Transcript of "Overview of BD Telecom Operators (ETE 521 L5)"
ETE 521: TelecommunicationBusiness and ManagementModule 05: Overview ofBangladesh’s Mobile TelecomSector.
2Dynamics of Bangladesh’sTelecom Sector• The Telecommunication sector of Bangladesh has beenexperiencing substantial transformation and growth overlast ten years. Once it used to be monopoly of stateowned entity, Bangladesh Telegraph and TelephoneBoard (BTTB).• The liberalization of the sector allowing the entry ofprivate operators started in late 80’s. During the first 10years of the liberalization, the sector did not experiencesubstantial improvement in terms of teledensity,subscriber’s base, price reduction, customer service, andrevenue.• The entry of private mobile operators in late 90’sstarted the scenario to change.
3Mobile Sector:• Over the last ten years, there has beenphenomenal growth in the mobile sector pushingteledensity from less than 1% before 2000 tomore than 20% in 2007.• Mobile subscribers’ base stands at more than 30millions by the middle of 2007 with revenue ofthe mobile sector alone more than US$1 billion.• More than 95% of Bangladesh’s geography,excluding three hill districts, is now covered bynetworks of multiple mobile operators.
4• The intense rivalry among mobile operators has beencausing reduction in tariff, promoting innovations inservices, and improving the quality of customer care.• Mobile tariff has been reduced by more than 300% overlast five years.• During the same period, customer and revenue havegrown by more than 1600% and 500% respectively.• Competition, technological innovations, and BTTB’spersistent failure of providing fixed phone connectionsare major factors of the remarkable growth of the mobilesector in Bangladesh.
5Cellular Mobile Service License:• Total 6 operators:• In 1989, agreement was made with one operatorBangladesh Telecom Ltd (BTL) for providing cellularmobile service (along with other services) which wasultimately taken over by Pacific Bangladesh Telecom Ltd(PBTL, brand name CityCell).• It started with Amps technology and from 1999 startedgiving the service using CDMA system. Three Operators,Grameen Phones (GP), TM International Bangladesh(TMIB, brand name AKTEL) and Sheba (later, brandname Banglalink) were given licenses in 1996, whichare giving services using GSM system.• Later in 2004, the state owned company, Teletalk and in2005 Warid Telecom were given licenses for providingservices using GSM system.
6Background Information ofMobile Operators• Pacific Bangladesh Telecom Ltd (PBTL)– It started to give service through Amps system; CDMA System wasintroduced in 1999. Licensed to give service in whole of Bangladesh;Present coverage is about 85%. Brand name is Citycell.– Originally BTL had the license for multiple services. From this theCellular mobile portion of the license later transferred to a companyHBTL (Hutchison Bangladesh Telecom Ltd.)– Entire share (100%) of mobile phone service purchased by PBTL in1994.– 45% of this share purchased by ‘Singtel’ of Singapore in 2005 and 15%more to be transferred subsequently.– Type of Service: CDMA – Voice, Data & International Roaming from2005– Access Frequency: 825-835 MHz and 870-880 MHz for Dhaka & 825-832.2 MHz and 870-877.2 MHz for Outside Dhaka– Brand Name: CityCell– Number of Subscriber 1.31 million (July’07)
7• Sheba Telecom (Orascom Telecom, Egypt)– Has been giving service through GSM system. Licensed to give servicethroughout Bangladesh; Present coverage is about 80%.– Cellular mobile license received on 11 November 1996 with 49% shareby a local Co. ISL (Integrated Services Ltd), 51% share by a MalaysianCo. TRI (Technology Resources Industries).– Entire shares (100%) purchased by ‘Orascom Telecom’ of Egypt inSeptember 2004.– Type of Service: GSM – Voice, international roaming from 2005– Access Frequency: 895-900.2 MHz and 940-945.2 MHz & 1757.5-1765MHz and 1852.5-1860 MHz– Brand Name: BanglaLink– Number of Subscirber 6.61 million (July’07)
8• Grameen Phone Ltd– Licensed to give service throughout Bangladesh– Biggest company with subscriber base of about 50% of the mobilesector– Cellular mobile license received on 11 November 1996 with 49% shareby TeleNor of Norway, 41% share by Grameen Telecom, 5% share byGonophone of USA, 5% share by Marubeni of Japan.– After about 6 years, share of TeleNor rose to 62% & the rest 38%remained with Grameen Telecom.– Type of Service: GSM – Voice, Data & International Roaming from 2001– Access Frequency: 907.6-915 MHz and 952.6-960 MHz & 1720-1727.2MHz and 1815-1822.2 MHz– Brand Name: GrameenPhone– Number of Subscriber: 15.73 million (July’07)– Area Coverage: 85% wihtin Bangladesh
