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1GRAMEENPHONEGrameenphone: Growth Strategy Amid Changing Regulatory Environment andIndustry Trends• Author: Raisa Tasneem Zaman• Publisher: SAGE Publications: SAGE Business Cases Originals• Series: Sustainability• Original publication date:2021• 2,598 words• Region:Southern Asia• DOI:http://dx.doi.org/10.4135/9781529742138Abstract:Grameenphone of Bangladesh is coming under pressure as telecom companies,facing competition from non-traditional players, must shift focus to non-voice services.Major regulatory reforms are also changing the telecom industry: a licensing guidelinethat limits bidding for a tower company license, the significant market power regulation,and the mobile number portability service, which allows users to switch carriers withoutchanging numbers. In particular, mobile number portability service has causedGrameenphone to lose subscribers. Although case details are specific to the contextof a developing country and the telecom industry, the principles involved apply tobusiness strategy, competitive, and driving forces faced by business everywhere.Grameenphone’s strategic direction, in response to changes in governmentregulations.IntroductionTisha has been a user of Grameenphone Ltd. (GP) for more than five years; her latestSIM card is from the “013” number series. When Tisha called her best friend, Swati,and asked her to save the new number, Swati said, “You have started to use yetanother number from GP! I switched to Robi and kept my old number.”GP is the leading telecommunication service provider in Bangladesh; as of December2018 it dominates the telecom industry with 46% of the total market share of activemobile SIM users (BTRC, 2018). However, with the introduction of Bangladesh’smobile number portability (MNP) service, which allows a customer to switch mobileoperators and keep their current mobile number, mobile subscribers have begun toleave GP and avail themselves of the new service.Grameenphone is the largest provider in terms of revenue, coverage, and subscriberbase, mainly providing telecommunication services (voice, data, and other related2services). Voice and SMS revenues comprise the major portion of company revenue.Since the launching of 3G in 2012, revenue from data has surged (see Figure 1). GPis considering introducing a video streaming platform in future to take advantage ofthe upward trend in data consumption. As of December 2018, the total number of GPowned sites (or towers) stands at 2G –14,521; 3G –14,687; 4G –5009(Grameenphone Ltd., 2018), enabling GP to cover 95% of the country.According to GP, total smartphone penetration of the country stood at 28% as ofAugust 2017. Increased smartphone penetration combined with 3G and 4G-enableddevices will result in higher data consumption. In 2018, GP ran out of new “017”numbers and added “013” number series with the same portfolio of products andservices and the same network services as customers of “017” (Dhaka Tribune,2018b).Trends in the Global Telecom IndustryGlobally, telecom companies must shift focus to non-voice services to continuegrowing (Chakroborti, 2017). Minutes of use (MoU) have flattened as consumer usageshifts toward data, despite more packages offering unlimited voice minutes and textmessages (Ernst & Young, 2013). Increased use of smartphones is enabling greateraccess to “over-the-top” data services, such as Voice over Internet Protocol (VoIP)and mobile messaging (Kemp, 2017). Over-the-top (OTT) service providers employInternet connectivity on smartphones to offer voice calls and messaging services,which are significantly cheaper than “traditional” voice calls and SMS (Kemp, 2017).Bangladesh is the fifth-largest mobile market in Asia Pacific Region and ninth in theworld, with 85m unique subscribers (GSMA Intelligence, 2018). Mobile operatorrevenue from data services is spiraling up as people use mobile devices to completemore tasks. Telecom companies are investing more to upgrade network operations,maintain fiber infrastructure, and provide simplified service offerings (Islam, 2018),making telecom a capital-intensive industry. However, the Bangladesh telecomindustry is highly regulated, where regulators fix the voice tariff and data pricing limit.Telecoms cannot charge below or above a particular range set by regulators.Recent Regulatory IssuesThe past few years marked several major regulatory developments in local telecom.In Q2 of 2018, the telecom regulator, Bangladesh Telecom Regulatory Commission(BTRC) published a tower company licensing guideline, stating that mobile networkoperators (MNOs) will not be eligible to bid for a tower company license. Only the fourtower company license owners who have permission from BTRC may develop, build,own, acquire, operate, and maintain mobile network towers.No MNO can rent a tower to another MNO; they can, however, sell a tower to the towercompanies (Dhaka Tribune, 2018d). In Bangladesh, there are almost 30,000 towers,as building towers has helped MNOs expand their networks (Dhaka Tribune, 2018d).One competitive differentiator for GP has been its geographic area of coverage. Thusfar, GP used to build, own, and operate its own towers across the country, allowing itto cover the majority of the area. Now, with this new regulation, it is likely that GP willlose that competitive