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TELECOMMYANMAR UPDATE
September 2016
Get to the point.
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SERVICES WE OFFER IN OUR TELECOM PRACTICE
Our firm is well recognized as a leader in the Myanmar telecom space, with extensive experience in investment, transactions, financing and regulatory matters. We provide telecoms companies, infrastructure providers, regulators, industry participants, financial institutions and various suppliers with in-depth advice on Myanmar telecommunications law and regulations.
In most cases, importation of equipment into Myanmar is only allowed after securing multiple regulatory approvals from various Government organizations. Our import regulatory team makes a capability available to our clients which goes well beyond the scope of what is usual for law firms. We have secured import licenses in Myanmar for well over US$1B worth of telecommunications and technical equipment.
Equipment licensing
Passive network infrastructure deployment
Our TMT team has unique in-depth and hands-on experience with the regulatory aspects of the deployment of passive network infrastructure. We have performed due diligence on and assisted towercos and fibercos with securing land-use rights, approvals and construction permits on a nationwide basis.
• Landleasedocumentationandregistration• Landclassconversion• National,state/regionandlocalapprovals• Constructionpermits• Environmentalandsocialcompliance• Stampdutypayment
Telecommunications services and media licensing
Our TMT team has assisted state-owned telecom enterprises, mobile operators, ISPs, satellite service providers, financial institutions and corporates with their licensing needs.With a strong Nay PyiTaw presence, we provide a full service to clients which comprises advice, preparation and documentation of license applications, and liaison and follow-up with the authorities.
• NetworkFacilitiesService(Individual)licenses• NetworkFacilitiesService(Class)licenses• ApplicationServicelicenses• NetworkServicelicenses• Spectrumlicenses• Numberinglicenses• Mobilefinancialservices• Radiobroadcasting• Televisionbroadcasting
Consumer protection
We advise telecommunications companies on their obligations in terms of Myanmar’s consumer protection rules. In connection with telecommunications services, we advise on advertising, general terms and conditions, data protection and contractual compliance.
Interconnection and access
Our TMT team advises telecoms and mobile network operators, towercos and fibercos, investors and lenders on the Myanmar legal and regulatory framework of interconnection and infrastructure sharing. This comprises:
• Interconnectionagreements• Masterservice/licenseagreements• Compliancewithtarriffregulations• Regulatoryapprovals• Publicsectortechnicalassistance
Competition
Myanmar’s telecommunications law and regulations foresee a detailed framework of rules and procedures. We advise clients on potential exposure and assist with procedures and disputes. Given the firm’s multi-disciplinary foundations, we are able to create a coalition with lawyers, regulatory experts, litigators and financial specialists to meet their needs.
Our offices in Myanmar
NAY PYI TAWNo.S-204,ThaPyayKoneWard Zabu Thiri Township
T:+95678108091
F:+95678108092
YANGONLevel8,CentrepointTowers
No.65SulePagodaRoad&Merchant Street KyauktadaTownship
T:+951371902/+951371635
F:+951241238
Find us on:
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VDB Loi in MyanmarContents
VDB Loi (www.vdb-loi.com) is a network of leading law and advisorymemberfirmsandaffiliatedcompaniesthatcomprises10partnersandover120 lawyersandadvisers,withoffices inMyanmar,Cambodia, Indonesia,LaosandVietnam,andrepresentativesinJapanandSingapore.
Withoffices inYangonandNayPyiTaw,wearea leading foreignfirm inMyanmar,andrankedasatop-tierfirmbyChambers2016.
Our outstanding expertise in the TMT space is well-recognized in Myanmar and throughout our network, with extensive experience in investment, transactions, financing and regulatory matters. We provide telecom companies, infrastructure providers, regulators, industry participants, financial institutions and various suppliers with in-depth advice on Myanmar telecommunications law and regulations.
We have advised on many of the largest telecom investments in Myanmar, including acting as local counsel for the licensing and market entry of a multibillion dollar greenfield telecom project, as well as assisting with the licensing process for a number of mobile network operators and towercos and acting for the investors purchasing a stake in a leading telecom infrastructure company.
Partners
Edwin VanderbruggenSenior [email protected]
Edwin is one of Myanmar’s most prominentforeign legal advisers. He is widely recognized in Myanmar for his TMT experience, both on the transactional and regulatory fronts. He has advised 2 of the 3 telecom operators in Myanmar, including acting as local counsel for the licensing and market entry of a multibillion dollar greenfield telecom project. He advises 5 out of 7 tower and fibercos, and was the first to secure MIC permits for telecom systemsvendors.
He has a deep understanding of the financing aspects of the telecom industry, having acted for IFIs, commercialbanksor corporateborrowers on all of the completed major project finance transactions, including the largest-everfinancingdealactingfortwoDFIsin Myanmar.
Edwin currently advises several Myanmartelecom operators, ISPs, infrastructure providers, lenders and vendors. Furthermore,he has provided technical assistance to the telecom regulator, the PTD.
He has worked in the region since 1997, and haslivedandworkedinYangonsince2012.
