Evaluating Pacific Bangladesh Telecom Limited’s Internal & External Environment:The Quest for Competitive Advantage of Citycell

Tuesday, April 08, 2014Prepared for:Dr. A. K. M. Saiful MajidProfessor& Course InstructorStrategic Management (W615)

Prepared by:Fahad Hasan ChowdhuryRoll: ZR 1003038Executive MBA Program

Institute of Business Administration (IBA)University of Dhaka

1. IntroductionMobile Telecommunication Industry of Bangladesh has been reaching its maturity stage on her 23 years age of this service. First mobile operator got license in 1989 named Sheba Telecom to operate telephone exchange in 199 upazillas (sub-district). After that there were five more operators got license over the period between 1989 and 2007 to do mobile business in Bangladesh named Pacific Bangladesh Telephone Limited (1989), Grameenphone and Telecom Malaysia International Bangladesh (1996), Government owned cellular mobile (2004) and Warid Telecom International LLC (2007). Sheba Telecom has captured only 250 subscribers in first year of operation. There was a steady growth found till 1996 and move to 525% growth in 1997 after the inception of Prepaid Mobile by Grameenphone.

There were ups and down situations found in this industry from 1998 to 2005. However, Banglalink, Grameenphone and ROBI perform high competitive sales advantages than others. Industry shows lower growth trend in last seven years from 2005 to 2011. Having more than 92 million subscriber base; Mobile Telecommunication Industry reached more than 61% market penetration which indicating the market is going toward maturity stage. The industry's sales growth has been decreasing and most of the operators are trying to defend their market share. The market leader Grameenphone, challengers Banglalink and ROBI and followers Airtel, Citycell and Teletalk all are spending more on selective communication to attract customers to buy their products. In this mature market product differentiation and operation excellence for lowering cost techniques are using by most of the operators. Mobile industry's growth is highly depending on diversified strategies in different value added and quality services of Grameenphone, Banglalink and ROBI as others are following them. The business strategies to survive in different position in life cycle of the market of mobile network operators (MN0s) have been found through MNOs websites, TV advertisements, billboard, SMS, Bangladesh Telecommunication Regulatory Commission (BTRC) and operators' chain shops observations. The mobile subscriber base data have collected from the online sources of global subscriber mobile operators' association (GSMA), BTRC, annual reports and websites of MNOs and Trading Economics and World Bank.

2. Industry OverviewThe Telecoms sector in Bangladesh has seen growth in mobile penetration that has exceeded all expectations with over 115 million subscribers as of February 2014 versus only 4 million in 2004. We believe that with a supportive regulatory environment, crossing 150 million subscribers by 2015 is achievable.

The rapid growth in mobile telephony has undoubtedly had a transformative impact on the economy in terms of aggregate investment, FDI and productivity levels. There have also been substantial benefits from greater connectivity in terms of social cohesion and poverty alleviation. However the industry also faces a number of uncertainties, including upcoming Telecom license renewals which expire in 2011 and the prospective auction/issuance of 3G licenses where the cost of the licenses and CAPEX requirements are still unclear. A further key challenge is the slowdown in revenue growth, as subscriber growth is netted out by falling voice tariff and the lower spending patterns of new users. A potential constraint on the next phase of growing subscribers further is the high level of taxation on the sector. The recent amendments to the Telecoms Act might also increase the risks of arbitrary regulatory interventions.

Greater internet penetration is of particular relevance to Bangladesh given the priority given to “Digital Bangladesh” by the Government. This initiative offers a number of potential revenue enhancing opportunities to MNOs.

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Fixed line penetration continues to be low and so the opportunity lies with mobile, for voice and for data. Most people’s first experience of the internet will be mobile. With India’s 3G auctions having been completed on 19 May 2010 and service delivery under roll out process, we believe there are a number of valuable lessons for the future evolution of 3G markets in Bangladesh.

3G networks are expected to significantly enhance user experience of existing data services, with the introduction of video and other high bandwidth services by carriers; to help 3G really gain adoption among consumers, development of a mobile VAS ecosystem is critical.

One of the key areas where operators, equipment vendors and value added service providers in the industry are focused is the rising importance of convergence and its impact on consumer spending patterns.

2.1 Grameenphone LimitedBefore Grameenphone’s inception, the phone was for a selected urbanized few. The cell phone was a luxury: a flouting accessory for the select elite. The mass could not contemplate mobile telephony as being part of their lives.

Grameenphone Limited, DBA Grameenphone (Bengali: গ্রামীণফ�ান), started its journey with the Village Phone program: a pioneering initiative to empower rural women of Bangladesh. The name Grameenphone translates to “Rural phone”.

Starting its operations on March 26, 1997, the Independence Day of Bangladesh, Grameenphone has come a long way. Grameenphone pioneered the then breakthrough initiative of mobile to mobile telephony and became the first and only operator to cover 98% of the country’s people with networkSince its inception Grameenphone has built the largest cellular network in the country with over 8500 base stations. Presently, nearly 99 percent of the country's population is within the coverage area of the Grameenphone network. Grameenphone has always been a pioneer in introducing new products and services in the local telecom market. GP was the first company to introduce GSM technology in Bangladesh when it launched its services in March 1997.

Grameenphone was also the first telecommunication operator in Bangladesh to introduce the pre-paid service in September 1999. It established the first 24-hour Call Center, introduced value-added services such as VMS, SMS, fax and data transmission services, international roaming service, WAP, SMS-based push-pull services, EDGE, personal ring back tone and many other products and services. In October 2013 the company launched 3G services commercially. The entire Grameenphone network is 3G/EDGE/GPRS enabled, allowing access to high-speed Internet and data services from anywhere within the coverage area. There are currently over 7 million 3G/EDGE/GPRS users in the Grameenphone network.

