Financial Analysis and Valuation of AKTEL
Origin of the Report
This report titled “Financial Analysis & Valuation of AKTEL” has been prepared as part of the internship programme for the completion of MBA course from the Institute of Business Administration (IBA). The report is prepared under the supervision of Mr. Rana Shohel, Head of EAS, IT Division, TMIB with the consultative support and advice from Mr. Mohiuddin Ahmed, Assistant Professor, IBA.
Objectives
This report aims to achieve the following specific objectives:
· To briefly discuss about the organization TM International (Bangladesh) Limited.
- To sketch a picture of the telecom industry of Bangladesh from a global perspective.
- To analyze the financial performance of AKTEL
- To analyze various methods of equity valuation and use those in telecom stock valuation.
- To value the stock of AKTEL considering the global and national economic scenario and the performance of stock markets.
- To link the practices with the learnt theories
Scope of the Study
This study on its first part (Organization Part) mainly concentrates profiling the company TM International (Bangladesh) Limited. This includes an attempt to formulate a picture of TMIB starting from its formation history, network coverage, products and services, organizational structure, management activities, to its recent financial performance.
On it’s Second part (Project Part) the study puts major emphasizes beneath the title of the report and tries to draw a complete picture of the economic and industry analysis from the valuation point of view. This part further analyzes the company (AKTEL) strategy and financial performance comparing with the competitors’ performance. Finally, various equity valuation methods have been adopted to evaluate AKTEL’s share and their comparative results is depicted in the report.
Methodology
i. Study Design
The study is analytical in nature and so was conducted using the quantitative instrument. Various valuation techniques have been adopted with careful interpretation of the stock markets’ performance to get some clear and comparative picture of company’s position. Depth interviews as well as assessment of different historical and financial data are used to analyze the present scenario.
ii. Source of Data
a. Primary: In-depth interviews were conducted with the key Finance and Corporate Strategy personnel of AKTEL. The primary sources of data are the auditors’ reports of last 6 years, quarterly performance report of TMIB and competitor analysis and business forecast by Corporate Strategy department.
b. Secondary: Majority of the secondary data was obtained from the websites of the telecom operators and their parent companies. Also, for macro-economic and stock market analysis a number of Bangladesh Govt. and international websites have been explored.
Limitations
The telecom industry showed the highest growth in last few years among all industries in Bangladesh. In this extremely turbulent market, it is really difficult to forecast next few years’ performance. A number of assumptions have made which may not come true in future and the market may show extra-ordinary results.
Confidentiality of information has limited the extent of presentation in the report. Respondents declined to furnish categories of information treated as “confidential”, for obvious reasons. TMIB is still a private limited company and their financial information is not disclosed publicly. Due to the non-disclosure policy the actual financial information could not be presented in the report. But the ratios and results would show a true picture as same multiple is used in all figures to present the information in this report.
Some information about the other industry players are obtained from the Corporate Strategy and Business Intelligence team of AKTEL and their authenticity could not be checked against actual.
No telecom operator is listed in any stock exchange of Bangladesh and so no comparison could be made for equity valuation. General public’s perception about telecom stock is yet to be discovered. The multiples used in valuation (e.g. P/E ratios) have been adjusted comparing Dhaka Stock Exchange and some other nearby stock exchange where telecom companies are listed. The assumptions about these multiples may not depict the actual picture.
The forecasts made are not inflation adjusted and time value of money is not considered. The tariff structure is also very hard to predict and may have some dramatic impact on the revenue and cash flow if not assumed correctly.
The stock exchanges of Bangladesh have also showed abnormal run since last year although the country’s economy was severely affected by a number of natural disasters and political turmoil. That is why, extensive analysis of the stock market could not be made (or even not justified to make) which could have a serious impact on the valuation.
Part A
Chapter 1
Organization Profile
1.1 Company Overview
TM International (Bangladesh) Ltd. (TMIB), established in 1996, is a joint venture company between Telekom Malaysia Berhad (TM) and A. K. Khan & Co. Ltd. It operates under the brand name ‘AKTEL’, which is one of the most dynamic end-to-end countrywide GSM mobile communications solutions brands.
Under the stewardship of TM, AKTEL is one of the fastest growing mobile communication brands offering comprehensive range of solutions to more than six million subscribers nationwide. Today, AKTEL boasts of the widest International Roaming service in the market, connecting 440 operators across 185 countries.
By leveraging on TM’s extensive expertise in the international communications implementation, AKTEL became the first mobile operator to connect Tetulia and Teknaf, which is the northern and southern most points of Bangladesh, and first to provide seamless coverage along the Dhaka-Chittagong highway.
With a network covering all 64 districts of Bangladesh, coupled with the first Intelligent Network (IN) Prepaid Platform in the country, AKTEL is geared to provide a wide range of products and services to customers all over Bangladesh.
TM International (Bangladesh) Limited was registered as a private limited company on October 22, 1995 under the Companies Act 1994. The company has obtained the radio system operating license from the Ministry of Posts and Telecommunications, Government of Bangladesh in 1996. The license is valid for a period of 15 years commencing from November 11, 1996 upon payment of annual fee of Tk. 10 million.
