1A.

Overview of the Telecom Industry

The history of mobile phones can be traced back to two-way radios permanently installed in vehicles such as taxicabs, police cruisers, railroad trains, and the like. Later versions such as the so-called transportable or "bag phones" were equipped with a cigarette lighter plug so that they could also be carried, and thus could be used as either mobile two-way radios or as portable phones by being patched into the telephone network. Bell Labs developed the notion of "cellular" systems allowing for frequency reuse (and thus far greater capacity) and developed it through the 1970s. On April 3, 1973 Motorola manager Martin Cooper placed a cellular phone call (in front of reporters) to Dr. Joel S. Engel, head of research at AT&T's Bell Labs. This began the era of the handheld cellular mobile phone. Meanwhile the 1956 inauguration of the TAT-1 cable and later international direct dialing were important steps in knitting together the various continental telephone networks into a global network. The FCC approved operation of an analog cellular mobile telephone system in 1982, sparking a new growth sector. In the 1950s, thoughts of deregulating the telecommunications industry started to develop gradually. The United States of America (USA) were the first country to deregulate1 the telecommunications market. Following, other countries also started to deregulate their telecommunications markets. In the past three decades, due to the latest liberalization 2 and privatization3 wave in the world, the telecommunications industry has turned into a dynamic environment and is rapidly growing.4 In this rapidly changing industry, the availability of state-of-the art technological know-how, innovations and domestic and international market access are critical to a companys competitive success. As a result of a number of radical political and technological developments, telecommunications companies needed new or complementary capabilities and resources to fulfill the new demands and requirements. Therefore, extensive use was made

The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. 2 A relaxation of previous government restrictions, usually in such areas of social and economic policy 3 The transfer of ownership of property or businesses from a government to a privately owned entity. 4 Graack, C. (1996). Telecom operators in the European Union: Internationalization strategies and network alliances, Telecommunications Policy.
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of alliances, mergers and acquisitions.56 Companies had to reconsider their strategies and their product and market portfolio. This is one of the main reasons why the industry shifted from a vertical state to a much privatized horizontal one.

Telecom Industry of Bangladesh

Bangladesh Telephone and Telegraph Board (BTTB) was the lone telecoms operator until 1993. Bangladesh Telecom Limited (BTL) then awarded the license to operate cellular services. However, the first mobile service in Bangladesh remained limited to only a few rich customers, due to its hefty price. Monopolisation in the telecoms sector shattered with the debut of three GSM operators --Sheba Telecom, Grameenphone and Aktel -- in the mid 90's. Competition among the GSM players brought phenomenal power into the hands of the customers. Customers could switch from one operator to the next with the GSM (global system for mobile communications) technology without the need for changing handsets, which was not the case for CDMA. Although mobile tariff dropped from around Tk. 25 a minute to around Tk. 11 from the shift from CDMA operator to GSM, the technology remained beyond the grasp of the masses until 2005 due to the still high prices then. Bangladesh needed almost decade to add 10 million customers into the mobile networks. Interesting enough, the next 40 million customers were added in a mere four years -- 2005-09. The price war among the operators intensified after Egypt based mobile operator Orascom acquired Sheba Telecom in 2005. Connection prices were further lowered to Tk. 10 and the per minute tariff dropped to Tk. 0.25 under the aggressive marketing strategy by Banglalink, the subsidiary of Orascom. The mobile phone customer base reached 52.43 million by the end of 2009. In the next move in the telecoms industry, Bharti Airtel acquired a 70 percent stake of Bangladesh's fourth largest mobile operator Warid Telecom, who had entered the market previously in 2008. They continued Warids low prices promotion system and this brought the call rates to a much lower level, handing the baton to the customers who could easily switch between the operators. What is to be noted is that the telecom industry in Bangladesh went through the same evolution as that in the global scenario. The early telecom operators were a one-stop solution for the

Chan-Olmsted, S., & Jamison, M. (2001). Rivalry through alliances: Competitive strategy in the global telecommunications market. European Management Journal. 6 Waverman, L., & Trillias, F. (2002). Corporate control and industry structure in global communications: An introduction. Telecommunications Policy.
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customers, who could also buy the terminals from them, i.e. the mobile phones. But with the decrease of prices for mobile phones globally, the terminal providers have created their own market in the industry and therefore telecom operators are focused on only providing connectivity to their customers with some additional content.

1B. Global Value Chain of the Telecom Industry

In traditional telecom industry era, telecom operators mainly provide basic telecom services, which are voice-based, relatively simple and also completely dependent on telecom network. All telecom services are provided by telecom operator alone, and all revenues remain with the telecom operator. Telecom industry chain is a single linear industry chain including members of network equipment providers, system integrators, basic telecom operators, terminal providers, and content providers who contribute to the customers (as shown in Fig.1). Among them, network equipment providers are responsible for providing network hardware equipment, system integrators are responsible for providing software platform, basic telecom operators are responsible for building and operating the basic network, terminal manufacturers are responsible for providing terminal devices, such as mobile phones and fixed telephones, content providers are responsible for creating the applications that the customers use. Customers are in the end of industry chain and are the end users of the service. Each of these participants of the Value Chain are of different industries yet contribute to the telecom industry as a whole.