Jean LoiManaging [email protected]
Jean is widely recognized as one ofthe region’s most experienced tax and regulatory specialists, with more than 12 years of experience in Indochina, Myanmar and Singapore. She has advised on a large number of project transactions and tax disputes in the specialties of structuring, power plant projects and oil & gas. As themanaging partner of VDB Loi, Jean hasextensive experience with projects related to the market entries of companies in the infrastructure, telecommunications and financial services industries in the region, as well as with supply chains. Her Myanmar tax experience is unsurpassed. She lives in Yangon.
CANCOPYRIGHTBEASECURITY
INMYANMAR?ACLOSERLOOK
ATTHEINCORPOREALASSET
ABEAUTIFULSPECTRUM
AUCTION?GAMETHEORY
COMESTOMYANMARASTHE
PTDDISHESOUTFREQUENCY
RECENTWORKIN
TELECOMMUNICATION,MEDIA
ANDTECHNOLOGY
APPLYINGFORTHENEWMOBILE
FINANCIALSERVICELICENSE
COMPARATIVEANALYSISOF
MYANMARTELECOMLICENSES
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8
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CAN COPYRIGHT BE A SECURITY IN MYANMAR? A CLOSER LOOK AT THE INCORPOREAL ASSET
Copyrightprotectionisanissueofgrowingimportance in the modern-day commercial world, and Myanmar is no exception. Important intellectual developments in the field of information technology, such as software, require copyright protection. Given the immense amount that firms are investing in research and development in these areas, a greater amount of financing is also required, and the best possible securitythesefirmshavetoofferaretheseintangible assets called copyrights.
Similar to many other common law systems, in Myanmar a security can be created over movable and immovable property to secure any financial transaction. The most prevalent forms of security used in Myanmar are mortgages, pledges, charges and assignments.
Considering its intangibility, it ispertinentto see under which category a copyright will fall, whether security can be created over it, and if so, what sort of security would be the most appropriate.
What form of asset is copyright?
In Myanmar, there are two broad categorizations of the term property:
1. Immovable property:
a. GeneralClausesAct,1898(§2(29)):“‘immovable property’ shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth.”
b. Registration Act, 1909 (§2(6)): “‘immovable property’ includes lands, buildings, hereditary allowances, right to ways, lights, ferries, fisheries, or any other benefits to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops or grass.”
c. TransferofPropertyAct,1882(§3):“Immovable property does notinclude standing timber, growing crops or grass.”
2. Movable property:
a. GeneralClausesAct,1898 (§2(39)):“property of every descriptionexcept immovable property.”
b. Registration Act, 1909 (§ 2(9)):“includesstandingtimber,growingcrops and grass, fruit upon and juice in trees, and property of every other description, except immovable property.”
c. Myanmar Penal Code, 1860 (§22):“ ‘moveable property’ is intendedto include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything, which is attached to the earth.”
Clearly, upon reading the definition ofmovable property as provided under the general Clauses Act and the RegistrationAct,itseemsthatallpropertythatdoesnotfall within the description of immovable property can be categorized as movable property.Thus, copyright is an intangible/incorporeal asset that is considered movable property under Myanmar law.
How is copyright defined under Myanmar law?
Under the provisions of the CopyrightAct, 1914 (§2), copyrightmeans the rightto produce or reproduce the work or any substantial part thereof in any material form or to perform an act or deliver a lecture in public. It also includes the publishing of an unpublished work, and the sole right to:
1. Produce, reproduce, perform or publish any translation of the work.
2. Convertadramaticworkintoanovel.3. Convert any novel, and other non-
dramatic work etc. into a novel.4. In the case of a literary, dramatic or
musical work, to make any record, perforate roll, cinematograph film or other device by means of which the work may be mechanically performed or delivered.
Such rights are inherent upon the authorship of a work, and may be assigned, licensed, or otherwise conveyed.
MEET OUR TEAM
Nar WahSenior Legal Associate
NarWah,aMyanmar-qualifiedlawyer,isanassociateonVDBLoi‘slegalteam.She has an exceptional educational and career background in both law and accounting. She spent more than seven years working in Singapore.
Jean LoiManaging Partner
Jean Loi is widely recognized as oneof the regions most experienced professional advisors with a CPAbackground. She was formerly a partner with PricewaterhouseCoopersin Southeast Asia. As the managingpartnerofVDBLoi, Jeanhasextensiveexperience with licensing, energy, power, property and consumer product projects. Her Myanmar tax experience is unsurpassed. She lives in Yangon.
Bryan Alexander Senior Associate
Bryan Alexander is an attorneyadmitted to the US state bars of South Carolina and Pennsylvania.He has practiced for more than 10years in corporate law, disputes and commercial matters. Bryan has extensive emerging market experience, having worked in India for a number of years. He is a senior associate on our firm’s CorporateM&Ateam,whereheadvisesclientsin a wide range of sectors, including telecom, consumer goods and financial services. He is also involved in infrastructure and resources projects.
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Creation of security over copyright
Since as discussed above, copyright falls under the definition of movable property in Myanmar law, let us now consider the forms of security that can be created over copyright. As per Myanmar law, broadly,there are four forms of security that can be created over movable property: (i) assignments; (ii) mortgages; (iii)hypothecations/charges; or (iv) pledges.However, as a copyright is an incorporeal assetandincapableofdelivery;securitybyway of pledge is ruled out from the start.
1. Assignment of copyright by way of security
Assignment is a mode of transferrecognized under the Myanmar Copyright Act. There are two types ofassignments: absolute, and by way of security.