The success story started with the commercial launch of AKTEL services in Bangladesh as a GSM 900 cellular phone operator on November 15, 1997. After the tremendous success in Dhaka, TMIB has started its operation in Chittagong in March 26, 1998. In the same year they expanded their coverage in Narayanganj the Business City and an important one closer to the capital city Dhaka. They have also reached the city with biggest beach of the world Cox’s Bazar. Now AKTEL is covering all 64 districts of Bangladesh.
TM International (BD) Ltd. (TMIB) was found as a joint company of the Telekom Malaysia Sdn. Bhd. from Malaysia and the A. K. Khan & Co. of Dhaka, Bangladesh. It operates as a Limited Liability Company, where a founder and a majority shareholder, the TMIB- member of the Telecom Malaysia, owns 70% shares, while the minority shares of 30 % are being controlled by the A. K. Khan & Co. Bangladesh.
· TM International Sdn Bhd (TMI): TM International Sdn Bhd (TMI) is a 100% owned subsidiary of Telekom Malaysia Berhad and was established with the core business mission to oversee and manage TMB’s foreign ventures located in Asia and Africa. Previously a division of TMB, TM International today has made a successful transition from an operating division to a wholly owned subsidiary. They have investments in 10 countries overseas and 7 of these are operating Cellular Telecommunication Networks in large populace market such as India, Indonesia and Bangladesh.Their main aim is to invest in emerging markets particularly in high growth markets which are closer to the home base. In their ventures overseas they have successfully listed 3 large companies namely Telkom South Africa (listed on the NYSE), Dialog Telekom Sri Lanka (listed at the Colombo Stock Exchange) and PT Excelcomindo Pratama Tbk in Indonesia (listed at Jakarta Stock Exchange).
· A K Khan Group: The AK Khan Group is one of the largest and oldest private sector corporations in Bangladesh, established in 1945 by late A. K. Khan. The group has been mainly operating in the industries/segments of Textile, Jute, Garments, Fisheries, Docking and Engineering, Plantation and Shipping Industries for more than half a century. AK Khan Group is a passive investor in TMIB.
TMIB started with six members in its board of directors. Mr. A. M. Zahiruddin Khan was the first Chairman of the board of directors and Hazi Omar Zakir Mustafa was the first Managing Director of TMIB.
Mr. A. M. Zahiruddin Khan was the Chairman of TMIB till March 2005. He passed away on March 29, 2005. AT TMIB’s Board Meeting in Kuala Lumpur, Mr. Salah Uddin Kashem Khan is elected as Chairman. Mr. Khan is a founder Director of AKTEL and Managing Director of A.K. Khan & Co. Ltd.
AKTEL is the dynamic and leading end-to-end countrywide GSM mobile communication solutions of TM International (Bangladesh) Limited. With a vision to be the leading service provider in the ICT sector in Bangladesh, it has contributed considerably to the improvement of tele-density of the country. This fact is apparent through AKTEL’s presence throughout the reaches of Teknaf to Tetulia and the seamless network established along the Dhaka-Chittagong highway.
AKTEL’s investment in Bangladesh to date stands at a significant amount, which has contributed significantly towards the growth of the economy of the country while creating multifarious employment opportunities in many active areas.
Among many products, AKTEL has launched its dynamic new service called AKTEL International Roaming Service (airs), which allows AKTEL users to access over 440 global operators across more than 185 countries. With this robust service, AKTEL boasts to be the widest roaming operator in the country, far outweighing the current roaming service provider’s coverage. (New service and features area to be added)
AKTEL also prides itself as a technology driven company. It has invested heavily into upgrading the systems with state of the art equipment with cutting edge technologies available today in the telecom sector such as its Short Message Service (SMS) and Voice Message Service (VMS) systems, and migration of the Pre-Paid network platform to Intelligent Network (IN), which was successfully implemented for the first time in Bangladesh. A reflection of these processes are the highly competitive product packages and first ever services that had been offered to all AKTEL Customers throughout the year.
It is strongly believed that AKTEL will be the pioneer service provider to be able to realize the long-felt needs of the customers from all walks of life by offering innumerable innovative products and value-for-money services throughout the years to come. In concert with the theme of undeniable customer appreciation, AKTEL celebrates the end of a remarkable year.
Through aggressive investment to extend network coverage and improving call quality, AKTEL has been in constant motion to maintain its commitment to provide subscribers the best possible cellular service. This momentum enveloped all (allowed) upazillas. AKTEL is looking forward to massive investment to target 9.2 million subscribers by 2008. AKTEL has a business plan to retain the subscriber with unique and best quality services than to go to price war. That is, the objective for AKTEL’s communication seems to generate sales and to approach toward building a strong and consistent brand image in the mind of the consumers to provide them a reason to select AKTEL over others.
