Companies will enjoy increased data revenue when complete 4G rollout has taken place and consumers have completely shifted to 4G internet use. Furthermore the smartphone penetration is GSMA Intelligence predicts that mobile internet subscription is expected to grow to 73 million by 2025 with a penetration of 41% from 35 million in 2017. Smartphone penetration is also going to rise as prices fall. According to Grameenphone, 4G smartphone users have 116% higher ARPU than feature phone users.
With the emergence of IoT technology, the telecom companies have the potential to increase their data ARPU with more customers constantly connected to the internet for daily activities.
This potential will be more fruitful when 5G technology is established in the country resulting in seamless connectivity across all devices. There are however rising concerns among experts about the cost-effectiveness of this technology due to highly restrictive government policies such as high internet spectrum prices.
With rising OTT technology, consumers will shift to OTT call service providers for voice calls. Thus it is important to develop other services which require mobile data in order to switch the revenue source for the telecom operators.
Companies are now looking to develop streaming services to keep the customers connected their service and thus increase internet revenue.
Government regulations are widely seen as the largest challenge being face by the telecom industries. The government’s Digital Bangladesh Initiative has supported the growth of the telecom industry but it has also brought its own complications. In order to regulate the activities of the companies in the oligopolistic industry, the government issued Significant Market Power (SMP) Regulation and decided to separate the tower industry from the telecom operators. The tower industry separation may reduce network quality as the new tower operators are not being able to guarantee the same capacity as the telecom operators leading to potentially higher call drops.
The SMP regulation attempt to restrict monopoly activities, collusion and unfair prices. The regulation states certain rules for companies above market share of 40%, with Grameenphone being the only company eligible for the regulation. The company will face certain restrictions as part of regulation including higher minimum call rate.
Grameenphone is the leading telecommunications service provider in the country, and was a pioneer in the industry’s introduction of GSM technology. The company has a subscriber’s base of 76.56 million customers covering 99.6% of the Bangladeshi population with its network. The company currently has a market share of 46.18%. Founded in 1997 by Iqbal Quadir and Dr. Muhammad Yunus, the company went on to become the strongest player in the market continuously providing solid business performance in a highly competitive market. The company reported a revenue of Tk. 143.66 billion in 2019 and a market capitalization of Tk. 322.45 billion.
The company is a joint venture between Telenor (55.8%) and Grameen Telecom (34.2%), with the remaining 10% held by public investors. Grameenphone has managed to encompass 95.4% of the population under its 3G network and 754.5% under its expanding 4G network. In 2019, the company invested Tk. 18.2 billion in expanding both its 3G and 4G network. The company was able to increase its mobile data subscribers to 40.6 million in 2019. A notable achievement of the company was enhancing the deep sea network connectivity safeguarding the fishermen and commuters. In 2019, Grameenphone contributed Tk. 85049 million to the National Exchequer.
The telecom operator is focused on delivering growth through increased connectivity and improved voice, data and digital services. They are striving to bring innovation and drive modernization from network management to customer management through enhanced network and IT assets and process simplification. The company has faced a major turmoil when it was forced to enter a fight with the telecom regulator over audit claims of Tk. 125.8 billion which may have serious impacts on its cash flow as they had to pay Tk. 10 billion on court orders with further instructions to pay another Tk. 10 billion in three months. Despite recent issues with the authorities, Grameenphone is aiming to reduce the digital divide of the country using its streamlined network and extensive coverage, and contribute towards building the nation’s Digital Bangladesh dream.
Grameenphone has consistently capitalized on the Bangladeshi market’s demand for high quality service over the years by providing extensive network coverage and low call drops. The company believes in the differentiation strategy and has strived to provide the very best service to warrant a premium pricing. Grameenphone has been focused on innovating new products to differentiate themselves from the market and stay relevant in the digital world. Their recent priority has been on developing new IoT solutions for both the home and enterprise market to prepare for the establishment of 5G network technology in the near future and increase their ARPU. They are also enhancing the GPAY app which is a mobile wallet that GP customers can use to pay utility bills, internet bills, cable bills etc. Their streaming service, Bioscope, is another revenue generating source they are trying to improve. The target is to make Grameenphone services and everyday part of the consumer’s life so that they are always connected to the Grameenphone network, thereby increasing the company’s ARPU. The company has also been heavily investing in expanding their 4G network to increase their coverage beyond any other telecom operator, a strategy that has kept them on the top of the industry for at least the last decade if not more.
In order to consider investment in the company, we need to understand the strategic position of Grameenphone’s products. The following page contains an analysis of the BCG matrix of Grameenphone’s profit centers.
As seen in Figure 8 and discussed earlier in the report the voice call service is a cash cow for the company with already established coverage but poor market growth as customers are shifting to OTT calls. The company needs to reinvest the profits it is enjoying from voice calls now into its star product: Mobile Data packages. The company is competing heavily with Robi to increase its mobile data market share and enhance data ARPU. The market is constantly growing as customers enjoy more digital services and inherently have a higher demand for mobile data.
GPAY and Bioscope are both question marks for the company as they face severe competition in a growing market. It is safe to say that Bkash is dominating the digital wallet market and GPAY has a long way to go to make up and capture the market. Heavy investments are required behind creating innovative solutions through the app to gain market share in the mobile payments industry. Bioscope is also facing severe competition from several streaming services mainly from Binge, the newly launched streaming service of Robi. The service also face immense competition from foreign streaming services such as Neflix and Amazon as customers have increase viewing on those portals. However the potential in this market is huge, as streaming services are taking over television to become the source of content consumption by the population and proper investments in developing the right content could prove to be extremely profitable for Bioscope.
IoT solutions can be seen as a Dog right now since the market has not gained momentum yet and there is intense competition from not only other telecom operators but also smaller startups who are developing competitive solutions in this market. However with the advent of 5G technology in the country in the future, IoT solutions will become the most profitable product and this can turn into a Star. The company needs to monitor this industry’s growth and invest in the proper development of IoT solutions needed by both home and enterprise market. Thus from the BCG matrix analysis we can see that the company is poised to achieve a profitable stream of revenue and heavy cash flow if right investment and strategies are made. In order to understand the company’s ability to capitalize on future opportunities, we also need to analyze the company’s strength and weaknesses. Figure 9 contains a SWOT analysis for Grameenphone in the next page.