9• Telecom Malaysia (Bangladesh) Ltd– Licensed to give service throughout Bangladesh– Cellular mobile license received on 11 November 96 with 60% share byTMI (Telecom Malaysia International), 40% share by A.K.Khan & Co. ofBangldesh– After about 3 years, share of TMI rose to 70% and A.K.Khan & Co.share reduced to 30%.– Type of Service: GSM – Voice, Data & International Roaming from 2004– Access Frequency: 900.2-907.6 MHz and 945.2-952.6 MHz & 1727.2-1732.6 MHz and 1822.2-1827.6 MHz– Brand Name: AKTEL– Number of Subscriber: 6.67 million (July’07)– Area Coverage: 85% wihtin Bangladesh
10• Teletalk Bangladesh Ltd– Started as a project of BTTB and got the cellularMobile license for the company on September 2004with 100% share owned by the Govt– Licensed to give service throughout Bangladesh– Type of Service: GSM – Voice, Data & InternationalRoaming from 2007– Access Frequency: 890-895.2 MHz and 935-940.2MHz & 1710-1720 MHz and 1805-1851 MHz– Brand Name: TeleTalk– Number of Subscriber: 0.91 million (July’07)– Area Coverage: 80% within Bangladesh
11• Warid Telecom International– Cellular Mobile License received on 20 December2005 with 100% share by this Company from AbuDhabi– Licensed to give service throughout Bangladesh– Started to give connection from April 20, 2007– Type of Service: GSM – Voice & InternationalRoaming from April 2007– Access Frequency - 1732.6-1747.6 MHz and 1827.6-1842.6 MHz– Brand Name: Warid– Number of Subscriber: 1.41 million (July’07)– Area Coverage: Data not available
12Value Chain Elements of theMobile Sector :•RingtoneProviderMobile OperatorValue AddedService ProviderDistributorPlatformProviderPlatformDistributorErricsonMotorolaSiemensNortelHuaweiPlatformprovidershave theirown localdistributorsValue Chain Elements of the Mobile Sector
13• Mobile operators have been developing their networks by deployingplatforms distributed by major telecom equipment makers such asEricson, Motorola, Siemens, Nortel and Huawei.• These equipments makers have their own offices in Dhaka todistribute their platforms and provide services as shown in theadjacent figure.• Some value added service providers have just started to emerge tooffer mobile shopping services such as Cell Bazer and telemedicineservices.• Some ringtone service providers have started to emerge as part ofthe value chain.• Ringtone providers business volume is negligible. Platform providers’combined revenue is about US$400 millions/year.• NOKIA, Sony-Erricson, Motora, Samsung, LG, and Huawei are majormobile handset providers.
14Mobile Service MarketEnvironment Analysis:• High growths in both subscribers and revenueare major attributes of Bangladesh’s mobilesector, despite the fact that intense rivalryamong operators is causing continuousreduction in the tariff.• There has been high growth in the sector overlast three years.• Total number of mobile subscribers hascrossed 30 million marks by the middle of 2007which is more than double the number as wasthe general forecast in 2005.
15Subscriber, Revenue &Penetration:• Mobile telecom service has experienced dynamic growthduring last five years in every aspect.• Subscribers base has been shoot upto 32.37 million in2007 (upto July) form 1.91 million in 2003.• As a result, mobile phone teledensity, has increased to23.23%.• The overall growth of the sector in terms of subscribers,revenue, and mobile penetration per 100 people over theperiod of 2003-2006.
16Figure 4.1: Total Subscribers, Revenue and Penetration of the Mobile Sector1.9094.159.2621.771.3936.615.619.40531.2247.5473.142003 2004 2005 2006Subscribers,ReevenueandPenetrationSubscribers in MillionsMobile Penetration per 100PeopleRevenue in Billion Taka
17Growth Rate:• Rate of growth ofsubscribers,revenue, andpenetration overthe same periodis shown.• The revenuegrowth could notkeep the pacewith the growth ofsubscribers’growth due to thefact that intenseprice competitionhas beenreducing the tariff.Figure 4.2: Annual Growth Rate of Subscribers, Revenue andPenetration of the Mobile Industry115 12013611712313560.8852.2753.842004 2005 2006GrowthRatein%MobilePenetrationSubscribersRevenue
18ARPU:• The continued price competition has beenreducing average revenue per user(ARPU) of the industry as shown inFigure.• The overall ARPU of the industry hasfallen by almost 300% during last fouryears.• ARPU from mobile telecom service wasTk 847 in 2003 and it reduced to Tk 280 in2006. It has gone further down in 2007.
