Courtesy of the Wall Street Journal, an update on Myanmar’s nascent telecom sector:

When Myanmar’s first foreign telecommunications companies, Qatar’s Ooredoo QSC and Norway’s Telenor AS A, arrived last year, customers lined up for blocks to buy their inexpensive services, exhausting the supply of SIM cards within weeks and cheering their executives.

Six months later, state-owned Myanmar Posts & Telecommunications, which had for decades monopolized the market despite its generally outdated services, has added more new customers than its challengers combined.

The scenario underscores state-owned companies’ dominance here and the conflicting forces that foreign companies face as the military government tries to modernize Myanmar’s long-isolated economy and lure fresh investment while also moving to protect its interests. As Myanmar prepares to open up other sectors, including energy, real estate, tourism and manufacturing, the telecom industry is being watched as a test case.

“In this first round, MPT does have clear advantages and has emerged the winner,” said Chris Tun, director of Deloitte Consulting’s Myanmar practice. “But the game is still early.”

Myanmar’s outlook is particularly tricky for U.S. businesses, which are prohibited by the U.S. Treasury Department’s blacklist from doing business with more than 200 or so Myanmar individuals and entities, including the military.

There is much room for telecom growth in this country of 51.4 million people. Mobile penetration here is only about 14%, Deloitte estimates, compared with more than 100% in most countries, even less developed ones.

As Ooredoo and Telenor struggle with hurdles over bureaucracy, ambiguous land-ownership structures, hiring and even religious tensions, MPT is quickly moving to assert its dominance.

Bolstered by a $2 billion investment and strategic advice from Japanese mobile carrierKDDI Corp. and trading house Sumitomo Corp. , MPT has adopted new marketing strategies and a modern new logo and has cut the cost of its services by almost 40%. These upgrades are boosting the reach of the operator’s already-superior network, analysts say, and helping it to add new customers.

MPT has more than doubled its subscriber base to 11 million in the past six months, more than three times the 3.4 million claimed by Telenor at the end of 2014. “In the past, we did not even have a marketing department,” said Kyaw Soe, MPT’s general manager. “We did not know what a marketing strategy was, because we were the only one in the market.”

Ooredoo had 2.2 million customers in Myanmar by December 2014, according to the company. Ooredoo said in its earnings report Tuesday that while its Myanmar operations were unprofitable, the company’s results in the country were in line with its expectations. The Myanmar business contributed $189 million in revenue last year, Ooredoo said.

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Telenor and Ooredoo, since winning coveted licenses to operate in the country in 2013, have also embarked on marketing campaigns that are visible across Myanmar.

In the rural Shan and Karen states, numerous red Ooredoo and blue Telenor banners were recently draped alongside homes and tea shops. In the commercial capital of Yangon, roadside police booths carry Telenor logos; Ooredoo umbrellas shade street vendors from the tropical heat.

Building out their networks is another story.

Erecting cellphone towers is complicated because all land in Myanmar is constitutionally owned by the state and land-rights ownership is often unclear, executives from the companies and their tower contractors say. Villagers and city residents sometimes brandish old, often handwritten deeds in the hopes of a large payout, these people say.

Land is “an area of considerable legal challenge in Myanmar,” because the country lacks a developed regulatory framework, said Andrew Stott, a Singapore-based attorney with law firm Olswang LLP who specializes in the telecom industry. Companies have “struggled to gain sufficient clarity over ownership.”

Petter Furberg, chief executive of Telenor’s Myanmar operations, said local governments in Myanmar are “rapidly learning how to process land and building permits in a more efficient manner,” something that is “critical for the continued nationwide mobile network rollout.”

The government didn’t respond to requests to comment.

Both companies appear to have a long way to go. Telenor says it has built 1,500 towers so far, and is adding 200 to 300 a month, still far shy of the estimated 8,000 towers that Telenor and Ooredoo each need to provide coverage to 75% of the country by next year, as stipulated in their licenses.

Telenor’s Mr. Furberg acknowledged challenges with land rights and bureaucracy but said the company expected those risks. He added that Telenor’s subscriber numbers so far exceed its expectations.

Ooredoo says it has set an “ambitious pace” for its rollout. Still, Ross Cormack, CEO of the company’s Myanmar operations, says Ooredoo remains encumbered by different rules across the country’s seven states. “We are working closely with the government and their local government counterparts to address these challenges as and when they arise,” Mr. Cormack said

Deloitte Consulting estimates the company had 2,000 towers as of the end of December. Mr. Cormack declined to comment on the figure.

MPT, on the other hand, has an existing network and can navigate land-ownership issues more easily given its government affiliation, analysts say. The company has 2,000 towers, which it plans to double by the end of 2016, and is being helped by KDDI and Sumitomo to upgrade its existing towers to provide better, faster services. Those efforts seem to have paid off. In Yangon, mobile data speeds on MPT networks are faster than those on its rival’s networks.

“MPT has a very sophisticated partner in KDDI-Sumitomo,” Olswang’s Mr. Stott said.

Foreign operators have struggled to hire skilled local employees, with the country’s labor pool hindered by an educational system that withered under six decades of military rule. MPT already has an experienced staff of 8,000 employees.

Another challenge for Ooredoo has been the rise of extremist Buddhist nationalism in Myanmar, where several deadly outbreaks of anti-Muslim violence have raised tensions in recent years. Extremist monks have called for a boycott against the Qatar-based company. Ooredoo has spent considerable sums on advertising to counter any negative perceptions, analysts say. Ooredoo acknowledged the issues, but said they haven’t interfered with its operations.