Within the short span of a week, the Chief Executive Officer of Robi Axiata Limited has twice mentioned that the company would be looking to wind up its operations in Bangladesh as profitability was unsustainable. A twenty-seven per cent tax burden was, according to him, not allowing Robi to make money inspite of all the investments made in graduating from 2G to 4G and significant investments in the tower business that was ultimately spun off as Edotco to the parent company Axiata.
In the month of May, Telenor and Axiata announced that they were in talks to consolidate the tower business but that they would continue the separate telephony business in Bangladesh. It would now appear that that part of the agreement is being looked at.
Robi merged with Airtel two years ago making it the second largest telco in the country. The move gave the company leverage in bringing into its fold the new generation that were attracted by Airtel's slick young look. The CEO Mahtab Uddin Ahmed did not mince words in saying only one operator was making profits while the other two were bleeding losses. Interestingly enough, there are rumours that the third operator Banglalink is also in discussions to sell off its Bangladesh operations possibly to Reliance Jio of India.
On the other hand, facing the same if not more stringent regulations, the top operator Grameenphone (GP) continues to make profits and is the only listed telco in the country. GP is now battling to ward off Significant Market Power status that brings with it certain restrictions such as media buying. The cost of calls from the operator's network is also the most expensive. That is a turnaround from the past when operators used the minimum base price of calls to the fullest. They were given a boost when the base price was raised from thirty-paisa to forty-five paisa providing a windfall gain for all operators but the gloss was taken off with increase in the surcharge on calls made. GP with its subscriber base and network continued to make profits.
Overall services by all operators have left a lot to be desired with frequency of dropped calls and sustained network quality all headed south.
The cost of spectrum is one of the highest in the world but all three operators opted for the 4G system in the hope of higher profitability resulting from greater usage. But between a young population starved of data and the higher cost of such services is a space that, according to Robi, is not enough to meet shareholder expectation. This is further exacerbated by unresolved back taxes that are still to be sorted out in the court. GP is in dispute with the regulator over an audit that claims irregularities.
Whether the unveiled threat from Robi is real or not, telcos are feeling the pinch and the government needs to rethink its policy towards making the sector sustainable.
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