Network Equipment Provider

System Integrator

Telecom Operator

Terminal Provider

Content Providers

Cisco Systems Huawei

Siemens Alcatel

GrameenPho ne Banglalink Airtel Robi Teletalk Citycell

Apple Samsung HTC Symphony Walton

Rovio Mobage Google

Fig. 1 Traditional Telecom Industry Chain

1C. Dynamics of the GVC of the Telecom Industry

Suppliers/ Contractors
Component Suppliers

Equipment Providers
Contract Manufacturer

Service Providers

Consumers

Enterprises

Hardware OEMs

Service Providers

Retailers

Distributors

Individual Customers

Fig. 2 High Level Supply Chain Model

The current value chain of the telecom industry, based on the telecom operators, have taken a more complicated form. It is not just a single linear model that starts from Infrastructure/Equipment providers and ends with customers. The components of the chain operate on a more complex basis, with each other in different industries and among themselves in the same industry. As shown in Figure 2 above, Service Providers can contact with Hardware OEMs or take the same things they require from Distributors of such components. Similarly Individual customers can buy the required products from Service Providers or manage them through retailers. However, this is not the end of the evolution of the Global Value Chain of the telecom industry. The High Level Supply Chain Model i.e. that shown in Figure 2, is still basically a linear model, though more complicated than the primary traditional mode. The next step for the Global Value Chain was to completely move to a horizontal industry and therefore large companies began to rise, who were specializing in the different components of the industry.

Fig. 3 Mesh Structure of the Telecom Industry The figure above shows the mesh structure of the telecom industry. This model fairly explains the current value chain of the telecom industry as it shows the customers power in the current market. It starts again with the Network Equipment Providers who provide basic infrastructure and hardware to the outer circle entities i.e. the Telecom Operators, Terminal Providers and the Content Providers. These entities operate solely by themselves and can collaborate with each other but at the same time reach the end consumers with their own products. Unlike the traditional vertical chain where one single organization was responsible in providing the whole solution to the customer, now the customer can create any different combination from the relevant organizations from each step of the value chain. Global organizations exists for Terminal Providers in the likes of Apple, Samsung and Sony Ericsson. Each country has their own set of telecom operators who also have partners outside the country. Any user can access content provided by either their telecom operator or their terminal provider or even solo creations from the internet.

1D. SWOT Analysis of GrameenPhone based on TTF

SWOT Analysis
Strengths
Ownership Structure GrameenPhone is partly owned by Telenor, who are a global company. In Bangladesh, Grameen Bank is one of the largest NGO, with well-developed and accepted communications throughout the country. Market Leader Enterprise Capability Industry Customers

Network Availability - Grameenphone is perceived to have the widest network coverage offering the best quality of communication. Enterprise - Capability

Brand Name GrameenPhone has built up a brand name with its successful activities all over the country and people perceive GrameenPhone to have quality service regardless of the price they offer. Industry Customers

Financial Soundness - Because of effective planning, Grameenphone is able to earn a healthy amount of revenue, which gives them financial soundness. They are also in profits, which can be rarely said about a telecom operator here. Capacity Enterprise -

Support Organization - Grameenphone have shared the idea from the employees of Bangladesh Railway and Grameen Bank, who were able to provide precious guideline for the operation of Grameenphone. Collaborators Industry

High Ethical Standard - To keep the quality of service, Grameenphone is strict to follow its ethical standard. Culture Enterprise

3G technology GrameenPhone bid for a larger bandwidth of 3G technology that gives them an edge over their competitors. Innovation Wider Environment Technology &

Weaknesses
Culture Gap GrameenPhone consists of international as well as local managers and this might create a cultural gap inside the workforce. Culture Perceived High Price Customers perceive that the prices i.e. the call rates offered by GrameenPhone are much higher compared to the likes of Robi, Airtel and other competitors. Industry Customers Enterprise

Lack of Harmony among SBUs - Intercommunication among various departments is weak. The reason behind this is that there is no exchange program for employees to work among various Strategic Business Units (SBUs). Enterprise Culture

Opportunities
Huge Demand for Telecom Services - The market of telecommunication is expanding. It is therefore easy for GrameenPhone to achieve the major portion of expanded market because of its leading position. Industry Customers

Teletalks 3G Failure Despite coming in to the internet business with 3G almost 2 years ago, Teletalk has failed to capitalize on the monopoly and is set to lose their market share to other competitors, of whom GrameenPhone is in the best position to take over given their advantage in size and strength. Competitors Wider Innovation Environment Technology & Industry