Today, Grameenphone is the leading and largest telecommunications service provider in Bangladesh with more than 48.213 million subscribers as of February 2014. Grameenphone is the largest mobile telecommunications operator in Bangladesh also in terms of revenue, coverage and subscriber base. The company was incorporated on 10 October 1996 as a private limited company. Grameenphone converted to a public limited company on 25 June 2007. Trading of the company’s shares started at Dhaka and Chittagong Stock Exchanges from 16 November 2009. The shareholding structure comprises of mainly two sponsor Shareholders namely Telenor Mobile Communications AS (55.80%) and Grameen Telecom (34.20%). The rest 10.00% shareholding includes General public & other Institutions.

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Grameenphone Ltd. is a leading provider of telecommunications services of Bangladesh. The company operates a digital mobile telecommunications network based on the GSM standard in the 900 MHz, 1800 MHz and 2100 Mhz frequency bands, under license granted by the Bangladesh Telecommunication Regulatory Commission (BTRC). The table below gives an overview of the mobile spectrum licenses held by GP:

Spectrum Bandwidth (MHz) Expiry900 MHz 2×7.4 20261800 MHz 2×7.2 + 2×7.4 20262100 MHz 2×10 2028

Grameenphone serves both rural and urban customers across Bangladesh, where mobile telephony is a major driver of socioeconomic development. The company envisions to provide the power of digital communication, enabling everyone to improve their lives, build societies and secure a better future for all. The company also has always been a pioneer in introducing new products and services in the local telecom market. Grameenphone was also the first telecommunication operator in Bangladesh to introduce the pre-paid service in September 1999. It established the first 24-hour Call Center, introduced value-added services such as VMS, SMS, fax and data transmission services, international roaming service, WAP, SMS-based push-pull services, EDGE, personal ring back tone and many other products and services. In October 2013 the company launched 3G services commercially. The entire Grameenphone network is 3G/EDGE/GPRS enabled, allowing access to high-speed Internet and data services from anywhere within the coverage area. There are currently over 7 million 3G/EDGE/GPRS users in the Grameenphone network.

Grameenphone built its network on a nationwide basis. As of December 2013, Grameenphone’s network covered 99% of Bangladesh’s population and 90% of the total land area, and the network infrastructure included more than 8,800 sites in operation around the country. Grameenphone has so far invested more than BDT 243 Billion to build the network infrastructure. It is one of the largest taxpayers in the country, having contributed more than BDT 355 billion in direct and indirect taxes to the Government Exchequer over the years.

Some interesting facts about Grameenphone Limited: Grameenphone has so far invested more than BDT 24,300 crore to build the network

infrastructure Grameenphone is one of the largest taxpayers in the country, having contributed more than

BDT 35,500 crore in direct and indirect taxes to the Government Exchequer over the years. There are now more than 1600 GP Service Desks across the country covering nearly all

upazilas of all districts and 94 Grameenphone Centers in all the divisional cities Grameenphone has about 5000 full and temporary employees. 300,000 people are directly dependent on Grameenphone for their livelihood, working for

the Grameenphone dealers, retailers, scratch card outlets, suppliers, vendors, contractors and others.

2.1.1 Grameenphone’s Vision, Mission & ValuesThe right and contemporary use of technology is the key to the progress of a nation. Keeping this in mind, Grameenphone always brings the future proof technology in order to facilitate your progress.

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The possibilities in this new world are immense and someone as bright as you should not be behind in anyway. At the end of the day, all the individual progresses accumulate to the progress of the beloved motherland.

Grameenphone promises you to bring the best of communication technologies so that you can Go Beyond.

Vision We Empower societies. We provide the power of digital communication, enabling everyone to improve their lives, build societies and secure a better future for all.

Mission We’re here to help our customers. We exist to help our customers get the full benefit of being connected. Our success is measure by how passionately they promote us.

Values a. Make It Easyb. Keep Promisesc. Be Inspiringd. Be Respectful

Brand Promise Go Beyond

2.2 Banglalink Digital Communications LimitedBanglalink Digital Communications Limited, DBA Banglalink (Bengali: বাংলালিলংক) is fully owned by Telecom Ventures Ltd. (previously Orascom Telecom Ventures Limited) of Malta, which is a fully owned subsidiary of Global Telecom Holding S.A.E. (formerly known as Orascom Telecom Holding S.A.E.) Following business combination in April 2011 between Vimpelcom Ltd and Wind Telecom S.P.A, Vimpelcom owns 51.92% shares of Global Telecom Holding S.A.E. Vimpelcom (www.vimpelcom.com) is one of the world’s largest integrated telecommunications services operators providing voice and data services through a range of traditional and broadband mobile and fixed technologies in Russia, Italy, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Laos, Algeria, Pakistan, Burundi, Zimbabwe, Central African Republic, Canada and Bangladesh. Vimpelcom is headquartered in Amsterdam, the Netherlands and listed as an ADS on the New York Stock Exchange under the symbol “VIP”.

Since Banglalink’s launch in February 2005, its impact was felt immediately: overnight mobile telephony became an affordable option for customers across a wide range of market segments. Banglalink’s initial success was based on a simple mission: “bringing mobile telephony to the masses” which was the cornerstone of its strategy. Banglalink changed the mobile phone status from luxury to a necessity, brought mobile telephone to the general people of Bangladesh and made a place in their hearts. The mobile phone has become the symbol for positive change in Bangladesh. The brand slogan of “start something new” is in essence derived from banglalink’s promise of empowering people with affordable communication solutions so that they can take new initiatives in life. The company believes that, it is through such new initiatives that positive change will occur for the overall betterment of the nation.

This positive change that is quite correctly attributed to banglalink, has become the corporate positioning of banglalink and is translated in their slogan “making a difference” or “din bodol”- “making a difference” not only in the telecom industry, but also through its products and services, to the lives of its customers. This corporate stance of “making a difference” has been reflected in everything banglalink does.

