Grameenphone: Growth Strategy Amid Changing

Regulatory Environment and Industry Trends

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Author: Raisa Tasneem Zaman

Pub. Date: 2021
Product: Sage Business Cases
Sage Sage Business Cases
© Raisa Tasneem Zaman 2021

DOI: https://doi.org/10.4135/9781529742138
Disciplines: Business & Management, Strategic Management, Corporate Strategy, Porter's Five Forces,
Sustainability Strategy
Access Date: October 4, 2023
Publishing Company: SAGE Publications: SAGE Business Cases Originals
City: London
Online ISBN: 9781529742138

© 2021 SAGE Publications: SAGE Business Cases Originals All Rights Reserved.

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Abstract

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 guideline that limits bidding for a tower company license, the
significant market power regulation, and the mobile number portability service, which allows users to
switch carriers without changing numbers. In particular, mobile number portability service has caused
Grameenphone to lose subscribers. Although case details are specific to the context of a developing
country and the telecom industry, the principles involved apply to business strategy, competitive, and
driving forces faced by business everywhere.

Case

Learning Outcomes

After studying the case, students should be able to:

• Assess how competitive forces, such as threat of substitutes, customer and supplier bargaining pow-

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er affect the Bangladesh telecom industry and how Grameenphone is developing strategies to over-
come the negative impact of these forces.
• Identify the driving forces, such as emerging new Internet capabilities and applications, changing
consumer preferences and regulatory policies that influence the telecom industry in a developing
country.
• Analyze how economic factors, technological factors, and legal factors, including consumer inclina-
tion towards non-voice services, smartphone penetration, and tower sharing regulations affect the
growth of a telecom company.
• Evaluate risks and benefits, namely losing existing customers or acquiring new ones, changing costs,
and determining new services and how these may influence Grameenphone’s strategic direction, in
response to changes in government regulations.

Introduction

Tisha has been a user of Grameenphone Ltd. (GP) for more than five years; her latest SIM 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 yet another number from GP! I switched to Robi and kept my old number.”

GP is the leading telecommunication service provider in Bangladesh; as of December 2018 it dominates the
telecom industry with 46% of the total market share of active mobile SIM users (BTRC, 2018). However, with
the introduction of Bangladesh’s mobile number portability (MNP) service, which allows a customer to switch
mobile operators and keep their current mobile number, mobile subscribers have begun to leave GP and avail
themselves of the new service.

Grameenphone is the largest provider in terms of revenue, coverage, and subscriber base, mainly providing
telecommunication services (voice, data, and other related services). 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). GP is considering introducing a video streaming platform in future to take advantage of the upward
trend in data consumption. As of December 2018, the total number of GP-owned sites (or towers) stands at
2G –14,521; 3G –14,687; 4G –5009 (Grameenphone Ltd., 2018), enabling GP to cover 95% of the country.

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Figure 1. Breakdown of Grameenphone’s Revenue

Source: Annual Report 2018, Grameenphone Ltd.

According to GP, total smartphone penetration of the country stood at 28% as of August 2017. Increased
smartphone penetration combined with 3G and 4G-enabled devices 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
and services and the same network services as customers of “017” (Dhaka Tribune, 2018b).

Trends in the Global Telecom Industry

Globally, telecom companies must shift focus to non-voice services to continue growing (Chakroborti, 2017).
Minutes of use (MoU) have flattened as consumer usage shifts toward data, despite more packages offering
unlimited voice minutes and text messages (Ernst & Young, 2013). Increased use of smartphones is enabling
greater access to “over-the-top” data services, such as Voice over Internet Protocol (VoIP) and mobile mes-
saging (Kemp, 2017). Over-the-top (OTT) service providers employ Internet connectivity on smartphones to
offer voice calls and messaging services, which are significantly cheaper than “traditional” voice calls and
SMS (Kemp, 2017).

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Bangladesh is the fifth-largest mobile market in Asia Pacific Region and ninth in the world, with 85m unique
subscribers (GSMA Intelligence, 2018). Mobile operator revenue from data services is spiraling up as people
use mobile devices to complete more tasks. Telecom companies are investing more to upgrade network op-
erations, maintain fiber infrastructure, and provide simplified service offerings (Islam, 2018), making telecom
a capital-intensive industry. However, the Bangladesh telecom industry 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 Issues

The past few years marked several major regulatory developments in local telecom. In Q2 of 2018, the tele-
com regulator, Bangladesh Telecom Regulatory Commission (BTRC) published a tower company licensing
guideline, stating that mobile network operators (MNOs) will not be eligible to bid for a tower company license.
Only the four tower company license owners who have permission from BTRC may develop, build, own, ac-
quire, operate, and maintain mobile network towers.