1.4.1 Major Milestones of AKTEL
TMIB’s intention is to promote the wireless lifestyle – the complete mobile society. AKTEL is renowned for bringing new service offers in Bangladesh. Below, some of the first time offers are mentioned:
Table 1?1: Milestones of AKTEL
| Year | Milestones |
| 1996 | · AKTEL received the license. |
| 1997 | · Official Launch in Dhaka. |
| 1999 | · First to launch the Mobile to Mobile + BTTB incoming facility for AKTEL subscribers through ‘Mobile Plus’ in Bangladesh. |
| 2000 | · First time introduced the Seamless Coverage throughout the Dhaka-Chittagong Highway and named it as ‘Chittagong Dhaka Corridor (CDC)’. |
| 2001 | · Launch of One Pre-paid.· First time introduced the full-fledged IVR (Integrated Voice Response) based Customer Services (Call Center) in telecom market. |
| 2002 | · Launch of SMS service· First time introduced cellular services in the most northern part of Bangladesh by launching AKTEL Service in Rangpur and Dinajpur.· First time introduced the automatic system generated bill amount and payment request for the Post-paid subscribers. The automatic unbarring facility, after necessary payment making by the subscribers, is also a part of this system. |
| 2003 | · First to launch Pre-paid Mobile Standard. |
| 2004 | · Allowable 61 districts covered.· Established 1 million customer base.· Established inter-operator SMS.· Launched international Roaming (AIRS). |
| 2005 | · Established 2 million customer base.· Independent unit for Corporate Care.· First to launch Electronic Recharge Facility called E-fill in Bangladesh.· First to introduce GPRS (General Packet Routing System) with two months FREE trial for the post-paid subscribers.· First to launch 1 second pulse on Postpaid.· First to launch 10 second pulse on Prepaid.· International SMS with 500 operators.· First time introduced Message Greeting System with FunDose in Bangladesh· Established customer base of 3 million.· First time introduced Club Membership Offer for the Exclusive users of AKTEL. The club is known as “Club Magnate”, which offers extra services with its Platinum, Gold and Sliver cards.· First telecom operator to receive ISO 9001:2000 certification. |
| 2006 | · Established more than 5 million customer base.· Establishment of more than 3500 BTS in 451 upozillas, covering 90% thanas.· Successful completion of backbones in Dhaka-Chittagong, Dhaka-Sylhet, Dhaka-Bogra and Dhaka-Khulna. |
| 2007 | · Established 7 million subscriber base.· Upon permission from the Care Taker Government (CTG), covered the Chittagong Hill Tracts and completed mobile service all over Bangladesh. |
1.5 Strategic Overview of AKTEL
1.5.1 Vision
To be a leader as a Telecommunication Service Provider in Bangladesh.
1.5.2 Mission
AKTEL aims to be achieve its vision through being number “one” not only in term of market share, but also by being an employer of choice with up-to-date knowledge and products geared to address the ever changing needs of our budding nation.
1.5.3 Theme
AKTEL always strives to uphold the dictum “Customer First”.
1.5.4 Objective
The main objective of the company is to uphold the dictum “Customer First”. AKTEL has been aggressively addressing customer’s apprehension for smooth and quality customer care. A fully functional 24-hour call center has been in operation for some time now with toll-free help line numbers accessible from any phone (PSTN or Cellular) throughout the country. For more personalized care AKTEL has introduced been officering one-stop service solution. In order to insure that they strive to employ the best resources and latest technology for excellence in offering many more innovative and exciting products and services.
The Business Slogan “Clearly Ahead”
The whole is the sum of parts and when the best come together; the results can be truly spectacular. TMIB brings AKTEL Mobile phone service, a digital cellular phone service, which will prepare better for life in the fast lane. AKTEL GSM always keeps so near, even when so far.
AKTEL GSM wants to provide the following in order to ensure that they can gain potential customers as well as market share:
· The technology trusted around the world
· Wide coverage with digital clarity
· Digital security with peace of mind
· Various choices of value added features
· Better customer care not just promised, but delivered
· Competitive tariff rate and better billing
1.5.5 Quality Policy
AKTEL is committed to achieving leadership in customer satisfaction by continually improving its processes, products and services to ensure they consistently exceed customers’ requirements. We will develop and implement technology and infrastructure that enable us to be clearly ahead in Bangladesh and to enhance the mobility experience of our customers.
AKTEL wants to ensure:
- Total commitment to the needs of customers
- To follow the highest ethical standards
- Continuous improvement of all work processes
- Permanent improvement of all the employees knowledge and skills
- Securing the quality of the service to match the quality of service offered by the world’s most successful companies in the field
- Preserving the company’s leading position in the national market of mobile
1.5.6 AKTEL Core Values
· Uncompromising Integrity: Our reputation is based upon our ability to fulfill promises to shareholders, customers and employees. We do so by being honest in our dealings, taking responsibility and being accountable for our actions. We treat everyone the way we would like to be treated. We are proactive in identifying issues and coming up with solutions. We ensure that the highest ethical standards guide us in making decisions. We are true to our word.
· Total Commitment to Customer: Our success is based upon our customer focus. We listen to and connect with customers. We anticipate their needs and make it easy for them to do business with us. We keep promises. We offer them value and quality services to enrich lives and enhance business success. We treat them with dignity and respect.
· Respect & Care for Others: By working as one team with shared goals we achieve great things. We value ideas and contributions from everyone. We recognize, respect and value diversity in the team. We develop strong bonds by communicating and sharing knowledge. We encourage open discussion and commit to an agreed position. All of us have a part to play.