Banglalink attained 1 million subscribers by December 2005 and 3 million subscribers in October 2006. In less than two years which is by December 2007, banglalink overtook Aktel (now Robi) to

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become the second largest operator in Bangladesh with more than 7.1 million customers. Banglalink currently has 29.051 million subscribers as of February 2014, representing a market share of 25.05%. Banglalink’s growth over the preceding years have been fuelled with innovative products and services targeting different market segments, aggressive improvement of network quality and dedicated customer care, creating an extensive distribution network across the country, and establishing a strong brand that emotionally connected customers with Banglalink.

2.2.1 Banglalink’s Vision, Mission & Core ValuesBanglalink remained committed to play its role as a responsible corporate citizen to contribute in making a difference in the socio-economic development of Bangladesh. The company undertakes several projects each year for the welfare of community and preservation of the environment. These initiatives consolidated banglalink’s reputation as forerunner in the corporate social activity. According to its annual reports:

Vision To understand people’s needs best and develop appropriate communication services to improve people’s lives and make it simple

Mission a. Segmented approach in terms of products and servicesb. Delivering superior benefits in every phase of the customers' experience. (before, during and after sale)c. Creating optimum shareholder value

Core Values All employees of banglalink demonstrate the following values in day-to-day activities to ensure “making a difference’’ in every area of our operations:

a. Straightforward: We say what we do and we do what we sayb. Reliable: A promise made is a promise keptc. Innovative: Whatever we do will be useful and useabled. Passionate: We always deliver with honesty and passion

Brand Promise Making a difference

2.3 Robi Axiata LimitedRobi Axiata Limited, DBA Robi (Bengali: রলিব), is one of the leading mobile telecom operators in Bangladesh. It is a joint venture company between Axiata Group Berhad of Malaysia and NTT DoCoMo Inc. of Japan. Robi commenced operation in 1997 as Telekom Malaysia International (Bangladesh) with the brand name ‘Aktel’. With its strong network and seamless connectivity, Robi is empowering more than 24 million people across the country.

Robi, the most dynamic and rapidly-growing telecommunications operator in Bangladesh, is developing its services to meet increasing customer needs - ranging from voice and high speed Internet services to tailor-made telecommunications solutions. Robi is a joint venture company between Axiata Group Berhad of Malaysia and NTT DoCoMo Inc. of Japan. It commenced operation in 1997 as Telekom Malaysia International (Bangladesh) with the brand name ‘Aktel’. In 2010 the company was rebranded to ‘Robi’ and the company changed its name to Robi Axiata Limited. Robi draws from the international expertise of Axiata and NTT DoCoMo Inc. Services support 2G and 3.5G voice, CAMEL Phase II & III and 3.5G Data/GPRS/EDGE service with high speed internet connectivity. Its GSM service is based on a robust network architecture and cutting edge technology. The company has the widest International Roaming coverage in Bangladesh connecting 600 operators across more than 200 countries. Robi’s customer centric solution includes value added services (VAS), quality customer care, digital network security and flexible tariffs.

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Since its inception in 1996, Axiata Group and its predecessor Telekom Malaysia has invested around BDT 11,000 crore in the form of equity till 2012. Moreover the company has contributed almost BDT 10,000 crore to the Bangladesh Exchequer in the same period. As a subsidiary of Axiata Berhad Malaysia , Robi draws on leading edge technology to provide its service in Bangladesh, covering almost 100% of the population, Robi is committed to provide best data and voice quality and will continue to ensure that its customers are able to enjoy the best experience through leading edge technology and innovative products and services.

2.3.1 Robi’s Vision, Principles, Purpose & Green VisionAxiata, Robi’s parent company, is focused on high growth, low penetration emerging markets; its vision is Advancing Asia towards a better, brighter future by bringing affordable connectivity, innovative technology and world class talent to the entire region. Robi believes that every Bangladeshi has extraordinary potential. They are not content with limitations and wish to break barriers. And Robi is ready with solutions to ignite the power within every Bangladeshi. Robi design solutions that are intelligent, simple to know, and help people make the most of their potential.

As Robi looks to the future, it is and will continue to remain closely related with Bangladeshi values. Robi is linked at every step with the local culture and traditions and that's how it will evolve and grow together with the country in the years to come.

Principles & Purpose Uncompromising Integritya. We will be legally, ethically, and morally correct.b. Our conduct will be fair and honest.c. We will listen, seek understanding and encourage open dialogue.d. We will be passionate in pursuing our beliefse. We will treat others with dignity, valuing and benefiting from diversityf. We will be accountable for our actions and behaviors on fellow

employees, customers, shareholders, and the communities in which we operate.

g. We will be courageous in sharing our work and bold to learn and improve from our mistakes

h. We will adhere to our Code of Conduct, protect and uphold it.

Customer at the Centrea. We will be customer centric delivering their needs in terms of value,

quality and satisfaction.b. Our customer focus will be unrelenting in creating positive experience,

at every point of interface, sale and post-sale.c. Simplicity will be the key for the customer to learn about us, buy from

us, and get support from us whenever, wherever.d. We will strive for continuous innovative solutions in every sphere of

our work.e. We will engagement with the customers to know their demands and

design our actions to care for them better than our competitors can.f. We will not be distracted from creating and providing value for our

customers.

I Can, I Willa. Ensure our efforts produce desired results.b. Seize opportunities at the right time and execute them on time.

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c. Go beyond our scope, strive for and achieve excellence.d. Do what it takes to ensure delivery of results not waiting for

delegation.e. Go that extra mile, setting ambitious goals to ensure our efforts bring

success.f. Have the courage to say and do what it takes in order to ensure

successBrand Promise Ignite the power within

2.4 Airtel Bangladesh LimitedAirtel Bangladesh Ltd. (Bengali: এয়ারফ�ল বাংলাফ�শ), DBA Airtel, formerly known as Warid Telecom, is a GSM and 3G based cellular operator in Bangladesh. Airtel is the sixth mobile phone carrier to enter the Bangladesh market, and originally launched commercial operations under the brand name Warid on May 10, 2007.

In December 2005, Warid Telecom International LLC, an Abu Dhabi based consortium, paid US$ 50 million to obtain a GSM license from the BTRC and became the sixth mobile phone operator in Bangladesh.

