Bangladesh Telecommunications Report Q2 2008

Could Vodafone make a dramatic entrance to Bangladesh's telecoms market and repeat the success there that is having in India? It is looking a distinct possibility. The UK-based operator has been a long-term admirer of Bangladesh as a potential high-growth mobile market, and has been in discussions with Bangladesh's regulator, the Bangladesh Telecoms Regulatory Commission (BTRC), about investing in Bangladesh. Furthermore, 30% shareholder of Aktel, AK Khan & Co has revealed that it is interested in selling off its interest in Bangladesh's third largest mobile operator (as of the end of 2007). Until recently, Aktel was the country's second-largest operator, but a difficult second half of the year left the operator with 6.4mn subscribers, behind Orascom-owned Banglalink for the first time on just over 7mn customers and a 20% market share.

The dominant mobile operator in Bangladesh is Grameenphone, which is majority-owned by Telenor.

At the end of 2007, Grameenphone had 16.5mn subscribers and a 48% market share. This completed a good year for the carrier, in which it attracted 5.7mn new mobile customers, accounting for 45% of all net additions. However, we note that the country's largest mobile operator has had a slow start to 2008, collecting just 700,000 new customers in the first two months of the year, fewer than both Aktel and Banglalink - indeed Grameenphone's market share fell to less than 46% in February 2008. Conversely, it seems that Aktel has got through its blip, as it attracted 960,000 net additions in the first two months of the year, and with nearly 7.4mn subscribers, could still end 2008 as Bangladesh's second-largest operator.

A word on Warid Telecom, which having launched its mobile services commercially only in April 2007, appears to have repeated its performance in Pakistan by grabbing a 7% market share (and 2.6mn subscribers) within its first 10 months of operation. Warid will, no doubt, learn its lesson from Pakistan, where it has started to fall a little behind its main rivals, as a result of not investing enough in either its network rollout or capacity. One thing is certain - BMI expects sustained and rapid growth in the mobile market. Our long-term forecast projects that at the end of 2012 there will be in excess of 120mn subscribers, and that mobile penetration will be around the 80% level.

As the incumbent operator BTTB faces more competition from a growing number of alternative operators and as the regulator continues to liberalise the market, so does the government seem more ready to convert the operator into a publicly limited company. This could be why the state is being so tough on the illegal use of VoIP telephony, which until checked, was impacting terribly on BTTB's performance as the operator depends so much on international telephony revenues. The government will want to ensure that it gets a good price for its asset.

Like other south Asian states, India and Pakistan, the telecoms market in Bangladesh is hugely important to the country's economic growth, and so the regulator will want to ensure that it continues to encourage competition and inward investment: hence its interest in a market entrance from Vodafone.