulations based on transparent principles and rules;

■ Ensure terms and conditions of access, specific procedures and criteria for the dispute and the publicationof interconnection fees and tariffs are met;

■ Oversee licensing and licence fees;

■ Allocate radio frequency spectrums and licences;

■ Ensure that corporate tax on telecommunications service providers are met; and,

■ Establish numbering scheme.

Licensing

Between the start of 2006 and the end of 2007, Cambodia's regulator issued a total of 13 licences to provide

telecoms services. Since then, the regulator has continued to issue licences to new companies to operate in

the mobile and internet sectors. To date, three companies are licensed to provide fixed-line services; in

addition to Telecom Cambodia , they comprise Camintel , which is a joint venture (JV) between the

government and South Korea's KTC Cable Co , and Mfone , a JV between the government and Thailand's

Thaicom (Thaicom will be exiting the Cambodian market in after announcing in November 2012 that it has

filed Mfone into insolvency proceedings). A much larger number of licences have been issued to mobileoperators and internet service providers (ISPs). As of early 2009, there were eight companies providing

mobile telephony services and at least 12 companies providing internet access. The licensing process has

resulted in the need for spectrum restructuring to accommodate the new operators.

Lowering Minimum Tariffs

In December 2009, the Ministry of Economy and Finance came together with the MPTC to tackle price

disputes and set minimum tariffs. The two ministries signed the Minimum Tariffs of Mobile and Fixed





Telephone Services and Interconnection Fees. According to this edict, the minimum cost of calls made

within a network is USD0.045 per minute and for cross-network calls is USD0.0595.

In June 2013, a study by the ITU recommended that this be lowered by about 2 cents to USD0.025 orUSD0.026, equivalent to a reduction of 44%.The regulator is due to meet with operators after the July 28

2013 national elections to discuss the change. BMI believes that adoption of this suggestion would not be

advisable, considering the TRC's previous attempts to regulate price competition in the market.

In December 2013, the Cambodian council of ministers nullified the law, allowing operator's and the TRC

to begin redefining the country's telecoms prices at a lower rate. It is unclear when the TRC will begin

restricting the minimum prices though the minister of posts and telecommunications has stressed a need for

expediency.

Cambodia Regulatory Developments

Regulator To Revoke Inactive Licences

Cambodia's telecoms operators have been given until February 28 2014 to inform the TRC of their current

operations or face the revocation of their licences if they are not providing any services. 'The TRC will

withdraw the licence of companies that have a licence, but are not operating and do not complete the form

with updated information on time,' according to a TRC statement.

TRC Seeks Out-Of-Court Settlement To Smart Axiata-qb Dispute

The Telecommunication Regulator of Cambodia (TRC) is seeking an out-of-court settlement to a dispute

between local mobile operators Smart Axiata and Cambodia Advance Communications (CadComms),

operating under the qb brand. The TRC has also sent a letter to the telecoms ministry stating its intention to

facilitate negotiations between the two operators. In May 2014, qb blamed Smart Axiata for allegedly

damaging its reputation and financial interests, after the duo agreed to end an agreement that enabled qb

subscribers to roam on Smart's network. Before the termination of the agreement, qb started receiving callsfrom subscribers stating that Smart was contacting them to switch to its own network. qb's CEO Alan

Sinfield claims that the firm will be open for out-of-court negotiations if Smart is willing to pay damages.

TRC Warns 15 VoIP Providers Over Registration Fees Payment

The Telecommunication Regulator of Cambodia (TRC) has notified 15 local voice-over-internet protocol

(VoIP) service providers over their failure to pay annual registration fees. The TRC has demanded that the

firms pay their 2013 fees by August 30, otherwise their VoIP access codes will be dismissed and removed,





reports the Phnom Penh Post. The 15 operators include Hiway Telecom Cambodia, DialAny Internet

Telecom , Cambodia Data Communication and WiCam Corporation .

Laos

The government put in place a new telecoms regulator, the National Post and Telecommunications

Authority (NPTA) in December 2007. Previously, the industry had been regulated by the Ministry of

Communications, Post, Transport and Construction (MCTPC). The Department of Post and

Telecommunications plays a role as policymaker.

The NPTA oversees the following:

■ Regulating interconnection and access;

■ Implementing numbering management (country code 856);

■ Regulating pricing of interconnection; and,

■ Licensing.

Licensing

To date, Laos' regulatory authorities have authorised three companies to provide fixed-line services. In

addition to Lao Telecommunications (LTC), they comprise Enterprise of Telecommunications Lao

(ETL) and Lao-Asia Telecommunications (LAT). LAT has since been re-launched as Star Telecom , a JV

between the government and Vietnam's Viettel .

Although the government has also licensed 12 companies to provide internet access services, it is

understood that only eight companies actually provide services. They include LTC, ETL, Sky Telecom

(Laosky), Planet Internet , NAST , KPL (formerly GlobeCom) and Millicom .

Millicom had also revealed that the NPTA had granted it with an international VoIP licence valid until

2022. The licence was expected to enable the operator to develop its international direct dialling business.

Millicom subsequently completed the sale its Laotian telecoms operator to Russia's VimpelCom in early

2011.

Myanmar

In March 2012, the director-general of Myanmar's Post and Telecommunications Department (PTD), a

division of the Ministry of Communications, Posts and Telegraphs, said that a new communications law

was being studied for the creation of four telecoms licences, which would be offered to local and foreign





investors. Myanmar's government is undertaking a phased approach to achieve its stated targets for the

telecoms sector. It has already laid down the policy framework for the development of the telecoms sector

by facilitating competition of both local and international operators in the market. A new

Telecommunications Law has been prepared to enable the government to liberalise the telecoms industry.

The law has been submitted to the parliament for review and approval, and is expected to be promulgated

by the end of 2013. The government has already commenced the corporatisation of the telecoms activities

currently operated by Myanmar Post and Telecommunication under the Ministry of Communications and

Information Technology (MCIT).

Table: Myanmar: Regulatory Bodies And Their Responsibilities

Regulatory Body Summary Of Duties/Responsibilities

Source: BMI, MCIT

Ministry of Communications And InformationTechnologies (MCIT)

Building No. 2

Special Development Zone

Nay Pyi Taw

Myanmar

Tel: +9567 407225

Fax: +9567 407216

Web: www.mcit.gov.mm/

The MCIT has overall responsibility for setting telecommunications policy andcoordinating technology development initiatives. This includes reviewing and approvingapplications for infrastructure and service licences as well as allocating spectrum. Day-to-day responsibilities for policing the sector are currently delegated to the newly-corporatised Myanmar Posts and Telecommunications (MPT), which also operates keyfixed and mobile infrastructure and services. The Post and TelecommunicationsDepartment (PTD) provides policy and technical expertise to the MCIT and also sharessome regulatory duties. A new Telecom Law provides for the creation of an independentnational regulatory authority by 2015.

Source: MCIT, BMI

During this process, the Posts and Telecommunications Department will be responsible for providing policy

advice to the MCIT and carrying out regulatory functions in the sector. The Regulatory Authority is

envisaged to be transformed into an independent entity by 2015, according to the draft Telecom Law.

Foreign Investment Law

On November 2 2012, Myanmar finally passed its much-anticipated Foreign Investment Law (FIL), paving

the way for investment into the former pariah state to begin in earnest. The bill had previously been passed





by both houses of parliament in September, only to be sent back with suggested revisions by President

Thein Sein. However, after indicating that the sidelined bill would soon be finalised in late October, the

President signed off on the updated version of the bill, stating that it would provide both protection and

incentives for foreign investors to enter the frontier economy.