In a press conference on August 17, 2006, Warid announced that its network would be activated two months ahead of schedule, in October, 2006. Again in October, 2006 Warid Telecom put off the launch of its cellphone services in Bangladesh until April, 2007 after its major supplier Nokia walked out on an agreement over a payment dispute.

Warid had a soft launch at the end of January 2007. It gave away complimentary subscriptions among a selected group of individuals, whose job was to make 'test calls' and the operator adjusted its network's quality based on their comments.

On May 9, 2007, Warid in an advertisement in some daily newspaper stated that it would be launching publicly on May 10, 2007. However, no call rate nor any package details were revealed. The advertisement included an announcement for the people interested to buy Warid connections to bring the documents like ID Card, etc., to the designated franchise and customer care centres.

On July 19, 2007, the company crossed the 1 million customers mark in the first 70 days of operation. On October 1, 2007, Warid Telecom expanded its network to five more districts raising total number of districts under Warid coverage to 56, said a press release. Mymensingh, Jamalpur, Sherpur, Rajbari and Narail towns were covered by Warid network.

On November 10, 2007, 61 districts under Warid network coverage. On June 10, 2008, Warid Telecom expanded its network to 3 more districts Bandarban, Khagrachhari and Rangamati. Now all 64 districts of Bangladesh are under Warid network coverage meaning Warid Telecom now has nationwide coverage.

In 2010, Bharti Airtel bought out majority share of the company. The Bangladesh Telecommunication Regulatory Commission approved the deal on Jan 4, 2010. Bharti Airtel made a fresh investment of US$ 300 million to rapidly expand the operations of Warid Telecom. Bharti Airtel Limited took management control of the company and its board, and rebranded the company's services under its own airtel brand from December 20, 2010.

This is the largest investment in Bangladesh by an Indian company. The new funding is being utilized for expansion of the network, both for coverage, capacity, and introduction of innovative products

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and services. As a result of this additional investment, the overall investment in the company moved to US$ 1 billion.

In March, 2013, Warid Telecom sold its rest 30% share to Bharti Airtel’s Singapore-based concern Bharti Airtel Holdings Pte Limited. On September 8, 2013, Airtel Bangladesh received 5 MHz 3G spectrum with 1.25 million US$.

As of February 2014, Airtel Bangladesh has 8.362 million subscribers with 7.21% of market share.

2.5 Pacific Bangladesh Telecom LimitedPacific Bangladesh Telecom Limited, DBA Citycell (Bengali: লি�টিফ�ল), is the first mobile communications company of Bangladesh. It is the only CDMA network operator in the country. As of August 2013, Citycell's total mobile subscriber base is 1.338 million. Citycell is currently owned by Singtel with 45% stake and the rest 55% owned by Pacific Group and Far East Telecom.

In 1989 Bangladesh Telecom Limited (BTL) was awarded a license to operate cellular, paging, and other wireless communication networks. Then in 1990 Hutchison Bangladesh Telecom Limited (HBTL) was incorporated in Bangladesh as a joint venture between BTL and Hutchison Telecommunications (Bangladesh) Limited. HBTL began commercial operation in Dhaka using the AMPS mobile technology in 1993 and became the 1st cellular operator in South Asia. Later that year Pacific Motors bought 50% of BTL. By 1996 HBTL was renamed as Pacific Bangladesh Telecom Limited (PBTL) and launched the brand name "Citycell Digital" to market its cellular products.

By the end of 2007 Citycell had refurbished its old brand identity and introduced a new logo and corporate identity; the new logo is very reminiscent of the old logo.

As the only CDMA mobile operator in the country, Citycell provides innovative, reliable and excellent telecommunication and mobile internet services/solutions. Citycell understands the consumer needs and delivers the latest in advanced telecommunication services to Bangladesh.

The company offers a full array of mobile services for consumers and businesses that are focused on the unique needs of Bangladesh. Citycell’s goal is to integrate superior customer service and highest standards of technology to offer the best service at affordable rates. The introduction of revolutionary EV-DO technology only shows its drive to provide the customers with the best.

2.5.1 Citycell’s Goal, Vision & MissionGoal To integrate superior customer service & highest standards of technology

to offer the best service at affordable ratesVision To contribute to the happiness and prosperity of all Bangladeshis by

providing innovative communication, information & technology solutions.Mission a. Being the preferred solutions provider

b. Delighting customersc. Being an employer of choiced. Delivering sustainable shareholder value

Core Values Ambiguous or AbsentBrand Promise Unclear or Absent

2.6 Teletalk Bangladesh LimitedTeletalk Bangladesh Limited, DBA Teletalk (Bengali: টে�লিল�ক), is a GSM based state-owned mobile phone company in Bangladesh. Teletalk started operating on 29 December 2004. It is a Public Limited company of Bangladesh Government, the state-owned telephone operator. Teletalk

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provided GPRS and EDGE internet connectivity and from 14 October 2012 HSDPA/3G which is the latest cellular information service. Teletalk is the first operator in the country that gave BTTB (now BTCL) incoming facility to its subscribers.

Teletalk Bangladesh Limited is a public limited company, registered under the Registrar of the Joint stock companies of Bangladesh. Total shares owned by the Government of the People’s Republic of Bangladesh. Teletalk Bangladesh Limited (the “Company”) was incorporated on 26 December, 2004 as a public limited company under the Companies Act, 1994 with an authorized capital of Tk.20,000,000,000 being the only government sponsored mobile telephone company in the country. On the same day the Company obtained Certificate of Commencement of Business.

Teletalk continues to grow and engage its customers through its clear commitment to offering high quality products and services as well as leading customer retention and loyalty programmers. Teletalk continues to be a part of the revolution that’s connecting millions of Bangladeshi people and around the world.

Teletalk Bangladesh limited was established keeping a specific role in mind. Teletalk has forged ahead and strengthened its path over the years and achieved some feats truly to be proud of, as the only Bangladeshi mobile operator and the only operator with 100% native technical and engineering human resource base, Teletalk thrives to become the true people’s phone – “Amader Phone”.