19Figure 4.3: Average Revenue Per User (ARPU) Per Month8476264272802003 2004 2005 2006ARPUinTaka
20Mobile Phone Service Users:• Mobile service users have grown from 1.909million in 2003 to 32.37 millions by July 2007.• Growth of mobile service users over 2003-2007period is shown in following Figure.• It appears that the market is moving from massadoption to late adoption.• At this stage of growth, incremental revenuefrom each new user is usually lower than thoseof early and mass adoption stages.
21Figure 4.4: Mobile Service Users Growth1.9094.1529.26832.3721.77229.4272003200420052006June.07Jul-07MobileSubscribersinMillions
22Interconnection Issues :• As per Interconnection Regulation 2004, anyoneproviding the Telecom service, is to arrange for ’any toany Interconnection’ and while starting the service, it isto make Interconnection agreement with other operatorswithin 3 months.• Earlier the mobile operators made interconnectionarrangement within them without much difficulty butfaced tremendous problem with BTTB, as it could notprovide sufficient Interconnection ports to cater for theinter-operator traffic with the mobiles.• To deal with this constraint, GP introduced mobile tomobile service with special tariff. This resulted in a highpercentage of mobile subscribers (as high as 80% withGP) without having access to BTTB.
23• In such a situation, the 4 mobile operators (at that time)jointly made investment to upgrade the BTTB installationto increase the Interconnection facility. BTTB itself alsotook some action.• This has resulted in some improvement in theInterconnection scenario with BTTB. At present all 6mobile operators (including the new operators) exceptGP, have all their connections with BTTB access.• About 40% of GP subscribers still do not have BTTBaccess, which GP claims that they are not giving it toretain the quality of service by avoiding the congestion.• It is expected that the situation will improve further aftercompletion of some up gradation work, going on now inBTTB exchanges.
24• Provision of Interconnection is generally a bilateral issuebetween two parties, which are effected after anagreement between them on facilities, quality of service,charging, etc.• However, the access between various operators can bearranged at a common point, i.e. Point of Interconnection(PoI).• Such provision has been made at Chittagong by the 4mobile operators & BTTB, with arrangement that otheroperators could also join there to get the access service.
25• Fixation of charges to be paid by an operator enteringinto the network of another operator is a major factor inwhich negotiation on interconnection fails or lingers.• In the Interconnection Regulation, this has been left tothe negotiating parties with provision of intervention bythe Commission, if required, although it advocates forcost based charging in the long run.• At the moment, interconnection charges within all mobileoperators, between mobile and PSTN operators as wellas within PSTN operators has been fixed at Tk 0.66 percall per minute. This charge has been recently reducedto Tk 0.40 per minute.
26Mobile Service Users’ ServiceConsuming Behavior:• Mobile users in Bangladesh primarily consume voiceservices.• As indicated in Figure 4.5, the market leader GP’s voicecall charges accounted for 86.73% of total revenue.• Messaging, data, and International services accountedfor only 2.3%, 0.70%, and 0.67% only respectively.• For a new entrant like Warid the service consumingscenario appears to be similar.• In July 2007, out of Taka 88 millions revenue, SMS anddata accounted for only Taka 2 millions, which appearsto be less than 2%.
27Voice Traffic Leads theGP’s Service revenuebreakdown RevenueGP’s Service Revenue Breakdown:Jan-June 2007Call Charges:Line rentals :SMS & MMS:Inter. Roaming:Internet(EDGE & GPRS) :Interconnection :Others:86.73%0.76%2.30%0.67%0.70%8.40%0.44%Service Consumption Pattern of GPSubscribers
28• Through KII and IDI, we came to know that a substantial portion ofmobile users are subscribers of more than one connection. Theyswitch operator by just simple changing the SIM to enjoy thepromotional offer of a certain operator.• It has been gathered that some users change SIMs multiple timeseven in a single day. This SIM switching behavior is more prevalentin GSM subscribers than that in CDMA subscribers; since CityCell isthe lone CDMA operator.• This freedom of operator switching by having multiple SIMs, whichare now a days distributed by operators at nominal cost, is also themain reason of high response to certain promotional offers of GSMoperators.• This consumer behavior also contributes to artificial growth in GSMsubscribers’ base.
