TELENOR IN

BANGLADESH

TELENOR IN BANGLADESH:DOING GOOD AND DOING WELL?

• A Norwegian telecommunication company• CEO of Telenor, Tormod Hermansen• Ambassoder of Bangladesh, Mr. Tore Toreng, presents an

opportunity to him for doing business in BANGLADESH.• A unique opportunity for "doing well and doing good." How doing good?• Telenor would be first to do business here. How doing well?• It could also modernize the telecommunication

infrastructure and bring telephony to remote rural location with the help of Grameen bank run by Professor Mohammad Yunus.

BANGLADESH : COUNTRY OVERVIEW

• Located in south Asia on the northern littoral of the Bay of Bengal.

• Coastline 600 km.• Riverine country with deltaic plain having highly fertile

alluvial soil, full of rivers and thus vulnerable to natural calamities such as floods, cyclones, tornadoes, tides, etc.

• Densily populated agriculture country in the world having population of 120 million with annual growth of 2%.

• Per capita GDP is US $ 233

Contd...

• Agriculture accounted for - 37%• Manufacturing-11%• Services-40%• Urban population-20%• Illiterate-53%• Below poverty line-47%• HDI rank-144th • Poorly developed infrastructures• GDP rate-4.6%

Around 77% of Bangladesh's population is living in rural areas. The majority of those living in rural areas are poor and they fightagainst all sorts of odds, social, political or natural calamities like floods, cyclones, etc.

About 60 million of poor people of the world are living in Bangladesh.

GeographyArea: 143,998 sq. km. (55,813 sq. miles).Cities: Capital–Dhaka (pop. 7 million). Other cities – Chittagong (2.8 million), Khulna (1.8 million),Rajshahi (1 million).Terrain: Mainly flat alluvial plain, with hills in the northeast and southeast.Climate: Semitropical, monsoon.

PeopleNationality: Bangladeshi(s); Population: 120 million; Annual growth rate: 2.1%.Ethnic groups: Bengali 98%, tribal groups, non-Bengali Muslims.Religions: Muslim 83%; Hindu 16%; Christian, Buddhist, others 1%.Languages: Bangla (official, also known as Bengali), English

EconomyGDP (1995): US$28.2 billion; Annual growth rate (1995): 4.4%; Per capita GDP (1995): US$233Agriculture (37% of GDP): Products–rice, jute, tea, sugar, and wheat.Industry (17% of GDP): Types–garments and knitwear, jute goods, frozen fish and seafood, textiles,fertilizer, sugar, tea, leather, ship breaking for scrap, pharmaceuticals, ceramic tableware, newsprint.Trade (1995): Merchandise exports–US$3.1 billion: garments and knitwear, frozen fish, jute and jutegoods, leather and leather products, tea, urea fertilizer, ceramic tableware. Merchandise imports–US$5.9 billion: capital goods, food grains, petroleum, textiles, chemicals, and vegetable oils.

THE TELECOMMUNICATION SECTOR IN BANGLADESH

• Regulatory body Ministry of Posts and Telecommunication (MOPT)

• In 1976, it created the Bangladesh Telegraph and Telephone Department which in 1979 evolved into a corporate entity: the Bangladesh Telegraph and Telephone Board (BTTB).

• It runs countriy's communication services on a commercial basis.

• It was governed by seven members.• It had monopoly rights.

Its status as a state-run monopoly was justified by the government on two grounds: first, the government argued that only a state-run monopoly would have the resources to develop a telecommunications infrastructure, given the high start-up investment and expenses in maintaining services; and second, the government believed that a monopoly enterprise could achieve economies of scale that would allow it to offer better services at low costs.

Telenor’s four main business areas:

Telenor Networks :which managed infrastructure within telecommunications and data communication (telephony, data,broadband)

Telenor Mobile: which provided mobile services operations within voice, data, Internet, content services and electronic commerce.

Telenor Plus: which was responsible for sales and distribution of the group's communications, entertainment and information services

Telenor Business Solutions: which developed, sold and implemented the group’s communication and IT solutions.

Decision to enter Bangladesh

Discussions started with management team

Separate feasibility study was undertaken for urban and rural markets

Urban Market:

Worst case scenario: only 100,000 potential subscribers existed

Best case scenario : 6,000,000 potential subscribers existed (More then the entire population of Norway)

Positives:

No other mobile operators present

Opportunities for growth and profitability in Urban market

Drawbacks:

High level of corruption

Political concerns due to government instability

No regulatory regime existed in the sector

Debt collection could be problematic

Whether Bangladeshi government would allow Telenor to expatriate profits to pay Dividends to Norwegian shareholders

Rural Market:

Best case scenario: 100,000 to 150,000 subscribers with one or two telephones in each village

Positives:

Local Partnership with professor Yunus and The Grameen Bank

Recognizing the infeasibility of doing business solely in Rural market, The Grameen Bank proposed a solution to Telenor.

Drawbacks:

Rural market by itself could not be commercially viable

Expensive, due to lack of telecommunications infrastructure

Dilemma

Hermansen believed Bangladesh to be a significant business opportunity for Telenor.

On one hand there was significant opportunity and possibility of gaining “first-mover” advantages, but on the other end the business risk was extremely high

Telenor had not previously conducted business in a developing country or in Asia, and Bangladesh seemed worlds away from Norway.

Bangladesh’s uncertain economic, political, and legal environment

Telenor has the opportunity to "do well and do good" in Bangladesh.

It could help its financial bottom line by being a first-mover in the Bangladesh mobile telephone market and establish a successful operation through partnership with the world-renowned Grameen Bank.

However, in order to capitalize on this opportunity, Telenor has to agree to the social cause of providing telephone connectivity for the rural poor by offering mobile services in the villages, which was unlikely to be profitable.

Should Telenor undertake this venture?

The Key Challenge

Hemansen wondered:

Whether the CSR notion of “doing well and doing good” could be a platform for brand differentiation and whether this could be sustained to globally achieve long term business profitability.

Was Bangladesh the right strategic direction for telenor?

Should Telenor submit its bid for telecom license in Bangladesh?

And how should the Telenor’s Bangladesh operations be organized with Grameen Bank and Grameen Telecom?

THANK YOU