Teletalk Bangladesh Limited has continually expanded its network, to better accommodate its growing customer base as well as to keep the promise of providing better service. As of now, Teletalk has already established its network foothold in 64 Districts, 402 Upazilas, and most of the highways. Teletalk is continuing its network expansion to reach more corners of Bangladesh.

Now Teletalk is the 5th Mobile Network Operator in Bangladesh with more than 3.212 million subscribers as of February 2014.

2.6.1 Teletalk’s Vision & MissionGoal To innovate and constantly find new ways to enhance our services to our

customer’s current needs and desires for the future.Vision To know the customers and meet their needs better than anyone else.Mission a. To provide mobile telephone service to the people from the public

sectorb. To ensure fair competition between public and private sectors and

thereby to safeguard public interestc. To meet a portion of unmitigated high demand of mobile telephoned. To create a new source of revenue for the government.

Core Values Ambiguous or AbsentBrand Promise Aamader Phone / Our Phone

3. Dominant Traits of the IndustryThe study has considered seven indicators to analyze life cycle position of the mobile network operators in Bangladesh. It has analyzed the yearly sales, cost of MNOs, market growth rate, market penetration, technical change to move with the market, customers base to hold market share, segments to target customers and profit of the MNOs.

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Figure 1: Yearly Sales of MNOs in 2013 (in million)

The above chart indicates that the yearly sales of Grameenphone is very high and in EOY 2013 Airtel has sold 1.22 million connections, Banglalink 2.96 million, Grameenphone 7.09 million, Robi 4.34 million, Teletalk 1.17 million and Citycell has dropped 0.17 million connections.

The average market growth rate (Harmonic Mean) of mobile telecommunication industry is 21.19% in last six years where Banglalink 21.58%, Grameenphone 17.79%, Robi 22.66%, Teletalk 3.95% and Airtel 18.27%. In 2013, Teletalk has got highest market growth at 71.03% followed by Robi 20.63%, Grameenphone 17.71%, Airtel 17.27% Banglalink 11.42% and Citycell fall by 11.13%.

Figure 2: Yearly Market Growth of MNOs

Market penetration is another important tool to assess life cycle position of an industry. The mobile telecommunication industry has got 69.75% market penetration i.e. 115.98 million subscribers base among 166.28 million population in Bangladesh till February 2014. Grameenphone has got highest penetration at 28.99% among six mobile network operators followed by Banglalink 17.47%, Robi 15.48%, Airtel 5.03%, Teletalk 1.93% and Citycell 0.84%.

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Figure 3: Market Penetration of MNOs

Among 115.98 million customers base of industry, Grameenphone has the highest 41.57% market share having 48.21 million customers base where Banglalink is the second highest 25.05% market share gainer with 29.05 million customers followed by Robi 22.20% market share with 25.75 million customers, Airtel 7.21% market share with 8.37 million customers, Teletalk 2.77% share with 3.21 million and finally Citycell has got lowest 1.21% market share having only 1.40 million customers.

Figure 4: Market Share of MNOs

The other four indicators are showing the below status: Indicators Airtel Banglalink Citycell Grameenphone Robi TeletalkCosts High Average Moderate Low Average ModerateTechnical Charge Moderate Moderate Limited Moderate Moderate ModerateSegments Three Four Two Four Four ThreeCompetitors Large Large Large Large Large LargeProfit Negative Rising Low High Rising Low

4. Industry Life CycleThe study of product life cycle has drawn much attention in the previous researches. There are some different stages of product/industry life-cycle expresses by different authors in different books.

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Numerous studies have been initiated to look at the product life cycle and strategies fit for the specific stage (Z1muld and D'Amico, 1989, Assael, 1990, Kennedy and Others, 1992, Stanton and Others, 1994, Boyd and Others, 1995, McDonnell, 2005, Jain, 2007, Kotler and Armstrong, 2010, Kotler and Others, 2010). Boyd and Kotler articulate five stages of industry life cycle where other authors shape four stages of any industry. Kotler (2010) states that the product life cycle move into five stages including product development, introduction, growth, maturity and decline whereas Boyd (2007) shapes the stages are introduction, growth, competitive turbulence or Shakeout, maturity and decline or extension. Except these two authors everyone articulates basic four stages those are introduction, growth, maturity and decline. So, the ups and down of a product or industry life cycle can be originated through the following six stages:

Figure 5: Industry Life Cycle model

The various stages of industry life cycle have different market characteristics and need different strategies to survive in the market Boyd (1995), Jain (2007) and Kotler (2010) make out characteristics and business objectives; and formulate strategies for different stages of industry life cycle. Boyd focuses on market growth rate, technical change in product design, segments, competitors and profitability where Jain focuses on sales, costs, profits, customers and competitors to make out the industry position. For formulating the strategies both emphasizes on product, price, place and distribution where Jain prioritize extra focus on sales promotion. Product development stage begins when the company finds and develops a product idea. During product development, sales are zero and the company's investment costs mount.

The businesses strategies are taking by the different mobile network operators are as follows:

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Strategies Airtel Banglalink Citycell Grameenphone Robi TeletalkProduct Quality

ImprovementConcentrate on Features

Rationalize Concentrate on Features

Continue Quality Improvement

Quality Improvement

Product Line Eleven Eight Seven Ten Eleven EightPrice Reduce Reduce Reduce Reduce Reduce ReduceChannels Selective Intensive Intensive Intensive Selective SelectiveCommunications High High Decline High High DeclineSales Promotion Increase Increase Reduce Increase Increase Reduce

The major concern of the study is to find the life cycle position of mobile network operators and mobile industry of Bangladesh. Again, the strategies are captivating by the MNOs and their strengths. The life cycle position of the MNOs and industry have identified as follows: MNO / Industry Characteristics Life Cycle StageAirtel Rising Sales, High Sales Growth, Very Low Penetration,

