The future is bright in Myanmar, even if it is not as Orange as the French telecoms company might have liked. It is more a lurid yellow with puce-tinted characters in local Burmese script, according to MySQUAR, the social media business which hopes to float on the Alternative Investment Market in a fortnight.
The Burmese start-up is raising about £2m to piggyback off the impressive growth in mobile communication in Myanmar and build a local-language business of messaging applications and online games. Nearly 700,000 Burmese citizens already use its MyChat app, and that could be more than 1m by December if all goes to plan.
MySQUAR is just one of the many small businesses hoping to cash in on Myanmar’s economic revival after its release from half a century of military rule and censorship. Five years ago a fraction of a per cent of Myanmar’s population — of which nearly half are under the age of 24 — had access to a mobile phone. Now Myanmar’s economy is growing at about 8 per cent a year, say analysts, and by the end of 2015 a third could have phones.
The government hopes that by 2016 more than three-quarters of the country will have network coverage. Two years ago it invited the likes of Orange and Vodafone to tender for licences to roll out mobile services across the country. Norway’s Telenor and Ooredoo of Qatar won the tender and this month Telenor said it had already picked up 6.4m customers and was “unexpectedly” in profit. The average revenue per user is more than four times greater than in India or Pakistan, it added.
“We are sitting on top of all that telecom expansion,” says Eric Schaer, MySQUAR’s chief executive, a US-born former banker and citizen of Comoros who lives in both Vietnam and Singapore.
Yes MySquar has rivals, including Facebook, but while the literacy rate is extremely high, very few people speak or write English. MySQUAR is the only one allowing Burmese people to chat in the local lingo, says Mr Schaer.
That said, Myanmar is still a very poor, largely rural country without access to road, rail or reliable electricity supplies where less than 10 per cent of the people have bank accounts. Democracy is young, cronyism prevails and the country is split by factions and disputes over land rights. Companies are not governed by the norms that western investors are used to and the cost of doing business is unpredictable and high. In August, for example, Telenor reported evidence of the use of child labour by suppliers.
Mr Schaer says stoutly “[business] has all been quite straightforward. We have not had challenges.” So far.
Broker Beaufort Securities has discounted assumed cash flows to reach a value of about £23m for the company. But MySQUAR’s services are free for now while it builds its customer base and it will not start to charge users for add-on services or advertisers for space for a while. MySQUAR will not generate cash for months, if not years. The profits may come after that. Then again, they may not.
MySQUAR is a start-up in the real sense of the word and high risk. The purple prose is beguiling, but the company’s future may be more black and white.
Financiers are forever repackaging centuries’ old products and services, and rebranding them with the latest buzzword. Often it is just a way of charging another layer of fees for another layer of intermediation. Today’s buzzword is “crowdfunding”. It bestows a wow factor on the most pedestrian capital raising.
Or so Darwin Strategic, majority owned by Henderson, hopes. It claims to have pioneered crowdfunding for public companies. Its second customer is Aim-quoted Kea Petroleum, the New Zealand explorer trying to raise £3m from private investors at 1p a share via Darwin’s PrimaryBid.com. Anand Sambasivan, Darwin’s boss, says PrimaryBid is not brokering any old equity placing. The difference is that retail investors can bid for shares directly from companies. “We fill the gap in bank lending for small companies and give retail investors access to share placings,” he says.
Kea’s shares tell their own tale. They have fallen from above 30p in under a year and are trading at 0.875p in the market. Paying as much as 1p smacks of that old saying, “a fool and his money are soon parted”.