1.5.7 Advertisement and Promotional Guideline
AKTEL GSM are trying to convert non users to mobile phone users stressing the benefit of GSM services, and with the service benefit of AKTEL that will make their life easier. To serve the market more accurately their target market will be further segmented based on psychographics and business sites. Strive to develop a better product will be a continuous process.
AKTEL has a wide variety of promotional activities. The promotional mix includes TV, radio, newspapers, magazines, flyers, brochures, etc. AKTEL has also put up billboards at certain strategic locations in order to attract customers as well as give their products and services a boost so that they can increase their customer base. AKTEL branding has been carried in order to bring about its brand awareness. They are trying to identify AKTEL as a unique product so that it can be differentiated from it’s competitors. Billboards are there to attract attention and appeal to customers so that they are aware of AKTEL’s products and services. Mostly billboards have been put on main roads and some major shopping centers around Dhaka city like Eastern Plaza, where mostly the younger generation hang out. This in turn would attract that segment of customers within a specific age group, i.e. teenagers and people in their early twenties, as this generation has the urge to communicate frequently and be up-to-date on recent events.
Thus, by promoting their products and services through these various media, electronic as well as press advertisements, AKTEL can well be in the way of obtaining it’s vision and so resulting in a higher subscriber base and in turn a higher potential market share. The marketing division distributes leaflets or brochures so those new customers can find out information about AKTEL’s various packages and choose from among them.
AKTEL’s GSM service is based on a robust network architecture and cutting edge technology such as intelligent network (IN). The intelligent network (IN) provides peace-of-mind solutions in terms of voice clarity, wider nationwide network coverage, numerous international roaming global partners, and popular value added services (VASs), quality easy-access customer care, round the clock call center operations, ironclad digital network security, competitive tariff rates and precise billing. AKTEL provides standard mobile connections with NWD and ISD facilities. They also provide mobile-to-mobile, Mobile with T&T incoming and outgoing facilities. TMIB has an integrated and fully computerized Customer Care Billing System (CCBS), which supports virtually all subscriber-related functions with its 24-hour customer care service.
1.6.1 Product Line
The product line of AKTEL is divided into two types based on the subscription category- Pre-paid and Post-paid.
Pre-paid Packages
All Prepaid packages of AKTEL now transforms into a single package… A package that delivers singularity, a refreshingly new identity… brining in simplicity and desirability to all the subscribers. Previously the most successful pre-paid products were Joy, Power, Phurti and Economic ISD package.
Post-paid Packages
There are few lucrative post-paid packages named Signature, Infinity, Economy ISD and AKTEL Corporate.
The tariff and facilities under each package can be easily found from the webpage: www.aktel.com.
1.6.2 Services
Basic Services: Telephony
Supplementary Services:
· Calling Line Identification Presentation (CLIP)
· Call Waiting and Call Holding
· Call Forwarding
· National Roaming – Both way
· International Roaming
· Electronic Value Dispenser – e-Fill
· Itemized Billing
· Dedicated Customer Services
Value Added Services:
· Short Message Services (SMS): Local & international
· Balance Transfer
· Friends & Family (FnF)
· Call Barring & Conferencing.
· AKTEL-bdnew24.com
· AKTEL Phone Backup
· AKTEL Café 8000
· Info & News – Cricket World, Tele Ramadan, Prayer Timings.
· AKTEL GPRS (Spice)
· AKTEL Opener
· AKTEL GoonGoon
· AKTEL Voice SMS
· AKTEL GopShop
· AKTEL PA
· International Voice SMS
· SMS Banking
· SMS-Email
· Voice Mail Services (VMS)
· Voice Greeting Service
AKTEL has the widest roaming facility among Bangladeshi mobile phone operators, with 440 operators across more than 185 countries in the world. Many more products are in line to be added to the existing array of AKTEL products and services in the days to come.
AKTEL now covers all the 64 districts and more than 503 thanas of Bangladesh with a superb network. With the permission from Bangladesh Govt. to cover the 3 districts of Chittagong Hill Tracts, the company is aiming to invest heavily on network development in this region. The quality of voice and invulnerable and secured service are the key strengths of AKTEL to expand its business and subscriber base.
Figure 1-1: AKTEL Coverage Map
1.8 Organizational Structure
The organization is headed by its Chief Executive designated as the Managing Director entrusted with overall responsibilities of business direction of the organization and leading dynamically towards the attainment of its Vision, Mission and Goal. In attaining the above mission, Head of Corporate Strategy, Chief Financial Officer, Chief Commercial Officer, Chief Technical Officer, General Managers & Department Heads assists the MD. The organogram of AKTEL looks like:
Figure 1-2: Organization Structure of TMIB
The major operation is run from the Head Office which is located in Dhaka. But to focus the key business area in Bangladesh in a more concrete manner, the Chittagong Region is headed by a special Regional Head. In all the other Division/location of Bangladesh, TMIB has its own branches and customer touch points.
The organization has an executive committee, which includes Chairman, Directors, Managing Director, Chief Commercial Officer, Chief Financial Officer, Chief Technical Officer and other General Managers and Divisional Heads. Most of the Divisions consist of a number of Departments based on functionality and work nature. As a dynamic telecom company, it is very much essential to maintain good communication and cross functional cohesiveness within the organization. The communication across divisions is largely maintained by Project Management Office (PMO). Each division consists of a PMO which monitors all the activities and ensures quality and timely delivery of work.
