1A.

Overview of the Telecom Industry

The history of mobile phones can be traced back to two-way radios permanently installed in
vehicles such as taxicabs, police cruisers, railroad trains, and the like. Later versions such as the so-
called transportable or "bag phones" were equipped with a cigarette lighter plug so that they
could also be carried, and thus could be used as either mobile two-way radios or as portable
phones by being patched into the telephone network.

Bell Labs developed the notion of "cellular" systems allowing for frequency reuse (and thus far
greater capacity) and developed it through the 1970s. On April 3, 1973 Motorola manager Martin
Cooper placed a cellular phone call (in front of reporters) to Dr. Joel S. Engel, head of research
at AT&T's Bell Labs. This began the era of the handheld cellular mobile phone. Meanwhile the 1956
inauguration of the TAT-1 cable and later international direct dialing were important steps in
knitting together the various continental telephone networks into a global network. The FCC
approved operation of an analog cellular mobile telephone system in 1982, sparking a new
growth sector.

In the 1950s, thoughts of deregulating the telecommunications industry started to develop

gradually. The United States of America (USA) were the first country to deregulate 1 the
telecommunications market. Following, other countries also started to deregulate their
telecommunications markets. In the past three decades, due to the latest liberalization 2 and
privatization3 wave in the world, the telecommunications industry has turned into a dynamic
environment and is rapidly growing.4

In this rapidly changing industry, the availability of state-of-the art technological know-how,
innovations and domestic and international market access are critical to a company’s
competitive success. As a result of a number of radical political and technological developments,
telecommunications companies needed new or complementary capabilities and resources to
fulfill the new demands and requirements. Therefore, extensive use was made of alliances,

1 The reduction or elimination of government power in a particular industry, usually enacted to

create more competition within the industry.
2 A relaxation of previous government restrictions, usually in such areas of social and economic

policy
3 The transfer of ownership of property or businesses from a government to a privately owned

entity.
4 Graack, C. (1996). Telecom operators in the European Union: Internationalization strategies and

network alliances, Telecommunications Policy.

mergers and acquisitions.56 Companies had to reconsider their strategies and their product and
market portfolio. This is one of the main reasons why the industry shifted from a vertical state to a
much privatized horizontal one.

Telecom Industry of Bangladesh

Bangladesh Telephone and Telegraph Board (BTTB) was the lone telecoms operator until 1993.
Bangladesh Telecom Limited (BTL) then awarded the license to operate cellular services.
However, the first mobile service in Bangladesh remained limited to only a few rich customers, due
to its hefty price. Monopolisation in the telecoms sector shattered with the debut of three GSM
operators --Sheba Telecom, Grameenphone and Aktel -- in the mid 90's. Competition among the
GSM players brought phenomenal power into the hands of the customers. Customers could switch
from one operator to the next with the GSM (global system for mobile communications)
technology without the need for changing handsets, which was not the case for CDMA.

Although mobile tariff dropped from around Tk. 25 a minute to around Tk. 11 from the shift from
CDMA operator to GSM, the technology remained beyond the grasp of the masses until 2005 due
to the still high prices then. Bangladesh needed almost decade to add 10 million customers into
the mobile networks. Interesting enough, the next 40 million customers were added in a mere four
years -- 2005-09.

The price war among the operators intensified after Egypt based mobile operator Orascom
acquired Sheba Telecom in 2005. Connection prices were further lowered to Tk. 10 and the per
minute tariff dropped to Tk. 0.25 under the aggressive marketing strategy by Banglalink, the
subsidiary of Orascom.

The mobile phone customer base reached 52.43 million by the end of 2009. In the next move in
the telecoms industry, Bharti Airtel acquired a 70 percent stake of Bangladesh's fourth largest
mobile operator Warid Telecom, who had entered the market previously in 2008. They continued
Warid’s low prices promotion system and this brought the call rates to a much lower level, handing
the baton to the customers who could easily switch between the operators.