An absolute assignment is where theassignee becomes the full owner of the rights.Assignmentbywayofsecurityiswhere an asset is secured in favor of a third party by way of an assignment of rights or interest, which would become an absolute transfer/assignment inthe event of default and enforcement of the security. As held in U Hla WinandOthervs.DawKyiKyialiaDawYinWaeLwin (1999MyanmarLawReports(Civil),208),itisclearthattheownerofa copyright may assign the right either wholly or partially, and either generally or subject to limitation. However, such assignment must be done in writing and signed by the owner or the owner’s duly authorizedagent.§5(2)oftheCopyrightAct,1914prescribes thatunless it is sowritten and signed, such assignment is not valid.
In our view, since assignment is a mode of transfer recognized under the Myanmar Copyright Act, it seems tobe the most prudent form of security, which enables the assignee to obtain full ownership of the property upon default made by the assignor.
2. Mortgage
Mortgage as defined under the Myanmar TransferofPropertyAct,1882(“TPAct”)is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of a loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. This basically means that the definition ofmortgageundertheTPActdoesnotfactor in the mortgaging of movable property (including incorporealpropertylikeacopyright).Nevertheless,
mortgages over movable property have been recognized under Myanmar law through court rulings, for instance, in thematterofWebstervsPower, (1868)LR2PC69, thePrivyCouncilheld thatalthough mortgage over movable property is outside the scope of the TP Act, it is still valid and legally binding.Similarly, as per Myanmar law, rights should be considered to be a fit subject of mortgage, a persuasive judgement in this respect would be the case law from India:SawayRamandFattuRam,56I.C.489.Additionally,§6oftheTPActallowsthe transfer of all types of property except the specific types of property mentioned in the list of property that cannotbe transferred.Copyright isnotincluded in this list.
Given that mortgages of movable property are outside the scope of the TP Act, there is a possibility that thecourts in Myanmar may not apply all theprovisionsoftheTPActinthecaseof enforcement, and this may result in certaindisadvantages.Forinstance,thesale of the mortgaged property without a court’s intervention may not be availableinaccordancewith§69oftheTPAct,unlessthepossessionhasbeenprovided for, which is unlikely in the case of an incorporeal asset. Similarly, the right to appoint a receiver without a court’s intervention in accordance with §69Amay also not be available in thecase of a mortgage over a copyright.
In any case, if the parties to a transaction wish to create a mortgage over copyright, the most suitable form of mortgage is theEnglishmortgageasdefinedunderthe TP Act. An English mortgage canbe taken over a manuscript, a compact disk, an online data storage where the intellectual property may be stored and this would lead to an absolute transfer, with a right to re-transfer in accordance withtheTPAct.
Furthermore, there is a possibility ofstructuring the security by creating a mortgage over any immovable property and by the same deed creating a mortgage over the copyright. This would make the TP Act applicableupon the instrument in question. The provisionsunder theTPActpertainingto enforcement without a court’s intervention and the right to appoint the receiver would then be available in respect to the copyright.
3. Charge/hypothecation
As per §100 of theTP Act, a charge is“[w]here immovable property of oneperson is by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage”.
However, in a charge, the chargee has no legal right over the charged property but only the right to have the security made available. This means that there is basically no transfer of property, but it is rather a mere earmarking of the property as security. The chargee will only have the right to get the property sold and have the amount of the sale appropriated toward what it is due. However, this is not preferable, since charge as a concept of security does is notmentionedundertheCopyrightAct,thus this ambiguity means that it would be better to create a security by way of an assignment.
Stamp duty
In the context of Myanmar, one cannot ignore the stamp duty requirements during the creation of security. The Myanmar StampAct,beinganarchaiclaw,prescribesstamp duty at an unreasonable rate. Depending on the nature of the security, the stamp duty can go as high as 3% of the amount being secured. However, an assignment of copyright falls under the exemptioncolumnunderArticle23oftheStamp Act. This would mean that only aminimal amount of MMK 300 would belevied in an assignment of copyright under theMyanmarCopyrightAct.
In the case of a mortgage of a copyright, the applicable stamp duty is 1.5% of the amountbeingsecuredasperArticle40oftheStampAct.Therefore, it isadvisabletocharge a mortgage over a copyright only when it is clubbed with security over other immovable property, and the same would then be created by way of one deed.
Conclusion
Given the recognition of the assignment under the Myanmar Copyright Actand the exemption from stamp duty as provided under the Myanmar Stamp Act,copyrights are best secured by way of an assignment. Mortgage can be a secondary option, if the copyright is clubbed with other security, such as a mortgage over immovable property.
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A BEAUTIFUL SPECTRUM AUCTION? GAME THEORY COMES TO MYANMAR AS THE PTD DISHES OUT FREQUENCY
ForfansofJohnNash’sNobelprize-winninggame theory, highlighted in the motion picture “A Beautiful Mind”, you are aboutto see theory turn to practice in your very ownNayPyiTaw, inBuildingNo.2.On17October2016,theMinistryofTransportandCommunications,thenew,somewhatoddcouple of Government ministries, will hold its long-awaited spectrum license auction. The auction follows a public consultation stage that was organized in January andFebruary2016.
In this note, we look ahead at this potentially game-changing event, at who can participate, and how it will be run.