1.8.1 Manpower Distribution
TMIB always strives to build a skilled and dynamic manpower to flourish its business in this fiercely competitive market. As of June, 2008, TMIB has 1,726 staffs composed of locals and expatriates distributed as follows:
Table 1?2: Manpower Distribution of AKTEL
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1.9 Features of AKTEL
· Cellular Phone Service: TMIB brings customers the AKTEL mobile phone service. Fully digital cellular phone services that will prepare customers better in their day-to day activities, thus making their lives easier. AKTEL has been successful in bringing together the world leaders in various technologies, giving Bangladesh world class cellular phone service.
· Country-wide Coverage with Supreme Quality Network: AKTEL covered all 64 districts and more than 90% thanas of Bangladesh. As of 31st December, 2007 AKTEL has 3105 BTS that covers 74% geographical and 85% population area.
· Better Customer Service: TMIB’s vision is to continuously monitor their customers’ needs and wants and to plan accordingly for better & faster customer service. They are working very closely with the customers to launch more new services with exciting features. They have planned to introduce various Tele-info services very soon.
· Better Billing: Always keeping customers so near even when they are so far. AKTEL always thrives for achieving customer satisfaction so that they perceive better and quality service for their money.
· Better Switching: AKTEL cellular switching system provides the customers the state-of-the-art GSM technology, which will give customers the winning edge all the way. IP Based Switching stations are being installed.
· SIM-Card Identity Number: With the AKTEL Cellular Phone service, customers will have more than just a number. Simply because the GSM lays emphasis on the subscriber identification module (SIM) card, a key component of the whole process. It is computer chip card, which is highly secured against fraud. A microchip embedded in the plastic card stores PIN (Personal Identification Number), code personal phone directory, and details of call made. As a result, the customers can use a SIM card on any GSM 900 phone. So, even if the customer’s cellular phone is not handy, the customer borrows another one, insert their SIM card and it’s usable as usual. This electronic smart card also contains a unique PIN just as an ATM card does in order to prevent misuse as it can fall into wrong hands.
· Consistent and High Quality Voice: People who listen to music on CD are aware that digitized music may result in sharper and clearer audio quality. With GSM too, digitization of voices is done, therefore maintaining high quality.
· Security: It is almost impossible for anyone to tap or listen in on a conversation in the AKTEL cellular network. Digitization encodes speech and dynamic allocation of frequency makes it impossible for outsiders to enter a call. Incidentally, the technology that makes it possible for individual to talk better also makes it for anyone to intrude on their privacy audio quality. With GSM it is also possible for digitization of voice so that high quality is maintained.
· Exciting AKTEL Value Added Services: AKTEL offers a very comprehensive range of value added services for those on the move. Each service is designed to help the customers in specific frequently encountered solutions. Services like these will surely revolutionize the way customers communicate.
· AKTEL Itemized Billing: This service entitles the customers to a detailed bill with an accurate breakup of the call charges, including the date, duration and numbers of incoming and outgoing calls. This is extremely handy in cases where the customers wish to keep track of expenses, or even to find out whether their card is being misused or not.
· International Roaming: The AKTEL mobile service provides the customer with connectivity and the freedom to make and receive telephone calls to those GSM networks all over the world that have roaming agreements with AKTEL. So whenever a customer is within the service areas of these GSM networks, they will still be able to keep in touch with friends and family around the world.
· Choice of Handset: The AKTEL network has a chain of outlets where handsets from all the leading models and accessories of GSM compatible mobile phones are available. However, subscribers are free to procure their GSM cellular phones from any other source within the company or abroad provided these are duty paid and would connect to the AKTEL network.
· Competent Human Resource: The most important key resource factor of TMIB is its efficient human resource. It is using the state-of-the-art GSM technology and continuously monitoring its network traffic to ensure network quality. Moreover, its decisions are based on facts from market research and coverage survey. The company also monitors it’s competitor’s activities and is proactive in marketing decisions.
The company value chain consists of the value chain of its’ own as well as the value chains of its suppliers and its distributions channel allies engaged in getting its products or services to its end users. The competitiveness in end users market requires that the company managers understand the entire value chain system for delivering a product or service to end users of the company’s own value chain.
| Suppliers of SIM Cards, Scratch CardsAnd Network Providers |
| Supplier Related Value Chains |
| TechnicalITMarketingSalesDistributionHRAdmin Supply ChainCustomer Service |
| Company’s Own Value Chains |
| Forward Channel Value Chains |
| Alliance and Collaboration with Mobile Set Vendors, Distributors or franchises |
| Consumers, Corporate and PCO |
| Figure 1-3: TMIB Value Chain |
The supplier related value chain is a very critical factor for the success of the telecom companies. The suppliers are mainly the network providers like Nokia, Siemens, Ericsson, Alcatel, Huawei etc, who provide and maintain the network and the infrastructure
The costs, performance, features and quality of the network providers influence the costs of the company and also product differentiation capabilities. Anything that the mobile operator can do to help its suppliers take costs out of their value chain activities or improve the quality and performance of the network can enhance the competitiveness of the telecom companies.