High Cost, Moderate Technical Change, Few Segments, Large Competition and Negative Profit

Introduction

Banglalink Rapid Rising Sales, High Sales Growth, Moderate Penetration, Average Cost, Moderate Technical Change, Many Segments, Large Competition and Rising Profit

Growth

Citycell Negative Sales & Growth, Very Low Penetration, High Cost, Limited Technical Change, Very Few Segments, Large Competition and Low Profit

Introduction

Grameenphone Peak Sales, High Sales Growth, High Penetration, Low Cost, Moderate Technical Change, More Segments, Large Competition and High Profit

Shakeout

Robi Rapid Rising Sales, High Sales Growth, Moderate Penetration, Moderate Technical Change, Many Segments, Large Competition and Rising Profit

Growth

Teletalk Low Sales, High Sales Growth, Very Low Penetration, Moderate Technical Change, Many Segments, Large Competition and Low Profit

Introduction

Total Industry Industry Peak Sales, High Sales Growth, High Penetration, Moderate Technical Change, Many Segments, Large Competition and Low Profit

Shakeout - Mature

The above table indicates the mobile network industry is going toward maturity stage in Bangladesh. There are three operators staying in introduction stage with very low customers' base. Among other three operators Banglalink and ROBI are in growth stage and Grameenphone is in shakeout stage.

The strategies are captivating by the mobile network operators those fit or not fit can be articulates as follows:

MNOs Airtel Banglalink Citycell Grameenphone Robi TeletalkLife Cycle Stage Introduction Growth Introduction Shakeout Growt

hIntroduction

Product Fit Not Fit Not Fit Fit Fit FitProduct Line Not Fit Fit Not Fit Fit Fit Not FitPrice Fit Fit Fit Fit Fit FitChannels Fit Fit Fit Fit Not Fit FitCommunication Fit Fit Not Fit Fit Fit Not FitSales Promotion Not Fit Fit Not Fit Fit Fit Not Fit

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Most of the cases Banglalink, Grameenphone and Robi are going on right track and achieving highest number of customers' base where are Airtel, Citycell and Teletalk are not running as per the market requirement and step behind.

5. Drivers of Telecommunication Industry in BangladeshIn valuing a wireless company, its potential for subscriber growth is a key element. We believe that the following factors are likely to be the principal drivers of wireless penetration rates:

1. Relative wealth of a market, which we define as GNP per capita adjusted for purchasing power parity (PPP), and the distribution of wealth.

2. Quality, availability, and pricing for wire line services3. Innovative service offerings such as prepaid calling, along with calling-party-pays.4. The intensity of competition5. Variations between national markets6. The price of a handset7. Acquisition price of a SIM

Clearly, additional variables are at work. Some – such as mobility pricing, network quality, network coverage, and customer service – are associated with the operator. Others, of less concern to the average consumer, are set by the regulator: the number of wireless operators allowed, retail price regulation, and the taxation and interconnection regimes, for example.

Others depend on aspects of the country’s economy, including GDP growth, the investment environment, geographic distribution of population, cultural issues, and so on. In landline (wire line) penetration, PPP-adjusted GNP per capita helps to define the addressable market for wireless services, which seems logical, as the wealthier a country, the greater the number of people who could afford wireless (or even wire line) services. Research has found a very strong correlation between wireless (and wire line) penetration rates and PPP adjusted GNP per capita. Exhibit 12 for lower and middle income countries with per capita income below USD 10,000 shows a positive relationship between mobile penetration and per capita with an R Sq coefficient of 0.56. However there is considerable variation between countries.

Figure 6 Mobile Penetration vs. Mobile Subscribers CAGR

Bangladesh appears to have a relatively low level of mobile penetration relative to income. However Pakistan, Philippines, Ukraine, and Russia appear to have relatively high penetration rates relative to per capita. This might be explained by cultural factors and a willingness to accept technology more readily. This in part explains the much more rapid mobile penetration growth in the Scandinavian countries in the late 1990s and early 2000 period. However more likely there are other factors such as relative taxation and possibly the levels of taxation.

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Of course it may also be the case that countries reach “tipping points” where their mobile penetration accelerates. Bangladesh may already be entering such a phase. Quality, availability, and pricing of wire line services affect penetration. In developing countries, for example, a low tele-density of wire line service (normally quoted as the number of residential wire line phones per 100 people) may drive wireless penetration. Long waiting lists for wire line service and/or high connection fees could also increase demand for wireless service as an alternative to wire line. The chart below illustrates that Bangladesh has seen mobile penetration significantly grow rapidly as has been the case in a number of other Asian EM countries.

The intensity of competition has an impact on wireless penetration rates. Typically, the greater the competition (as determined by either the number of competitors or the intensity of competition among the players), the higher the penetration rate (all other variables being equal). The rationale for this is obvious. Greater competition should lead to more attractive pricing for consumers, which in turn should stimulate market demand. On this basis, with 6 competitors and aggressive battles over price, Bangladesh should be well positioned for further strong mobile phone growth.

Figure 7: Mobile Penetration vs. GDP per Capita (less than USD 10,000)

6. Situational Analysis of CitycellSituation analysis refers to a collection of methods that are used to analyze an organization's internal and external environment to understand the organization's Industry and competitive condition and competencies, capabilities, resource strengths, weaknesses and competitiveness. This mainly considers two things: External or macro-environment and Internal or micro-environment

Situational analysis is the process of gauging the position, situation and circumstances that a company is operating in at a given point in time. It assists in planning for the future of the business and to find out the competitive position of the company. A situational analysis is the process of identifying and evaluating existing internal and external elements that may impact an organization's ability to achieve its objectives.

