Published on June 5, 2016
1. Telecom sector of Bangladesh
2. Presented By Sourav Paul ID: 37 52D Contact : +8801671590670 Mail: [email protected]
3. Industry overview Internal Analysis External analysis Key findings Competitive scoring Sugession for investors. Presentation Roadmap
4. Industry overview 57%19% 16% 7% 1% Demand for Smartphones based on Operating System Android phone Feature phone iOS phone Windows phone Firefox phone 53% 14% 12% 21% Demand for Smartphones Based on Brand Symphony Samsung Walton Others Source: LightCastleBD.com 4.5 crore subscribers 50% by 2020 Competitive market 3G technology Installment facilities Device Application Network 1.5 crore sets imported
5. Mobile Financial Service Industry Bank-led MFS Operates under scheduled bank Operator-led MFS Controls most of the mobile money value chain 24% 54% 22% 76% Mobile Subscriber MFS Subscriber Source: BTRC & Bangladesh Bank Website 34.8 million No. of MFS Subscriber 4.04 million No. of Daily Avg. Transaction 608.05 Crore (BDT) Average Daily Transaction MFS subscriber growth rate is 2.7% monthly
6. Financial Product & Services Under M-Commerce Bill Payment • DESCO • WASA • GAS • PDB • Insurance Payment Ticket Purchase • Bus • Train • Cricket Match • Movie • Lottery Case Payment • Traffic Case • Motorbike or Car case. Airtime Top-Up • For all the operators at present. Distribution Channel 80% MFS Operator 13% MNO 7% Other 20% Revenue from Selling USSD Gateway Revenue from Selling ticket & Bill Payment
7. Industry Overview: Telecom Network Operators 2004-2005 123% 2006-2008 60% 2009-2013 20% Growth in Subscriber Base MarketPenetration PresentGrowthRate 10% 85% Expensive License Fee Low Profitability Limited License Merger or Acquisitio n 140%+ Growth only in Data Expensive Network Equipment Source: BTCL Decreasing
8. Industry Overview • Infrastructure for technical management. • New technology innovation. • Network up gradation. Specialization Ericsson : network modification. Huawei : Low cost product. Alcatel & Nokia: Small share. 40% 52% 8% Market share Ericsson Huawei Nokia & Alcatel Lucent Cost leadership Quality product
9. Life Cycle of the Industry Change Makers • Chinese manufacturers. • Innovators. Demand for Change • Push Strategy • Demand for better quality. • Free transfer of Knowledge. Recent Trend • Smart watches • Google glass • VR headsets Continuous improvement is must to sustain.
10. Current Scenario & Market Growth 10 20.4 32 44.01 75 96.15 115 121.33 0 20 40 60 80 100 120 140 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Number of Total Transactions in Million 2415 4714 6936 8323.8 11136.3 12969.51 15928.43 18241.51 0 5000 10000 15000 20000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Total Value of Transactions(BDT in Crore) Source: Bangladesh Bank Website