29• Field Survey found that almost 74% of subscribers havemore than 1 SIM cards and almost 75% respondentshave used more than 1 SIM cards in recent month.• It is interesting to note that although Banglalink andTeletalk are known to be low cost service provider,Grameen is still the most preferred operator amongmultiple SIM holders.• The field survey also indicates that more than 75%respondents rated the price of a new set as an importantbarrier for availing promotional offer of certain operators.• The price of SIM card appears to be a less barrier. Thisis one of the causes of slow growth of subscriber base ofCDMA operator.
30Competitive Analysis of the MobileIndustry: Subscribers Growth• GP is the market leader with 15.73 millionssubscribers as in July 2007;• while Warid being the youngest member ofmobile operators has already bagged 1.14millions subscribers just within 4 months ofoperation during April-July’07.• Subscribers’ status of all these six operatorsover last 5 years is shown in Figure.
310246810121416SubscribersinMillions2003 2004 2005 2006 July07Figure 4.6: Mobile Phone Subscribers by OperatorsTeletalk BDGrameen PhoneAktel(TMIB)CityCell(PBTL)BanglaLink (Sheba)Warid Telecom
32• Banglalink experienced very high growth rate insubscriber base, which was above 250% in 2006.CityCell’s growth rate jumped above 100% in 2006 fromits slow growth of less than 50% in 2005.• Aktel’s year to year growth was also impressive in 2006which recovered from its fall in 2005. GP’s growthappears to be modest less than 100% due to the factthat GP’s subscriber base by the end of 2005 wasalready high, 5.54 millions.• The growth rates of all these top five operators over last3 years are shown in Figure.
33Figure 4.7: Subscriber Growth Rate of Top Five Mobile Operators0501001502002503002004 2005 2006GrowthRateTeletalk BD Grameen Phone Aktel(TMIB)CityCell(PBTL) BanglaLink (Sheba)
34Revenue Growth:• GP’s revenue jumped by almost 50% fromTaka 29,628 millions in 2005 to Taka45,460 millions in 2006.• Remaining four major mobile operatorsalso experienced high revenue growthduring this period.• Operator-wise revenues and their growthsduring 2003-2006 are shown.
35RevenueinMillionsTaka2003 2004 2005 2006Figure 4.8: Revenue of top Five Mobile OperatorsTeletalk BDGrameen PhoneAktel(TMIB)CityCell(PBTL)BanglaLink(Sheba)
36• It is worth of mentioning that GP’s revenuegrowth rate remained almost flat at 50% duringthis period. Banglalink’s revenue growth fell fromabove 225% in 2005 to just above 150% in2006.• Both Aktel’s and CityCell’s revenue growth rateshave been falling during last three years andcame down below 40%.• TeleTalk being the youngest player among top 5operators showed impressive revenue growthrate of almost 150%.
37Figure 4.9: Revenue Growth Rate of Mobile Operators-500501001502002502004 2005 2006RevenueGrowthRateTeletalk BDGrameen PhoneAktel(TMIB)CityCell(PBTL)BanglaLink (Sheba)
38Average Revenue per User(ARPU) per Month:• The result of intense price competition amongthe operators is reflected in the key performanceparameter: Average Revenue per User (ARPU).• All top operators experienced fall in ARPU,except TeleTalk. Less Interconnection chargepayment to other operators due to the increaseof its own subscriber base appears to be thereason for TaleTalk’s increase of ARPU.• In 2006, AkTel’s ARPU suffered most, followedby CityCell. Actual ARPUs and their rate ofchanges of top five mobile operators are shown.
39Figure 4.10: ARPU/Month of Top Five Mobile Operators02004006008001000120014002003 2004 2005 2006ARPU/MonthTeletalk BDGrameen PhoneAktel(TMIB)CityCell(PBTL)BanglaLink (Sheba)
40• It is interesting to note that although ARPU of all majoroperators were continuously falling, but smalleroperators such as TeleTalk and Banglalink experiencedgrowth in ARPU in 2005 as shown.• The underlying cause appears to be lesserinterconnection charges paid by these two operators toother operators with the growth of their subscriber base.• It’s worth mentioning that smaller subscriber baserequires higher per subscriber payment ofinterconnection charges to operators having largersubscriber bases.