No MNO can rent a tower to another MNO; they can, however, sell a tower to the tower companies (Dhaka
Tribune, 2018d). In Bangladesh, there are almost 30,000 towers, as building towers has helped MNOs ex-
pand their networks (Dhaka Tribune, 2018d). One competitive differentiator for GP has been its geographic
area of coverage. Thus far, GP used to build, own, and operate its own towers across the country, allowing
it to cover the majority of the area. Now, with this new regulation, it is likely that GP will lose that competitive
edge. On the brighter side, the emergence of telecom tower companies will remove the burden of further in-
vestments in tower expansion for GP, enabling GP to focus on designing and delivering new services to their
customers using new technologies. New tower companies are expected to reduce GP’s total cost of opera-
tions significantly. Since they will be sharing the same set of towers for multiple network operators, the cost
per tower site will reduce. Moreover, tower companies are expected to deploy individuals with specialized
skills for operating these towers, thereby further reducing the cost of operations. All these factors will enable
GP to deliver services to its subscribers at a lower cost. Thus, the cost per unit of voice or data 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 telecom carriers without changing their phone num-

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ber, at a cost of BDT 50 plus VAT, with the process taking 72 hours at most. If a user wants to change opera-
tors yet again, she has to wait 90 days (Dhaka Tribune, 2018a). As GP has the highest market share at 46%
and best network coverage, MNP is likely to impact GP more than the other MNOs.

With the significant market power (SMP) regulation, restrictions such as bans on rolling out new voice or data
packages, establishing new towers, and product-based marketing can be placed on an operator once it ac-
counts for 40% of the subscribers, annual revenues, or allocated spectrum. This latest regulatory move aims
to bring greater competition and safeguard the industry from being dominated by a single player. Out of the
four mobile phone operators in Bangladesh, only GP makes up more than 40% of market share in terms of
subscriber base.

GP and the New Regulations

After the launch of MNP, many mobile users left GP to join Robi, the second largest operator (Daily Sun,
2018b). GP charges significantly more than Robi—for instance, GP charges BDT 189 for 1 GB Internet pack-
age while Robi charges BDT 119 for the same package, which is why many subscribers switched. GP enrolled
only 10,491 new customers, while 49,658 of its current customers left; the operator lost 39,167 subscribers
(Islam, 2018).

On February 11, 2019, BTRC declared GP an SMP operator and imposed four restrictions. Under the new
BTRC directive, acceptable call drop rate had to be brought to 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 the operator 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 MNP facility. A subscriber who wants to
switch networks must stay with the new carrier at least for 90 days. But such subscribers can quit GP after 30
days (Islam, 2019b).

The Road Ahead

In response to the net loss of 39,167 subscribers, GP introduced its new “013” number series, which was a
hit with customers. More than 100,000 customers opted in within four days of launch (Dhaka Tribune, 2018c).

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In the short term, GP has managed to compensate 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 highest network coverage in the
country. Now that BTRC has imposed the new tower company licensing guideline, Grameenphone manage-
ment must consider three alternatives:

1. GP can lease (finance lease) the existing towers (base stations as shown in Table 1) to Edotco, one
of the licensed tower sharing companies, for 10 years. Estimated lease payment will be 10% of the
leased asset. They will be able to use the towers during the lease period with an approximate rental
payment of 8% (effectively GP will gain 2% on net). However, GP will still have to incur the deprecia-
tion cost.
2. They can sell the existing towers at book value and pay rent to Edotco for using the towers. Estimated
rental payment will be 20% of the asset size.
3. They can retain their existing towers but they cannot establish any new towers. GP will have to pay
rent to Edotco to use new towers to expand their network. As GP already covers 95% of the geo-
graphical area of the country, it does not plan to add new towers to its existing network in the next five
years.

The best alternative will ensure that GP faces minimum loss owing to the new regulation.

Table 1. Property, Plant, and Equipment (PP&E) and Depreciation of Base Station of Grameenphone Ltd.
(BDT million)

2012 2013 2014 2015 2016 2017 2018

Net PP&E – base station 38,182 36,350 35,728 39,447 44,080 41,574 45,669

Depreciation and maintenance of base station 7,748 7,930 9,176 9,434 10,695 11,652 10,792

Source: Annual Report 2018, Grameenphone Ltd.

In retaliation to the four restrictions on GP under the SMP regulation, GP filed a writ petition in the Bangladesh
high court (HC) against BTRC, challenging the procedure through which the four restrictions were imposed.
Following a short hearing, the high court stayed one restriction on conducting nationwide promotional cam-

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paigns (Islam, 2019a). GP still cannot conduct product marketing or campaigns to promote a particular pack-
age or offer. However, it can run brand marketing that focuses to build the brand and its image. Now the com-
pany needs to decide between traditional marketing that focuses on a large group of customers and digital
marketing that deals with more specific target groups.