What is to be noted is that the telecom industry in Bangladesh went through the same evolution
as that in the global scenario. The early telecom operators were a one-stop solution for the
customers, who could also buy the terminals from them, i.e. the mobile phones. But with the

5 Chan-Olmsted, S., & Jamison, M. (2001). Rivalry through alliances: Competitive strategy in the
global telecommunications market. European Management Journal.
6 Waverman, L., & Trillias, F. (2002). Corporate control and industry structure in global

communications: An introduction. Telecommunications Policy.

decrease of prices for mobile phones globally, the terminal providers have created their own
market in the industry and therefore telecom operators are focused on only providing connectivity
to their customers with some additional content.

1B. Global Value Chain of the Telecom

Industry
In traditional telecom industry era, telecom operators mainly provide basic telecom services,
which are voice-based, relatively simple and also completely dependent on telecom network. All
telecom services are provided by telecom operator alone, and all revenues remain with the
telecom operator. Telecom industry chain is a single linear industry chain including members of
network equipment providers, system integrators, basic telecom operators, terminal providers,
and content providers who contribute to the customers (as shown in Fig.1). Among them, network
equipment providers are responsible for providing network hardware equipment, system
integrators are responsible for providing software platform, basic telecom operators are
responsible for building and operating the basic network, terminal manufacturers are responsible
for providing terminal devices, such as mobile phones and fixed telephones, content providers
are responsible for creating the applications that the customers use. Customers are in the end of
industry chain and are the end users of the service. Each of these participants of the Value Chain
are of different industries yet contribute to the telecom industry as a whole.

Network
System Telecom Terminal Content
Equipment
Integrator Operator Provider Providers
Provider

•Cisco •Siemens •GrameenPho •Apple •Rovio

Systems •Alcatel ne •Samsung •Mobage
•Huawei •Banglalink •HTC •Google
•Airtel •Symphony
•Robi •Walton
•Teletalk
•Citycell

Fig. 1 Traditional Telecom Industry Chain

1C. Dynamics of the GVC of the Telecom
Industry
Suppliers/ Equipment Service
Consumers
Contractors Providers Providers

Contract
Component Suppliers Enterprises
Manufacturer

Hardware OEMs Service Providers Retailers

Distributors Individual Customers

Fig. 2 High Level Supply Chain Model

The current value chain of the telecom industry, based on the telecom operators, have taken a
more complicated form. It is not just a single linear model that starts from Infrastructure/Equipment
providers and ends with customers. The components of the chain operate on a more complex
basis, with each other in different industries and among themselves in the same industry. As shown
in Figure 2 above, Service Providers can contact with Hardware OEMs or take the same things
they require from Distributors of such components. Similarly Individual customers can buy the
required products from Service Providers or manage them through retailers.

However, this is not the end of the evolution of the Global Value Chain of the telecom industry.
The High Level Supply Chain Model i.e. that shown in Figure 2, is still basically a linear model, though
more complicated than the primary traditional mode. The next step for the Global Value Chain
was to completely move to a horizontal industry and therefore large companies began to rise,
who were specializing in the different components of the industry.
 Fig. 3 Mesh Structure of the Telecom Industry

The figure above shows the mesh structure of the telecom industry. This model fairly explains the
current value chain of the telecom industry as it shows the customer’s power in the current market.
It starts again with the Network Equipment Providers who provide basic infrastructure and
hardware to the outer circle entities i.e. the Telecom Operators, Terminal Providers and the
Content Providers. These entities operate solely by themselves and can collaborate with each
other but at the same time reach the end consumers with their own products. Unlike the traditional
vertical chain where one single organization was responsible in providing the whole solution to the
customer, now the customer can create any different combination from the relevant
organizations from each step of the value chain. Global organizations exists for Terminal Providers
in the likes of Apple, Samsung and Sony Ericsson. Each country has their own set of telecom
operators who also have partners outside the country. Any user can access content provided by
either their telecom operator or their terminal provider or even solo creations from the internet.
1D. SWOT Analysis of GrameenPhone based
on TTF
SWOT Analysis
Strengths
 Ownership Structure – GrameenPhone is partly owned by Telenor, who are a global
company. In Bangladesh, Grameen Bank is one of the largest NGO, with well-developed
and accepted communications throughout the country. Enterprise – Capability