Forward channel of AKTEL are those allies and collaborating partners like the distributors and dealers who distribute the SIM cards, scratch cards all over the country, the handset providers like Nokia, Siemens, Motorola, Sony Ericsson etc. who jointly work with the mobile operators to provide user friendly and better attribute sets.
The value chains of the hand set providers and distributor /dealers of the telecom industry are relevant because:
· The costs and margins of the telecom company’s allies are part of the price the end user / customers pays.
· The activities that the distributors/ dealers of the mobile operators perform affect the end user’s satisfaction.
This is why AKTEL works very closely with the mobile hand set vendors and their distributors to perform value chain activities in mutually beneficial ways.
AKTEL strongly believes that subscribers are their most valuable assets. They have a strong Customer orientation. To always be with their customers the AKTEL “Help Line’ is there. AKTEL has successfully migrated to a new switch with higher capacities in terms of accommodating higher customer base and as well as to let them use all the basic supplementary services under GSM technology. TMIB’s expertise and experience are acknowledged throughout the industry.
As of December 31, 2007 there are 19 full-fledged customer care centers across different areas of Bangladesh – 6 in Dhaka, 2 in Chittagong, 1 in Narayangonj, 1 in Comilla, 1 in Feni, 1 in Cox’s Bazar, 1 in Mymensingh, 1 in jessore, 1 in Barisal, 1 in Rajshahi, 1 in Sylhet, 1 in Kushtia and 1 in Khulna. Apart from these, AKTEL has a plan to introduce 500 more mini customer care points by 2008 to reach the customer in a more convenient way. To ensure 24 hour customer service AKTEL has a heavily equipped call center which can handle 120 local and 1 roaming call simultaneously. The call center has been upgraded last year with the introduction of Interactive Voice Response (IVR) service for automatic problem resolving. In 2008, the company wishes to relocate and upgrade its call center to a much bigger extent.
1.12 Sales & Distribution Structure
The Distribution channel of AKTEL is mainly divided into two parts – one is dealer based and the other is contact point based popularly known as AKTEL Touch Points (ATP). The first channel is maintained by the sole distributor AKTD (AK Khan & Company – Telecom Division) and the second one by a Malaysia based distributor named Compugates. The distribution structure is as follows:
Figure 1-4: Sales & Distribution Structure
As of December 31, 2007 the company has 448 operational ATPs, 86 exclusive dealers and 65,840 trade outlets (Retail stores) to reach the customers.
· TeleLink Telecommunication Award 2007: TeleLink Telecommunication Award 2007″ for its excellence in service, corporate social responsibilities and dealership management for the year 2006 in commemoration of WORLD Telecommunication Day 2007.
· TeleLink Telecommunication Award 2005: TeleLink Telecommunication Award 2005 for its excellence in service for the year 2005.
· Arthakantha Business Award: Given by the national fortnightly business magazine of Bangladesh for its excellence in service in telecom sector.
· Financial Mirror Businessmen Award: Given by the national weekly Tabloid business magazine.
· Deshbandhu C. R. Das Gold Medal: For contribution to telecom sector in Bangladesh.
· Beatification Award: for exceptional contribution to the Dhaka Metropolitan city from Prime Minister Office on 13th SAARC Summit.
· Standard Chartered – Financial Express Corporate Social Responsibility (CSR) Awards 2006: For contribution in Education, Primary Health, poverty alleviation and ecological impact.
· Arthokontho Business Award 2006: For better telecom service provider in Bangladesh.
· Financial Mirror & Robintex Business award 2006: For its excellence in service, corporate social responsibilities activities throughout Bangladesh.
· Desher Kagoj Business Award 2006: For Corporate Social Responsibilities activities.
1.14 Corporate Social Responsibilities
AKTEL is always committed to the society. In fact, 2005 & 2006 were a year of exploration into Corporate Social Responsibility (CSR) for AKTEL. To actively identify and start establishing AKTEL as a concerned entity devoted to the development of many social interests throughout greater Bangladesh based on four core values. These are enlightened through education, Assure better health, Protect environment and Fight with poverty. In recognition of its CSR effort, AKTEL is the first among all mobile phone operators to win prestigious “Standard Chartered-Financial Express Corporate Social Responsibility Award-2006”.
AKTEL believes education platform remains the main focus to develop a nation. To ensure an early jump into technology and intellectual transfer, AKTEL has established a tradition of providing scholarships every year to three promising individuals to complete their higher studies in Multimedia University in Cyberjaya, Malaysia. To provide a world-class teaching and learning resources for Bangladeshi professionals AKTEL joined hand with Chittagong Skills Development Centre (CSDC), Underprivileged Children’s Educational Programs (UCEP-Bangladesh), etc.
AKTEL also aims to identify and supports indeed those in need of basic infrastructure to practice the fundamentals of Islam. This contribution goes in building orphanages and renovations of mosques all across the Bangladesh. To improve living condition of distressed people; AKTEL has always been providing support to them. As a shared concern with the society at large, AKTEL also focused towards the roaming street children found throughout Bangladesh.
Not only will AKTEL continue its thrust towards identifying & involving itself with more avenues for CSR activities, we encourage the fellow enterprise of Bangladesh to participate in such activities on a regular basis. By becoming more aware of living & social community, AKTEL can certainly see so many areas to be involved in. Only through concerted efforts of the private sector, there will be emerged a socially responsible collective consciousness.