With three new major changes, GP is uncertain about what course of action will help the company sustain its
competitive advantage.

Discussion Questions

1. Explain the competitive forces industry members are facing in the Bangladeshi telecom industry.
Which of these factors are more relevant for GP and why?
2. Assess the effectiveness of GP’s strategy to add a new number series in response to the MNP regu-
lation. How can GP retain its subscribers in the long term?
3. How might GP reach out to its customers, given the recent SMP regulation? What options does GP
have within traditional marketing or digital marketing to sustain its brand image?
4. How can GP sustain its competitive advantage, given the recent regulatory developments? Explain
which alternative GP should choose to maximize profit after the tower company licensing guideline is
introduced.
5. Outline a future growth strategy for GP.

Further Reading

CIA. (2018). World Factbook. South Asia: Bangladesh. https://www.cia.gov/library/publications/the-world-fact-

book/geos/print_bg.html

Grant, R. M. (2010). Contemporary Strategy Analysis (7th ed.). John Wiley & Sons.

GSMA Intelligence. (2018). The mobile economy. https://www.gsmaintelligence.com/re-

search/?file=061ad2d2417d6ed1ab002da0dbc9ce22&download

GSMA Intelligence. (2019). The mobile economy. https://www.gsmaintelligence.com/re-

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search/?file=b9a6e6202ee1d5f787cfebb95d3639c5&download

Mehedi, F. (2018). Major developments that will enhance ICT and telecom industry. https://dailyasian-
age.com/news/102464/major-developments-that-will-enhance-ict--telecom-industry

References

Bangladesh Telecommunication Regulatory Commission (BTRC). (2018). Mobile phone subscribers in

Bangladesh. http://www.btrc.gov.bd/telco/mobile

Chakroborti, A. (2017). Digital journey of telecom companies. https://www.thedailystar.net/business/digital-

journey-telecom-companies-1444183

Daily Star . (2019). Robi gains most from MNP. https://www.thedailystar.net/business/telecom/news/robi-

gains-most-mnp-service-in-bangladesh-1688038

Daily Sun . (2018a). Operators launch mobile number portability service. https://www.daily-sun.com/printver-
sion/details/340101/2018/10/02/Operators-launch-mobile-number-portability-service

Daily Sun . (2018b). Robi receives maximum, GP loses most after MNP launched. https://www.daily-sun.com/
post/344950/Robi-receives-maximum-GP-loses-most-after-MNP-launched

Dhaka Tribune . (2018a). MNP service for mobile phone users from Oct 1. https://www.dhakatribune.com/
business/2018/09/27/mnp-service-for-mobile-phone-users-from-oct-1

Dhaka Tribune . (2018b). Grameenphone launches “013” number series. https://www.dhakatribune.com/busi-

ness/2018/10/15/grameenphone-launches-013-number-series

Dhaka Tribune . (2018c). Grameenphone’s “013” series an instant hit with customers. https://www.dhakatri-
bune.com/business/2018/10/21/grameenphone-s-013-series-an-instant-hit-with-customers

Dhaka Tribune . (2018d). 4 firms get mobile phone tower sharing license. https://www.dhakatribune.com/busi-
ness/2018/11/01/4-firms-get-mobile-phone-tower-sharing-license

Ernst & Young Global Limited. (2013). Metrics transformation in telecommunications: Meeting the challenges
of communicating performance in a shifting industry landscape. https://www.scribd.com/document/

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285995104/Metrics-Transformation-in-Telecommunications-EF0117

Grameenphone Ltd. (2018). Quarterly Financial Report. https://www.grameenphone.com/about/investor-rela-

tions/ir-financial-report

GSMA Intelligence. (2018). Country overview: Bangladesh. Mobile industry driving growth and enabling digital
inclusion. https://www.gsmaintelligence.com/research/?file=a163eddca009553979bcdfb8fd5f2ef0&download

Islam, M. Z. (2018). Data perking up telco revenue. https://www.thedailystar.net/business/data-perking-telco-

revenue-1546894

Islam, M. Z. (2019a). Is SMP restriction procedure legal? https://www.thedailystar.net/business/news/smp-re-

striction-procedure-legal-1710283

Islam, M. Z. (2019b). GP handed out SMP restrictions. https://www.thedailystar.net/business/telecom/news/

gp-handed-out-smp-restrictions-1704100

Kemp, S. (2017). Digital in 2017: Global overview. https://www.linkedin.com/pulse/digital-2017-global-

overview-simon-kemp

New Age . (2019). BTRC slaps conditions on GP as SMP. http://www.newagebd.net/article/65238/btrc-slaps-

conditions-on-gp-as-smp

https://doi.org/10.4135/9781529742138

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