11. MFS Industry Lifecycle in Bangladesh Very potential market. So is it the one to invest????
12. Industry Life Cycle Maturity in Voice • Market is almost saturated in the “Voice” service Growth stage in Data • With 3G/4G technologies being introduced, demand for Data is set in increase exponentially Merger/Acquisition • Airtel and Robi are being merged under the “Robi” brand. Citycell/Teletalk • Incompatibility of Technology between GSM and CDMA is making it hard for Citycell to survive • Teletalk, despite major advantages, could not capitalize due to poor marketing. Condition of company fairly depending on maturity
13. Key Partners Technology alliances Commercial partners Key Activities Payments network management Transaction processing Value – added services Value Proposition Connectivity Platform for card programs and cashless payments Convenience, security, rewards associated with card payments After – sales services, customer convenience Customer Relationships Same side network and effects Cross side network and effects Customer Segments Internet users Advertisers and marketers Developers Channels Sponsorships TV ads, tradeshows, conferences Key Resources Payment products platform Cost Structure Personnel Network, EDP and communications Brand promotion R & D Revenue Streams Services revenues Data processing revenues International revenues Handset
14. Key Partners Key Activities Value Proposition Customer Relationship Customer Segments - Mobile Network operators - Banks - Distributors - Agents Providing USSD gateway for the MFSs Partnering with Banks - Bill Payments - Ticket Purchase (train/bus/movie/ cricket match) - Mobile top-up - Balance transfer - Cash-in - Cash-out - Remittance - Insurance payments - Traffic case payments - Mobile banking - Merchant payments - SMS Banking - Customer Care Center - Agents - Mobile phone users - Households - Merchant - Small enterprises - Retail sectorsKey Resources Channel - Technological setup - Subscribers - Agents - Distributors - Mobile phone - Agents - ATMs - Banks Cost Structure Revenue Streams - People recruitment - Training - Marketing - Product design & Network built-out - Technology solution purchase or in-house development - Maintenance fees - Transmission cost - USSD gateway charge - SMS charge - charge on per transaction - accounts opening charge - Charge on buying tickets - Utility bills pay charge - Revenue share from MFS providers / Banks MFS
15. Key Partners Equipment Suppliers Sim Manufacturers Fiber Optic Cable Service Providers Technology Support Key Activities Satisfying customer needs Providing network for communication Providing internet services Ensuring quality in the supply chain Value Proposition Strong network Wide Coverage Smooth channel of communication VAS including Healthcare and Utility bill paying service. Customer Relationships Personal interaction at call centers and customer cares. B2C relationship through product offers B2C communication through one sided messages Social media Customer Segments Mass population Convenienc e seekers Health conscious Key Resources Skilled people Equipment Manufacturers Marketing resources Stakeholders Channels Call center E-accounts Website Social media Cost Structure Establishment cost including infrastructure and related amenities Product innovation, manufacturing and selling Operation of customer cares, call centers, websites etc. Marketing costs Revenue Streams Value based pricing Cost based pricing Zero sum game Operators
16. Business Canvas Model Key Partners Machinery and equipment supplier Logistic support provider Legal Consultants Key Activities Innovations Delivering know-how Equipment leasing Value Proposition Infrastructure technical support Sustainability Customer Relationships Post Sales service Timely delivery On demand service Customer Segments Telecoms operators Government Key Resources Technological knowledge Technological experience Capital Global Acceptability Channels B2B Marketing Direct Communication Cost Structure Procurement of Materials is the most expensive. Business works on Credit so a large Working capital is required More spending on innovation and developing new products. Shipment of machineries from country to country. Certain period maintenance cost. Revenue Streams Industry works on Tenders so timely quality delivery is important Bulk Buying is the norm
17. Driving forces(Handset) Emerging Buyers • Lower income to middle income • Young generation large in population Globalization • Latest trends • New innovations Changing Lifestyle • Social networking sites • Payment method
18. Driving forces of the Industry Strong Network • GP, BL and Robi are the market leaders in this aspect. • Teletalk has strong 3G network • Growth in Data segment needs to be catered by 3G/4G services. Strong Financial Position • Industry requires large investments in infrastructure. • Citycell is failing due to lack of capital. License • License are expensive and limited. • Citycell failed to acquire 3G license Marketing • Teletalk, despite its strong network in 3G, is failing to attract customers
19. Driving Forces Drivers of Change Diversified need of customer Digital commerce Value added service of MNO Changing payment methods
20. Driving Forces(Equipment) Cost Network quality. Service time period. Manpower. Experience in foreign countries. Young generation’s knowledge transfer. Large Population and wide spread demography.
21. VRIN analysis Valuable Rare Inimitable Non – substitutab le R & D Yes No No Yes Production Yes No No Yes Marketing – Brand Image Yes No Yes Yes Customer Service Yes Yes No Yes
22. Resource Valuation: VRIN Analysis • High Tech Infrastructure • Wide spread Network Value • Costly for banks to install their own system Rarity • Costly & practically not feasible Inimitability • No non- substitutable resource. Non- substitutable Already established market players & Investment needs to make a operator first.
23. VRIN analysis • Strong Network (quality and coverage) and License of GP, BL and Robi • Strong Brand Value of GP • Quality of Human Resources Valuable • License for 2G/3G are limited • No one has a strong enough 3G network yet. Rare • Network Coverage of GP • Customer base. • Network coverage can be imitated but amount of time is a factor. Inimitable • Voice or data service is yet to find a stable and affordable substitute Non- Substitutable Grameen-Phone These dimensions will vary from organization to organization. But time length of presence and commitment to performance is the defining issue.