Threats
Rigid Government Regulations - Government is becoming restricted for taking away currency from the country. So, Foreign Company are threatened because they may have risk to back their investment to the country. The government also put restriction for

the work permit of foreign employee. State & Society

Wider Environment

Political Instability - Political instability is another threat because, with the change of Government, policies are also changed. So, this is difficult for any multinational organization to cope with new policies. Society Wider Environment State &

Price War Firstly Banglalink and now Airtel has positioned themselves as the cheaper alternative, capturing a big market of the population. Industry Competitors

1E. Two Strategic Issues

Price War
The entry of Banglalink in February 2005 sparked a price war in the Bangladesh Telecom Industry. Banglalinks attractive launch offer included a new connection and handset at a low start -up cost. Following Banglalink, three other private operators Grameen Phone, Aktel and CityCell also came up with various value-added offers resulting in an intense price battle. However, except GrameenPhone, the other 3 companies could not sustain this procedure and are still facing losses. Warid Telecom then entered the market with a lower price structure and this caused another upheaval in the telecom sector. GrameenPhone refused to react primarily because of the inevitable way in which Warid would face the same consequences as Banglalink. However in 2010, Indian Telecom giants, Bharti Airtel, bought majority shares of Warid Telecom, renaming it Airtel Bangladesh and sustained the low cost structure, thus inducing a response from the market leaders, who have currently lost out on the youth and rural market group to Airtel and face a drop in their revenues.

3G Connectivity
The Bangladesh Telecommunication Regulatory Commissi on (BTRC) awarded the countrys four largest private sector operators GrameenPhone, Banglalink, Robi Axiata and Airtel Bangladesh 3G licenses. The licenses may also be used for the rollout of 4G services. 2G market leader GrameenPhone was the sole bidder in the first round of auctions, buying a 210MHz concession, followed by Banglalink, Robi and Airtel each purchasing 25MHz licenses in a second round. This

price of $21M per MHz sets the rate that state-owned Teletalk will now have to pay for its 3G spectrum, after being permitted a head start in the market when it launched its W-CDMA network in October 2012. Despite getting a headstart of such a long time over its competitors, Teletalk has failed to capitalize with its 3G operation. First failing to create a monopoly on which to take advantage of, and secondly to gather substantial market share so that it could get into positive figures. However, with the entry of GrameenPhone, Robi, Banglalink and Airtel in the frame and their vastly superior promotion procedures, Teletalk will surely lose their market share and fall behind the privately owned companies in the 3G market. GrameenPhone faces an issue regarding the other competitors strategies and the price packages that they offer and at the same time th ey are faced with the task of becoming market leaders in 3G as well as 2G.

1F. Strategic Moves for Strategic Issues

The two issues pose a strange strategic problem for a company of the stature of GrameenPhone. Firstly, there is the 3G issue that requires GrameenPhone to position themselves as a quality 3G internet provider and uphold their image of the best telecom brand in the country. But then prices must be competitive so as to not lose market share to its competitors. Secondly, the price war issue prompts GrameenPhone to decide whether it should lower its call rates so as to not lose out on market share or risk diluting their market image. Furthermore, it should be considered that the pricing and promotion of one also affects the other to some extent. Therefore the first step that GrameenPhone should make is to undertake a complete customer analysis and evaluate its target customers. Currently it focuses on almost every possible population that uses a mobile phone and therefore it needs to assess itself to understand who their true customers are. Once they have evaluated their customers and revenue stream, the data should be separated to understand which customer base contributes exactly what percentage of the revenue or what amount of the revenue, firstly, in terms of the basic call procedure and secondly, in terms of their internet usage. Both data should be compared. After a complete evaluation has taken place and GrameenPhone has identified its principal target customers and have also

recognized its separate target markets, it should focus on preparing pricing packages for its customers. These pricing packages can be separate for its youth segment, corporate segment, and rural segment and can also differ in its prices for the usage of internet or in basic call rates. GrameenPhone can also decide to make a combined package that encapsulates all these offers so as to not focus on a target that it does not think contributes much i.e. it needs to place its segments in the Power/Interest Matrix and determine its stance. These packages should be made available as soon as possible with frequent promotion done, especially on the 3G front so that GrameenPhone can take the upperhand on the 3G market over its competitors. Frequent feedbacks must be done after this strategic change and new customer analysis should be carried out to better the process so that continuous and incremental change can be made to the packages and maximum customers can be engaged in the process.

1G. Proposed Strategic Model

Customer Analysis Revenue Stream Analysis Strategy Analysis

Phone Usage Internet Usage

Corporate Market Rural Market Youth Market Develop Power/Interest Matrix

Separate Pricing Package for Separate Segments

OR

Combined Pricing Package

Customer Feedback

Bibliography
Chan-Olmsted, S., & Jamison, M. (2001). Rivalry through alliances: Competitive strategy in the global telecommunications market. European Management Journal. Graack, C. (1996). Telecom operators in the European Union: Internationalization strategies and network alliances. Telecommunications Policy. Waverman, L., & Trillias, F. (2002). Corporate control and industry structure in global communications: An introduction. Telecommunications Policy.