Table of Content

Contents
Introduction ................................................................................................................................................. 2
Merger and Acquisition .............................................................................................................................. 3
Bangladesh Mobile Telecom Market......................................................................................................... 4
Current Mobile Telecom Market Structure ............................................................................................. 5
Pre-merger and post-merger analysis using Herfindalhl-Hirschman (HHI) ........................................ 6
Conclusion ................................................................................................................................................... 7
References .................................................................................................................................................... 8

Introduction
Merger and acquisition is most popular topic in business in todays world. The concept of
globalization made it easy for creating business across the border. Companies all around the world
merging with other companies or taking over it creating new market and expanding their frontier.
In the pre globalization era, international business was bounded to trading. Big companies from
developed world used to export to other countries. Those were mostly those goods in which they
are efficient. On the other hand they used to import products in which they have no longer any
competitive advantage.
However, globalization helped these big MNCs to open their production plant and expand their
business in new market. For example apple design their product in USA but produce in China in
same quality to minimize the cost. Besides KFC serving their fried chicken from USA to
Bangladesh all around the world. The most appropriate example of globalization would be The
Coca-Cola Company. Coca-Cola is now serving in almost 190 countries of the world.
Merger and acquisition is the quickest way to enter in market. This is much easy and reliable then
green field investment. But if the merger or acquisition happens in concentrated market it could
be harmful for consumer. Industry with few seller have more control on price and they can
overcharge on customer. So, government should make policies in this area to reduce unethical
business practices.

Merger and Acquisition

A merger or an acquisition in a company sense can be defined as the combination of two or more
companies into one new company or corporation. The main difference between a merger and an
acquisition lies in the way in which the combination of the two companies is brought about. In a
merger there is usually a process of negotiation involved between the two companies prior to the
combination taking place. For example, assume that Companies A and B are existing financial
institutions. Company A is a high street bank with a large commercial customer base. Company B
is a building society or similar organization specializing in providing home loans for the domestic
market. Both companies may consider that a merger would produce benefits as it would make the
commercial and domestic customer bases available to the combined company. There will
obviously be some complications and difficulties involved but there are also some obvious
potential synergies available. For example, company B might be able to use its home loans
experience to offer better deals to potential and existing mortgage customers of company A. The
two companies may decide to initiate merger negotiations. If these are favorable, the outcome
would be a merger of the two companies to form a new larger whole.
In an acquisition the negotiation process does not necessarily take place. In an acquisition company
A buys company B. Company B becomes wholly owned by company A. Company B might be
totally absorbed and cease to exist as a separate entity, or company A might retain company B in
its pre-acquired form. This limited absorption is often practiced where it is the intention of
company A to sell off company B at a profit at some later date. In acquisitions the dominant
company is usually referred to as the acquirer and the lesser company is known as the acquired.
The lesser company is often referred to as the target up to the point where it becomes acquired. In
most cases the acquirer acquires the target by buying its shares. The acquirer buys shares from the
targets shareholders up to a point where it becomes the owner. Achieving ownership may require
purchase of all of the target shares or a majority of them. Different countries have different laws
and regulations on what defines target ownership. Acquisitions can be friendly or hostile. In the
case of a friendly acquisition the target is willing to be acquired. The target may view the
acquisition as an opportunity to develop into new areas and use the resources offered by the
acquirer. This happens particularly in the case of small successful companies that wish to develop
and expand but are held back by a lack of capital. The smaller company may actively seek out a
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larger partner willing to provide the necessary investment. In this scenario the acquisition is
sometimes referred to as a friendly or agreed acquisition. Alternatively, the acquisition may be
hostile. In this case the target is opposed to the acquisition. Hostile acquisitions are sometimes
referred to as hostile takeovers.

Bangladesh Mobile Telecom Market

Bangladesh was the first South Asian country to adopt cellular technology back in 1993 by
introducing Advanced Mobile Phone System (AMPS). In fact, the first mobile license was issued
back in 1989 but it took several years to launch the services. The network coverage and number of
subscribers had remained very limited due to exorbitantly high subscription cost and call tariff.
In 1996, the then government led by Prime Minister Shiekh Hasina, considering the monopolistic
environment prevailing in the sector, awarded three GSM licenses aimed at breaking the monopoly
and making the cellular technology affordable to the general masses.
Since then, the country's cellular industry never looked back, now it has turned into the largest
infrastructure provider during the last decade as sub sector within telecom sector. This sub-sector
has created new opportunities by generating employment, facilitating education and health
services for common people.
The mobile communications sector in Bangladesh is one of the fastest growing industries and has
helped boost the economic and social development in the country in three main ways:
1. By providing value-added services and creating employment from direct/indirect firms in
the telecommunications sector.
2. Increased productivity in businesses as a result of mobile phone usage.
3. Increasing the involvement and engagement of its population with news and current affairs.
This is borne out by key economic indicators. "The inflow of foreign direct investment (FDI) grew
by 26 per cent with telecommunication sector making highest growth in the 2008-09 fiscal years
over that of the previous fiscal. A total of around US $ 430 million was invested in the country's
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telecommunication sector, particularly by fast-growing mobile phone companies in FY 09," a

