Mobile firms focus on rural areas in Bangladesh

new articles Uncategorized

The story is wriiten by Zahedul Islam on 13.4.2008

Mobile phone operators are targeting the rural areas in the impoverished Bangladesh as their next battlefield amid slower growth in urban areas.

Nearly 1.5 million new subscribers are signing up for mobile connections every month in the country as the mobile market booms in the recent years. In last year, mobile phone subscribers grew by 58 percent to 35 million, provided country’s six wireless operators, says Bangladesh Telecommunications Regulatory Commission, the country’ telecoms regulator.

But many new mobile phone subscribers no longer come from the booming towns and cities. As growth in urban areas begins to recede, mobile operators are eyeing the next big market – the vast rural areas, where 80 per cent of country’s more than 140 million people live.

‘We have planned to focus on the rural market for new subscribers,’ said Rashid Khan, chief executive officer of the Banglalink, the second largest operator in the country owned by Egyptian telecom giant Orascom Telecom Holdings. ‘We are confident to provide service there with affordability,’ he said.

Rashid said the rural segment would be the driver of the next growth as the country is expected to have 50 million mobile phone users by the end of this year, up from 35 million last year.

The top brass of company said though there was no available statistics about what percentage of mobile users actually were from urban areas, but it was estimated that around 70 to 80 per cent of the country’s 35 million subscribers came from cities and towns.

The mobile phone penetration rate is still at around 25 per cent and there were lot opportunities to grow. ‘We call it saturation point when the penetration rate touches 50 per cent, so still there is plenty of scope to grow,’ said Rashid.

Anders Jensen, the chief executive officer of Grameenphone, the largest operator in the country said the wireless carrier sought additional spectrum from the telecom regulator to expand its footprint in the country to offer new services as well as reach in the rural areas to tap the underserved market.

Grameenphone, owned by Nordic Telenor and Banglalink, altogether hold the 70 per cent of the 35 million mobile phone users in the country. other operators—Aktel, a joint venture of Telekom Malaysia International and local AK Khan group, Citycell, owned by SingTel, Warid Telecom of Dubai based Dhabi group and state-owned operator Teletalk Bangladesh Limited controls the rest 30 percent.

Anders said Grameenphone had planned to make its subscriber base double by the next two years mainly concentrating on untapped rural areas which he termed ‘emerging segment.’

‘With the seriousness of country’s two largest operators, it is obvious the next battle field will be the rural areas,’ said telecom analyst Russel Ahmed adding that the other operators had to follow the suit to stay in the competition.

Affordable prices would be the only weapon to win the battle to woo new customers from this segment with limited buying power, which often termed by the industry people as the ‘bottom of the pyramid,’ Ahmed said.

‘We will direct lot of our efforts to make sure we continue to have leadership in this area. And to be able to do so, we have to consider the buying power of this segment, which will be lower and we will have to reinforce our effort to offer cheap, affordable and efficient service to rural areas,’ Anders said in the interview.

Rashid, however, pointed out a regulatory bottleneck, the Taka 800 [US$12] tax on SIM [subscriber’s identification module] card, a major barrier to reach to the rural people with affordable connections amid declining Average Revenue Per User resulted from massive price war among the operators. Currently the ARPU, the average amount of revenue a company collects from each user per month touches as low as US$3.5.

‘Because of the SIM tax, an operator needs eight months to recover the cost of providing the connections as the ARPU touches around Taka 140 [US$3.5] a month amid the significant fall of call tariffs in the past years,’ he said.

According to the industry insiders, the handset prices and call tariffs fell by 40 and 80 per cent respectively since the beginning of 2006 because of the cutthroat competition among the six operators to increase subscriber base to cannibalise each other market share.

Besides, the SIM tax, an operator has to spend around Taka 300 [US$4.5] for distribution and other related costs to reach a potential subscriber, he said.

Rashid said they had had talks with the BTRC about the matter and the regulator was working on lowering the tax on SIM card from next fiscal.

He also said the mobile companies were trying to ensure affordability for low-income customers through offering recharging the balance denomination as low as Taka 10 [ 7 cent].