24. SWOT Strengths Large customer base Increasing disposable income Large number of service providers High technological advancement Weaknesses Highly competitive Saturated market Intensive R & D required Opportunities Rural market penetration Growing number of diversification Rising 3G uptake Threats Low barriers to enter Unorganized sector Need to look for each social class Growing home demand and more options for customization.
25. SWOT Strengths • Technological Infrastructure • Rich distribution & sales network Weaknesses • Depends on cooperation of banks • Govt. regulation Opportunities • Rural market penetration • Acceptance of new technology by user • New products & services • growing demand Threats • growing competition and lower profitability Profit may be a deceiving indicator because of existing strong rivalry.
26. SWOT Ever growing market. Financial soundness of the major operators. Skilled human resource. Stronger than ever communicat ion channels. S Complicated and confusing promotional activities. Tax evasion. Room for improvement in value added services. W Strong economic growth. Better interconnectiv ity agreement. Strong demand for 3G services. Declining prices for handsets. Major growth in MFS and Data O Rigid government policies. Devaluation of taka. Non-co- operation of government and fixed PSTN Competitive market. T Already well established players & Large scale of initial investment
27. SWOT(OT) • A large domestic market. • Educated worker in home country. • Bangladeshi Government’s vision 2020 is to make a digital Bangladesh. • A lot is to be yet done here. • Possibility of disruptive technology. • Possibility of market saturation by low quality less costly product • Unfavorable Government policies. Present bureaucratic situation. • Major political unrest and change of
28. THE BIG PLAYERS(Handset) Symphony 47% Samsung 29% Walton 12% Microsoft 6% Micromax 6% Market Share Source: Market Monitor program for Q1 2014
29. The Big Players(MFS) bKash 58% DBBL Mobile Banking 19% Ucash 8% Others 12% MyCash 3% MFS OPERATORS GP 43% Banglali nk 24% Robi 21% Airtel 8% Teletalk 3% CityCell 1% MNO
30. STRATEGIC GROUP MAPPING Symphony Walton Samsung Micromax Lava Oppo Strawberry Microsoft HTC Perceived Quality Price
31. STRATEGIC GROUP MAPPING Symphony Walton Samsung Micromax LavaOppo Strawberry Microsoft HTC Features Price
32. GP Banglalink Robi Airtel C.CellT.Talk 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 0 10 20 30 40 50 60 MobileFinancialService Number of Subscriber in million Strategic Group Mapping (MFS)
33. Strategic Group Mapping Source: Teletalk Annual Report 2013- 14 Coverage Revenue 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0 0.2 0.4 0.6 0.8 1 1.2 Strategic Group Map Grameenphone Robi Axiata Banglalink Airtel Teletalk Coverage Revenue
34. Strategic Group Mapping Coverage Price 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 0 0.2 0.4 0.6 0.8 1 1.2 Strategic Group Map Grameenphone Robi Banglalink Citycell Airtel Teletalk Coverage Price
35. Strategic Group Mapping
36. How Apple is using GVC
37. Recent Strategic MovesLeader • Aggressive pricing strategy • product differentiation • country-wide distribution network and customer service center • pro active, anticipative and responsive marketing Challenger • Frontal Attack : vast infrastructural and financial resources • Bypass attack : capitalized on the high-end range of smart phones. • Encirclement Attack : With a product line with varying quality and price range as low as Tk 7,500 to highest level of Tk 80,000 Follower • Imitator Strategy: copies some features from some existing popular models, • Follower Strategy : named one of it’s latest models as Primo S3 which is similar to Samsung’s Galaxy S3. • Adaptor: some models are improved versions of some other existing models of leading brands.