The bill's passage represents a key milestone for the still fledgling government in its unprecedented bid to

open the economy up to global investors. While myriad foreign firms have been lining up to enter the

promising Myanmar market (the boldest of which have already begun to establish a presence in Yangon and

elsewhere), most have been awaiting a more robust investment framework than the previous version

established in 1988.

Bright spots in the new law include the removal of set foreign ownership restrictions in so-called 'restricted'

sectors as well as an unrealistic investment minimum of USD5mn, key points of concern in previous drafts

that Thein Sein had indicated could be perceived as too protectionist. The new law also provides clarity on

the leasing of land owned by qualified private owners, a subject that was not explicitly detailed in the 1988

law. Under the auspices of the new FIL, leases of up to 50 years are now possible (up from 30 years

previously), with two 10-year extensions also available.

Two Telecommunications Service Licences By H113

On January 15 2013, Myanmar called for the expression of interest regarding tender for two

telecommunications service licences. The main goals are to increase the overall teledensity of the country to

75% to 80% in 2015-2016, to make the telecommunications services available to the public at affordable

prices, and to give the public the capability of choice for the telecommunications services.

In support of this policy framework and objectives, Myanmar intended to award two nationwide

telecommunications service licences by the end of H113 in accordance with the guidelines included in the

new Telecommunications Law. Basic terms and conditions included:

■ The telecommunications licences are technology neutral;

■ A range of spectrum across multiple frequency bands was made available;

■ The initial licence term is for 15 years with the possibility of renewal;

■ There is a requirement to meet or exceed specified population and geographic coverage targets;

■ There is also a requirement to commit to reasonable tariffs and low initial registration fees in order tofacilitate the government's accessibility and teledensity targets; and,





■ Both new and existing licensees are expected to enter into infrastructure and facilities sharingarrangements in order to achieve rapid and cost efficient network deployment.

The licences were awarded via a comparative evaluation process.

Licensing

On June 27 2013, the MCIT awarded two 15-year telecommunications licences to Norway-based Telenor

and Qatar-based Ooredoo (formerly Qtel ). The companies each secured spectrum in the 900MHz and

2.1GHz bands, theoretically enabling them to offer 2G (GSM), 3G (W-CDMA/UMTS) and 4G (LTE)-

based mobile telecommunications services. The final terms and conditions - which rest on the adoption of a

definitive new Telecoms Law - have yet to be disclosed. The licences are not expected to be issued before

late-September 2013. Thus, it remains unclear whether the licences allow the operators to build their ownfixed-line infrastructures as well as mobile networks. The proposed new Telecoms Law was formally

approved at the end of August 2013 but still had to be transposed into the country's legal framework before

final negotiations with the winning bidders could get underway. Political and consumer concerns regarding

Ooredoo's links to the Islamic world could still undermine that company's selection.

Telenor has said that it will launch an HSPA and LTE-based network early in 2014 and achieve nationwide

coverage within five years. Ooredoo has yet to comment on its strategy but is known to have begun

preliminary discussions with Telenor and the MPT regarding interconnection agreements and infrastructure

sharing arrangements.





Myanmar Regulatory Developments

Viettel To Invest In Yatanarpon Teleport






More Telecoms Licences Considered

In mid-June 2013, just before the selection of Telenor and Ooredoo as the winners of the two new telecoms

licences, the MCIT made it clear that it was considering awarding licences for the creation of a national

fibre-optic next-generation access network (NGAN) and the provision of fixed broadband internet services.

The MCIT also indicated that it wanted to see more competition in the long term, suggesting that further

mobile licences could be awarded at some point. This is contingent on the adoption of the new Telecoms

Law and the completion of negotiations with Telenor and Ooredoo, both of which are expected by the end

of September 2013.

By March 2015, MCIT had issued licences to 11 firms since the beginning of 2015. The MCIT awarded

Network Facilities Services (Individual) licences to Shwe Than Lwin Media , Elite Telecom and

Yatanarpon Teleport . Individual licences allow operators to construct networks, lease access to service

providers, and offer any type of public or private telecoms service. The watchdog issued Network Facilities

(Class) licences to firms including Global Technology , Pan Asia Majestic Eagle ,

Digicel Myanmar Tower Company , Irawaddy Green Towers and Apollo Towers Myanmar . Class

licences enable operators to deploy and maintain passive infrastructure, and lease access to service

providers.





Competitive Landscape

Table: Key Players - Cambodia Telecoms Sector

Company Name Ownership Market

Telecom CambodiaMinistry of Post and Telecommunications,Ministry of Economics and Finance

Fixed-line (PSTN), data, internet (dial-up, ADSL, leased line, WiMAX, satellite)

Mobitel (CamGSM) Royal Group of Cambodia (100%) Mobile (GSM 1800)

Smart

Axiata (90%)

Timeturns (10%) Mobile (GSM 900/1800), internet, VoIP

Cambodia AdvanceCommunication

(CadComms) Cambodia Advance Communication Mobile (GSM 1800, 3G W-CDMA)Excell Southeast Asia Telecom Cambodia (100%) Mobile (CDMA 2000), Fibre, 4G

Beeline Acquired by Metfone (Viettel) in March 2015(100%) Mobile (GSM 900/1800)

Metfone Viettel (100%) Mobile (GSM 900/1800), internet, VoIP

EMAXX

Keybridge International investmentCompany (65%)

Digital Star Media (35%) Mobile, Internet (4G), satellite TV

Camintel KTC Cable Co. (100%)Fixed-line (PSTN and WLL), internet (dial-up,

ADSL, leased line, WLL)


Table: Key Players - Laos Telecoms Sector


Lao TelecommunicationsShenington Investments (49%), LaotianGovernment (51%)

Fixed-line (PSTN, WLL), internet (dial-up, ADSL,leased line), mobile (GSM 900)

Enterprise ofTelecommunications Lao Laotian Government (100%) Fixed-line (PSTN), internet (dial-up, ADSL, leasedline), mobile (GSM 900/1800)

Beeline VimpelCom (78%), LaotianGovernment (22%) Mobile (GSM 900/1800), internet

Unitel (Star Telecom)Laotian Government (51%), ViettelGlobal (49%) Fixed-line, Mobile (GSM 900/1800)

Sky Telecom (Laosky) Skytel & Net Co. (100%)Fixed-line (WLL), internet (ADSL, leased line, WiMAX,

VSAT and satellite)






Table: Key Players - Myanmar Telecoms Sector


Myanmar Post and Telecommunication State-owned (Ministry ofCommunications, Posts andTelegraphs)

Fixed-line, Internet, Mobile

Yatanarpon Teleport State-owned (Ministry ofCommunications, Posts andTelegraphs) + local private companies

Internet (Dial-up, ADSL, Wireless andWiMax, FTTx and Metronet)

Ooredoo Myanmar Ooredoo Group (100%) Mobile (900MHz, 2,100MHz)

Telenor Myanmar Telenor Group (100%) Mobile (900MHz, 2,100MHz)






Company ProfilesLao Telecommunications

SWOT Analysis

Strengths ■ Fully integrated operator offering a full range of fixed, data and internet services.

■ Has a dominant position in the country's telecoms industry, controlling over 80% of

the fixed-line market and claiming first position in the mobile market.

■ Benefits from strong demand for mobile services.

■ Maintains its top position through superior coverage quality and range.