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Inte

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ProductVoice products are marketed as a commodity, focusing solely on low priceData products are attractive but suffer from a lack of focus

NetworkVoice network only compatible with CDMA handsets, GSM base not addressableData network is currently ‘best-in-class’, and can be upgraded

Devices

Handsets: lack of differentiation, sourced to enable as low a selling price as possibleDongles: short supply cycles, resulting in consumer confusion and inventory issues

BrandBrand identity defined by low price and low value, linked to voice productsHighly distinctive data brand and market-leading performance

Exte

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CompetitionCompetition on voice drowns Citycell, price positioning probably inefficientData product much more attractive, vulnerable to WiMAX and soon 3G

RevenuesExtremely competitive voice market and multi-SIMs result in low revenue per SIMPC / Tablet penetration remains low, limiting the market for large-screen internet

Supply CDMA handset import has to be handled by CitycellNot attractive for another importer

Regulatory ICX and IGW regimes, revenue share introduced inefficient costs in the businessSIM tax makes acquisitions expensive, and is not applied to WiMAX operators

Figure 8: Citycell's Internal Challenges

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Figure 9: Citycell's External Challenges

7. SWOT Analysis of Citycell

Figure 10: SWOT of Citycell

8. Porter’s Five Forces Model for CitycellPorter’s Five Forces Model of Competition is a framework for industry analysis and business strategy development. It draws upon industrial organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability.

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Figure 11: Porter’s Five Forces Model

a. Competitors Analysis – HighGrameenphone is the market leader. They have a strong position in the mass market, youth segment and enterprise segment. It also has around 3mn EDGE subscribers. Banglalink is in 2nd position with 28% of the market. They also have a strong presence in mass market and the SME market is also mainly occupied by Banglalink. 3rd placed operator, Robi has been focused in 2010 on building marginal subscriber additions with an aggressive marketing campaign after their re-branding from AKTEL to Robi. Airtel, the latest entrant in the market, began by focusing on the low income segment. Bharti Airtel, India’s largest Mobile Company acquired a 70% stake in Warid in 2009. There is an expectation that will focus on mobile internet and other Value Added Services.

Citycell, the lone CDMA operator, is experiencing limited growth. They are trying to leverage of their less popular technology by providing better mobile internet services. State owned operator Teletalk is struggling to attract customers in this fast moving industry. It has less than 2% market share. Weak marketing, distribution, and substandard network are to blame.

Grameenphone has the most significant strength in terms of network coverage given it has the largest number of base stations. This will also help GP in revenue terms if there is greater infrastructure sharing. It also has the best distribution network, highest ARPU and also has a strong penetration to mobile internet via its Edge service. Its biggest vulnerability is aggressive price wars as it is perceived to be a premium price product. It also has the largest amount of spectrum after the 2008 re-allocation.

Banglalink, the number 2 player is perceived to be the most aggressive in offering price discounts. It is also believed to have added staff the most substantively to support its aggressive growth campaign. Robi the number three player is potentially strongly placed to develop more sophisticated VAS products as well as for 3G given the 30% shareholding by NTT Docomo who have been dominant in Japan but also acknowledged a leading global innovator in 3G, Data and VAS services. It is too early to do a SWOT analysis on Bharti’s plans for Airtel but one would imagine they are likely to be aggressive on price, be strong on rural penetration given the contextually relevant experience in India, and also leverage their large portfolio/database of VAS products developed for the Indian market.

b. Buyer Power – HighBuyers in Telecom industry generally land in two categories: Individual and Enterprise Customers like IT companies, Banks etc. There is ample number of telecom providers in the market with big product variance and cheaper prices which gives buyer many options to select operators and thus have a large bargaining leverage.

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Buyers’ Price Sensitivity: High Relative Bargaining Power: High Cost of product relative to total cost (High) Product differentiation (High) Competition between buyers (?)

Size & concentration of buyers relative to products (high)

Buyers’ switching cost (low) Buyers’ information (High) Buyers’ ability to backward integrate (low)

The individual buyers don’t have any competition among themselves but enterprise customers like IT or banks do have. Enterprise customers generate major part of the revenues for any telecom companies like Grameenphone, Banglalink or Robi which means higher buyer power. But this is not significant for the newbie or the one who deals with individual customers. Big size and low concentration of consumption per individual gives lower leverage to buyer power. Big size and big concentration of consumption accrues high buyer power for Enterprise customers. Together we can say its moderate buyer power in terms of size and concentration.

Buyers’ switching cost is lower along with low new connection cost. With Mobile Number Portability, switching will become even easier. Bangladesh’s neighbor, in India, Mobile Number Portability requests increased from 50.16 million subscribers at the end of May 2012 to 54.33 million at the end of June 2012 in India. This means low switching cost and high buyer power in near future.

Buyer’s information regarding the availability of other options has become high. Increased social networking, high advertisements through TV, hoardings, banners and word of mouth, buyers are well informed about the substitute products with better offerings urban as well as rural areas. This also means high buyer power.

Buyers’ ability to backward integrate is low and hence low buyer power. Not much intermediaries between the producer and the consumers. High Investment required for backward integration.

c. Suppliers Power - LowThe suppliers bargaining power has increased influence on the profitability of the company. Increase in the bargaining power of the supplier will lead to a decrease in profits or increase in the price of the end product (Buyer).

There is a price war happening between the different mobile operators, so even the suppliers are chosen carefully so that they do not drag down the profitability of the company. So the suppliers have less bargaining power in this industry.

Suppliers enjoy less bargaining power because of more number of suppliers. Also there is little or no forward Integration.

Price Sensitivity: Low Relative Bargaining Power: Low Cost of product relative to total cost (Low) Product differentiation (Low) Competition between suppliers(High)

Size and concentration of suppliers relative to products (Low)

Buyers’ switching cost (Low) Buyers’ information (High) Suppliers’ ability to forward integrate (Low)

SIM card for the mobile operators are mostly imported. The MNOs don’t always procure the SIM card from a single supplier to avoid any delays. Thus the bargaining power of suppliers is less along with little or no threat of forward integration.

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d. Threat of Substitutes - ModerateBuyer propensity to substitute is increasing as Internet subscriber base is increasing higher than GSM/CDMA services. ISPs want to open up Net telephony. If allowed, this will open up the domestic voice market to all operators which have a unified access services license to offer voice services along with data to its consumers.