Game theory-based auction system
The method of the auction is something called “Second-Price Simultaneous,Multiple-round, and Ascending” or SMRA.SMRA is the oldest and probably best-known auction type for spectrum in case of excess demand.
Under the SMRA method, the Post andTelecommunications Department (“PTD”)will auction several blocks of frequency bands, in some areas simultaneously, by going through a sequence of rounds. Anauction often has several blocks available in a number of regions. In Myanmar, there arethreeregionsforthispurpose.Foreveryround of bidding, the standing high bid for the lot is determined, and the bidding rounds go on until there is only one bidder left for each lot.
Forthemathematiciansamongus,abidderremains active in round T by submitting
the leading bid in T-2 or by submitting a higher bid than the T-1 leading bid. Interested bidders may read up on game theory strategies for spectrum auctions in the Handbook of Game Theory, edited by Petyon Young and Shmuel Zamir.
In practice it means that bidders are kept in separateroomsfrom10amto5pmanduserunners to bring their bids for blocks, per round,totheauctionroom.Eachtimethatthere is excess demand, the PTD’s auction manager (a consulting company calledNordicity)will set a“MinimumAcceptableBid” and a new round will be called with new bids from the separated bidders, unless one or more of them drops out. There may be one hour or less between rounds.
The advantage of this auction type is that it is simple. The problem is that unlucky bidders may end up with blocks of spectrum that do not match together. Bidders may also end up paying quite a bit more than they otherwise would have had to pay. Most importantly, perhaps, there is the possibility of tacit collusive behavior, based on an informal understanding of who should get which spectrum.
What can you bid for?
At this time, the PTD will only auction 40MHzofspectruminthe2600MHzband(2575-2615 MHz), made up of two times20MHz (2575-2595MHz,2595-2615MHz)divided into three regions. Each bidderwill be able to acquire up to two regional licenses, thus allowing for three to six regional licensees in total.
The spectrum license is for 15 years.
The rules and processes for the 2600MHzauction point out that a bidder will be allowed to “bid for a maximum of onespectrum lot comprised of up to two regional20MHzLotsintheTDDmode.Thusthespectrumcapinthe2600MHzbandwillnotexceed20MHzperlicenseeinthesameregion”.IntheNationalTableofFrequencyAllocations (“NTFA”), Myanmar has beensubdivided into three regions.
REGION STATES and REGIONS INCLUDED
1
NayPyiTawMagway BagoMon KayinThanintharyi
2YangonAyawaddyRakhine
3
Mandalay Sagain ChinShan KachinKaya
The blocks on the auction table are 2 x 20 MHz, for three regions in the 2575-2615 MHz band. In Myanmar, this band is within the 2535-2655 MHz and has been allocated in the NTFA to“FIXEDMOBILEexceptaeronauticalmobile5.384ABROADCASTING-SATELLITE”.
The NTFA also points out that the band2500-2690MHzisintendedforbroadbandservices, while the band 2300-2400 MHzwill be considered for use by broadband services.
Who can participate?
You need to already have a telecommunications service license; morespecifically, an NFS-I license. The NFS-I isthe most comprehensive form of telecom license Myanmar has, allowing the licensee to provide services and hold a network.
Asof June2016, theseare thecompaniesthathavereceivedanNFS-Ilicense:
Myanmar 2016 Tax Update16March2016,SuleShangri-laHotel,Yangon
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Companies issued NFS(I) licenses, as of 13 June 2016
No. Company Name Issue Date Expiry Date
1 ShweThanLwinMediaCo.,Ltd 30January2015 29January2030
2 EliteTelecomPublicCo.,Ltd 27February2015 26February2030
3 YatanarponTeleportPublicCo.,Ltd 27February2015 26February2030
4 MyanmarEconomicCorporation 23March2015 22March2030
5 MyanmarNetworkCo.,Ltd 23April2015 22April2030
6 UnionInternetCo.,Ltd 12June2015 11June2030
7 ShwePyiTagonCo.,Ltd 26June2015 25June2030
8 FPTMyanmarCo.,Ltd 6July2015 5July2030
9 FortuneInternationalCo.,Ltd 14July2015 13July2030
10 GoldenTMHTelecomCo.,Ltd 21July2015 20July2030
11 MyanmarTelecommunicationNetworkPublicCo.,Ltd 4August2015 3August2030
12 KBZGatewayCo.,Ltd 4August2015 3August2030
13 AGBCommunicationCo.,Ltd 27August2015 26August2030
14 TerabitWaveCo.,Ltd 28August2015 27August2030
15 Southeastasianet Technologies MyanmarCo.,Ltd 4September2015 3September2030
16 MyanmarCountryCo.,Ltd 6October2015 5October2030
17 TahMoeHnye`ChanTharTunWaiTharCo.,Ltd 6October2015 5October2030
18 CampanaMythicCo.,Ltd 14October2015 13October2030
19 KingRoyalTechnologiesCo.,Ltd 14October2015 13October2030
20 MyanmarTechnologyGatewayCo.,Ltd 4November2015 3November2030
21 GlobalTechnologyCo.,Ltd 30November2015 29November2030
22 FiberLinkMyanmarCo.,Ltd 31December2015 30December2030
23 SpeedBirdCo.,Ltd 11January2016 10January2031
24 FrontiirCompanyLimited 25January2016 24January2031
25 MargaGlobalTelecomLimited 18February2016 17February2031
26 SpectrumLifeCo.,Ltd 28March2016 27March2031
27 MyanmarAPNCo.,Ltd 28March2016 27March2031
28 BaganISPCo.,Ltd 30March2016 29March2031
29 BlissMyanmarInternationalCo.,Ltd 30March2016 29March2031
30 YNetPublicCo.,Ltd 30March2016 29March2031
31 MyanmarSpeedNetCo.,Ltd 30March2016 29March2031
32 KineticMyanmarTechnologyCo.,Ltd 30March2016 29March2031
33 AmaraCommunicationsCo.,Ltd 30March2016 29March2031
34 HongsaTelecomCo.,Ltd 6April2016 5April2031
35 ChinaUnicom(MYA)OperationsCo.,Ltd 20May2016 19May2031
How can you participate?
