Telecom renewal guidelines under fire

Rohan Samarajiva (L)

The government should go by locally or globally recognised benchmarks or auction to sell spectrum instead of sticking to the draft renewal guidelines, to maintain the explosive growth of the telecom sector, experts and operators said yesterday.
"Exercising best practices available in the country or abroad or auction can give the authorities over $3 billion in sales, which is double the amount the government has fixed," said Muhammad Aslam Hayat, director of corporate affairs of Grameenphone.
He was speaking at a workshop at Sonargaon Hotel in the capital.
Hayat said there are two possible options, both of which are commonly used for renewal worldwide -- administrative ways and auction.
"Through administrative ways, the government needs to use benchmarks from local precedent or other countries. The government needs to work its best if the recognised benchmarks are available."
"This is quick and cheap to implement, and promotes continuity of existing services," he said.
The government can also consider auction, Hayat said, which would free the government from setting prices, and its outcome is transparent and legally robust.
He said the draft renewal guidelines consist of legal and financial uncertainties, non-licence elements and non-telecom issues, and lack stability, transparency and best practices.
According to the draft licence renewal guidelines, Grameenphone, the market leader, would have to pay $754 million, Banglalink $410 million, Robi $411 million and Citycell $85 million for 2G licence renewal, which will be expired in November this year.
Telecom companies have invested Tk 30,000 crore between 1997 and 2009, and now contribute 10 percent to the national budget.
Six mobile operators, with over 7 crore subscribers, cover more than 90 percent of the territory and 99 percent of population in the country. Last year, the sector made up over 60 percent of the total foreign direct investments flown into Bangladesh.
Rohan Samarajiva, chief executive officer of LIRNEAsia, said nobody thought about nearly 100 percent territory coverage of telecom in Bangladesh when the country enacted telecom laws over a decade ago.
"Now we have almost 100 percent of national territory coverage. Over 90 percent of the population say they have used a phone in the last three months, and there are more phones than radios in the households," he said.
Samarajiva, who helped Sri Lanka to have one of the finest telecom laws, said despite being a developing country, telecom tariffs in Bangladesh are among the lowest in the world, thanks to the result of budget telecom network business model.
He said the government vision for a Digital Bangladesh could only be met "by extending the budget telecom network model to broadband, building wireless access networks capable of handling data cost-effectively, backed up by non-discriminatory, cost-oriented access to backhaul, including redundant capacity, and offering applications that are of value to consumers, giving them reason to use broadband."
He said to attract major investments in the sector and to reach the bottom of the pyramid, regulatory risks must be reduced; especially re-licences renewals and spectrum.
"The government must develop, in consultation with stakeholders, a roadmap on when and what spectrum will be made available, and they must adhere to it," he said.
Syeed Khan of Asian Tiger Capital Partners said if the government sticks to the draft guidelines, the operators would not be able to collect the money for the high spectrum fees, as local banks are not capable of financing such high investments.
"3G licence fee and capex will add more financial requirement," he said.
State-run Biman Bangladesh has received $114.5 million, the highest ever syndicated loan in the country's history, financed by a number of banks. Banglalink could manage to issue bonds $102 million, which is also the highest in the history.
If all banks operating in Bangladesh agree to finance the mobile operators, the amount they would be willing to pay could be about $600 million, said Hayat.
Ifty Islam, managing partner of Asian Tiger Capital Partners, said the government must balance short-term goals with long-term revenues.
He said Bangladesh has the lowest internet penetration in the region, only ahead of Nepal. "We need to catch up with the regional countries and achieve 20 percent penetration as rapidly as possible."
"It will be possible if the regulators and the government give up short-term benefits for the sake of long-term opportunities," said Islam.
He said as one-third of the country's 16 crore population's age is below 30; technology could be an enabler to create employment opportunities, giving them a chance to participate in the global economic activities.
"The government's support remains vital in terms of cutting SIM tax, accelerating mobile penetration rates and clarifying regulatory uncertainties over licence renewal as soon as possible."
Islam said Bangladesh is already burdened with infrastructure bottlenecks such as power, energy and transports. "So, we do not want to create any further hold-up in the telecom sector."