Download Click here to get the file - Asian Institute of Technology

NEW BUSINESS OPPORTUNITIES IN
THE MOBILE TELECOMMUNICATION MARKET OF BANGLADESH
Examination Committee:
Professor Ilkka Kauranen (Chairperson)
Dr. Mikko Kovalainen
Dr. Donyaprueth Krairit
Presented by
Pranay Kumar Das (105928)
Agenda
• Overview
- Background
- Objective
- Methodology
• Literature review
• Country analysis
• Market analysis
• Players analysis
• Evaluation
• Conclusion
• Recommendation
Background of the study
•
This study was carried out under a University-Industry project between AIT
and Qvantel Corporation
•
Qvantel Corporation provides Business Support Solutions and Services for
mobile phone operators
•
The company has current customer base in Finland, Sweden, Spain, and
Denmark
•
Qvantel Corporation is planning to enter into three countries in Asia in the
near future
•
Bangladesh, India and Pakistan have been selected as the target countries
Objective of the study
The objective of this present study:
“To examine potential opportunities and suitable strategies for
Qvantel Corporation in the mobile phone market of Bangladesh.”
Methodology of the study
Global telecommunication industry
Bangladeshi telecommunication industry
Outsourcing as a business strategy
Literature Review
Facts finding trip to Finland
(Orientation and training)
12 issues by Qvantel Corporation
Questionnaires development
Secondary data collection
Primary data collection
Data analysis
Conclusions and Recommendations
Writing the report
Literature review
World Bank (2008)
“The number of mobile phone subscribers exceeded the number of fixed
phone subscriber in 2002.”
Lane et al. (2006)
“A quarter of a million Bangladeshi people depend, directly or indirectly, on
the mobile phone industry. This industry sector added an amount of US$650
million to the economy per year.”
Literature review
Bayes et al. (1999)
“The poor make more phone calls for land transactions (17%) whereas the
non-poor use the phone for their business related matters (25%).”
Laila (2008)
“A most noteworthy benefit of the (mobile) telecommunication industry is
making the Internet available to the masses.”
Literature review
Gewald & Dibbern (2005)
“Outsourcing is a strategy to improve the quality of goods or services in
situations where existing staff, technology, or systems are under performing.”
IBM Corporation (2006)
“Companies who are engaged in information technology (IT) outsourcing
have experienced 12% higher growth in earnings, 10% lower expenses and
9% higher return on assets, when compared to sector medians.”
Country analysis : Bangladesh
Topic
Characteristics
Demography
•
•
•
•
Economy
• Per capita GDP (2008) - $1,500
• GDP growth rate - 6.5%
• Sector-wise GDP (2008): agriculture 19%, industry
29% and services 52%.
• Ease of doing business ranking – 110 (of 181)
Cultural orientation
• High inequality of power and wealth
• Collective society
• Values of men and women differ deeply
Government and politics
• Dysfunctional political system
7th most populous country with 150 million people
Literacy rate 45%
98% speaks Bangla as mother tongue
75% live in rural areas
• Weak governance in the institutions
Telecommunication market: Major milestones
Until 1993:
In 1997:
One Govt.
owned fixed
phone operator
Grameenphone,
AKTEL and
Sheba telecom
In 2005:
Warid and
Teletalk
In 1993:
In 2004:
Citycell, 1st
mobile phone
operator
Banglalink
acquired Sheba
telecom
50%
40
40%
30
30%
20
20%
10
10%
0
0%
2004
2005
2006
2007
on
50
Penetration
Subscribers(Mn)
Mn)
Mobile telecommunication market
•Total subscribers (2008) - 45 million
• Penetration: 2% (2004) and 31% (2008)
2008
Year
Subscribers growth rate
200%
183%
137%
• High growth rate
• Growth rate follows decreasing trend
56%
30%
0%
2004
2005
2006
2007
2008
Mobile telecommunication market
Mobile Operators and Market Shares (February 2009)
5%
4% 2%
19%
• Grameenphone is market leader (46%)
• 3-companies have 89% market share
46%
24%
Grameenphone
Banglalink
Aktel
Warid
Citycell
Teletalk
Mobile phone subscribers by operators
25
20
• Subscribers growth for most
companies are becoming flat
In millions
Grameenphone
Banglalink
15
Aktel
Warid
10
Citycell
Teletalk
5
0
Jun-07
Dec-07
Jun-08
Dec-08
Feb-09
Players analysis
Players analysis
Grameenphone
Banglalink
AKTEL
 Market leader
 GSM advantages
 20.9 million subscribers
 High-end quality but high price
 Best network coverage
 International partnership between
Telenor AS, Norway (62%) and
Grameen Telecom (38%)
 Making profit






2nd largest operator
GSM advantages
10.7 million subscribers
High-end quality with low price
US$ 650 million
Fully foreign company owned by
Orascom Telecom, Egypt
 Incurring loss





