Industry Overview of IGW & ICX Operation in Bangladesh / Telecom Sector

The telecom sector in Bangladesh showed a significant growth in mobile dissemination that has exceeded all expectation compare to the other countries. It has certainly a trans-formative impact on the economy in terms of aggregate investment, FDI and productivity level. There is likely to be a whole new wave of innovation and value added services as well as data for telecoms players. The government of Bangladesh’s commitment to a “Digital Bangladesh” is also likely to present major opportunities for the sector.

Technological progression in the field of telecommunication has brought in new generation technologies in the International Long Distance Telecommunication (ILDTS). The VoIP technology succeeded in proliferating popularity due to its low cost and compatibility with a host of different Internet Protocol (IP) based networks. 

The vision of Digital Bangladesh of government to ensure the socio economic development by creating new technological revolution and connected to the global community. The government also ensures that the information and communication system is obtainable and affordable to the general people in rural areas in every corner. The new ILDTS Policy will help to renovate the idea for “Digital Bangladesh” into reality. The Government will follow this policy as a part of its pledges to the people to ensure easy entrance to information and technology as one of the means to achieve economic liberation.

As per the information provided in the official web portal of BTRC (Bangladesh Telecommunication Regulatory Commission), there are total 24 International Gateway (IGW) Service providers in Bangladesh including the Govt. owned BTCL. To liberalize and legalize VoIP in the country, the government formulated “International Long Distance Telecommunication Services (ILDTS) Policy 2007” and delegated this to the Commission for implementation. As suggested in the ILDTS Policy, BTRC has successfully issued four International Gateway (IGW) Licenses in 2008. As the sector has comparatively high regulatory issues compare to other business the Threats of new entrance is bare minimum.

The industry consists of 24 (twenty four) licensed company & IOF members are divided into two group where Tier-2 consist of Seven members Unique Infoway, Digicon Telecommunication, Mirtel Ltd, Bangla Trac Communications, NovoTel, Roots Communication and Global Voice telecom -- will now be controlling the common network switch for interconnection and call termination. The ratio of profits sharing on a ratio of 1:1.9 between tier-1 and tier-2 operators after deduction of the revenue, which means tier-2 operators get the opportunity to almost double their profits as against those of tier-1 operators. The company will realized revenue equal to all Tier-1 companies.

The use of Viber,  Messenger, Whatsapp are increasing day by day. And many other apps are starting voice calling services. The new addition on voice call services provider is Instagram and Sanpchat. They are the major substitute for IGW service Provider Company. From 2015 there is a revaluation among the apps industry which create a negative impact on IGW industry.

Currently BTRC have revised international incoming call termination rates. The minimum rate has been re-fixed at $0.0175 and maximum at $0.0250, according to a letter sent the telecom regulators sent to the mobile phone, IGW and ICX operators. It said the new rates go into effect immediately. The minimum international incoming call termination rate was $0.015 and maximum $0.035 until now. The BTRC letter says state-owned BTCL and all other International Gateway or IGW operators will terminate international calls at maximum rates within the fixed rates. The letter says, it will be considered as a move to bring fewer foreign currencies to the country and the BTRC will take help from the Bangladesh Bank. The mobile-phone operators say the revision of the rates has created more opportunity for the IGW operators to increase their profits.

The government in a report last year said number of daily calls dropped from 110 million to 75 million, causing nearly Tk 20 million in lost revenues. Currently, the BTRC gets 40 percent of the revenue from international call termination, IGW operators 20 percent, ICX operators 17.5 percent ANS receive 22.5 percent.

Industry Overview of Merchant Bank Operation in Bangladesh

Merchant banking has been a very lucrative and risky endeavor, currently 61 merchant banks have engaged in the business under existing law. Recent legislation has expanded the merchant-banking activities into different segments of debt and equity financing. Merchant banking activities are permissible to commercial banks and they are influential player of the industry. Merchant Banks negotiate and co-operate with different regulators through Bangladesh Merchant Bankers Association (BMBA). BMBA started its journey sometime in 1997.

