The telecoms market in Bangladesh has seen a burst of activity recently after months of announcements and rumours from the market’s regulator and main stakeholders. The Bangladeshi regulator, the BTRC, seems to be committed to improving the efficiency of telecoms through the adoption of infrastructure sharing.
The merger between between Robi and Airtel has been approved, and the government plans to award two tower management licenses to independent companies by the end of the year. This represents strong progress towards the adoption of the independent tower ownership model, as Bangladesh seeks to address its main challenges: a combination of dense population centres and remote rural populations, unstable grid during the monsoon season, and overlapping MNO-captive towers that are ripe for consolidation.
MNO consolidation
First announced in January 2016, the long-awaited merger between Airtel and Robi has been approved by the Bangladeshi Prime Minister. In the merged entity, Axiata, the parent company of Robi, will hold a 68.7% stake, Bharti Airtel 25% and NTT DoCoMo of Japan 6.%. Currently, Axiata has a 91.59% share and NTT DoCoMo 8.41% in Robi.
The government of Bangladesh has agreed to a plan to charge Robi BDT5.07bn (US$63.5mn) to use Airtel’s 1.8GHz spectrum, as well as a BDT1bn merger fee. The spectrum fee (BDT338mn per megahertz) is aimed at making up the difference between the price Robi paid for spectrum in 2011 and the lower price Airtel paid in 2005.
NTT DoCoMo entered the market in June 2008 by taking 30% from then Aktel of AK Khan and Company at a price of US$350mn. In May 2013, NTT DoCoMo reduced its stake to 8.41% from 30%. Airtel entered the market in 2010 by buying a 70% share of Warid’s Bangladeshi opco, after which Airtel also bought the remaining 30% share from Warid in 2013 at a price of US$85mn.
The newly combined entity will have 37.3mn subscribers and a 28.5% market share, making it larger than current number two operator Banglalink with its 24% share. Airtel has less than a 7% market share in Bangladesh and is the fourth largest among eight operators. The remaining four operators have a combined share of less than 5%t. The leading operator, Grameenphone, has a 43% share, according to GSMA Intelligence.
Breakdown of shares in the new entity
The Bangladeshi tower market
To date Axiata’s edotco Bangladesh is the only towerco operating at scale in this market after taking over the management of 5,300 tower assets from Robi, also part of the Axiata Group. edotco Bangladesh was created in response to the draft tower company guidelines in Bangladesh which state that an entity having a relation with a mobile phone or WiMAX operator is ineligible to apply for a full licence. The draft guideline also said foreign tower management companies must have a local partner and would not be allowed to operate on their own.
At present, edotco Bangladesh manages over 7,500 towers of the six mobile companies operating in Bangladesh, trading on the basis of certificate of no-objection from the BTRC. Robi is now planning to transfer 31.01% of edotco Bangladesh’s shares back to edotco Group as the Malaysian tower management company looks to get a full licence to run its operations in the country. Before the share transfer, Robi held 51% of edotco Bangladesh’s shares. Now with the share transfer, edotco Group will hold 80.01% equity in edotco Bangladesh and Robi the remaining 19.99%.
The government of Bangladesh has announced plans to award two tower management licenses to independent companies through an open tender by the end of the year. According to the current draft tower company guidelines, with Robi holding a 19.99 percent share in edotco Bangladesh, it will be ineligible to apply for the tower licence, unless changes are made to the draft guidelines prior to the transaction. At the same time, the BTRC reportedly said that the watchdog would form a new tower company to manage the tower sharing initiative. According to the BTRC, 36,000 mobile towers have been installed so far in the country, whereas only 24,000 are needed.
With the edotco Bangladesh application for one of the two tower management licences up in the air it remains to be seen who the other candidate or candidates may be. There may be some other international companies that are interested in entering this market; at one point Bharti Infratel seemed interested, but that interest may have cooled with the consolidation of Bharti Airtel’s Bangladeshi opco. We have also seen Towershare and Tower Bersama exploring investment opportunities in other Southern Asia markets. Another possibility is that the tower management companies will originate from the domestic market; one of the local MNOs may be considering creating its own tower company, or two or more operators may be planning to create a joint venture towerco.
These developments mark a new stage for the telecoms market and tower market in Bangladesh, and there could be more MNO consolidation and tower transactions in the near future. There are rumours that VimpelCom may look to divest the tower assets in Bangladesh belonging to its subsidiary Banglalink. At ~6,000 towers this is the third largest portfolio in Bangladesh and a tempting target for a company aiming to reach scale. There is definitely room for growth in the Bangladeshi market; as of Q4 2015 the GSMA estimated that mobile broadband penetration was at 13%. At least three of Bangladesh’s MNOs are keen to focus their investment on 3G and 4G rather than on passive infrastructure, creating an ideal environment in which towercos can acquire and build towers, enabling MNOs to concentrate on QoS and selling minutes and megabytes.
Estimated tower count for Bangladesh
Bangladeshi regulator warms to international towerco investment
It is not unusual for tower companies to trade under a certificate of non-objection for a period whilst regulatory regimes are drafted to accommodate the still new phenomenon of independent tower ownership.
The challenge for the BTRC has been that the towerco interested in creating efficiencies in their market, and ultimately investing in critical national infrastructure, was a foreign direct investor owned by Axiata, the parent company of one of Bangladesh’s MNOs, Robi. The fact that Robi was also proposing in-market consolidation further muddied the waters for the regulator, but this latest set of developments provides a degree of clarification.
It feels like we’re still missing one piece of the puzzle in the Bangladeshi tower market - if edotco Bangladesh is to be permitted to own and operate Robi’s towers, perhaps overseeing the consolidation of the Airtel network, who is the second mooted towerco license for? One would imagine VimpelCom sought assurances that, if a party other than edotco where to acquire the Bangalink towers, that party could be accommodated within the new licensing framework?
One thing is for sure: the trading environment in which edotco operates and in which the Vimplecom / Bangalink process will take place, just got a bit more welcoming.