38. PRICE WARS Apple Iphone 4s 3,5 inch LCD, ios Tk 39900 Samsung Galaxy s3 4 Inch Amoled Display, Android Jellybean Tk 33000 Nokia Lumia 830 5 inch LCD, Microsoft Windows Phone 8.1 Tk 36800 Walton Primo RX2 5 inch LCD, Android Kitkat Tk 14990 Symphony Xplorer H50 5Inch, Android KitKat Tk10500 Source: Lightcastel Partners
39. Recent Strategic Moves Acquisition of 3G license • Citycell failed to acquire one Merger/Acquisiti on • Robi and Airtel is merging soon, pending regulatory requirements. • A number of major players entered into the market through acquisition of already established businesses. GP decided to use Ericsson’s hardware for its network
40. Strategic Moves Ericsson: New targeted areas like cloud, IP networks, TV and media. Free installation of High quality equipment for GP in Chittagong. Huawei: serves additional set of customers and areas beyond the traditional service provider market. Nokia • Programmable World. • Connecting Software. • Nearly all the people carrying billions of devices can be connected with software
41. INDUSTRY PROSPECTS AND OVERALL ATTRACTIVENESS(Handset) Factors for attractiveness No hassle of landlines Affordable Substitute for PC Substitute for cameras Fashion object Factors for unattractiveness Mergers like Airtel and Robi Special problems and issues Health concerns Road hazards Identity theft Source: Businessoutlookbd.com; lightcastlebd.com
42. Key Components to Success(MFS) Key Components to Success Strong Value Proposition Strong Mobile Infrastructure Effective Cooperation between Bank & MNO Optimal Regulatory System Enhanced Security Wide Agent Network
43. Overall Attractiveness Regulation • Sub-optimal regulations Bank-MNO Coordination • Lack of coordination between bank and Mobile operator Security • Lack of proper secure system
44. Key findings(Handset) Smart phones are taking over Maximum use of Global Value Chain Massive growth potential Bangladesh’s growing economy working as an accelerator Promoting Digitalizatio n
45. Industry attractiveness(Operators) • Very competitive market – Limited growth in subscriber base – Data usage is growing at 150%+ but revenue per customer is still very low. • Limited license • Strong Competition giving rise to need for Merger/Acquisition
46. • Industry level: (Handset) Technical support providers. Telecoms. Triple Triangle Framework Meso Customer Mass population. Different demography. very minimal.
47. • Industry level:(Equipment) Triple Triangle Framework Meso Customer Any disruptive Technology Telecom. as they are servicing company. Also the equipment manufacturer. Telecoms and Government projects
48. • Industry level: (Telecom) Technical support providers. Regulatory bodies. Triple Triangle Framework Meso Customer Mass population. VOIP services (Viver, WhatsApp)
49. • Industry level: (MFS) Triple Triangle Framework Meso Customer Acceptor organizations. Small organizations who are promoting different purchase through mobile transferred cash Own operator users. Bkash Ucash But from a different perspectives.
50. • Macro-level Analysis: (Equipment) Triple Triangle Framework Macro State & Security Very welcoming and local demand is high LTE: (Long Term Evolution) 10 times more speed of Data than 3G. • 422 operators in 143 countries(2015) • 1 billion by the end of year 2016. 3.6 billion by 2020 estimated LTE user.
51. • Macro-level Analysis: (Handset) Triple Triangle Framework Macro State & Security Less restriction in market entry. Welcoming environment. • Many brands are evolving. • Knowledge sharing is open. • Wide variety of choice. Less chance of disruptive technology. Very strong infrastructure in sourcing.
52. • Macro-level Analysis: (Telecom) Triple Triangle Framework Macro State & Security High restriction in market entry. Business environment is competitive. • VOIPs are getting popular. • Other competitive offers are transparent Very good experienced facilities are present. These are costly. No local provider.
53. Competitive Scoring Sector Infrastructure (out of 5) Operators (out of 5) MFS (out of 5) Handset (out of 5) Market readiness (Demand) 4 5 3 5 Customer base 2 3 3 5 Competition 3 1 1 2 Supporting Industry 2 2 1 4 Entry Barrier 3 1 1 5 14 12 9 21
54. Risk return matrix Risk Return High Low High Telecom Infrastructure. low MFS.
55. Suggestion for new investors Operators Go for Acquisition Buy out small players like Citycell. Invest only if you have very large capital Profitability is low in the industry, so be ready to wait decades before hitting breakeven.
56. Large global competition. Perceived quality depends on international exposure. Less options from supporting industry. Already established contract with major player. Entry and exit barrier is high. Large initial investment. Suggestion for new investors (Infrastructure)
57. Suggestion for new investors (MFS) Largely dependent on Operators. Nearly impossible without own operator facility. Large initial investment. Most of the margin is dedicated to distribution team. If already an operator opting for it is a good diversification strategy but not a singly profitable industry.
58. Suggestion for new investors Handset. Most promising among all Easy customization option from China. Larger home demand. Entry and exit barrier is low. Comparatively lower investment.