Mobile boom faces big budget blow

By M. Al-Amin

Bangladesh is just following the footprint of its big neighbours in Asia, who have propelled up the world growth of mobile telephony and made telecommunication a part of their people's day-to-day life and changed the lot of the people in their countries. Inspired by those instances and growth factor in Japan, China, India and Thailand, Bangladesh has opened up its economy for investment in most prospective energy and

telecommunication sectors and already started reaping the benefits in terms of attracting foreign investment and economic growth.

The most prospective and booming mobile telephony has brought about many positive changes in the country's economy and socio-economic sectors and was thriving for another big leap forward with a huge some of foreign direct investment (FDI) by big telecom giants like Telenor, Telekom Malaysia (TM), Orascom and SingTel in rural network expansion in Bangladesh. The foreign operators in collaboration with their local partners were working on with the infrastructure to widen the very base of mobile subscribers by removing the entry barrier and make the mobile telephony affordable even to rural masses.

And after the launching of state-owned Teletalk and Banglalink, the sector was experiencing a cut-throat competition which was absent in the market here before the two new operators' launching and the people had just started reaping the benefits of competitiveness as the call charges were coming down significantly and line rent and handset prices were also coming down while the number of subscribers were going up with a rapid pace.

The once limited numbers of cell phone uses have rose nearly to six million within a very short span of time and the operators were expecting even faster growth of subscribers raising the base to 20 million mark by 2008, but suddenly the budget blues on June 9 spelled doom for the booming sector as the Finance Minister M Saifur Rahman has proposed a Tk 1200 tax on each SIM card (connection) which would certainly reimpose the entry barrier to the rise of new subscribers and slow the pace of the sector's growth. But there were good news too for subscriber in the budget blues as tax on cell phone sets were reduced to Tk 300 from Tk 1500.

Saifur has his words of defence for the measures and he has slammed the cell phone operators for high call charges which is four time higher than neighbouring India. But his word of defence is a mere trap for him as he and his ruling four party alliance government has allowed the cell phone operators to charge such an exorbitant rate to the subscribers for years and let them make quick bucks by giving the ruling party high-ups their due share in forms of graft.

Suddenly the vibrant scenario turned volatile as the four private cell phone operators unitedly censured the slapping of tax on SIM/RIM cards and threatened to withhold their investment on network expansion in rural areas.

The move is posing a serious hurdles for the low-income people who were turning to mobile telephony as a necessity of the time, but the tax has emerged as the entry barrier for them. Because the tax made mobile more costly. According to one estimate, the government is valuing each connection at Tk 2,172 which includes the tax in SIM card and other related duties like supplementary duty and VAT. Industry sources recently that this latest fiscal move would also shy away nearly a billion dollar in potential investment that the major cell phone operators were planning to put into the country's burgeoning mobile telephony sector.

In next one year, according to estimates given by the mobile operators, some five million new mobile connections could have been provided had not the authorities levied the new tax on SIM cards. With the newly imposed tax on mobile connection, which came into effect on June 9, the operators reckon the mobile penetration scenario will dramatically come down to the level of only a few lakhs in the next 12 months. "This is a very frustrating scenario… In essence the government has increased the price for a SIM card by nearly 1,600 percent," said a top executive of a mobile phone company.

He feared the mobile operators will have to withhold their planned investments in this potential growth sector in Bangladesh if the government goes ahead implementing the new tax regime on cell phone connection.

In a major show off the country's four mobile telephone operators have urged the government to withdraw the newly imposed tax of Tk 1200 on SIM cards to allow the continued growth of this burgeoning sector. "We earnestly appeal to the government to withdraw this new tax and allow the continued growth of this sector, enabling the mass people to use this modern communication tool at a price they can afford," said Erik Aas, CEO of GrameenPhone while speaking on behalf of the operators at a press conference at Sonargaon Hotel Monday afternoon(June 13). He said that with the sudden imposition of the new connection tax, the entry barrier for new users of mobile has been raised. Aas said the move has been taken when the mobile industry has been one of the fastest growing areas of the economy - growing at a rate of more than 100 percent in recent years. The operators pointed out that with more than six million subscribers, mobile phones have greatly helped the telephone penetration rate in the country, which is still one of the lowest in the world.

The sector, they further pointed out, has attracted one of the highest amounts of foreign direct investment (FDI) into the country and has become one of the largest contributors to the government exchequer through direct and indirect taxes.