■ Consistently growing revenues quarter-on-quarter (q-o-q) and year-on-year (y-o-y).

■ Number of Internet subscribers continued to increase significantly especially

HSPA and CDMA Fixed Wireless subscribers.

Weaknesses ■ Demand for fixed-line services will negatively hit revenues and ARPU growth in the

long term.

■ Cost of broadband services remains expensive and unaffordable to a large proportion

of the population; growth potential in this segment of the operator's business is

therefore under-realised.

■ 3G customer growth has been much weaker than expected.

■ Mobile ARPU has been falling in the prepaid and postpaid customer segments.

Opportunities ■ Laos has a young and growing population that should be receptive to new

communications technologies.

■ Broadband penetration rates remain low, and we could expect to see rapid growth in

the country's broadband market overall in the longer term.

■ Although demand for public switched telephone network services has stagnated, the

operator has experienced growing demand for wireless local loop services.

■ Anticipated 4G launch should provide upside opportunities to increase ARPU.






Threats ■ A competitive mobile market means that a long-term and accelerated fall in fixed-line

traffic should be expected.

■ Faces a number of demographic challenges including low literacy levels and low GDP

per capita.

■ Nature of the company's licence means that the government must renew it in 2021.

Company Overview Lao Telecommunications Company (LTC) was established in 1996. A joint venture (JV)between Shenington Investments (49%) and the Laotian government (51%), theoperator has a 25-year licence (ending 2021) to operate fixed-line, mobile phone, publicphone, public international facilities and internet services.

According to the shareholder agreement, LTC is required to invest at least USD400mnin the projects specified in the agreement within 25 years. As at December 2014, LTChas remaining additional investment of approximately USD36.79mn, down fromUSD71.54mn at end-December 2013.

Furthermore, the joint venture agreement between the Group and the Government ofthe Lao People's Democratic Republic, requires that the Group's LTC shares betransferred to the Lao Government, without any charges or compensation, on theexpiration date of the joint venture agreement in 2021.

Strategy Faced with limited growth potential within its fixed-line business, the operator isexpected to concentrate on the development of its mobile and broadband internetservices. Specifically, it would continue to invest in its 3G network, expanding itsnetwork coverage to areas outside of the capital. It would, however, also be required tolaunch innovative and appealing services if it is to achieve strong demand for its

services, together with a range of compatible handsets.

In March 2012, LTC announced that it planned to invest LAK120bn in 2012 on networkexpansion and service development. The network expansion will see the operator addalmost 200 base stations to its existing 1,400, while LTC would also upgrade its corenetwork systems to prepare for 4G services. LTC said in October 2012 that it offeredLTE services for the 9th Asia-Europe Meeting Summit scheduled for November 5-6 in

Vientiane, thereby making Laos the second country behind Singapore to offer the 4Gservice in ASEAN.

Thaicom announced that LTC will do the following:





■ continue to focus on its dealer network to ensure quality of service and improveddistribution;

■ strengthen brand perception and recognition through segment strategies;■ focus on provincial communities to protect our market and regain subscribers;■

focus on value-added service with enriched data content and applications;■ improve network infrastructure and blind spot areas;■ enhance customer experience.

Financial

PerformanceThaicom reported that it generated revenue of THB 1.076bn in Lao in 2014, up fromTHB893.576mn in 2013, and THB752.822mn (2012), and THB615.786mn (2011).

Thaicom attributed this increase to a significant improvement in its 3G mobile services,allowing for higher data usage, as well as the introduction of 4G in Vientiane. At the endof Q414, LTC had total phone subscribers of 1.713mn, increased from 1.487mn at theend of Q413 and maintains its market lead in the mobile sector.

Thaicom has also noted in the past that its growth in revenue has been helped by theincrease from prepaid and postpaid mobile phone services, resulting fromhigher subscriber base and increasing average revenue per subscriber (ARPU).

Additionally, it reported increases from interconnection charge, international telephoneservice charge, and International Roaming charges, as well as from Internet accessservices as a result of growth in the number of HSPA subscribers.

OperationalDevelopments

Mobile

In July 2013, LTC announced its plan to launch LTE technology at 60 base stations in Vientiane. The introduction of LTE will mean that Laos is the second of the 10 ASEANmember countries after Singapore to use LTE. The project - a JV between LTC andHuawei - is presently at the equipment and technology installation stage. LTC expectsitself to launch 4G services in Laos by the end of August 2013.

LTC announced the launch of its 3G service in late October 2008, following long delaysdue to technical difficulties. The operator became the first in the country to offer a 3Gmobile service, which was initially restricted to the capital Vientiane. There were plans toexpand its 3G service, which offers high-speed internet access and video calling toother regions of the country such as Luang Prabang, Savannakhet and Champassak,although the company rarely comments on its progress in this area.

The operator had set itself a target of achieving 30,000 3G subscribers by the end of2008. It also suggested that it could see about 100,000 subscribers by year-end 2009.

According to parent company Thaicom, actual 3G customer numbers came to 15,637at the end of 2009, indicating that performance has been far short of expectations. Itsservices are largely being targeted at young people and the corporate sector.

Network

In August 2012, LTC entered into a partnership deal with Thailand's state-ownedtelecoms operator CAT Telecom, reports the Lao News Agency. The deal is designed tooffer international leased line services through multiprotocol label switching (MPLS). The





networks of the firms are linked along common borders between the two countries,thereby offering services to link sites of business clients to branches and trade partnersoverseas through MPLS.

In November 2012, LTC announced that it has started to expand its service coveragewith additional 2G and 3G base stations. A total of 108 sites are expected to becompleted by Q113.

Financial Data ■ Thaicom Laos Revenue (2010): THB671.738mn■ Thaicom Laos Revenue (2011): THB615.786mn■ Thaicom Laos Revenue (2012): THB752.822mn■ Thaicom Laos Revenue (2013): THB893.576mn■ Thaicom Laos Revenue (2014): THB1.076bn■ Thaicom Laos Revenue (Q114): THB266mn■ Thaicom Laos Revenue (Q214): THB273mn■

Thaicom Laos Revenue (Q314): THB266mn■ Thaicom Laos Revenue (Q414): THB271mn■ Thaicom Laos Operating Income (2010): THB156.055mn■ Thaicom Laos Operating Income (2011): THB73.728mn■ Thaicom Laos Operating Income (2012): THB141.643mn

Operational Data ■ No. of Fixed-Line and Mobile Subscribers (2010): 1.658mn■ No. of Fixed-Line and Mobile Subscribers (2011): 1.309mn■ No. of Fixed-Line and Mobile Subscribers (2012): 1.336mn■ No. of Fixed-Line and Mobile Subscribers (2013): 1.487mn■ No. of Fixed-Line and Mobile Subscribers (Q114): 1.528mn■ No. of Fixed-Line and Mobile Subscribers (Q214): 1.597mn■ No. of Fixed-Line and Mobile Subscribers (Q314): 1.618mn■ No. of Fixed-Line and Mobile Subscribers (Q414): 1.713mn

Company Details ■ Lao Telecommunications Co Ltd

■ Thanon Lane XangBan Sisakhet

Muang Chanthaburi

Laos

■ Tel: + 856 (0)21 216465

■ Fax: + 856 (0) 21 216156

No. of Thaicom Laos Employees (2012): 1,506





Mobitel

SWOT Analysis

Strengths ■ Second largest mobile operator in Cambodia with a market share of 21% at the end

of September 2011.

■ Offers 3G services.

