Bangladesh: Telecommunication

Mobile phone subscriber base expected to reach 18m by 2007

Bangladesh’s mobile phone subscriber base expected to reach 18 million by 2007 following massive surge of foreign investments in booming cellular marketLeading industry analyst and forecaster, BIS Shrapnel, has launched its Bangladesh Mobile Telecommunication, 2005 report. The extensive market analysis carried out for this study incorporated comprehensive interviews with most network operators and importers, as well as network dealers, and retailers.

Report author Mr. Priyam Shah explains that Bangladesh’s mobile phone market has achieved exceptional growth since the beginning of 2004, registering a massive 100 % growth in its subscriber base during 2004, and 137% during 2005. This trend is forecast to continue over the coming years, bringing the subscriber base to 18 million by 2007.

According to Mr. Shah, recent growth in the Bangladesh mobile market can be attributed to factors such as the deregulation of the telecommunication sector, low levels of tele-density, inadequate fixed phone infrastructure, high competition following the entry of two new operators (Banglalink and Teletalk) and, particularly, massive foreign direct investment (FDI) by telecom giants like Telenor, Telekom Malaysia (TM), Orascom, SingTel, and most recently by UAE-based Warid Telecom. Mr. Shah explains that foreign operators, in collaboration with local partners, have been working with the infrastructure to remove entry barriers and make mobile telephony more affordable and widen the base of mobile subscribers.

Mobile Price War

According to Mr. Shah, the entry of Banglalink in February last year has sparked a price war. Banglalink’s attractive launch offer included a new connection and handset at a low start-up cost of Tk 3,400. Following Banglalink, 3 (three) other private operators ­ GrameenPhone, Aktel and CityCell ­ have also come up with various value-added offers resulting in an intense price battle.

The development of a competitive mobile phone market is expected to prompt an easing in cell phone tariffs going forward, after years of escalation in what was a captive market. Consumers will also benefit from cheaper connection and call rates.

State-owned operator Teletalk, however, is expected to struggle in this new environment as it is still grappling with poor network coverage and inefficient management.

New SIM Tax

Controversially, the country’s 2004/05 annual budget (delivered in June 2005) imposed a tax of Tk 1,200 on each new SIM card connection, raising a huge furore among cell phone operators. Operators think that the new tax will pose a serious entry hurdle for low-income earners and will significantly stifle growth expectations.

According to the latest figures from BIS Shrapnel research, the sale of mobile phone connections has picked up after an initial slowdown in June and July. The tax on SIM cards was revised to Tk 900 in August in response to fierce demands from operators.

Mobile Handset Market

In tandem with the growing subscriber base, sales of mobile handsets has increased at a phenomenal pace. However, nearly 70 per cent of mobile handsets available in the local market have been entering through informal channels, depriving the Government and importers of a huge amount of revenue each year.

In a serious bid to turn around this drastic situation, the Bangladesh Government reduced the tax on mobile handset imports from Tk 1,500 to only Tk 300 in mid 2005. Mr. Shah explains that although this initiative has revived the situation to a certain extent, the effect on the grey market has not been as significant as was expected by distributors and importers. Interviews conducted by BIS Shrapnel with leading distributors reveal that the grey market is currently holding around 40% market share, but they are hopeful this will diminish over the coming months.

According to BIS Shrapnel research, Bangladesh’s mobile handset market is dominated by first-time users (nearly 85%), as the country is still in its infancy in terms of mobile phone usage. Further, 80% of the handset market is dominated by ultra-low to low-end handsets, available for less than Tk 4,500, due to the country’s low per capita income levels.

As with many other Asia-Pacific countries, the Bangladesh mobile handset market is predominantly captured by global handset giant Nokia (approximately 52% market share) followed by Siemens. Mr. Shah explains that the success of these 2 (two) vendors can be attributed to excellent handset quality, ease of use, an efficient sales and distribution network, dedicated after-sales service, and regular launches of low-priced handsets to meet market demand.

Source: BIS Shrapnel Pty Ltd (01.02.2006)