So responding to the overall reaction of both the users and cell phone operators the government should consider withdrawing the proposed tax on SIM/RIM and rather help boost the sector as telecommunication has become necessity and a part of people's day-today life and growth of the sector is immensely contributing to the national economy and growth by attracting foreign direct investment.

Competitiveness in the air as mobile telephony gets a big boom

Finally an intense competitiveness has hit the very prospective and fast growing telecommunication sector in Bangladesh, specially the mobile telecom sector. And the credit goes to Banglalink, the new private operator and also to TeleTalk, the state-owned cell phone unit of BTTB.

Even a lay man can feel the intensity of the competitiveness that has been gaining momentum in the prospective market if somebody just goes through newspapers and watch televisions as the telecom operators are expending a huge some of money for putting advertisements there to win over others in media campaign.

These advertisements of four private cell phone operators have spelled boom for the electronic and print media, but the media blitz at the same time has created confusion among the prospective buyers of the mobile sector because every other day the operators are bringing in new packages with many more attractive offers, though languages of these ads, specially by the leading operators, are very much tricky and in some cases deceiving as these are never clear cut in language actually what is in the offer.

So, the buyers are in confusion which one is more beneficial for him or her and often get messed up and pick up one without any clear idea. But not everyone are confused, some specially young people are becoming expert in picking the right one and recommending others to buy the same detailing the actual features of the packages.

While talking to some college and university students about the packages of cell phone operators, M Moksidul Amin Ritu, a Masters student of Dhaka College said, "I am actually using two SIMs with my mobile set and one is Banglalink's, which I use for sending messages to my friends abroad while the other one is of GP's mobile-to-mobile for regular use for its wide network coverage. "Ritu's friend Meherul Islam Rajiv, a Dhaka University student of economics echoed almost the same tone saying "I use two SIMs one is GP mobile-to-mobile and another one is Aktel post paid with T&T incoming and outgoing facilities and I'm planning to buy a Banglalink SIM for SMS as it cots only Tk 200."

Many NSU students are also doing the same thing as mobile phone SIM cards are now quite affordable with much lower prices and many interesting offers and packages from the private operators. While talking to Afrin Hossain Barsha, a NSU student of Telecommunication and Engineering department, she said "oh, yes we do use two SIMs of different operators for many purposes like SMS and also for T&T incoming facilities."

Some people are even more enterprising as they are using two SIMs on a single phone set and cell phone servicing centres at the Eastern Plaza, a shopping mall in the city's Hatirpul area, are offering to incorporate this facility for a charge of Tk 300 to 3,000. And young people are availing this facility for many purposes and some are doing it just for fun and others as necessity.

Boom time for telecom product dealers and mobile shops

Telecom shop owners and dealers of the four private operators in the capital city are talking about a sales boom after the new operators arrival in the market during the reporter's market visit on May 27. While talking to Zahidul Haque, the owner of the Mobile Mart, a GrameenPhone dealer at the Basundhara City Shopping Mall, he said "Sales are quite good and GP's Easy Gold are selling like hotcakes these days as GP has reduced the price of the pre-paid package with T&T incoming and out-going futilities which is now selling for Tk1500 only." But he said GP's new product Djuice is failing to pull much buyers and are not selling well these days despite attractive offers.

Another GP dealer Telesens' owner and salesman Nure Alam Shimu said, "After the launch of Banglalink sales of GP packages have dropped a bit, but still GP is leading with 70 percent of the total sales in this shopping mall."

Mohammadullah Bhuiyan, the owner of Bhuiyan Telecom and the dealer of Aktel products at the country's biggest shopping mall, said "Aktel sales have increased significantly and now buyers purchase sets by availing BanglaLink package and then buy Aktel SIMs for greater network facilities as Aktel packages usually do not have any handset offer. " He also said the arrival of TeleTalk and Banglalink has made the market vibrant and sales of handsets and SIMs have increased significantly at present.

Salesman Ripon of TMR International Private Ltd, the Banglalink dealer at the Basundhara City, said Banglalink's inaugural package was a hotcake in the market with much lower prices for the handsets and after that it's distributor Deens Telecom Ltd has launched another Family Package of 3 handsets and 3 connections for Tk 7,600 which was also selling well in the market.

After that Deens Telecom launched another package on Bangla New Year which offered a handset and mobile-to-mobile connection for Tk 1,999 with lottery coupons. Right now Banglalink is offering a SIM card for Tk 200 only with 1000 SMS and a music CD of popular singer Habib free of cost which is attracting many buyers. Moreover Banglalink's unique international SMS network, where other operators are lagging behind, is also making a significant contribution to the sales of BL products.