 Market Leader Industry – Customers

 Network Availability - Grameenphone is perceived to have the widest network coverage

offering the best quality of communication. Enterprise - Capability

 Brand Name – GrameenPhone has built up a brand name with its successful activities all
over the country and people perceive GrameenPhone to have quality service regardless
of the price they offer. Industry – Customers

 Financial Soundness - Because of effective planning, Grameenphone is able to earn a

healthy amount of revenue, which gives them financial soundness. They are also in profits,
which can be rarely said about a telecom operator here. Enterprise - Capacity

 Support Organization - Grameenphone have shared the idea from the employees of
Bangladesh Railway and Grameen Bank, who were able to provide precious guideline for
the operation of Grameenphone. Industry – Collaborators

 High Ethical Standard - To keep the quality of service, Grameenphone is strict to follow its
ethical standard. Enterprise – Culture

 3G technology – GrameenPhone bid for a larger bandwidth of 3G technology that gives

them an edge over their competitors. Wider Environment – Technology & Innovation
Weaknesses
 Culture Gap – GrameenPhone consists of international as well as local managers and this
might create a cultural gap inside the workforce. Enterprise – Culture

 Perceived High Price – Customers perceive that the prices i.e. the call rates offered by
GrameenPhone are much higher compared to the likes of Robi, Airtel and other
competitors. Industry – Customers

 Lack of Harmony among SBUs - Intercommunication among various departments is weak.

The reason behind this is that there is no exchange program for employees to work among
various Strategic Business Units (SBUs). Enterprise – Culture

Opportunities
 Huge Demand for Telecom Services - The market of telecommunication is expanding. It is
therefore easy for GrameenPhone to achieve the major portion of expanded market
because of its leading position. Industry – Customers

 Teletalk’s 3G Failure – Despite coming in to the internet business with 3G almost 2 years
ago, Teletalk has failed to capitalize on the monopoly and is set to lose their market share
to other competitors, of whom GrameenPhone is in the best position to take over given
their advantage in size and strength. Industry – Competitors
Wider Environment – Technology & Innovation

Threats
 Rigid Government Regulations - Government is becoming restricted for taking away
currency from the country. So, Foreign Company are threatened because they may have
risk to back their investment to the country. The government also put restriction for the work
permit of foreign employee. Wider Environment – State & Society

 Political Instability - Political instability is another threat because, with the change of
Government, policies are also changed. So, this is difficult for any multinational
organization to cope with new policies. Wider Environment – State & Society

 Price War – Firstly Banglalink and now Airtel has positioned themselves as the cheaper
alternative, capturing a big market of the population. Industry – Competitors
1E. Two Strategic Issues
Price War
The entry of Banglalink in February 2005 sparked a price war in the Bangladesh Telecom Industry.
Banglalink’s attractive launch offer included a new connection and handset at a low start-up
cost. Following Banglalink, three other private operators – Grameen Phone, Aktel and CityCell –
also came up with various value-added offers resulting in an intense price battle. However, except
GrameenPhone, the other 3 companies could not sustain this procedure and are still facing losses.

Warid Telecom then entered the market with a lower price structure and this caused another
upheaval in the telecom sector. GrameenPhone refused to react primarily because of the
inevitable way in which Warid would face the same consequences as Banglalink. However in
2010, Indian Telecom giants, Bharti Airtel, bought majority shares of Warid Telecom, renaming it
Airtel Bangladesh and sustained the low cost structure, thus inducing a response from the market
leaders, who have currently lost out on the youth and rural market group to Airtel and face a drop
in their revenues.