Weaknesses ■ Declining market share; 40% in 2009, 26% in 2010 and 21% in Q311.

■ Mobile business is highly dependent on prepaid users.

■ Lacks the presence in fixed-line and internet market.

Opportunities ■ Mobile penetration rate remains comparatively low, providing ample opportunity for

future growth.

■ Mobile data and internet market is in the early stages of development.

■ Exit of Mfone and Vimpelcom from the mobile market has made it less crowded.

■ Will gain additional subscribers following an agreement to merge with departing

Mfone.

■ All mobile operators have agreed with the Telecommunication Regulator of Cambodia

(TRC) to stop offering excessive free calls aimed at increasing their market shares.

They have also agreed to set a minimum price of USD0.045 per minute for on-net

calls and USD0.0595 per minute for off-net calls. The new consensus should help to

increase ARPUs and margins for operators.

Threats ■ Mobile market continues to become more competitive with seven operators.

■ Danger that the increased mobile market competition could prompt a price war.

■ Reports in March 2014 suggested that the Royal Group was considering a sale of its

stake in CamGSM or its towers portfolio, however, these rumours were denied by the

company.

■ Government plans to control all infrastructure have Cambodian operators concerned.






■ Acquisition of Beeline by Metfone strengthens the latter's share of the market

including subscribers, towers and other assets.

Company Overview CamGSM has been operating in the Cambodian telecoms market since 1997, and itoffers mobile, wireless broadband, internet and portal services via its subsidiariesMobitel, TeleSurf and Everyday. CamGSM was established in 1996 as a joint venture(JV) between the Luxembourg-based Millicom International Cellular with 61.5% shareand Cambodia's Royal Group of Companies with 38.5% share.

In August 2009, Millicom announced it had signed an agreement with the Royal Groupof Cambodia for the sale of CamGSM. For USD346mn in cash, the Royal Groupacquired MIC's 58.4% stake in CamGSM, as well as its holdings in Royal TelecamInternational and Cambodia Broadcasting Services. This brought the Royal Group'sshareholding in Mobitel to 100%.

Strategy Until recently, Mobitel's strategy had been influenced by former parent company,Millicom International Cellular of Luxembourg. Key priorities are likely to remain thesame under the Royal Group of Cambodia's management, involving the extension ofthe operator's network infrastructure into other parts of Cambodia. The 3.5G (HSDPA)

network, in particular, is understood to be limited to the Cambodian capital, PhnomPenh. Another key strategy has been the reduction of tariffs in order to make servicesmore affordable to a larger number of Cambodians.

In January 2013, Mfone, which filed for bankruptcy, agreed to transfer its mobilesubscribers (365,316 as of December 2012) to Mobitel. However, the legality of themove was challenged by Huawei Technologies in February 2013 as a court injunctionwas issued to freeze Mfone's assets. In April 2013, Huawei Technologies has agreed towithdraw its injunction against the bankrupt cellco Mfone, paving the way for the Mfoneasset sale to begin. Mfone assets are reportedly worth around USD107mn, including1,037 base stations which cost around USD100,000 each.

In March 2014, unnamed sources suggested that Royal Group was reportedly seekingto divest a part of its share capital. Several trade and private equity parties are lookingto acquire a stake in the firm or its 3,000 telecoms towers. Previously, PT TelkomIndonesia and France-based Orange were seeking to acquire a major stake inCamGSM, but discussions eventually ended during the due diligence process.Indonesia-based network operator Tower Bersama also conducted due diligence on thetowers, although it decided not to follow through. The reports were subsequentlydenied by the company, insisting that it was instead in the process of rolling out thenext phase of an additional 300 sites during 2014. Furthermore, CamGSM confirmed





that it had some debt with the Bank of China but that it does not consider it to be asignificant sum.

Corporate Structure Mobitel operates under the Cellcard brand and offers 3.5G mobile services in the capitalPhnom Penh and Siem Reap, and EDGE nationwide with the widest coverage in thecountry. Mobitel has a GSM licence valid for a period of 35 years until 2031. RoyalGroup reported that Mobitel has coverage of more 85% of all cities, towns and villages.

TeleSurf is Cambodia's first broadband service with a coverage that extends to all thecountry's major cities. TeleSurf provides 24-hour internet connectivity and high-speedtwo-way data transmission that allows users to surf the web more efficiently andeffectively via WiMAX.

Everyday is a portal offering news in English and Khmer, local information, a free email

account, music, TV guide, chat and games.

OperationalDevelopments

Networks

A network expansion deal was signed between Mobitel and Alcatel-LucentTechnologies in September 2007 at a cost of USD150mn. The contract relates to theexpansion of its 3G network and launch of HSDPA services across the capital of PhnomPenh and the tourist province Siem Reap. The contract enabled the operator to expandits mobile services from voice to video transmission, mobile TV and internet access tomore than 3mn subscribers.

Mobitel continued to invest in expanding its network in 2008. By the end of the year, theoperator covered 62% of the population with 1.4mn base stations across Cambodia.

Mobitel awarded Huawei Technologies a contract worth approximately USD200mn inMarch 2010, to upgrade and expand its network coverage, according to a report fromReuters. The company - which claimed to have been negotiating with Huawei 'for years'- aims to improve the quality and range of services as competition intensifies. It wasunclear whether Mobitel's latest network expansion applies to its GSM or UMTSnetworks or both platforms as Huawei had not issued a formal press release at the timeof writing.

MobileMobitel announced in March 2011 that it was in talks with Cambodia's UnionCommercial Bank to process mobile money transactions for its subscribers. This is tomeet legal requirements laid down by the National Bank of Cambodia (NBC) afterMobitel launched its Cellcard Cash money service in September 2010 without seekingto apply for oversight. The NBC has said Mobitel's application is likely to be approved inthe near term as it has now complied with all the requirements.





In September 2011, Mobitel provided free SIM cards and SMS in a pilot project totackle malaria in the country. Under the scheme, volunteers are given mobile phones toreport malaria cases with a simple text message.

According to the Bangkok Post, Mobitel has partnered with international calling cardservice provider SawasdeeShop to offer mobile airtime and remittance services inCambodia. The launch date was not revealed.

Mobitel is involved an alert system in Cambodia to help control the spread of malaria.The operator supplies the SIM cards and launched the system in Pailin in July 2012,after introducing the service in three other provinces in 2011.

In January 2013, Mfone reached a deal with Mobitel to transfer all of its subscribers tothe latter's network. Mfone began an insolvency procedure after an acquisition plan bylocal investor INT Management fell through. Mobitel will provide an immediate roaming

service to Mfone subscribers within Cambodia for sixty days to avoid interruption ofservice. During the period, both companies agreed work to transfer Mfone customers toMobitel. In February 2013, Huawei challenged the legality of the transfer.

Financial Data ■ Annual Revenues, Group (2007): USD2.624bn■ Annual Revenues, Group (2008): USD3.412bn■ Net Profits, Group (2007): USD697mn■ Net Profits, Group (2008): USD518mn

Operational Data ■ No. of Mobile Subscribers (2009): 2.864mn■ No. of Mobile Subscribers (2010): 2.607mn■ No. of Mobile Subscribers (Q311): 2.889mn■ No. of Mobile Subscribers (Q213): 4mn (according to Cambodia Daily)

Company Details ■ Mobitel

■ Cellcard33 Preah Sihanouk Blvd

PO Box 2468

Phnom Penh

Cambodia

■ Tel: +11 (855) 012 800 800

■ Fax: +11 (855) 012 801 801





Telecom Cambodia

SWOT Analysis

Strengths ■ Largest provider of fixed-line services in Cambodia.