410-23.4-23.78-6.97-57.890-35.22-19.71-16.2417.6118.4-19.77-53.45-42.71-28.01RateofchangeofARPU2004 2005 2006Figure 4.11: Rate of Changes of ARPU/Month of Mobile OperatorsTeletalkGrameenPhoneAktelCityCellBanglaLink
42Market Shares of Five Operators:• GP is the market leader both in subscribers’ base as wellas in revenue. In 2006, GP leads the Revenue with 63%market share followed by Aktel with 18%.• Due to lower ARPU, Banglalink’s Revenue share is just8% with 21% subscribers’ base. GP’s Subscriber sharehas fallen from 62% in 2005 to 49% in 2006.• But, it’s Revenue share remains almost same due torelatively strong performance in ARPU. Market shares oftop five operators based on Revenue as well asSubscriber in 2006 are shown.
43Figure 4.12A: Market Shares of Mobile Operatorsbased on Revenue in 2006GrameenPhone63%Aktel18%TeleTalk2%CityCell8%BanglaLink9%Figure 4.12B: Market Shares of MobileOperators based on Subscribers in 2006CityCell4%BanglaLink21%TeleTalk3%GrameenPhone49%Aktel23%
44• On the entry of new operator, WaridTelecom, above picture has beenchanged slightly in July 2007: GP andCityCell almost retained their marketshare based on subscriber number, butAKTEL and BanglaLink market sharefallen slightly and it goes to WaridTelecom pushing down TeleTalk in the 6thposition.
46• Service Offerings: Pricing, Value Added Service• Different operators have been offering diverse call ratesto their different packages.• Based on the analysis of these diverse call rates, itappears that on an average call rate in Bangladesh isaround Taka 1.40/minute or US$ 0.02/minute.• On an average, the tariff has fallen by almost 400% overlast four years. The price of peak hour mobile voiceservice has fallen from Tk 7.0/minute in 2002 to Tk2.0/minute in 2007.• It has been gathered that Bangladesh’s mobile tariff ishighly competitive with that of India and Pakistan;
48Business Strategy of MobileOperators• The primary business strategy is todevelop large scale network and hugecustomer base for enjoying the benefits ofeconomies of scale.• Such strategy also reduces theinterconnection charges to be paid out toother operators.• Companies are investing in networkexpansion and marketing.
49• Price cut appears to be the primary strategy for retaining as well asattracting new customers. As a result, mobile call rate has fallen by78% from that in 2004. The lowest call rate has fallen below Tk 1.00per minute.• Different incentive packages such as bonus talk time are beingexercised to retain customer base. Offering of products targetingcertain user group appears to be prevalent in the industry. GP’sdjuice is a product targeting youngsters with the subscriber base ofmore than 10 millions.• Aktel’s Joy is another segment specific product targeting couples.• Special rate commonly known as F&F (friend and family) forselected numbers appears to be an attractive means as well.Banglalink’s products for SMEs and business solutions from GP arealso examples of customer segment specific product strategies.
50• It has been observed that all these majormobile operators have identified datasegment as emerging growth markets.GSM operators have been offeringGPRS/EDGE base internet services.• It has been learned that CityCell’s internetservice, Zoom, has received quite strongmarket response.
51Network Infrastructure:• Mobile operators for coverage of the distantareas with co-located/adjacent cells require longdistance circuits.• Out of four, 3 mobile operators (PBTL, TMIB,Sheba), initially took lease of the long distancecircuits from BTTB.• GP on the other hand got the railway opticalfiber on long term lease basis from the Railwayauthority to meet their own long distance circuitrequirement.• For initial period they also leased out some ofthe circuits to other 3 mobile operators.
52• However, since the leasing charges of bothBTTB and GP were quite high, those 3 operatorswent for building up their own long distancenetwork by Microwave Radio Link as well asoptical fiber line.• Presently, these operators are more or less selfsufficient with their long distance network andwill also be in a position to lease out some oftheir circuits to other operators, in addition tomeeting their own future demands consideringtheir expansion plan.
53• Remaining other 2 Mobile operators (Teletalkand Warid) who came late in the market, do nothave their own long distance network.• Teletalk is using the long distance network ofBTTB and Warid is functioning after taking thelong distance circuits on lease from the otherMobile operators.• Warid, however has got the plan to build up theirown long distance network.
54• The network infrastructure of BTTB and the 4 mobileoperators are provided either by Microwave or by opticalfiber cable.• Originally the long distance networks were built byMicrowave but later with the increase in capacity.• In BTTB and Aktel, there are still some Microwave linksfunctioning but with other 3 mobile operators.• Besides optical fiber cable networks, upto STM 64 havebeen built or under installation/proposed by BTTB as wellas the mobile operators.• STM -1: 1890 Channels