Bangladesh Telecommunications Report Q3 2012

In this quarter’s update, we have updated the Bangladesh telecoms report with latest figures from the Bangladesh Telecommunications Regulatory Commission (BTRC) as well as Bangladeshi telecoms operators. Despite the new data, there were no major changes to our forecast scenarios as the various subscriber growth trajectories are within our expectations.

The total number of mobile subscribers in Bangladesh at the end of 2011 was slightly higher than we had previously estimated. According to data provided by the BTRC and mobile operators, there were 92.570mn subscribers, a penetration rate of 61.5%. BMI forecasts the penetration rate to increase to 72.9% in 2012, which places in the country in 17th position out of the 18 Asia Pacific countries covered in our reports. The underdeveloped situation is also present in the fixed-line and broadband markets as we envisage only 1.069mn fixed-line and 448,000 broadband subscribers in the country at the end of 2012.

While we expect growth in all three sectors, the pace is likely to result in Bangladesh further lagging behind its peers.

At present, the 3G auction in Bangladesh is scheduled for September 2012, although there is still a possibility that the process could be delayed. Regional peer Pakistan, which initially planned to auction licences in March 2012, has postponed its auction without disclosing a new timeframe, and Bangladesh could follow a similar path. The biggest threat to the 3G auction in Bangladesh is the dispute between the regulator and mobile operators over fees and taxes associated with the renewal of 2G licences, which expired in November 2011. Operators could scrutinise the relevant regulations in order to prevent a repeat of the 2G renewal saga.

The introduction of 3G services could threaten Bangladesh’s WiMAX industry, which had 323,307 subscribers at the end of February 2012. We envisage strong competition between the 3G licence winners, as well as a suite of low-cost mobile devices such as smartphones, which would spur adoption among price-sensitive consumers. Despite the imminent threat, there is a positive that could emerge from the launch of 3G services. Operators are expected to aggressively market their services, thereby raising the profile and awareness for mobile broadband technologies. While we expect customers with basic needs to be attracted to 3G services, consumers and businesses that demand higher speeds could turn to WiMAX..

Bangladesh had a Telecoms Rating score of 48.9 in BMI’s latest Asia Pacific Telecoms Risk/Reward Ratings. We firmly believe that Bangladesh is poised to record its slowest rate of growth in three years in FY2011/12 (July-June), with real GDP growth expected to come in at 5.9% (from 6.7% in FY2010/11). Consensus expectations (for 6.5% growth) remain overly optimistic, given the clearly deteriorating economic picture (for example the ongoing deceleration of M3 money supply growth and the general slowdown in industrial production activity). Meanwhile, public unrest due to heightened tensions between the ruling Awami League (AL) and its main opposition, the Bangladesh Nationalist Party (BNP), will unlikely subside as both sides continue to confront each other regarding the restoration of the caretaker government system (abolished by the AL-led parliament in 2011). Bangladesh scores a low 67.1 (out of 100) in our short-term political risk ratings as it performs poorly in terms of social stability. That said, we note that the AL could be forced to compromise as it slowly loses public support, while the BNP gradually gains favour.