■ Fully integrated operator offering full range of fixed, data and internet services.

■ Internet and data business continues to grow.

■ The operator has been expanding its fibre-optic network.

Weaknesses ■ Faces competition in the fixed-line market from Camintel and Mfone, both of which

offer wireless local loop (WLL) services; Telecom Cambodia is currently losing market

share to Camintel.

■ Reduction in fixed-line traffic will cause a slowdown in revenue and ARPU growth.

■ Cost of broadband services remains expensive and unaffordable to a large proportion

of the population.

■ Failed to list on bourse in March due to poor operator performance.

Opportunities ■ The privatisation of the operator would provide much-needed investment and a

strategic boost.

■ Broadband penetration rates remain low, and we could expect to see rapid growth in

the country's broadband market overall in the longer term.

■ The decision to lower broadband service fees could have a positive effect on

subscriber growth.

■

Foreign investors eager to enter the telecoms market could spearhead opportunitiesfor Telecom Cambodia.

■ Development of a National Broadband Plan with the ITU would help Telecom

Cambodia expand its network infrastructure.

Threats ■ WLL services offered by competitors are likely to grow at a faster pace than public

switched telephone network (PSTN) services.






■ A highly competitive mobile market means that falls in fixed-line traffic are likely to

accelerate and be prolonged.

■ There were 27 internet service providers in the Cambodian market, limiting growth

opportunities for Telecom Cambodia and encouraging price wars.

■ Facing strong competition in the internet market from Vietnam's Viettel.

■ Competition arising from voice over internet protocol (VoIP) service providers will

place further pressure on fixed lines.

■ Seatel has strong investment plans totalling USD500mn in 4G network build.

Company Overview Established in 2006, Telecom Cambodia is the country's incumbent operator leading inthe fixed-line, internet and data segments. It is wholly state-owned, managed by theMinistry of Post and Telecommunications and Ministry of Economy and Finance. Atlaunch, the operator had about 700 employees with an initial capital of USD70mn. Ofthis total, USD30mn was funded by the Japanese government. The company

announced that 2010 revenues exceeded its USD31mn target, which was animprovement from its 2009 revenues of about USD27.55mn. Telecom Cambodiaattributed the achievement to the recovery of the economy. The operator announced inJanuary 2011 that it had more than 35,000 fixed-line subscribers. Telecom Cambodiahad set a revenue target of USD34mn for 2011.

Strategy Telecom Cambodia has not publicly announced an official strategy. The operatorcontinues to invest in the development of its fibre optic backbone infrastructure, a movethat would benefit the advancement of voice and data communications. However, thefuture of the operator's PSTN business looks limited, particularly because of the strongpotential offered by mobile and WiMAX alternatives. In recent months, TelecomCambodia has seen demand for its fixed-line services slow. In addition, the emergenceof VoIP services in the country would add pressure. We therefore expect the operator tofocus greater attention on the development of its broadband services, as has been seenby its plans to expand its existing fibre-optic network providing internationalconnectivity with its neighbouring countries and to serve tourist hotspot areas.

In December 2011, Telecom Cambodia signed a business cooperation agreement withstate-owned Vietnam National Post and Telecommunications (VNPT) in order to bolsterthe formers product portfolio and coverage area. VNPT will provide the technology and





equipment necessary for Telecom Cambodia to grow its operations in the Kingdom,and in turn allow the company to better compete in a crowded sector. According toTelecom Cambodia, the deal will help the operator increase its number of customers,expand its business activities and generate more revenue. The boost in services shouldalso result in lower prices for customers.

Corporate Structure Although Telecom Cambodia remains wholly owned by the government, it isunderstood that the government plans to eventually privatise the operator. Theprivatisation of the company was originally expected in 2008.

Until recently, the government had not provided any indication of how it will go aboutprivatising Telecom Cambodia. However, in September 2009, the Phnom Penh Postreported that Telecom Cambodia had been asked by the Ministry of Finance to prepareto list on the Cambodian Stock Exchange (CSX). According to the report, TelecomCambodia and two other state-owned firms received letters in May instructing them toprepare an initial public offering (IPO), but the companies have since said they wouldonly do so reluctantly. The director general of Telecom Cambodia, Lao Sareoun,reportedly stated that he was worried that the listing would interfere with the state-owned telecoms company's business operations, as it lacked the human resourcesneeded to prepare an IPO. He added that the company met listing requirements interms of financial performance and governance transparency, but warned that it mightnot be ready to list until the end of 2010.

Although the company had not listed its shares by the end of 2010 as originally

scheduled, it was reported to be one of the three state-owned companies to be listedon Cambodia's new stock exchange. In July 2011, it was announced that TelecomCambodia was set to become one of the first companies to list on the country's newlylaunched stock exchange. Trading on Cambodia's stock exchange was further delayedto end-2011 after companies said that they needed more time to comply withregulations.

In January 2012, it was reported by the Phnom Penh Post that the final technicalaspects of the CSX were completed and ready for listing and trading. Phnom PenhWater Supply Authority aimed to raise USD20.4mn in an IPO scheduled for mid-April2012, while Telecom Cambodia is expected to follow suit by end-2012. However, it wasreported by the Wall Street Journal, citing the Cambodia Securities Exchange, inNovember 2012 that Telecom Cambodia was likely to list by June 2013. The delay wasa result of Telecom Cambodia not being able to meet listing requirements in time.

In March 2013, Telecom Cambodia failed to join the CSX citing its poor financialperformance. The operator will redesign its business plan to improve operations, saidSarak Khan, secretary of state at the Ministry of Post and Telecommunications.Telecom Cambodia's revenues have been declining since 2008, excluding the transit





fees charged by the operator to connect to alternate provider networks, according tointernational audit firm KPMG .

Financial Results Telecom Cambodia does not publish its financial results on a regular basis. In H112, theoperator reported a 5% year-on-year (y-o-y) decline in revenues to USD14.5mn. Thedecline was attributed to the negative impact of robust competition in the telecomssector. The operator will focus on enhancing its service quality and offering competitiveprices to customers in a bid to re-grow its revenues in H212, Director General LaoSaroeun said.

Based on the decision not to list on the bourse and the trend towards falling revenuesfrom the sporadic data that Telecom Cambodia provides, it seems likely that its H212results will reveal further financial decline.

Operational

DevelopmentsTelecom Cambodia operates in the country's internet market through its internet unit,Camnet. According to reports, Camnet had about 300 internet subscribers at the end of2007 and about 1,000 at the end of June 2009 (latest available data). One reason for theincrease in customers is said to be the operator's decision to cut the cost of broadbandinternet access. Previously, the monthly cost for a 1Mbps downlink connection stood atUSD1,300. However, following the launch of operations by Vietnamese military-ownedrival operator Viettel, Camnet dropped its price to USD700 for the same amount ofbandwidth. Prices have since dropped significantly. As of March 2013, TelecomCambodia's CamDSL Gold 1Mbps unlimited data service package cost USD35 a month(excluding a deposit of USD35), down from USD55 in September 2012.

Camnet also operates a fibre-optic transmission backbone network that runs fromBavet in the south east of the country, bordering Vietnam to Poipet, to the north west,bordering Thailand, via Svayrieng, Neakloeng, Phnom Penh, Kampong Chhang, Pursat,Battambong and Sisophnom. According to the operator's website, it has plans toexpand its network reach further, connecting Phnom Penh with Kampong Sam andKampot in the south west of the country. Telecom Cambodia will deploy a furthernetwork along the Mekong River connecting Phnom Penh via Kampong Cham andStoeung Treing towards the north, bordering Laos.