recent study of Bangladesh Bank reveals. Investment from this industry as of December 2008
stands around BDT 30,000 (Thirty Thousand) crore.
Contributions of mobile industry to the National Exchequer are worth more than BDT 20,000
(Twenty Thousand) crore, as of December '08. It has generated direct and indirect employment of
6,75,000 (six lakh seventy five thousand) people till 2006-07 FY which has increased further in
recent years.

Current Mobile Telecom Market Structure

The total number of Mobile Phone subscriptions has reached 131.956 million at the end of
January, 2016
The Mobile Phone subscribers are shown below:
OPERATOR
Grameen Phone Ltd. (GP)
Banglalink Digital Communications Limited
Robi Axiata Limited (Robi)
Airtel Bangladesh Limited (Airtel)
Pacific Bangladesh Telecom Limited (Citycell)
Teletalk Bangladesh Ltd. (Teletalk)
Total

SUBSCRIBER
56.204
32.368
27.795
10.510
0.867
4.211
131.956

% of Market Share
42.59%
24.53%
21.06%
7.97%
0.66%
3.19%
100%

Source: Bangladesh Telecommunication Regulatory Commission, till January 2016.

* Subscribers in Million
**The above subscribers' numbers are declared by the mobile operators

In current market share percentage GP is the market leader followed by Banaglalink and Robi.
Airtel and Teletalk has few market share and Citycell market share is very insignificant.
In Bangladesh total population is about 160 million and there is six telecom service provider in
this small amount of people. So market is very competitive especially among the top three player.

Currently Robi and Airtel are proposing to merge which been advanced to final stage. Public
hearing been done. However Robi got 21.06 % and Airtel got 7.97% market share. If they marge
total market share will be 29.03%. The company name will be Robi.

Pre-merger and post-merger analysis using Herfindalhl-Hirschman (HHI)

Pre-merger situation
Company
GP
Banglalink
Robi
Airtel
Citycell
Teletalk
Total

Market Share
42.59%
24.53%
21.06%
7.97%
0.66%
3.19%
100%

HHI
1814
602
444
64
0.44
10
2934.44

Market Share
42.59%
24.53%
29.03%
0.66%
3.19%
100%

HHI
1814
602
843
0.44
10
3269.44

Post-merger situation
Company
GP
Banglalink
Robi
Citycell
Teletalk
Total

HHI Concentration Level and Possible Government Action

Post-Merger HHI

Concentration

Change in HHI

Government Action

Less than 1,000

Not concentrated

Any amount

No action

Between 1,000 and 1,800

Moderately concentrated

100 or more

Possible challenge

More than 1,800

Highly concentrated

50 or more

Challenge

In the calculation we see that the post-merger HHI is more than 1800 and the change is by
335, which indicates that the market will be highly concentrated if the merger is happen and
government will be challenge by it.
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The government should consider that fact that if Robi and Airtel merge the 96.15% market will be
controlled by GP, Banglalink and Robi. This merger will push Robi as 2nd market leader. As they
will be controlling the market monopoly in telecom market could come again.

Conclusion
Till now the merger is yet to complete. There are lot of calculations still need to make by the
government and other parties who look after the interest of consumers. If the merger happens it
might not bring good in telecom industry.

References

1. BTRC (2016) Mobile Phone Subscribers in Bangladesh January, 2016, Available at:
http://www.btrc.gov.bd/content/mobile-phone-subscribers-bangladesh-january-2016
(Accessed: 2nd March, 2016).
2. Dr. Aref Chowdhury (2016) 'Robi Airtel Merger: An opportunity to ponder ', The Daily
Star, 1st February, p. 4.
3. Muhammad Zahidul Islam (2015) 'Robi-Airtel merger another step closer to reality ', The
Daily Star, 29th September, p. 4.
4. Star Business Report (2016) 'Robi, Airtel ink merger deal ', The Daily Star, 29th January,
p. 4.