Deal focus: Ascent envisions 10-year Myanmar play

Singapore-headquartered Ascent Capital believes Myanmar has the potential to become like Vietnam by 2030: a destination for investors with a long-term horizon that also want to make a positive societal impact.

Having spent nearly two years on the road with its debut fund – attracting commitments of $80 million to date – the GP has made a first investment, participating in a $26 million round for local internet service provider (ISP) Frontiir. Ascent contributed most of the equity, with co-investors brought in to provide the rest.

Frontiir wants to expand internet coverage beyond the four regions in Myanmar where it has active operations. In time, it would also like to introduce ancillary services like local language content as the customer base expands beyond the current 360,000 households and enterprise customers.

“Investment mandates these days should not be driven by pure profit considerations,” says Ascent founder Lim Chong Chong. “Through our investments, we hope to support Myanmar’s economic and social development goals.”

Conceding the challenges of investing in a country where it is difficult to generate risk-adjusted returns over a short-term horizon, Lim says Ascent decided to back Frontiir because it represents an established proposition. Last year, UK development finance institution CDC Group committed $30 million to the company, which offers Myanmar Net, the leading broadband internet service in the country.

However, controversy emerged in March when the government ordered ISPs to suspend access to more than 2,000 websites it said were peddling fake news. Human rights advocates argued it was a crackdown on freedom of speech targeting media outlets operating in a conflict zone. It is part of a year-long shutdown of mobile internet services in eight townships in crisis-ridden regions in west Myanmar.

CDC has faced calls to divest its stake. Frontiir declined to comment on questions related to government influence.

For Ascent, the company still appeals from a business development standpoint. Not only would Frontiir’s expansion efforts create jobs, but it could also help lay the groundwork for improved internet access that can help alleviate poverty, improve access to education and promote economic growth. Lim says that Frontiir’s internet packages are competitively priced and are becoming an alternative to the mobile-based internet data plans offered by the country’s four telecom service providers.

Right now, it’s unclear if there is even an exit route available. In any case, Myanmar’s private capital ecosystem is at an early juncture. Ascent is one of the few private equity players.

Most of the foreign capital raised has gone to overseas-listed local conglomerates, but Lim believes there are plenty of long-term positives. He points to a general pull-back by state-backed entities from various sectors – which leaves room for private enterprise growth – as an example.

“One needs a lot of patience to do well in Myanmar,” Lim adds. “Remember, income levels in Myanmar were higher than Thailand just a few decades back. It is both a challenge and opportunity to help bridge that gap.”

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• Topics
• Southeast Asia
• Expansion
• Technology
• Myanmar
• Growth capital
• Ascent Capital
• TMT