In July 2009, it was reported that an initial three-year phase of a project to build atelecoms network linking Cambodia with five other countries had been completed. A 650km fibre-optic cable, which covers two-thirds of Cambodia, was inaugurated linkingthe country with China, Laos, Myanmar, Vietnam and Thailand. The new line, which wasdeployed with the help of Chinese equipment vendor Huawei, has a transmission speedof 620Mbps. The next phase will see the construction of a high-speed ring networkbetween the six countries to help further develop their economies, while the final stepwill connect all public services in Cambodia to the cable.

In April 2012, Telecom Cambodia and Vietnam Telecom International launched theCambodian-Vietnamese Super Highway Telecoms Network, which was designed to





meet the increasing demand for telecoms services in Cambodia. The 260km connectionhas a starting capacity of 10Gbps and links Phnom Penh to Ho Chi Minh City. It isexpandable to Asia, Europe and North America through submarine cable systems andland cable connections.

According to the Ministry of Posts and Telecommunications, Telecom Cambodia has1,200km of fibre-optic backbone infrastructure in the country, substantially less than

Viettel Cambodia (16,000km) and Cambodia Fibre Optic Cable Network (5,180km).

Company Details ■ Telecom Cambodia

■ 95-97 Preah Sihanouk BlvdCorner St 105

Sangkat Boeung Prolit, Kahn 7 Makara

Phnom Penh

Cambodia

■ Tel: +11 (855) 23 720 047

■ Fax: +11 (855) 23 727 168





For Q414, Nokia Networks reported a 3.0% y-o-y decrease in sales to Greater China and a modest 0.9%

improvement in sales to the rest of Asia. The latter was driven by higher mobile broadband network

deployments in Vietnam, Myanmar and India, but were undermined by lower deployments in Japan. With

regards to Greater China, Nokia opined that lower deployments of TD-LTE solutions were behind the fall in

sales.

Year-on-year growth was a little brighter, however, with non-Chinese Asian sales increasing by 17% as a

result of continued strong demand for network infrastructure in Vietnam, Myanmar, Indonesia and Japan;

weaker demand from India prevented sales from rising any further. In China, net sales increased by 8% as

demand for TD-LTE products increased. The Chinese government has now authorised operators to deploy

FDD-LTE technology alongside TD-standard platforms. Alcatel-Lucent was quick to capitalise on this

development, winning a substantial order from China Mobile in January 2015 and building on its existing

long-running relationships with China Telecom and China Unicom . It seems clear that Nokia's traction in

China will bite deeper if it acquires its French-American rival.

Alcatel is particularly strong in Greater China, as demonstrated not only by its recent successes in supplying

LTE mobile broadband solutions to the three principal operators, but also its well-established reputation as a

supplier of high-quality IP routing/networking equipment as well as fundamental wireline access solutions,

which are still in demand by operators in countries that are in the process of migrating from legacy

narrowband networks.

Its mobile equipment business lacks traction outside of China, however; with Chinese economic growth

slowing markedly over the next few years (a development that will impact many of China's key trading

partners across the Asian region), we believed this would undermine Alcatel-Lucent's ambitious

transformation programme, geared towards reinventing itself as a next-generation converged solutions

provider.

In some respects, Alcatel-Lucent's so-called 'Shift' strategy was well-timed to capitalise on the emerging

demand for infrastructure and solutions designed to leverage the power of 'Big Data' and cloud computing

among economies seeking to diversify away from traditional engines of growth. The company's expertise in

small cells and IP routing equipment will appeal to cost-conscious businesses looking to migrate to the

digital world and, in fact, the emphasis on non-telecoms customers was expected to insulate Alcatel-Lucent

from the shrinkage playing out in its traditional telecoms operators and carriers market. It is this broader

appeal that will improve Nokia's long-term sustainability in the years ahead and, in that regard, the merger

makes strategic sense.





With Nokia as the surviving entity, we expect

mobile infrastructure and related solutions to

continue to be central to its product portfolio. This is

no bad thing, given that a number of Asian markets

have yet to migrate to 3G while 4G-powered mobile

broadband remains a cost-effective solution to the

problem of rolling affordable broadband services

into rural areas.

However, the market will remain highly competitive

as Ericsson and Huawei Technologies haveaccounted for the majority of mobile broadband/4G

contract wins outside of China. Ericsson has a long

association with operators in the region, and has

largely been untroubled by the need to rebrand or

realign its product portfolios as a result of mergers

and acquisitions, unlike Alcatel-Lucent and, to a

degree, Nokia Networks. Continuity of brand and portfolio can be just as important as pricing, innovation

and breadth of offering, which is the key strength of Chinese upstart Huawei Technologies. We believe

Ericsson and Huawei will compete more aggressively on pricing while Nokia integrates Alcatel-Lucent and

winnows out unprofitable or duplicated product lines. Both - along with ZTE - already offer comprehensive

converged products and solutions, giving them an edge in the short to medium term.

Meanwhile, by moving into the IP networking business through Alcatel-Lucent, Nokia will be facing new

competitors such as Cisco Systems and Juniper Networks ; these are key players both globally and

regionally in the nascent market for SDN/NFV and the broader cloud computing arena. They, too, will be

difficult to dislodge.

BMI believes that Nokia will make further acquisitions to bolster its converged products portfolio both

prior and subsequent to completing its purchase of Alcatel-Lucent. The company must be careful not to

place too much pressure on its ability to absorb new product lines and intellectual property while still giving

itself enough freedom to rationalise those parts of the business that could act as an impediment to growth.

We believe the toughest battles for supremacy will be waged across the Asia region over the next three

years. A very different Nokia - and a very different client base - will emerge at the end of that period.

Asia Will Be Nokia's Battleground

Nokia Networks Annual Sales By Region, 2014

Source: Nokia





Demographic Forecast

Demographic analysis is a key pillar of BMI 's macroeconomic and industry forecasting model. Not only

is the total population of a country a key variable in consumer demand, but an understanding of

the demographic profile is essential to understanding issues ranging from future population trends to

productivity growth and government spending requirements.

The accompanying charts detail the population pyramid for 2015, the change in the structure of

the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show

indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split

and life expectancy.