Dealers of the other operator, CityCell, are a bit worried about the sales as the lone CDMA technology is failing to attract much buyers in a market dominated by GSM technology.

Has the 'Pulse War' turned into 'Price War' already?

Bangladesh's most prospective and emerging telecom sector is growing up steadily for the last couple of years but the near monopoly cell phone market got the whisker of rapid growth at the very beginning of the year 2005 and now lot of things are happening in the mobile market. The market is now gaining momentum and competitive edge and five key factors have contributed to bring about some positive changes in the cell phone market. And these are: 1. Launching of Banglalink 2. Aktel crossing one million mark 3. GrameenPhone reaches three million mark 4. Launching of TeleTalk and 5. Media campaign with so many competitive packages kicking off the "Pulse War".

Now the all four private operators are locked in the 'pulse war' and media blitz through advertisements and bringing in many more new packages with value added services like validity time extension of cards, free SMS, free talk time, package price cuts, tariff cut for special hour and family and friends numbers etc and all these are reducing the subscribers' overall expending on the cell phones and ultimate the game is proceeding towards the 'price war' i.e. direct call charge cut.

Despite the vibrant and cut-throat competition in the market, the big market players like GrameenPhone which enjoys the largest markets shares of subscribers is taking very few steps towards the price war. Without taking any lead, GP is just following the small market players and doing what the other players have done before.

New player in the market Banglalink which is barely a three month old company is coming up with many more value added services for the subscribers and contributing a lot in making others to cut prices to make the mobile telephony affordable to the mass people and make the subscribers' base bigger.

So far though none of the company has directly cut call tariffs, but the extension of cards' validity time, making pulse even 1 seconds, handset price reduction, fixed line rent cut etc have in reality sparked off the 'price war' which has opened up a new chapter of competitiveness in the cell phone market and forcing operators to bring in new products and value added services every other day to remain in the race and outsmart others to win subscribers' hearts.

Growth prospect & foreign investment boom

With many new packages on offer and the competitiveness among the operators for raising their regular subscribers' base, a mad rush is visible almost every corner of the capital city with large billboards on roadsides to moving bus advertisements and all these are making the cell phone market fastest growing sector in South Asia. The present growth and potentials of future growth are attracting the foreign investors and big names in the world's telecom sector to have a stake in the Bangladesh market.

Foreign telecom giants like Norwegian telecom big name Telenor which owns the largest market player GrameenPhone, TM International (Bangladesh) Limited which is a joint venture of Telekom Malaysia Group (TM) and Bangladesh's AK Khan & Company and owns the second largest player Aktel and Egyptian giant Orascom has bought the Sheba Telecom and launched Banglalink. All these telecom foreign giants have contributed to the growth of Bangladesh telecom market. Following the footprint of these big names another major Asian telecom giant SingTel which is the city state Singapore's key operator, is eyeing to have a big share of the Bangladesh's booming telecom market. And currently SingTel is holding talks with Pacific Bangladesh Telecom Limited, the owning company of CityCell, which is the pioneer of mobile telephony in Bangladesh, to have a major stake.

So, the Bangladesh's thriving mobile market is growing up with a rapid pace and telecom experts are quite hopeful that the present five million subscribers base will turn into a 22 million market by the end of 2008 which is quite encouraging news for the operators and the subscribers as well. Because the growth of the sector will ensure quality services for subscribers while operators will make lot of gain too by the market expansion for attracting more foreign investment in the sector for future expansion.

Launching of mobile telephony

Bangladesh Telecom Limited (BTL) has obtained the license as the first company of the country to operate cellular, paging, and other wireless communication networks in 1989 and it turned into Hutchison Bangladesh Telecom Limited and launched Bangladesh's first cellular operation in August, 1993.

And in February 1996, HBTL was renamed Pacific Bangladesh Limited (PBTL) and launched 'CityCell Digital' to market its cellular products.

Ending CityCell's monopoly business, TM International (Bangladesh) Limited, a joint venture company of Telekom Malaysia Berhad and A.K. Khan & Co. Limited was established in the year 1996 and the company launched its operation in 1997 under the brand name 'Aktel'.

The big player GrameenPhone obtained its cellular license in November 28, 1996 and launched its operation in March 26, 1997 and never looked back.

And after that another Malaysia-Bangladesh joint venture Sheba Telecom (Pvt) Limited launched its operation in 1998. But failing to come of the competitive edge, Sheba Telecom formally sold its cent percent shares to Egyptian telecom giant Orascom and Orascom formally launched its operation under new brand name Banglalink in February 10, 2005 and shook the market with its inaugural package.