edge. On the brighter side, the emergence of telecom tower3companies will remove the burden of further investments in tower expansion for GP,enabling GP to focus on designing and delivering new services to their customersusing new technologies. New tower companies are expected to reduce GP’s total costof operations significantly. Since they will be sharing the same set of towers for multiplenetwork operators, the cost per tower site will reduce. Moreover, tower companies areexpected to deploy individuals with specialized skills for operating these towers,thereby further reducing the cost of operations. All these factors will enable GP todeliver services to its subscribers at a lower cost. Thus, the cost per unit of voice ordata may also decline in the coming days.In October 2018, the Bangladesh government introduced the mobile number portability(MNP) service (Daily Sun, 2018a). This allows a mobile phone user to change telecomcarriers without changing their phone number, at a cost of BDT 50 plus VAT, with theprocess taking 72 hours at most. If a user wants to change operators yet again, shehas to wait 90 days (Dhaka Tribune, 2018a). As GP has the highest market share at46% and best network coverage, MNP is likely to impact GP more than the otherMNOs.With the significant market power (SMP) regulation, restrictions such as bans on rollingout new voice or data packages, establishing new towers, and product-basedmarketing can be placed on an operator once it accounts for 40% of the subscribers,annual revenues, or allocated spectrum. This latest regulatory move aims to bringgreater competition and safeguard the industry from being dominated by a singleplayer. Out of the four mobile phone operators in Bangladesh, only GP makes up morethan 40% of market share in terms of subscriber base.GP and the New RegulationsAfter the launch of MNP, many mobile users left GP to join Robi, the second largestoperator (Daily Sun, 2018b). GP charges significantly more than Robi—for instance,GP charges BDT 189 for 1 GB Internet package while Robi charges BDT 119 for thesame package, which is why many subscribers switched. GP enrolled only 10,491 newcustomers, while 49,658 of its current customers left; the operator lost 39,167subscribers (Islam, 2018).On February 11, 2019, BTRC declared GP an SMP operator and imposed fourrestrictions. Under the new BTRC directive, acceptable call drop rate had to be broughtto no more than 2%, from 3.38%, which is higher than its competitors (Islam, 2019b).GP was also barred from making any exclusive agreement with any entity while theoperator would not be able to carry out any market communication through any media(New Age, 2019). Lastly, BTRC has made it easier for a user to leave GP under MNPfacility. A subscriber who wants to switch networks must stay with the new carrier atleast for 90 days. But such subscribers can quit GP after 30 days (Islam, 2019b).The Road AheadIn response to the net loss of 39,167 subscribers, GP introduced its new “013” numberseries, which was a hit with customers. More than 100,000 customers opted in withinfour days of launch (Dhaka Tribune, 2018c). In the short term, GP has managed to4compensate for its lost customers; however, MNP applies to the new number series.Thus, any subscriber can still switch from GP.The towers that GP owns have long allowed the company to maintain the highestnetwork coverage in the country. Now that BTRC has imposed the new tower companylicensing guideline, Grameenphone management must consider three alternatives:1.GP can lease (finance lease) the existing towers (base stations as shown in Table1) to Edotco, one of the licensed tower sharing companies, for 10 years. Estimatedlease payment will be 10% of the leased asset. They will be able to use the towersduring the lease period with an approximate rental payment of 8% (effectively GP willgain 2% on net). However, GP will still have to incur the depreciation cost.2.They can sell the existing towers at book value and pay rent to Edotco for using thetowers. Estimated rental payment will be 20% of the asset size.3.They can retain their existing towers but they cannot establish any new towers. GPwill have to pay rent to Edotco to use new towers to expand their network. As GPalready covers 95% of the geographical area of the country, it does not plan to addnew towers to its existing network in the next five years.The best alternative will ensure that GP faces minimum loss owing to the newregulation.In retaliation to the four restrictions on GP under the SMP regulation, GP filed a writpetition in the Bangladesh high court (HC) against BTRC, challenging the procedurethrough which the four restrictions were imposed. Following a short hearing, the highcourt stayed one restriction on conducting nationwide promotional campaigns (Islam,2019a). GP still cannot conduct product marketing or campaigns to promote aparticular package or offer. However, it can run brand marketing that focuses to buildthe brand and its image. Now the company needs to decide between traditionalmarketing that focuses on a large group of customers and digital marketing that dealswith more specific target groups.With three new major changes, GP is uncertain about what course of action will helpthe company sustain its competitive advantage.5

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