Youmust have lodged your ExpressionofInterestbythedeadlineof9August2016.Then, interested parties will have until 7 September 2016 to prepare and lodgetheir financial, technical and ownership documents for qualification. The qualified bidders will be announced on 28 September 2016.Aftersubmissionofmorepaperworkand a Q&A stage, amock auctionwill beheld on 12 October 2016. Finally, the bigday(ordaysifthingsgetoutofhand)willbeon17October2016.Winnersshouldbeannounced by 20 October 2016, but theresults will also be disclosed in the main auction room right during the auction itself.
By the way, you will also need to arrange for a bid bond of US$500,000 (from aMyanmar-licensed bank or approved by thePTD),andyoucan’thaveanycommonownership with Telenor, Ooredoo or MPT.
Looking ahead
If you are not participating in this auction, not to worry. According to the PTD, thefollowing bands could potentially be made available for assignment in the next five years:
• Unassigned portions of the 850/900MHzand2100MHzbands
• 700MHz• 1800MHz• 2300MHz• Unassignedportionsofthe2600MHz
band
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RECENT WORK IN TELECOMMUNICATIONS, MEDIA AND TECHNOLOGY
MARKET ENTRY AND LICENSING • MultibilliondollargreenfieldmarketentrybyQatarTelecominMyanmar• Advised5outof12biddersinthe2012telecomtenderinMyanmar• Advising5outof7towercompaniesinMyanmar• Advised on the deployment and financing of a submarine fiber optic cable in the
Andamansea• AssistancewiththeconcessionforanationwidefiberopticcablenetworkinLaos• DeploymentandlicensingofaclosedcircuitFOCnetworkinIndonesia• Assistedthetop3worldleadersincommunicationstechnologywiththeirinvestment
licensing in Myanmar • Obtained over a dozen telecom licenses of various categories in Myanmar• MarketentryofaninternetgamingcompanyinCambodia
TRANSACTIONS • Conversionofastate-ownedformermonopolistoperatorinMyanmarintoacommercial
company • First-evermergerbetweentwotelecomoperatorsinCambodia• US$50millionacquisitionofagroupoftelecomnetworkassetsinVietnambyaforeign-
listed entity • JointventurebetweenaJapanesetradinghouseandaleadingMyanmarISP• Firsteverspin-offbyanoperatorofitstelecomtowersintoanewaffiliateinCambodia• Purchase of aUS$52million stake in a telecomnetwork company inCambodia and
Myanmar• AcquisitionofaCambodianISPandcableTVprovider,actingforthepurchaser• Purchase of fiber optic cores by a mobile network operator in Myanmar
SATELLITES
• AdvisinganinternationalsatelliteoperatoronleasingsatellitecapacitiestoMyanmarcustomers
• Development and licensing of a satellite ground station in Myanmar
DATA CENTERS
• AssistinginthedevelopmentofadatacenterinThilawa,Myanmar• RegulatorycomplianceforconstructionofadatacenterinYangon,Myanmar
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RECENT WORK IN TELECOMMUNICATIONS, MEDIA AND TECHNOLOGY
E-MONEY
• Acted for the purchaser on the acquisition of a mobile money service platform inCambodia
• Advising the joint venture between a bank and a mobile network operator on itse-money business in Myanmar
• Assistinganindependente-moneyissuertosecureitslicensesinMyanmar
REGULATORY
• Assisted with procuring licenses and permits for a nationwide network of telecominfrastructure
• ActingforatelecomoperatorinadisputewithatelecomregulatorybodyinCambodia• Advisedagroupofdevelopmentfinancialinstitutionsonregulatorycompliancefora
nationwide network of telecom infrastructure in Myanmar • Assisted in connectionwith tax structuring and compliance for a telecomvendor in
Indonesia
FINANCING • US$300millionfinancingoftelecomnetworkinfrastructure,thelargest-evertransaction
by international financial institutions in Myanmar, acting for the lenders • ProvidingspecializedadvicetoatowercoinMyanmaronitsUS$250millionfinancing
from a US development lender• ActingforagroupofdevelopmentfinancialinstitutionsonthenearlyUS$200million
financing of a towerco in Myanmar • First ever non-recourse financing involving Myanmar, US$87 million financing of a
Myanmar tower company, acting for the borrower• US$50millionfinancingofafiberopticcableprojectinCambodiaandMyanmar,acting
for the lenders • FinancingofaUS$40millionsubmarinefiberopticcableproject,advisingtheborrowers• US$40.2millionfinancingbyaconsortiumofcommercialbanksfortheconstructionof
3,000telecomtowers,actingfortheborrowers
MEDIA
• Advisingaglobal,US-basedsocialmediagiantonitscomplianceinVietnam• Market entry and joint venture in Myanmar of a global leader in cinemas and the
distribution of motion pictures • ActingforthemajorityshareholderinaprintmediapartnershipdisputeinMyanmar• Assistedinconnectionwiththeacquisitionofamediaservicescompanywithapresence
inCambodia,LaosandVietnam
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APPLYING FOR THE NEW MOBILE FINANCIAL SERVICE LICENSE
On 30 March 2016, the Central Bank ofMyanmar (“CBM”) issued ‘regulationson mobile financial services’ (“theRegulations”), the marketplace has longbeen awaiting. Below we have set out the key points to consider if you wish to apply for permission to provide mobile financial services(“MFSLicense”)inMyanmar.