Though the much-talked about state owned company Teletalk Bangladesh Limited (TBL), the mobile unit of BTTB was formed on December 26, 2004 and Prime Minister Begum Khaleda Zia inaugurated Teletalk Mobile Service on December 29, 2004, but it formally launched its mobile telecom service on commercial basis on March 31, 2005.

Few words about the new operators

For the last couple of years BTTB and the government were beating the bush by talking about launching of state-owned mobile operation with much cheaper call charges. But the project was delayed again and again allegedly to help the private operators do business unhindered avoiding competition and that did happened. But due to constant media and people's pressure finally state owned mobile company was launched, but that dashed the hopes of people and prospective buyers as the call charges were fixed in such a manner so that the company turn into a losing concern from the very beginning and naturally people were very frustrated as after launching faulty SIM scam shocked them again. Irregularities and corruption were so prevalent that even the Anti-Corruption Commission raised questions about it and it has decided to probe allegation of corruption in the whole process.

Even application form distribution was ridiculous as people have to sweat it out in front of the T&T offices and even beaten up by policemen while collecting subscription forms. After media blitz over plight of subscribers, TeleTalk was forced to opt for online form distribution service and they got a reasonable response. Finally on May 22 TeleTalk announced the lottery results for the online subscription forms and 40,000 connections were distributed by lottery.

And during the hide and seek period of TeleTalk launching, the private operators were under tremendous pressure and were offering almost every other day new packages sparking off the pulse war and that eventually taking a shape of burgeoning price war as TeleTalk has offered T&T incoming free of charge .

Moreover the TeleTalk is suffering another setback over a litigation filed with the court challenging its legality and it had so far failed to sign any inter-connectivity accord with the private cell phone operators. Without any inter-connectivity accord its subscribers will face the real trouble in getting connected to other cell uses' phone. Another trouble would be the slow coach move of the state-owned company to set up network across the country and it is almost certain that subscribers won't get any value added services like one the private operators are providing. Expectation for receiving round-the-clock customer care services would be like a day dreaming.

Another new operator, the Banglalink has mainly put the other top mobile operators under tremendous pressure and all of them were constantly monitoring Banglalink move since its inception as it's vision is to make mobile telephony affordable to masses and keep it on the growth track. Banglalink, in its high hope about market growth has so far attained initial success and slowly moving towards its goal. While talking to Omar Rashid, the Marketing Director of Banglalink on May 26, he said "the company is quite happy with its pace of growth and it's quite hopeful about its business prospect as subscribers are tremendously responding to Banglalink's packages." He is very positive about the growth of Bangladesh market and making the mobile telephony affordable to mass people as competitiveness has making people's expenditure on mobile usage coming down substantially.

After Banlalalink's launching the four private operators are locked in competition to win over others and make their subscribers' base growing and for that they are offering more and more value added services following the foot print of the new comer. But despite its laudable contribution to making the mobile telephony affordable to the masses, the company's hasty launching with network in only 9 districts was criticized by many mobile shop owners and some mobile market analysts. "Banglalink was quite successful in shaking the mobile market and created cut-throat competition among the operators, but it could not utilize the full potentials of that shakeup in its favour as many subscribers just bought their attractive launching package for the handsets and dumped the SIM while many dealers even stored many sets for making money that had created short supply and many prospective subscribers failed to buy the package", said Shakhwat Hossain Bhuiyan, a mobile shop owner at the Motalleb Plaza in the city's Hatirpul area on Monday.

Ending the long talk

But despite some faults and initial shortcomings of the two new market players, subscribers must appreciate their contribution in shaking up and shaping up of the market as they have brought in the much needed competitiveness. As a direct consequences of the competition, now subscribers are enjoying new packages with much low prices and of course with many more attractive offers which were unthinkable even few month's back. On the other hands mobile operators too are gaining from the competition by extending their subscribers' base which is wooing the foreign investors to inject fresh investment in the sector to have a share in the booming market with huge growth potentials. Still tricky language of fresh package offers by operators and people's expectation for direct call charge cuts have made many potential subscribers a little bit confused. Questions like will the package prices come down further? Should they wait for the next one or simply which package is more suitable for them - all these are haunting the subscribers and making them confused. So subscribers hope more clarity of actual package offers, direct call charge cuts and healthy competition among the operators would help the sector grow even faster and make mobile telephony much affordable and an integral part of everybody's day-today life, not just in cities, but even in rural Bangladesh.