 Grameenphone profit based on
revenues generated from post-paid
users
 Banglalink is making a difference
via pricing and innovation
 AKTEL has recently followed
aggressive price promotions
Network
coverage Leader
Price leader
3rd largest operator
GSM advantages
8.6 million subscribers
Innovative pricing
Fully foreign company owned
by Telecom Malaysia and NTT,
Japan
 Incurring loss
Creation of branding
Players analysis
Warid
Citycell
Teletalk
 New entrant
 GSM advantages
 2.2 million subscribers
 High quality at most affordable price
 US$ 750 million
 Fully foreign company owned by
Abu Dhabi Group, UAE
 Incurring loss
 1st entrant
 CDMA advantages
 1.9 million subscribers
 Low quality and low price
 Fully foreign company owned by
SingTel, Singapore
 Incurring loss
 Poor performer
 GSM advantages
 0.9 million subscribers
 Very low quality and very low price
 Govt. owned operator
 Incurring loss
 Warid’s success depends on max.
network coverage & clear connectivity
 Citycell is making a difference via
high quality mobile Internet services
Quality services leader
Mobile data service leader
 Teletalk tries to ensure fair
competition between public &
private sectors
Safeguard of public interest
Product positioning map
Network
coverage leader
Creation of
branding
Quality services
leader
Price leader
Safeguard of
public interest
Mobile data
service leader
Network equipment
suppliers 62 m
Terminal component
suppliers 155 m
Suppliers of support
services 33 m
Other suppliers of capital
items 28 m
Fixed network operation
35 m
Platform & component
suppliers 144 m
Mobile services industry value chain (2005) in US$
Terminal designers &
manufactures 73 m
Government
revenues
256 m
Interconnect payments
Fixed
network
operators
Dealers
57 m
213m
Fixed to mobile calls
Payments for mobile services
Payments for terminal
Recent developments
Network sharing:
• On September 2008, regulatory commission issued infrastructure sharing guidelines.
• This has been reducing the capital expenditure of network deployment.
MNP (Mobile number portability) law:
• Currently there is no MNP law in Bangladeshi market.
• Just recently the regulatory commission has started working in this regard.
3G (Third generation) technologies:
• Bangladesh is now on the edge of introducing modern 3G mobile technologies.
• The guideline preparation for 3G technologies is at drafting stage.
• The regulatory commission are hopping to issue the guideline by the end of 2009.
Company analysis: SWOT
Strength
Weaknesses
• Complete billing process
• Flexible products
• Product integration is simple
• Adequate resources
• Efficient work culture
• Efficiency in a small range of products
• Post-paid mobile service oriented
• Scalable up to five million subscribers
• Revenue stream is not diversified
SWOT
Analysis
Opportunities
Threats
• Other markets can be explored
like utilities billing
• Firm has good knowhow of
other telecom processes
• ‘The country of origin effect’
• ‘Relationship leader’ may be an obstacle
• Depending largely on single customer may
be fatal for the firm
• Critical software knowledge is with a few
of the employees
Evaluation
• 150 million people. 70% under the age
of 25 with high mobile affinity
• 45 million subscribers, penetration
31%, growth rate 30% in 2008
• 6 operators (5 GSM, 1 CDMA)
• 3 companies hold 89% share
• Pre-paid subscribers (97%), but 3%
means 1.5 million post-paid users
• Regulatory body acts as a facilitator
• High GDP growth (6.5% in 2007)
• Investment friendly environment
(incentives, tax holidays, 100% sole
venture, full repatriation of profit)
• English is widely used in business
Country analysis
Company analysis
Opportunities
for Qvantel
Corporation?
Market analysis
Competitor analysis
• International presence
• Flexible and reliable products
• Performs as a ‘Relationship Leader’
• Motto: “We grow as you grow”
• Mostly foreign firms including
China, India, UK, Russia, UAE etc
• Earning: one million Euros (2008)
• Less products differentiation
• Business model: ‘Service bureau’
• Low switching cost
Issues to be taken care of properly
• Downward trend of the growth rate
- Indicates a possibility of stagnant market in the future.
• Pre-paid concentration
- Post-paid services are
not popular to the mass people, corporate houses
mostly use post-paid services.
• Market structure (Oligopoly market)
- 3 major operators hold 89% of market share. Bargaining power in negotiation lies
with these companies.
• Mismatch between Revenues and Expenses
- ARPU is $2, but acquisition cost for an additional customer is more than $80.
• Political risks
- Some sorts of political instability
Conclusion
• The telecommunication market of Bangladesh is a feasible choice for a foreign
mobile service provider. This is because, the forecast shows that by year 2011,
another 20 million subscribers will be added.
• An appropriate change in the strategies would give Qvantel Corporation a
better competitive edge to start and expand its business in Bangladesh.
Recommendations
• Qvantel Corporation could enter into the mobile telecommunication market of
Bangladesh as factors show good potential.
• To minimize the effect of potential country risks, the Qvantel Corporation should
form a joint venture with a firm which is currently in operation. A sole venture could
also be possible by utilizing the good reputation and the proven track record of
Qvantel Corporation.
• Qvantel Corporation’s current products should be redesigned so that they are better
capable to serve the pre-paid users segment.
• The scalability of the existing business solution systems of Qvantel Corporation
should be further enhanced so that Qvantel Corporation’s systems are able to serve
the large operators in the Bangladeshi market.
Recommendations
• Before entering into Bangladesh, Qvantel Corporation should have an
integrated package of services covering Billing, Mediation, Activation,
Rating, Charging, and Customer relation management.
• Qvantel Corporation should reconsider its leadership strategy. More
emphasize should be given towards being a ‘cost leader’ as Bangladeshi
mobile telecommunication market is a price sensitive market.
• Qvantel Corporation should consider the ‘Licensing’ model for Bangladeshi
mobile phone market rather than its existing ‘Service Bureau’ model.
In some cases, ‘Managed service’ agreement could be a feasible option.
THANK YOU!!!