Bangladesh's telecom sector 'designed to fail'

Grameenphone Chief Executive Officer Yasir Azman has issued a blunt warning that Bangladesh's telecommunications sector is becoming commercially unviable due to excessive taxation, unresolved audit disputes and restrictive regulation, saying the overall environment is "designed to fail".

In an interview with The Financial Express recently, Mr Azman said the industry remains trapped in long-standing structural problems that continue to deter foreign investment and undermine innovation.

"The biggest problem for the telecom industry is the tax burden," he said, noting that more than half of customer spending goes directly to the government through multiple layers of taxation.

"When a customer buys a mobile pack, about 55 per cent goes straight to the government. It is a direct cut."

He pointed to a combination of a 40 per cent corporate tax, 15 per cent VAT, 20 per cent supplementary duty, revenue sharing, spectrum fees and various licensing charges, describing the fiscal regime as among the harshest globally.

"I have not found another country close to Bangladesh in terms of spectrum cost. It is unheard of," he said, adding that such pricing sends a negative signal to investors.

Azman was particularly critical of the failure to resolve audit disputes between operators and the regulator, saying uncertainty has persisted throughout the industry's entire history.

"In 28 years of operation, not a single annual audit dispute has been resolved," he said. "So, we have not been able to get clear of financial disputes from inception to this day."

He disclosed that Grameenphone alone has around Tk 125 billion tied up in disputed claims, while industry-wide liabilities, including accumulated interest, run into tens of thousands of crores of taka.

"All three private operators are foreign investors," he said. "How will they decide to invest more when uncertainty exists from the very beginning till today?"

Warning that prolonged litigation could cripple the sector, Azman said: "If disputes remain in court for another 10 years, followed by another 10 years of accumulated interest, no telecom business will be viable."

He called for international arbitration as a realistic way forward, arguing that the current legal process has failed to provide closure.

"This door was entirely closed," he said, adding that regulators either could not be convinced or "don't want to be convinced".

The CEO also slammed competition rules, particularly the Significant Market Power (SMP) framework, saying it has severely limited Grameenphone's ability to innovate.

"SMP continues to pull us down," he said. "Every product or service requires lengthy approvals, sometimes taking years. Innovation is extremely difficult under these conditions."

He questioned why profitability has deteriorated despite strong subscriber growth. "We were profitable with far fewer customers in the past," he said. "So why is the industry struggling now? The answer lies in taxes, disputes, competition rules and pricing constraints."

Azman warned that the current revenue model is becoming increasingly fragile, with data services subsidised by declining voice income.

"Data services are essentially subsidised by voice," he said. "If this trend continues, the profitability we have today may not be sustainable in five to seven years."

He also rejected claims that operators are solely responsible for service quality issues, disputing recent regulatory assessments of network performance.

"The methodology of the report is flawed," he said, adding that operators had raised concerns over its conclusions. While acknowledging coverage gaps, he said infrastructure deployment is often blocked by permission constraints.

"There are more than 200 spots in Dhaka where it's very difficult," he said. "These are challenges we have to take on our shoulders."

Azman argued that the telecom sector's problems reflect a wider issue for foreign direct investment in Bangladesh.

"What is happening in the country is designed to fail," he said, warning that unless core issues are addressed, "investors' appetite to invest in Bangladesh is very, very low".

Without reform, he cautioned, the consequences would extend beyond telecom.

"Without strong connectivity, healthcare, education, financial inclusion-nothing works," he said.

"Telecom reform is not about benefiting operators; it's about whether the country can continue to progress."

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