Macroeconomic Analysis
2.1 Global Economic Trends and Their Implications
The increasingly globally integrated economy of Bangladesh suffered the consequences of some of the negative trends experienced by the global economy in 2008. As is known, about 56 per cent of Bangladesh economy is at present connected with the global economy through export and import of goods and services, and aid and investment. Slower growth projections for major export destinations of Bangladesh, particularly the stagflation in the US (following the sub-prime mortgage market crisis) and also the Euro-zone countries, and the high global inflationary trends, have had an adverse impact on the performance of Bangladesh economy in FY2008.
Slower Growth Rates for Global Economy…
As is evidenced by information in Table 2.1, growth projections for the US, EU and Japan economy for 2008 was lower than previous year. Growth rates were also revised downward for China and India, two major import sources of Bangladesh. Indeed IMF has reduced its 2008 global growth projections from 4.1 per cent to 3.7 per cent; world trade growth is expected to come down to 4.5 per cent in 2008.
Table 2?1: Projections of Real GDP growth of Selected Countries (in percentage)
| 2007 | 2008 | 2009 | |
| World | 4.9 | 3.7 | 3.8 |
| United States | 2.2 | 0.5 | 0.6 |
| Japan | 2.1 | 1.4 | 1.5 |
| European Union | 3.1 | 1.8 | 1.7 |
| China | 11.4 | 9.3 | 9.5 |
| India | 9.2 | 7.9 | 8.0 |
| Singapore | 7.7 | 4.0 | 4.5 |
| Hong Kong | 6.3 | 4.3 | 4.8 |
| Bangladesh | 6.5 | 5.5 | 6.5 |
Source: World Economic Outlook, April 2008
Extreme Oil Price Hike and Higher Inflation…
Like any other country, global oil price hike and consequent inflation has been one of the major worrying concerns for the Bangladesh economy in last year. High commodity prices, particularly of critically important import items of Bangladesh including food, fuel and fertilizer, raised the import burden significantly. Prices of these increased in the range of 100-200 per cent in the span of one year between April 2007 and April 2008.
Sluggish Growth Dampens FDI and Lower Net Exports…
Sluggish growth in developed countries is also likely to have dampening effect on FDI and portfolio investment flow to Bangladesh and adverse implications for flow of foreign aid. Sluggish US growth, and consequently lower consumer demand, led to a deceleration in demand for Bangladeshi exports – in the first nine months of FY2008 export to US had come down by 10 per cent; however, export to EU registered quite robust growth. One effect of the sluggish global demand had been increasing price squeeze in the international market for Bangladesh’s major exports, including apparels. Higher commodity prices in global market, and declining export prices of Bangladeshi commodities has led to deteriorating terms of trade and higher trade deficit in the first three quarters of FY2008. Slower growth of major economies could also dampen initiatives such as aid for trade, and also undermine the prospects of LDC-friendly initiatives in the WTO in the form of DF-QF market access, and the NPDA2007 initiative in US (providing zero-tariff access to LDC products).
Devalued Dollar…
A weakened dollar also had negative impact for Bangladesh’s FOREX reserves (denominated, to a significant extent, in dollar terms), and for import from Euro-zone and other countries.
Opportunity for Higher Inward Remittance…
Major portion of the inward remittance for Bangladesh comes from the countries of the middle-east. Rising fuel prices have significantly enhanced export earnings of these oil-exporting economies which are attracting increasing number of migrant workers, leading to higher remittance flow to countries such as Bangladesh.
2.2 Bangladesh Economy: Key Indicators
Macroeconomic performance of Bangladesh during FY2008 was marked by acceleration of the inflationary momentum, lower level of ADP implementation underpinned by cost escalation of project and weak implementation capacity of the government machinery, higher public expenditure owing to the flood and cyclone rehabilitation related efforts, rising demand for subsidy in the wake of higher import prices, and pressure on balance of payment arising from higher trade deficit driven by higher import expenditure particularly for food and fuel imports and relatively low pace of export growth. Notwithstanding the upturn seen in the recent past, the cumulative impact of the global and domestic challenges facing the economy resulted in a downward revision of the growth projection of about 1 per cent, to about 6 per cent, from the earlier envisaged 7 per cent GDP growth target set for FY2008.
Bangladesh Is Going Through Extra-Ordinary Political Reform…
Both FY2007 and the ongoing FY2008 went down as exceptional years in the history of Bangladesh. Experience of FY2007 was unique in the sense that it saw three consecutive governments and declaration of a state of emergency. After a series of political turmoil and disruption in the economy, the new caretaker government (CTG) has taken over in January 2007 and has been in charge of macroeconomic management for the duration of the second half of FY2007 and the full fiscal year FY2008.
