Norwegian telecom giant Telenor Group remains stuck in Myanmar for now, despite its July announcement of the $105 million sale of its local business to Lebanese investment company M1 Group, as sources confirmed the military regime's reluctance to approve the deal.

Telenor also faces uncertainty over the future of its 51% stake in Myanmar mobile payments group Wave Money after the collapse of a deal to sell a portion of its Wave holding to China's Ant Group, an affiliate of China's Alibaba Group Holding. The deal, valued at $76.5 million, would have reduced Telenor's stake in Wave to 34.2%.

Wave Money is also owned by Yoma Strategic Holdings, which holds a 44% stake, and Yoma Bank with 5%. The two companies are affiliated with Sino-Burmese tycoon Serge Pun.

Telenor's wholly owned subsidiary, Telenor Myanmar, announced the sale of its Myanmar mobile operations to Beirut-based M1 Group for $105 million in July, a fraction of the estimated $1 billion the Norwegian company has invested in the Southeast Asian country since it was granted a license in 2013. Earlier Telenor wrote off the value of its Myanmar unit, booking a loss of about $750 million in May, after seeing its mobile business severely restricted following the Feb. 1 military coup.

Under existing laws, the Telenor-M1 deal requires approval from the military-controlled Ministry of Transport and Communications (MOTC) and the Myanmar Investment Commission, according to legal and investment experts.

"Myanmar's telecoms competition rules stipulate that approval, refusal or inquiry must be provided within 60 days following the application for approval of the proposed transaction," said Ross Taylor, a Bangkok-based lawyer who specializes in Southeast Asia. "Under the telecommunications law, all foreign applications require approval of the Union Government, which means that the license transfer will require approval by the SAC cabinet," he noted, referring to the State Administration Council, the formal name of the military regime that rules Myanmar.

Two industry sources with access to MOTC officials told Nikkei Asia that the military has given "strong" signals that the deal is "very unlikely to be approved," citing concerns about corruption charges, reports of the company's closeness to the Syrian government, and the company's methods of operating.

In 2019, corruption charges were filed by state prosecutors against Najib Mikati, Lebanon's prime minister designate, who previously served twice in the post, in Beirut for illicit gains through a subsidized housing loan scheme. The case was not brought to trial, although the charge has been left uncleared. Mikati and his brother Taha are co-founders of M1 Group, which was created in 2007 from a construction business they established in the early 1980s.

"The Mikatis' business record is marred by corruption and a long history of cozying up to dictators with a disregard for the right to privacy and freedom of expression," the activist group Justice for Myanmar said in a July 9 report.

Another industry executive close to Telenor said the Norwegian company is being pressured to cancel the sale to M1 and open the deal to other prospective buyers. A local telecom executive said several investors connected to the industry had been in discussions about possible partnerships to bid jointly for Telenor's business if it came up for sale again.

In light of recent restrictions aimed at foreign participation in Myanmar's economy, the military regime is unlikely to look favorably on the sale of sensitive industries or infrastructure to foreign entities, several analysts, noted. For example, the regime in early August imposed strict limits on the number of foreigners that banks are permitted to hire.

Several Myanmar-focused analysts cited earlier examples of military hostility toward Ooredoo, a Qatar-owned company and one of four key telecoms operators in Myanmar, when it won a license alongside Telenor in 2013. At the time, anti-Muslim groups, including the 969 Buddhist nationalist movement -- which is closely connected to the military -- called for a boycott of Ooredoo, warning that such a sensitive sector should not be sold to a company based in an Islamic country.

Extremist monks supported the military's brutal campaign in 2016-17 to drive out minority Muslim Rohingya from Myanmar's western state of Rakhine. Min Aung Hlaing, leader of the junta that seized power on Feb. 1, has made frequent anti-Muslim statements.

The Mikatis hail from a prominent Sunni Muslim family and have close relations with companies across the Middle East.

"For various reasons, probably including reluctance to see more telecom infrastructure controlled by foreigners, ministry officials have made it very clear they are not comfortable with M1," one of the sources said. "The ministry -- and we assume the junta's leadership -- feel M1 would be a bad investor for such an important sector, and to own sensitive infrastructure."

"There is a strong feeling that [the ministry] has decided to block it and are trying to pressure Telenor into overturning the sale to M1 in order to sell to someone else," another telecom investor said, citing ministry sources.

Responding to questions from Nikkei, Telenor said the sale was continuing, subject to official approval. "As announced on July 8, Telenor Group has signed an agreement to sell 100% of the shares of Telenor Myanmar to M1 Group. The sale is subject to regulatory approval in Myanmar and the process is ongoing," a spokesperson said at the weekend.

Other factors have converged to delay the sale, including suspension of business due to de facto lockdowns amid a resurgence of the pandemic. COVID-19 has resulted in at least 15,600 deaths and 413,000 cases since early 2020 in the country of 53 million people. The latest lockdowns are in the form of "public holidays" implemented in July and extended through September.

"Because of the so-called holidays, the process to facilitate approval of the sale has been delayed. Telenor probably hopes to get it approved within this year, but it is highly uncertain whether the junta will green-light the deal," said another person with direct knowledge of the matter.

So far the regime has not publicly commented on the deal. M1, however, has pressed its case, with the group's CEO, Azmi Mikati, saying in a media interview published Sept. 4 that the group would spend $330 million over the next three years to expand the Myanmar business it is buying from Telenor.

Telenor's stake in Wave Money further complicates the group's exit from Myanmar. Ant Group's decision to call off the purchase of a minority stake from Telenor dealt a further blow to the military regime's economic credentials after the exit of other big foreign companies from the country, including, most recently, German retailer Metro.

Executives from two companies involved in the Wave transaction confirmed that Ant's investment had been called off. Some in the industry believe the corporate empire led by Pun will seek to buy Telenor out.

Wave Money told Nikkei on Monday that Telenor "for now remains an engaged shareholder of Wave," adding that they "do not expect the announced sale of Telenor Myanmar to M1 Group to impact Wave's ownership structure."

In a statement about the Ant deal in mid-2020, Wave Money said Yoma Strategic Holdings planned to acquire the remainder of Telenor's Wave stake, or 34.2% of the company. On the question of whether Yoma Strategic is sticking to its acquisition plan, Brad Jones, CEO of Wave Money, last week told Nikkei: "There continues to be a dialogue with Telenor Group and Yoma Strategic, and I would expect there'll be some developments, moving forward."

"Wave Money, and every mobile financial service provider in Myanmar, [is] in a dire situation as the junta is clamping down on sources of financing," a telecom executive said, referring to fundraising efforts by the parallel National Unity Government, which opposes the military regime.

In mid-August, the shadow government launched an online lottery program which netted $300,000 in a trial run within days. In response, the central bank's deputy chief Win Thaw warned that financial services, and particularly mobile payment and mobile banking services, such as Wave Money's WavePay and Kanbawza Bank's KBZPay, would be "closely monitored" by the regime.

"Given the current economic outlook and business environment, the lineup of potential investors to buy up Telenor's shares in Wave Money could be very short," the executive said.