 Merchant banks of Bangladesh is working with several lucrative products such as Underwriting IPOs, Managing new issues,  Right issue, Corporate advisory , Structured finance , Portfolio management, Bond Issuance, Alternative Financing, Mergers and Acquisitions etc.  As we consider issue management is the front line product of a merchant bank let’s see a little statistic in this regards. After introducing Electronic Subscription System (ESS) by DSE from May, 2017 to November 2018, 19 companies raised their capital through IPO under Book Building Method and Fixed Price Method; BDT 939.25 crore has been raised during the period. Regulator like BSEC, DSE and CSE fasten their IPO approval process for fund raising.

According to BSEC information during 6 (six) months period from January 01, 2014 to June 30, 2014 58 private companies raised BDT 1310.68 core equity capital and 49 public companies raised BDT 3964.80 crore equity capital. In recent year’s financial activity become more complex above mentioned numbers are per better now. Entrepreneurs are more aware about their financing activity. For established sustainable business venture companies need long term financing and entrepreneurs are now move from debt base financing to equity base long term financing.

In refer to industry insider portfolio management, corporate advisory and strategic investment are more profitable now-a-days. Performance of capital market is a major contributor of the profitability of the merchant bank. During 2017 we have seen very good performance of capital market of Bangladesh but in 2018 the market performs poorly. In this situation we can be hopeful for the capital market and in subsequent merchant bank activity will go levels high which lead profit more than we may expect.

Merchant Banking (MB) refers to company/ industries' development. Merchant Bankers can play a pivotal role in serving the nation by generating/ increasing production, employment, and earning foreign currency as well as improving the foundation of capital market through equity investment/ equity participation. It is evident that Merchant Banker (MB) can develop and make quick progress to strengthen our national economy by developing the overall industrial sector. The core business of merchant banking comprises of issue management services, portfolio management services and underwriting services.

In Bangladesh, new entrepreneurs are facing acute shortage of capital. There is not a single investment bank in the country which could provide direct equity funds to the entrepreneurs. It is here that merchant banks can play the role of investment banks. Merchant banks play major roles in listing securities with stock exchanges. Entrepreneurs are the life blood of the economy. They are the major sponsors of a company. Merchant bank integrates fund for entrepreneurs in many ways like Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Share Offer, and Direct Listing for selling of existing paid-up capital, issue of preference share convertible or non-convertible in shares. Besides listing, a merchant banker can create benefits for the company through issuing directives on merger, acquisition and takeover and change of management for listed sick industries and EEF (Equity and Entrepreneurship Fund) of the Bangladesh Bank.

Every company aspiring to be listed with stock exchanges has to get undertaking on firm commitment basis. MB provides all kinds of underwriting services like Underwriting of Initial Public Offering (IPO), Underwriting of Rights Share Offer, Underwriting of Repeat Public Offering (RPO) and participation in the book building system as investment banker.

Sound merchant banking calls for effective merchant banker's policy guidelines which may include merchant banker's policy for operation, information memorandum, appraisal reports and agreements etc. A typical merchant bank has several departments. Some of them are Marketing Department, Documentation Department, Audit/Inspection Department, Investment and Analysis Department, Legal & Compliance (Tax & VAT) Department, Human Resources Department, Accounts Department.

Conventional banks, Islami banks and financial institutions can widely participate in equity investments for the development of the industrial sector, strengthen the economy of the country and also do brisk businesses with the assistance of merchant bankers. Merchant bankers are more specialized in dealing with equity securities.

The concept of merchant banking is not much familiar among mass people like commercial banking. But in developed countries, merchant banks are prime mover of economic development. Every year many potential companies are funded and discovered by merchant banks. Their specialized investment techniques help many potential companies turn into business conglomerate within a decade from small sole proprietorship.