Who can apply?
Of significance, it appears that only mobile network operators and registered “non-bank” financial institutions are entitled to apply for an MFS License. The applicantmust be incorporated solely for the purpose of providing mobile financial services, and must have a minimum capital of MMK3billion (approx.US$2.5millionat the timeof writing), amongst other requirements,and must submit an application to the CBM,which,accordingtotheRegulations,shouldbeprocessedin90days.
What should be included in the application?
TheapplicationmustincludeafeeofMMK3million (approx. US$2,500 at the time ofwriting),technical/functionaldetailsofthemobile financial services to be provided, a three-year business plan, details of the board of directors and senior managers, and if the applicant is a mobile service operator, then a non-objection letter from what was previously the Ministry of Information and Communications Technology. The CBMmay request further information, and notably, in theory may prescribe a range of
fees and charges to avoid anti-competitive behavior.
TheCBMhasnotyetcirculatedatemplatefortheMFSLicenseapplication,anditcanbe expected that additional information and documents will be required, including with regard to agent networks, systems and technology, consumer protection measures, and trust account issues (seebelowformoredetails).
Agent networks
A mobile financial services provider isallowed to operate through a network of agents(agentexclusivityisnotpermitted),subject to CBM approval of the agentnetwork based on three-year projections, which include the geographic coverage of agents, draft agency agreements, services to be provided by agents, policies and procedures, risk assessment report, and the mobile financial services provider’s agent KYCpolicy.
Assuming approval by the CBM, themobile financial services provider must make public a list of its agents, keep the CBM notified of the GPS locations of itsagents/areas of operation, and submit totheCBManauditreportwithinsixmonthsafter the start of mobile financial services operations. Naturally, themobile financialservices provider is legally responsible for the actions of its agents to the that extent the actions relate to the scope of the agents’ appointment.
Aung Soe MoeSenior Legal Associate
Aung is an experienced Myanmarqualified attorney with a Bachelor’s of Law degree fromDagon University.He has unique and extensive experience in telecommunications, land and licensing issues in Myanmar.
Jeffrey Lyle MartinSenior Legal Associate
Jeffrey is an experienced lawyerqualified in Canada with anextensive background in real estate development and transactional matters, also advising clients on related corporate, commercial and finance issues. He has assisted a broad range of clients with complex cross-border investments, offshorefinancing, mergers and acquisitions and joint ventures.
Chris SheridanSenior Legal Associate
A barrister and a solicitor admittedin Australia, Chris has a solidbackground in commercial practice for a wide range of sectors including financial services, resources and finance. At VDB Loi, Chris advisesforeign investors on commercial and corporate law,M&A, real estate lawand dispute resolution.
PPA breakfast briefing16August2016,SuleShangri-laHotel,Yangon
MEET OUR TEAM
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Tier KYC/CDD Cumulative Transaction Limits Per Day
Cumulative Transaction Limits Per Month
Maximum Balance Limit (based on aggregate of
all accounts held)
Level1(individualsonly)
Presentation of ID is required if and when necessary MMK50,000 MMK1million MMK200,000
Level2(individualsonly) SIM registration or ID MMK200,000 MMK5million MMK1million
Level3(forregisteredbusinessesonly)
Business registration certificate, identification requirements for opening bank accounts
MMK1million MMK50million MMK10million
Systems, technology and consumer protection
The mobile financial services provider is required to implement and maintain systems and technology for consumer protection, anti-money laundering measuresandothermatterssubjecttoCBMsatisfaction. There is also a requirement on the mobile financial services provider to maintain records and oversight of its operations and make records and books available to the CBM upon request. Themobile financial services provider must report to the CBM as prescribed and inthe event of any substantial change to its system or business model, and to submit auditedaccounts to theCBMwithin threemonths of the close of each financial year, amongst other reporting requirements.
Trust account
In addition, the mobile financial services provider must maintain a 100% float ofliquid assets in trust, which may not be comingled with other funds – interest earnedmustbedeclared to theCBMandused for the benefit of its customers. The trust account must be reconciled no later than 4pm each day and any deficienciesrectified by 12pm the following day.
So what transactions are permitted under mobile financial services?
The Regulations allow a broad scope ofdomestic transactions, including cash-in/cash-out, although international transfers would only be permitted with CBMapproval. Transactions must be in Myanmar kyats, and account holders are entitled to have their credits redeemed at any time.