Population

(1990-2050)

Cambodia - Population, mn

1 9 9 0

2 0 0 0

2 0 0 5

2 0 1 0

2 0 1 5 f

2 0 2 0 f

2 0 2 5 f

2 0 3 0 f

2 0 3 5 f

2 0 4 0 f

2 0 4 5 f

2 0 5 0 f

0

10

20

30

f = BMI forecast. Source: World Bank, UN, BMI





Cambodia Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)


Table: Population Headline Indicators (Cambodia 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, total, '000 9,057 12,222 13,356 14,364 15,677 16,946 18,119

Population, % y-o-y na 2.2 1.6 1.6 1.7 1.5 1.2

Population, total, male, '000 4,370 5,935 6,485 6,998 7,656 8,288 8,874

Population, total, female, '000 4,686 6,287 6,870 7,366 8,020 8,658 9,244

Population ratio, male/female 0.93 0.94 0.94 0.95 0.95 0.96 0.96

na = not available; f = BMI forecast. Source: World Bank, UN, BMI

Table: Key Population Ratios (Cambodia 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Active population, total, '000 4,762 6,768 7,953 9,069 9,926 10,656 11,488

Active population, % of total population 52.6 55.4 59.5 63.1 63.3 62.9 63.4

Dependent population, total, '000 4,295 5,453 5,402 5,295 5,750 6,290 6,631

Dependent ratio, % of total working age 90.2 80.6 67.9 58.4 57.9 59.0 57.7





Key Population Ratios (Cambodia 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Youth population, total, '000 4,002 4,985 4,817 4,573 4,866 5,167 5,255Youth population, % of total working age 84.0 73.6 60.6 50.4 49.0 48.5 45.7

Pensionable population, '000 292 468 585 722 884 1,122 1,375

Pensionable population, % of total working age 6.1 6.9 7.4 8.0 8.9 10.5 12.0


Table: Urban/Rural Population & Life Expectancy (Cambodia 1990-2025)

1990 2000 2005 2010e 2015f 2020f 2025f

Urban population, '000 1,408.1 2,271.7 2,561.0 2,846.3 3,254.4 3,741.9 4,316.7

Urban population, % of total 15.5 18.6 19.2 19.8 20.8 22.1 23.8

Rural population, '000 7,649.3 9,951.1 10,795.5 11,518.7 12,422.7 13,205.0 13,803.0

Rural population, % of total 84.5 81.4 80.8 80.2 79.2 77.9 76.2

Life expectancy at birth, male, years 52.2 59.3 64.5 68.0 69.8 71.4 72.8

Life expectancy at birth, female, years 57.4 64.6 69.7 73.4 75.2 76.9 78.3

Life expectancy at birth, average, years 54.9 62.0 67.2 70.8 72.6 74.3 75.7


Table: Population By Age Group (Cambodia 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, 0-4 yrs, total, '000 1,731 1,486 1,505 1,592 1,778 1,773 1,691

Population, 5-9 yrs, total, '000 1,478 1,753 1,504 1,471 1,589 1,777 1,770Population, 10-14 yrs, total, '000 792 1,745 1,807 1,509 1,498 1,616 1,793

Population, 15-19 yrs, total, '000 900 1,657 1,605 1,683 1,409 1,400 1,544

Population, 20-24 yrs, total, '000 802 763 1,624 1,323 1,560 1,288 1,311

Population, 25-29 yrs, total, '000 665 922 716 1,760 1,357 1,593 1,310

Population, 30-34 yrs, total, '000 572 831 870 663 1,707 1,311 1,553

Population, 35-39 yrs, total, '000 503 714 820 857 656 1,684 1,294

Population, 40-44 yrs, total, '000 360 545 715 789 842 647 1,655

Population, 45-49 yrs, total, '000 300 485 534 714 779 832 639





Population By Age Group (Cambodia 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Population, 50-54 yrs, total, '000 263 341 467 514 691 755 808Population, 55-59 yrs, total, '000 219 277 335 447 497 668 730









Population, 100+ yrs, total, '000 0 0 0 1 2 4 6


Table: Population By Age Group % (Cambodia 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, 0-4 yrs, % total 19.11 12.16 11.27 11.08 11.34 10.47 9.33








Population, 40-44 yrs, % total 3.98 4.46 5.36 5.50 5.38 3.82 9.14Population, 45-49 yrs, % total 3.32 3.97 4.00 4.97 4.97 4.91 3.53












Population By Age Group % (Cambodia 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f



Population, 100+ yrs, % total 0.00 0.00 0.00 0.01 0.02 0.03 0.04



Demographic analysis is a key pillar of BMI 's macroeconomic and industry forecasting model. Not onlyis the total population of a country a key variable in consumer demand, but an understanding of











Population

(1990-2050)

Laos - Population, mn

1 9 9 0

2 0 0 0

2 0 0 5

2 0 1 0

2 0 1 5 f

2 0 2 0 f

2 0 2 5 f

2 0 3 0 f

2 0 3 5 f

2 0 4 0 f

2 0 4 5 f

2 0 5 0 f

0

5

10

15

f = BMI forecast. Source: National Sources/BMI

Laos Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)

Source: World Bank, UN, BMI





Table: Population Headline Indicators (Laos 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f







Table: Key Population Ratios (Laos 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f





Youth population, total, '000 1,876 2,344 2,338 2,351 2,412 2,555 2,569

Youth population, % of total working age 84.6 82.2 72.3 61.8 55.6 53.5 48.6

Pensionable population, '000 150 193 216 238 270 323 394







Table: Urban/Rural Population & Life Expectancy (Laos 1990-2025)

1990 2000 2005 2010e 2015f 2020f 2025f

Urban population, '000 655.2 1,184.2 1,585.8 2,118.3 2,711.6 3,338.6 3,958.6








Table: Population By Age Group (Laos 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f












Population, 55-59 yrs, total, '000 104 115 133 164 194 229 263Population, 60-64 yrs, total, '000 87 100 105 122 152 180 214












Population By Age Group (Laos 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f



Table: Population By Age Group % (Laos 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f





















Population, 100+ yrs, % total - 0.00 0.00 0.00 0.00 0.00 0.00







Demographic analysis is a key pillar of BMI 's macroeconomic and industry forecasting model. Not only

is the total population of a country a key variable in consumer demand, but an understanding of







Population

(1990-2050)

Myanmar - Population, mn

1 9 9 0

2 0 0 0

2 0 0 5

2 0 1 0

2 0 1 5 f

2 0 2 0 f

2 0 2 5 f

2 0 3 0 f

2 0 3 5 f

2 0 4 0 f

2 0 4 5 f

2 0 5 0 f

0

20

40

60

80






Myanmar Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)

Source: World Bank, UN, BMI

Table: Population Headline Indicators (Myanmar 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f







Table: Key Population Ratios (Myanmar 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f









Key Population Ratios (Myanmar 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Youth population, total, '000 15,868 14,893 14,097 13,539 13,101 12,826 12,407Youth population, % of total working age 64.8 47.6 41.9 37.9 34.4 32.4 30.4

Pensionable population, '000 1,771 2,291 2,469 2,644 2,936 3,669 4,495



Table: Urban/Rural Population & Life Expectancy (Myanmar 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Urban population, '000 10,366.5 13,186.5 14,745.7 16,661.1 18,919.6 21,264.5 23,601.4








Table: Population By Age Group (Myanmar 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f


Population, 5-9 yrs, total, '000 5,490 4,892 4,741 4,423 4,355 4,295 4,153Population, 10-14 yrs, total, '000 5,060 5,145 4,843 4,700 4,399 4,334 4,276












Population By Age Group (Myanmar 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Population, 50-54 yrs, total, '000 1,321 1,617 2,275 2,584 2,911 3,338 3,684Population, 55-59 yrs, total, '000 1,194 1,304 1,495 2,124 2,435 2,750 3,159


Population, 65-69 yrs, total, '000 750 920 949 1,008 1,177 1,697 1,957

Population, 70-74 yrs, total, '000 528 692 725 754 809 949 1,375








Table: Population By Age Group % (Myanmar 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f





















Population By Age Group % (Myanmar 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f



Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.00 0.00 0.00






Glossary

Table: Glossary Of Terms

2G second generation GDP gross domesticproduct NGN next generation network

3G third generation GPRS global packet radioservice Mbps megabits per second

ADSL asymmetric digital subscriberline GSM

global system formobilecommunications

MHz megahertz

ARPU average revenue per user HDSL high-bit-rate digitalsubscriber line MNP mobile number portability