3G Connectivity
The Bangladesh Telecommunication Regulatory Commission (BTRC) awarded the country’s four
largest private sector operators – GrameenPhone, Banglalink, Robi Axiata and Airtel Bangladesh
– 3G licenses. The licenses may also be used for the rollout of 4G services. 2G market leader
GrameenPhone was the sole bidder in the first round of auctions, buying a 2×10MHz concession,
followed by Banglalink, Robi and Airtel each purchasing 2×5MHz licenses in a second round. This
price of $21M per MHz sets the rate that state-owned Teletalk will now have to pay for its 3G
spectrum, after being permitted a head start in the market when it launched its W-CDMA network
in October 2012.

Despite getting a headstart of such a long time over its competitors, Teletalk has failed to
capitalize with its 3G operation. First failing to create a monopoly on which to take advantage of,
and secondly to gather substantial market share so that it could get into positive figures. However,
with the entry of GrameenPhone, Robi, Banglalink and Airtel in the frame and their vastly superior
promotion procedures, Teletalk will surely lose their market share and fall behind the privately
owned companies in the 3G market. GrameenPhone faces an issue regarding the other
competitors’ strategies and the price packages that they offer and at the same time they are
faced with the task of becoming market leaders in 3G as well as 2G.
1F. Strategic Moves for Strategic Issues
The two issues pose a strange strategic problem for a company of the stature of GrameenPhone.
Firstly, there is the 3G issue that requires GrameenPhone to position themselves as a quality 3G
internet provider and uphold their image of the best telecom brand in the country. But then prices
must be competitive so as to not lose market share to its competitors. Secondly, the price war
issue prompts GrameenPhone to decide whether it should lower its call rates so as to not lose out
on market share or risk diluting their market image. Furthermore, it should be considered that the
pricing and promotion of one also affects the other to some extent.

Therefore the first step that GrameenPhone should make is to undertake a complete customer
analysis and evaluate its target customers. Currently it focuses on almost every possible population
that uses a mobile phone and therefore it needs to assess itself to understand who their true
customers are. Once they have evaluated their customers and revenue stream, the data should
be separated to understand which customer base contributes exactly what percentage of the
revenue or what amount of the revenue, firstly, in terms of the basic call procedure and secondly,
in terms of their internet usage. Both data should be compared.

After a complete evaluation has taken place and GrameenPhone has identified its principal
target customers and have also recognized its separate target markets, it should focus on
preparing pricing packages for its customers. These pricing packages can be separate for its
youth segment, corporate segment, and
rural segment and can also differ in its prices
for the usage of internet or in basic call rates.
GrameenPhone can also decide to make a
combined package that encapsulates all
these offers so as to not focus on a target that
it does not think contributes much i.e. it needs
to place its segments in the Power/Interest
Matrix and determine its stance.

These packages should be made available

as soon as possible with frequent promotion done, especially on the 3G front so that
GrameenPhone can take the upperhand on the 3G market over its competitors.
Frequent feedbacks must be done after this strategic change and new customer analysis should
be carried out to better the process so that continuous and incremental change can be made
to the packages and maximum customers can be engaged in the process.

1G. Proposed Strategic Model

Revenue Stream
Customer Analysis Strategy Analysis
Analysis

Phone Usage Corporate Market

Develop
Internet Usage Rural Market Power/Interest
Matrix

Youth Market

Separate Pricing
Combined Pricing
Package for Separate OR Package
Segments

Customer Feedback

Strategy Evaluation
Bibliography
Chan-Olmsted, S., & Jamison, M. (2001). Rivalry through alliances: Competitive strategy in the
global telecommunications market. European Management Journal.

Graack, C. (1996). Telecom operators in the European Union: Internationalization strategies and
network alliances. Telecommunications Policy.

Waverman, L., & Trillias, F. (2002). Corporate control and industry structure in global
communications: An introduction. Telecommunications Policy.