The KYC requirements depend on thesize of the transfer (although paymentsto merchants, financial institutions, and forutilities, taxes/government feesdonotcounttowardsthelimits):
Can a mobile financial services provider obtain an MIC permit?
Amobilefinancialservicesproviderclearlydoes not require an MIC permit to carryon business, but there is nothing in the Foreign or Myanmar Citizen InvestmentLaw or regulations which would prohibita mobile financial services provider from obtaining an MIC permit. Typically as amatter of practice, service companies are not given much priority in receiving MICpermits, although nonetheless, certain service companies have been successful in obtainingMICpermitsinthepast.
A potential mobile financial servicesprovider should definitely consider applyingforanMICpermit for themobilefinancial services activities, and particularly if the provider intends to make a significant capital investment in Myanmar. The obvious benefitsofobtaininganMICpermitincludethe potential tax incentives, including a five-year tax holiday, assurances that the business will not be nationalized during the investment period, and assurances that the investor will be able to repatriate funds in the same currency as they were brought into Myanmar.
MEET OUR TEAM
Edwin VanderbruggenSenior Partner
Edwin and his team secured thelicenses for Myanmar’s first western-ownedCCGT,nowinproduction.Stillin the energy sphere, he advises on thestructuringoftheThilawaSEZ,theconstructionofa2,000MWcoalpowerplant, a series of hydropower projects and several other projects in the renewables space. He also provided technical assistance to national and international stakeholders on Myanmar energy issues.
Nishant ChoudharySenior Legal Associate
Nishant is an experienced lawyerqualified in India with an extensive background in finance and securities. He assists finance institutions navigate the emerging regulatory framework of foreign and secured lending in Myanmar. Nishant also advises oncorporateM&Aandrestructuringinawide range of industries.
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LICENSE NFS-I NS NFS-C AS
1 Purpose/ authorized activities
� Provide any public or private telecommunications services(internationalornational)tothepublicand/orotherlicensees
� Construct,maintainand operate a network
� Leaseallorpartofanetwork to another licensee
� AnNFS-Ilicenseeislicensed to perform allNS,NFS-CandASactivities
� LeasetransmissioncapacityfromNFS-Ilicenseeand/orotherlicensee to provide telecommunications services(internationalornational)toendusersand/orotherlicensees
� Provide all services authorizedbyNSandASlicenses
� NSlicenseescannotconstruct, maintain or operate networks, except for switches, routers and processing equipment needed for the licensed services
� Construct,maintainand lease passive infrastructure to an NFS-Iand/orconstruct,deploy and maintain a telecommunications network solely for the self-provision of telecommunications
� NFS-Clicenseescannot provide interconnection with networks, whether publicorprivate;orclosed user group telecommunications services that are offeredtoanyperson
� Provide telecommunications application services without the need for a subscriber number, such as Internet Service Provider(“ISP”)
� Leasetransmissioncapacity directly from anNFS-Ilicenseeand/or other licensee in order to provide public and private telecommunications services on a national basistoendusersand/or to another licensee
� ASlicenseescannotconstruct, maintain or operate networks, except for switches, routers and processing equipment needed for the licensed services
2 Examples of activities
Construct,maintain,operate, and provide telecommunications services over:
� Terrestrial fixed line transmission facilities
� Terrestrial radio transmission facilities
� Mobile base station facilities
� Submarine cable facilities
� International Gateway Services facilities
� Satellite earth station facilities
� Other Myanmar-based satellite facilities that can transmit telecommunications services
Provision of the following telecommunications services:
� Resaleofwirelineconnectivity services
� Resaleofterrestrialwireline connectivity services
� International and domestic network transport and switching services
� ResaleofInternationalGateway Services
Deploy and maintain passive network infrastructure for civil engineering and non- electronic elements, including but not limited to:
� Towers � Masts � Ducts � Trenches � Poles � Dark fiber
Provision of the following telecommunications services:
� Public payphone services
� Public switched data services
� Audiotexthostingservices provided on an opt-in basis
� Directory services � ISP services � Public access center
services � Messaging services � Privatelinevoiceand/or
dataservices(includingleasingWideAreaNetworkcapacitytothirdparties)
� Value-added services
COMPARATIVE ANALYSIS OF MYANMAR TELECOM LICENSES
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LICENSE NFS-I NS NFS-C AS
3 Application procedure
ProceduresforbothNFS-IandNSarethesame:Acompany must:
� CompletetheMTC’sstandardapplicationform,providing all required information
� Applyunderthelicensecategoryrelevanttoitsintended activities
� Submit the application to the Posts and TelecommunicationsDepartment(“PTD”)
� PaytheapplicationfeesetbytheMTC,unlessexemptedundertheRules- NFS-Iapplicationfee:MMK10million- NSapplicationfee:MMK5million
NOTE: The MTC will publish the standard application form on its website and will indicate the information to be provided in the application
ProceduresforbothNFS-CandASarethesame:Acompanymust:
� Completeastandardregistrationformprovidingallrequired information
� Applyunderthelicensecategoryrelevanttoitsintended activities
� Submit the registration form to the PTD � PayaregistrationfeeofMMK2.5million,unless
exemptedundertheRulesNOTE: The MTC will publish the standard application form on its website and will indicate the information that must be provided in the application