A Number of Natural and Economic Disruptions…
FY2008 is characterized by a series of natural calamities and global economic hazards which affected Bangladesh economy severely. Firstly, three consecutive natural disasters, two floods and cyclone Sidr, inflicted severe burden on the macroeconomic management in FY2008. The damage to the economy was estimated to be of $1.8 billion and a lot of attention had to be paid for rehabilitation and reconstruction related activities. Secondly, the creeping inflation observed in FY2007 gathered momentum as the year proceeded, driven by rising food and fuel prices in the international market and also domestic supply-side constraints. Thirdly, global economic slowdown, particularly the downturn in the US economy, generated negative consequences for the increasingly globally integrated economy of Bangladesh. Exports particularly to the US and terms of trade suffered as a result.
Growth Performance: Forecast Revised Downwards…
According to the preliminary estimates presented in the Budget for FY2008-09, GDP posted a growth of 6.21 per cent during FY2008. This growth was severely affected by unabated increase in the price of oil, two back to back floods and the devastating cyclone Sidr experienced in the first half of the fiscal year FY2008. Along with the crop loss, agriculture sector also suffered from avian flu which affected the livestock sub sector. Industry and service sector suffered from a loss of business confidence due to the extensive drive against corruption, hoarding, tax evasion and illegal business by the CTG, eventually leading to a depressed investment climate and a sluggish growth in export in the first two quarters of FY2008. Both agriculture and industry sector experienced slower growth of 3.6 per cent and 6.9 per cent respectively in FY2008, while their respective growth rates in FY2007 were 4.6 per cent and 8.4 per cent. Such adverse conditions led to lower than six per cent GDP growth projections by many, including the International Monetary Fund (IMF) and the Asian Development Bank (ADB) [1].
Figure 2-1: GDP Growth and Inflation
[Source: CPD-IRBD Database]
However, improved business confidence, upturn in industrial production, regaining of the lost momentum in the export sector and a bumper Boro harvest during the second half of the fiscal year had positive impact on the growth performance of the latter half of FY2008, with consequent positive impact for the performance for the entire fiscal year. The usual trend of revising GDP growth rates in the revised budget of the subsequent year, however, would suggest that this year’s growth figure would be revised as well in the next year. It could be re-fixed at about 6 per cent from the 6.21 per cent as mentioned in the budget. It may be noted here that such downward revisions occurred 10 times during the last 13 years!
GDP Dominated by Service Sector: Worrying Trend…
Overwhelming share of service sector in the GDP of Bangladesh has somewhat acted against volatility in economic growth performance of the country. Service sector contribute about 50 per cent share in the real GDP of Bangladesh. Shocks experienced by agriculture or industry sector have tended to have adverse impact on the growth performance of the service sector. Even then the overall growth (6.21 per cent) was only 0.22 per cent lower compared to the previous year, owing to the lower fall in service sector growth. Service sector experienced 6.7 per cent real growth in FY2008, compared to 6.9 per cent growth achieved in FY2007, helping the economy to register growth rate of 6.2 per cent [2]. When the numbers are rechecked it will become clear whether services sector was really capable of registering such high growth at a time when growth rates of both agriculture and had come down significantly.
[Source: Bangladesh Bureau of Statistics]
Among the nine sub sectors of the service sector, only three experienced positive growths (Transport & Communication, Public administration & defense and Community, Social & Personal Services), while the others experienced lower real production growth in FY2008 compared to FY2007.
An analysis of the real growth in GDP achieved in FY2008 reveals that service sector contributed 51.2 per cent of the incremental GDP, while industry and agriculture sectors contributed 31.5 per cent and 12.0 per cent respectively. Share of agriculture in the total GDP of FY2008 declined by 0.5 per cent, while the share of service sector increased by 0.2 per cent. Much desired improvement in the share of industrial sector has not, however, taken place and remained almost stagnant at 28.6 per cent against 28.5 per cent in FY2007 [3].
Creeping Inflation Diminishes Purchase Power Drastically…
Creeping inflation throughout the year, particularly, rising prices of cereals and fuel originating from increasing world prices of cereals and oil, was already emerging as causes for concern. Inflation, measured on a point-to-point basis, increased to 11.21% in Nov’07, marking an 11-year high.
Figure 2-3: Inflation (base 1995-96)
[Source: Bangladesh Bureau of Statistics]
This continued rising inflation is specially driven by food as food import had risen dramatically due to loss of 3 crops to flood and SIDR cyclone. Rise in international commodity prices, especially petroleum, edible oil, rice and wheat contributed most in the overall CPI. Earlier in the year, drive against corruption and tax evasion shrunk business growth and amplified price increase during 2007. Despite nearly static USD/BDT helping the cause of containing inflation, the country as a whole suffered from very high unofficial prices of essential almost in every sector and this trend is continuing unabated in early ‘08.
The cumulative impact of high inflation and significant income erosion is being most severely felt particularly by low income groups of people in the country. According to CPD estimates, even when the increase in cumulative GNI is considered (between 2005 and 2008), given the price hike (particularly taking into consideration the weighted inflationary impact of price of rice), an additional 8.5 per cent households have fallen below the poverty line in recent times because of high inflation (taking Household Income and Expenditure Survey data for 2005 as reference point). This would mean that an additional 2.5 million household could have fallen below the poverty line in terms of real income. However, it needs to be kept in mind that a large proportion of these households have received support from government’s various safety net programmes, coverage of which was substantially increased in the recent past. This support would have enabled such households to address their immediate nutritional needs, to some extent. Notwithstanding this, the fact of t