Author Topic: Bangladesh Mobile Market Opportunity  (Read 1294 times)


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Bangladesh Mobile Market Opportunity
« on: April 18, 2017, 10:25:34 PM »
Bangladesh Mobile Market Opportunity

Ministry of Science and Information & Communication Technology (MOSICT) established an ICT incubator to develop the ICT sector in Bangladesh. All of these are positive signs for sustainable innovation in ICT. We therefore believe efforts should be focused on mitigating concerns on the market operating environment, particularly those around investment protection, promoting the free flow of capital and exit opportunities on the public markets.

Bangladesh is a low-income country, with a GNI per capita of $900 (GNI per capita as income levels are based on it), however, it is the tenth largest market worldwide in terms of unique mobile subscribers. Based on the global mobile penetration average of the different income levels, Bangladesh has a higher mobile penetration compared to the low and lower-middle income economies (see Figure 13). The number of mobile phone users in Bangladesh has grown rapidly; in 2003 subscriber penetration was only 1%, and in ten years this grew to 40%. It is expected to grow to 50% by 2020. There is still significant room for growth as more than 40 million adults still do not subscribe to mobile services.

One of the reasons behind Bangladesh’s high mobile penetration rate is due to the impact of the Grameenphone Village Phone program, a pioneering initiative that, among other things, has led to the empowerment of rural women in Bangladesh. Grameen Bank provides women entrepreneurs in rural areas with credit to buy a phone from Grameenphone which is then used to provide mobile pay phone services, allowing the women to charge a markup agreed with Grameenphone. Underpinning this is the rapid roll-out of mobile infrastructure. By 2000 nearly half of the country was covered by mobile networks, and this rapidly increased to nearly the whole country by 2002 (see Figure 14). In June 2014, Grameenphone reported that 2G coverage was 99.17% by population and 89.50% by area and that all 64 of the country’s district headquarter cities are covered by its 3G network. In this regard, Bangladesh is significantly ahead of countries within its region or level of development (see Figure 15).

Deploying network infrastructure, operators have needed to extend their coverage to rural areas with limited access to the grid. Operators need to find an alternative energy solution to reduce their dependency on diesel generators (DG) to power up their base stations, as this leads to a significant increase in operational expenses (opex). By depending on a DG solution, operators spend 65% of their opex on diesel for off-grid sites. Operators can implement a green technology solution for 3,622 problematic sites and claim some savings; in 2012 there were only 171 green-power sites. GSMA Green Power for Mobile (GPM) has estimated that for the problematic sites, operators could save around $41 million in opex with total investment of up to $100 million in 2012. This can increase to a $90 million saving per year by 2015 with an investment of $184 million for 6,660 problematic sites(ref 5). Since 2007 there have been six mobile operators in Bangladesh. Grameenphone is the dominant operator, with a 41% market share at the end of 2013 (see Figure 16). Bangladesh has a relatively competitive market which has had a clear consumer benefit in terms of falling mobile phone prices; the effective price per minute has fallen from $0.12 in 2002 to $0.01 today which in turn has led to Bangladesh enjoying a lower cost of ownership as a share of income compared to its peer countries (see Figure 17 and 18).

Bangladesh has one of the lowest average revenue per user (ARPU) levels in the world; however this has not always been the case. In 2001, ARPU was nearly $30 and declined to $2 in 2013. Over the same period the prepaid subscriber base grew from 62% of connections in 2001 to 97% today. While contract ARPU is still 3–4 times higher than prepaid ARPU in Bangladesh, this change in the prepaid mix is the dominant factor for the decline in blended ARPU (see Figure 19). Another reason for the declining ARPU is a mix effect from new subscribers that are low income. Finally, adverse regulation surrounding the introduction of per 10 second billing on voice calls (as opposed to per minute) have impacted ARPU growth. This decline in ARPU has had a negative effect on mobile service revenue growth which now sits at 3% per year. Another factor has been the decline in subscriber growth; in 2012 the Bangladesh Telecommunication Regulatory Commission (BTRC) deactivated over one million VoIP customers from Banglalink’s subscriber base and cut incoming voice call termination rates by 50% to fight the illegal calls market, placing pressure on revenue growth.

Bangladesh is still a market dominated by voice. In 2013, on average, 94% of Grameenphone’s recurring revenue was generated via voice services. This is one of the highest rates in the world, compared with an average of 85% in Zimbabwe, 64% in Kenya and 60% in the US, Europe and Asia. Of non-voice revenue, VAS account for only 3% of operators’ recurring revenue. In addition, we expect ARPU to continue to decline as a majority of new subscribers will continue to be low income prepaid rural customers. This underlines the need to mitigate this by developing new revenue streams. We believe the opportunity is in data and VAS.