4 Application incomplete or inaccurate
� IfthePTD/MTCthinkstheinformationintheapplicationisincompleteorinaccurate,itwillgivenoticeinwriting and the applicant may amend and re-submit the application
� Failuretorespondwithin30 days may result in rejection of the application
5 Timeframe for review and decision
� Approvalordenialofapplicationwithin 60 days � If the applicant is foreign or it is for International
Gateway Services, then review period is 90 days
� Approvalordenialofapplicationwithin30 days � If the applicant is foreign or it is for International
Gateway Services, then review period is 60 days
6 Delays in review &decision on license
If review exceeds 60 days, the applicant will receive written notice explaining the delay and giving the expected review completion date
If review exceeds 30 days, the applicant will receive written notice explaining the delay and giving the expected review completion date
7 Application approved
If the application is approved, the applicant must pay the applicable fees set by the PTD
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LICENSE NFS-I NS NFS-C AS
8 Application denied
� If denied, the PTD must provide objectively justifiable reasons in writing � The applicant may re-apply but must submit a new application and pay a new application fee
9 Qualification requirements
NotspecifiedintheProposedLicensingRules
10 License period
15 yearsNoindicationintheProposedLicensingRuleswhetherthisperiodisextendable;Seelicenserenewal(#12)
11 New or additional services
� AwrittenrequestmustbesenttothePTDandapprovalobtainedforofferingadditionalnetworksor services to end users or other licensees under the existing license
� The request must describe the proposed additional services and show that the licensee can meet any additional related conditions or obligations
� The licensee must pay a fee equal to half of the application fee- NFS-Ifee:MMK5million- NSfee:MMK2.5million
� The PTD will notify the licensee of its decision within 30 days
� Upon approval, the PTD will update the existing license
If the request is denied, the PTD must give specific reasons and allow the licensee to re-apply. The licensee is not allowed to provide the additional services until approved to do so.
� AwrittenrequestmustbesenttothePTDandapprovalobtainedforofferingadditionalnetworksor services to end users or other licensees under the existing license
� The request must describe the proposed additional services and show that the licensee can meet any additional related conditions or obligations
� ThelicenseemustpayafeeofMMK1.25million � The licensee may begin engaging in the additional
activities permitted within the scope of its existing license upon submission of the notification
� The PTD will notify the licensee of its decision within 30 days
� Upon approval, the PTD will update the existing license
If the request is denied, the licensee must cease the new activities. The PTD must give specific reasons for the denial and allow the licensee to re-apply.
12 License renewal
� Arequestforrenewalshallbemadenomorethan24 months and no less than 12 months prior to the license expiry date
� Arequestforrenewalwillbereviewedonthesameorsubstantiallysimilartermsandforthesamedurationofthe initial license period
� If the request is refused, the PTD will provide written notice stating the reasons for refusal and provide a reasonable opportunity to remedy
� Written notice of the decision will be provided within 6 months of receiving the application to renew
13 Spectrum licenses
� AnNFS-Ilicensedoesnot guarantee access to spectrum resources
� Companiesmustsubmit a separate application for a spectrum license to the PTD
� AnNSlicensedoesnotpermit a licensee to use scarce spectrum resources assigned by the PTD
� Alicenseecanonlyuse unassigned spectrum resources, such as a spectrum in “unlicensed”frequencybands
N/A � AnASlicensepermitsalicensee to use spectrum resources that are not assignedbytheMTC,such as a spectrum in “unlicensed”frequencybands
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LICENSE NFS-I NS NFS-C AS
14 Allocations for numbers
� Separate application processfromNFS-Iapplication
� Must apply pursuant to theNumberingRules
� Separate application processfromNFS-Iapplication
� Must apply pursuant to theNumberingRules
N/A
Telecommunications Equipment Licensing
15 Registration procedure
� TheMTCwillissueastandardregistrationform,whichindicatestheinformationtobeprovided � The applicant must complete the registration form � AregistrationfeeofMMK5,000mustbepaid � IfthePTDorMTCthinksthattheinformationintheapplicationisincompleteorinaccurate,itwillinformthe
applicant in writing and the applicant may amend and re-submit the application � Insuchacase,theapplicantmustamendandre-submititsapplicationwithin30daysofreceiptofwritten
notice � Failuretorespondwithin30daysmayresultinrejectionoftheapplication � Anyonemeetingthequalificationcriteriasetoutintheregistrationformwillreceivealicense
NOTE: � TheMTCwillsetforthinaschedulethelistofequipmentthatrequiresalicense � Public consultation will then be done, which will include proposed terms and conditions and duration of license � Alicensewillgenerallyberequiredwherethereisahighlikelihoodofharmfulinterferenceand/oralicenseisin
the interests of national security and the public
16 Timeframe for review and decision
� ThePTDwillreviewtheregistrationformwithin30daysofreceiptofacompletedandaccurateregistrationform
� The PTD will issue a license if the registration is approved � If the registration is denied, the PTD must provide objectively justifiable reasons in writing � The applicant may re-apply but must submit a new form and pay a new registration fee
17 Equipment that requires a license
Satelliteequipment(e.g.,satellitetelephones)RadarequipmentanddevicesHFradioequipment
RECOGNITION OF VDB LOI
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www.VDB-Loi.com
