KDDI, the Japanese telecommunications giant, finds itself navigating turbulent waters as its Myanmar subsidiary’s financial struggles come to light. The company recently announced a significant 105 billion yen ($690 million) provision for doubtful receivables related to its dealings with Myanma Posts and Telecommunications (MPT), underscoring the heightened risk of operating in politically volatile regions. This provision has forced KDDI to revise its net profit forecast downward by 45 billion yen to 635 billion yen for the fiscal year ending in March, marking a 6% decline from the previous year.
The financial hiccup stems from KDDI Summit Global Myanmar, a joint venture between KDDI and Sumitomo Corp., which has been instrumental in the mobile telecommunications business in Myanmar since 2014. The ongoing dollar exchange regulations by the Myanmar military regime, coupled with a continuous operating deficit, have hampered the collection of lease receivables, exacerbating the financial strain on KDDI and Sumitomo Corp.
Adding to the companies’ woes, Norway’s central bank placed both on its “observation list” in December 2023. This move could potentially disqualify them from investment by Norway’s state pension fund due to the risk of complicity in the military regime’s control of the business. Despite these challenges, KDDI and Sumitomo Corp. issued a joint statement in January, reaffirming their commitment to continue their operations in Myanmar.
This saga not only highlights the geopolitical risks inherent in global telecommunications operations but also raises questions about the long-term viability of foreign investments in regions with unstable governance. Investors and analysts alike will be watching closely as KDDI navigates these troubled waters, seeking to balance operational commitments with financial prudence and ethical considerations.