Internet Telephony is eating into the revenue of GSM/CDMA telephony. Data revenues from internet services are causing cannibalization of revenues from GSM/CDMA services. However, voice quality remains an issue with internet telephony. Internet voice services also currently limited due to regulatory road blocks.

e. Threat of Entry - LowThreat from new entrant is low due to high capital requirements. he cost of active equipment is estimated to be 40 percent of the telecom operator's total CAPEX, while the balance is accounted for by passive infrastructure. Typically, a ground based tower costs BDT 45-50 Lac. A roof-based tower can be built for BDT 13-14 Lac. Cost of maintaining one tower (active + passive) is estimated at BDT 80,000-85,000 per month. If tower is rented then monthly rent is BDT 20,000-25,000 for active network. The monthly outflow of a TSP would be close to BDT 80,000-85,000 per tower per month.

However, the recent announcement made by MNOs about leasing its towers will help both the older and newer players to penetrate into new markets. This factor makes the telecom industry moderately attractive for the new players and investors.

As stated earlier, the entire market is maturing and new classes of consumers are mostly rural and their ARPU is well below $5 (probably $3-3.5). So, managing bottom-lines at such low levels of revenue per user will prove to be a challenge for new entrant.

The largest optical fiber has been built by the incumbent operator BSNL who is also the long distance operator. The private sector players such as Bharti and Reliance have also constructed optical fiber cable network connecting mainly cities and towns but their presence is very limited in the rural areas and difficult terrains. It is fairly difficult and cost- ineffective for new entrants to lay down optical fiber connecting remote places as well.

Also known as Incumbent Wrath signifies the leverage the players in the market commands. The incumbents grow because of an established network presence, a brand that consumers are aware of and sheer economies of scale.

Mobile termination charge, which one operator pays to the other when the customer of the former uses the roaming charges of the latter, is high as of today. This is charged to the consumer as the cost of roaming. With an all Bangladesh footprint (or 80% coverage), the incumbents effectively do not have to pay termination charges.

The incumbents have either been pocketing the termination charges or passing them to consumers “no roaming charge” kind of schemes. This factor makes the industry unattractive for the new entrants and investors.

The existing Telecom players might begin to bundle broadband, voice, wireless, video and other emerging technologies together, as well as a variety of value added content, in an effort to remain competitive, offer seamless services and attract more customers, at a cheaper price.

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Government and Legal Barriers are also very high for any new player. However, no industrial license required for setting up manufacturing units for telecom equipment. 100% Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipment. Moderate threat entry based on Government Policies.

9. ConclusionMobile telecommunication industry of Bangladesh has rapidly expanded in recent years. It has reached more than 90 million mobile subscriber bases for 166.28 million populations with 69.75% market penetration. Though Bangladesh is the lowest penetrated country among 62 highest numbers of mobile users' countries; it is facing intensive price competition with less ARPU for six mobile network operators. There were several changes in ownership of every operator except giant Grameenphone and Government owned Teletalk. Grameenphone is ahead of gaining competitive advantage as first mover in market operation and covering network to reach high customer base. Marketing programs are very similar and applying mostly on price attraction. There is a huge gap between market leader, challengers and niches.

10. Recommendations for All MNOs in BangladeshIt is very difficult to recommend the effectiveness considering only the subscribers base and sales growth of mobile operators. It can be better to recommend if there is a comparative financial performance analysis. But from the sales volume and growth can easy to understand the strength and weakness to be stable in captured position. So, surviving in the mobile market of Bangladesh; operators can set their strategies reflecting on followings:

a) Grameenphone should maintain the existing customers' base highly categorizing on ARPU rather focusing on new customer base. Because, there is a chance of shift of existing high volume customers where new customers will get preferences. Again, upcoming 3G network and mobile number portability can affect more to the leader.

b) Banglalink and ROBI should focus specific markets and segments to capture and maintained market share. Again, the multi-dimensional focuses of the company such as mobile money, mobile insurance, can create a great competitive advantage to challenge the leader.

c) Citycell, the only CDMA operator should realize the customers vulnerable behavior to use mobile phone and manage dual operating system in their network. It can also focus on specific services as like the mobile interne.

d) The government owned mobile operator i.e. Teletalk should visualize its services and ensure state of the art mobile telephony business to capture market share patronizing patriotic feelings of Bangladeshi people.

e) At least one operator should merge either with giant or challenger through acquisition to fit for the competition. Niches should provide marketing strategies considering their target market not for all. Priority should extend towards existing customers to avoid switching on upcoming 3G network and introduction of number portability.

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Table of Contents

1. Introduction.......................................................................................................................................1

2. Industry Overview.............................................................................................................................1

2.1 Grameenphone Limited...............................................................................................................2

2.1.1 Grameenphone’s Vision, Mission & Values..........................................................................3

2.2 Banglalink Digital Communications Limited.................................................................................4

2.2.1 Banglalink’s Vision, Mission & Core Values...........................................................................5

2.3 Robi Axiata Limited......................................................................................................................5

2.3.1 Robi’s Vision, Principles, Purpose & Green Vision................................................................6

2.4 Airtel Bangladesh Limited............................................................................................................7

2.5 Pacific Bangladesh Telecom Limited............................................................................................8

2.5.1 Citycell’s Goal, Vision & Mission...........................................................................................8

2.6 Teletalk Bangladesh Limited........................................................................................................8

2.6.1 Teletalk’s Vision & Mission...................................................................................................9

3. Dominant Traits of the Industry.........................................................................................................9

4. Industry Life Cycle............................................................................................................................11

5. Drivers of Telecommunication Industry in Bangladesh....................................................................14

6. Situational Analysis of Citycell.........................................................................................................15

7. SWOT Analysis of Citycell.................................................................................................................17

8. Porter’s Five Forces Model for Citycell............................................................................................17

9. Conclusion.......................................................................................................................................21

10. Recommendations for All MNOs in Bangladesh............................................................................21

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