ASP average selling price HSDPA high-speed downlink

packet accessMoU memorandum of understanding

BMI Business Monitor International HPSA high-speed packetaccess MOU minutes of use

bn billion HSUPA high-speed uplinkpacket access MPLS multiprotocol label switching

BTS base transceiver stations HTML hypertext markuplanguage MSC mobile switching centre

CDMA code division multiple access Hz hertz MVNO mobile virtual network operator

CRM customer relationshipmanagement ICT

information andcommunicationtechnology

- not available

D-AMPSdigital-advanced mobilephone service IDD

international directdialling OIBDA

operating income beforedepreciation and amortisation

DLD domestic long-distance ILD international long-distance POP point of presence

DMB digital multimediabroadcasting IPO initial public offering R&D research and development

DSL digital subscriber line IP internet protocol SaaS software-as-a-service

DSLAM digital subscriber line accessmultiplexer IPTV internet protocol TV SDSL symmetric digital subscriber line

DSU digital subscriber unit ISDN integrated servicesdigital networks SIM subscriber identity module

DTH direct-to-home ISPinternet serviceprovider SMS short messaging service

DVB-H digital video broadcasting-handheld IT information

technology TDMA time division multiple access

DVB-SH digital video broadcasting-satellite handheld ITU

InternationalTelecommunicationUnion

TD-SCDMA time division-synchronous codedivision multiple access

e/f estimate/forecast JV joint venture trn trillion

EBITDA earnings before interest,taxes, depreciation andamortisation

Kbps kilobits per second UMTS universal mobiletelecommunications system

EC European Commission KHz kilohertz VOD video on demand





Glossary Of Terms - Continued

EMEA Europe, Middle East and Africa km kilometres VoIP voice over internet protocol

EV-DO evolution-data optimised LANs local area networks VLAN virtual local area network

FDI foreign direct Investment LEC local exchangecarrier WAP wireless application protocol

FTTB fibre-to-the-building LTE long-term evolution W-CDMA wideband CDMA

FTTH fibre-to-the-home M2M machine-to-machine WiBro wireless broadband

FTP file transfer protocol mn million WiMAX worldwide interoperability formicrowave access

Gbps gigabits per second MEA Middle East and Africa WLL wireless local loop

GPON gigabit passive opticalnetwork MENA Middle East and

North Africa WTO World Trade Organization

Source: BMI





We use the selected best model to perform forecasting.

It must be remembered that human intervention plays a necessary and desirable role in all our industryforecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot

structural breaks, anomalous data, turning points and seasonal features where a purely mechanical

forecasting process would not.

Sector-Specific Methodology

Our Telecommunications industry forecasts are generated using a number of principal criteria, and differfrom the regression and/or time-series modelling used in other industries.

■ Average Market Growth

Indicator takes into consideration the historical growth patterns of the fixed-line, internet, broadband and

mobile markets, providing a basis from which to forecast. Using historical data is often the most desirable

method of analysis. In most cases, subscriber data are derived from individual operators and/or national

regulators.

■ Subjective Indicators

Indicators look at a number of factors, such as the following:

■ Neighbouring/similar states. These types of markets often share similar telecoms markets. For example,Japan and South Korea are both highly developed technophile markets where growth prospects are highin 3G. Meanwhile, China and India both offer high growth in successfully emerging markets.

■ Tracking growth. High growth may be more likely to be repeated in the near future, and is unlikely to

turn into a significant decline in the short term, although there may be exceptions to this rule.

■ Market maturity. Where markets have reached saturation, they are not likely to expand as fast as thosethat are less developed.

■ Competition from alternative technologies, such as VoIP versus fixed-line, ADSL versus mobilebroadband.

■ Operator behaviour. Operators' corporate strategies and investment behaviour may dictate changes in thetelecommunications market. This is similarly the case for regulatory developments, which have beenaccounted for in our integration of the Telecommunications Risk/Reward Index.





Sources

Sources used in telecoms reports include national ministries and media/telecoms regulatory bodies,

officially released company results and figures, national and international industry organisations, such as theCTIA, the GSM Association and the International Telecommunication Union (ITU) and international and

national news agencies.

Risk/Reward Index Methodology

BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of

doing business and the industry-specific opportunities and limitations for potential investors in a given

market.

The RRI system divides into two distinct areas:

Rewards : Evaluation of sector's size and growth potential in each state, and also broader industry/state

characteristics that may inhibit its development. This is further broken down into two sub categories:

■ Industry Rewards. This is an industry specific category taking into account current industry size andgrowth forecasts, the openness of market to new entrants and foreign investors, to provide an overallscore for potential returns for investors.

• Country Rewards. This is a country specific category, and the score factors in favourable political andeconomic conditions for the industry.

Risks : Evaluation of industry-specific dangers and those emanating from the state's political/economic

profile that call into question the likelihood of anticipated returns being realised over the assessed time

period. This is further broken down into two sub categories:

■ Industry Risks. This is an industry specific category whose score covers potential operational risks toinvestors, regulatory issues inhibiting the industry, and the relative maturity of a market.

• Country Risks. This is a country specific category in which political and economic instability,

unfavourable legislation and a poor overall business environment are evaluated to provide an overallscore.

We take a weighted average, combining industry and country risks, or industry and country rewards. These

two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking

system for the risks and rewards of involvement in a specific industry in a particular country.

For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall

Risk/Reward Index a weighted average of the total score. Importantly, as most of the countries and





territories evaluated are considered by BMI to be 'emerging markets', our score is revised on a quarterly

basis. This ensures that the score draws on the latest information and data across our broad range of sources,

and the expertise of our analysts.

Indicators

The following indicators have been used. Overall, the index uses three subjectively measured indicators,

and around 20 separate indicators/datasets.

Table: Risk/Reward Index Indicators

Rationale

Rewards

Industry Rewards

- ARPU Denotes depth of telecoms market. High-value markets score better than low-value ones.

- No. of subscribers Denotes breadth of telecoms market. Large markets score higher than smaller ones.

- Subscriber growth,% y-o-y

Denotes sector dynamism. Scores based on annual average growth over our five-yearforecast period and also take into account the penetration rate.

- No. of operators Subjective evaluation against BMI-defined criteria. Evaluates market openness andcompetitiveness.

Country Rewards

- Urban/rural split A highly urbanised state facilitates network rollout and implies higher wealth. Pre-dominantly rural states score lower, with overall score also affected by country size.

- Age range Proportion of population under 24 years old. States with young populations tend to bemore attractive markets.

- GDP per capita, USD A proxy for wealth. High-income states receive better scores than low-income states.

Risks

Industry Risks

- Regulatory independence Subjective evaluation against BMI-defined criteria. Evaluates predictability of operatingenvironment.

Country Risks

- Short-term external risk Score from BMI's Country Risk Index(CRI). Denotes state's vulnerability to externallyinduced economic shock, which tend to be the principal triggers of economic crises.

- Policy continuity From CRI. Evaluates the risk of a sharp change in the broad direction of governmentpolicy.

- Legal framework From CRI. Denotes strength of legal institutions in each state - security of investment canbe a key risk in some emerging markets.





Risk/Reward Index Indicators - Continued

Rationale

- Corruption From CRI. Denotes risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies' ability to compete.

Source: BMI

Weighting

Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal

weight. Consequently, the following weighting has been adopted:

Table: Weighting Of Indicators

Component Weighting, %

Rewards 70, of which

- Industry Rewards 65

- Country Rewards 35

Risks 30, of which

- Industry Risks 40

- Country Risks 60


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