1. ETE 521: Telecommunication
Business and Management
Module 06: Overview of Bangladesh’s PSTN
Telecom Sector.

2. Overview of the General Competitive
Landscape of PSTN Service Market:
 In 2007, major development in the PSTN industry is
BTRC’s policy decision of allowing PSTN operators to
extend their networks in the Central Zone.
 The Central Zone, comprising the Dhaka city,
Narayangonj municipality, Gazipur, Tongi, Savar, and
Jinjira is considered the most lucrative for landline
connections.
 It is estimated that there is a demand of around 1
million connections.
 BTRC has already granted license for the Central Zone
to four operators converting their Zonal licenses to
National license.

3.  BTRC has been contemplating to issue two more
National licenses to existing land phone operators.
 These operators may ramp up their subscriber base by
taking the advantage of high demand of the Central
Zone.
 Another development may affecting the PSTN industry
is BTRC’s decision for allowing ISPs to offer IP phone
(VoIP) services.
 This decision has the potential to increase the
competition in the fixed phone connections.

4.  Historically till 1989, BTTB was the monopoly operator
(also Regulator) providing the PSTN services (in fact
all types of Telecom services) in the country.
 An agreement was made with a private company,
Bangladesh Rural Telecom Authority (BRTA) in July
1989 to provide digital telephone service in 200
Thanas of the country.
 Again in August 1994, another agreement was made
with another private company;
 Integrated services Ltd (ISL) to provide digital
telephone service in the rest 195 Thanas of the
country.

5.  Performances of these two operators, to say the least,
were very poor.
 Till June 2004, subscribers under BRTA was about
17,800 and under ISL (name changed to Sheba
Telecom after acquisition of Cellular Mobile license in
1996) was about 3000 only.
 Later with the opening up of the PSTN licensing in
2004, BRTA was converted into two PSTN companies
(National Telecom & Peoples Telecom), both receiving
licenses to provide PSTN services in 4 Zones
(excepting Central Zone) of the country.
 ISL which was changed to Sheba Telecom regained its
old name in 2004 (after sale of its full mobile share)
and started to give the PSTN services in its previously
allocated 195 Thanas.

6.  In late 90’s, it was decided to give license to one
operator to provide PSTN services in Dhaka multi-
exchange area (which was later named as Central
Zone).
 License agreement was made by MOPT with Worldtel,
a foreign holding company, in August 2001, to
provide fixed telephone service in the present Central
Zone area but the execution of the same did not start
due to various reasons.
 The license was revalidated in April 2004, but the
implementation of the same has not been started till
today. This license is likely to be cancelled shortly.

7.  In 2004, PSTN service was fully opened for private
participation with issue of licenses through open
licensing system.
 For issuing PSTN licenses, the country was divided
into 4 Zones in 4 parts of the country and the Central
Zone at Dhaka.
 Total 37 Zonal licenses (except in Central Zone) were
issued to 15 local companies, of which 5 licenses of 2
companies have been cancelled recently for their
failure to start the operation.

8.  These companies started operation at different time in 2005
and 2006 but their performance in general is not at all
satisfactory.
 Apart from cancellation of licenses of 2 companies, fines
have been imposed on 3 companies for non-fulfillment of
service provision as per roll-out plan and same are likely to
be imposed to another 2-3 companies very soon.
 Continuous fall of tariff of the mobile operators and equal
tariff for their local and long distance calls, are some of the
reasons for inadequate growth of the PSTN subscribers.
 Even the growth of BTTB telephones is stationery in last 3
years and a good number of subscribers surrendered their
telephones, especially outside Dhaka.

9.  The demand for fixed telephone in Dhaka
multi-exchange area is more than that of
the other parts of the country, which is at
present better served by the mobile
operators.
 But the issue of license in Dhaka multi-
exchange area or Central Zone has been
delayed for a long time, firstly because of
the policy decision of the Govt. and
secondly due to court injunction (filed by
Worldtel) imposed on entry of new
operators in the Central Zone.

10.  After the injunction was lifted, applications
were invited for issue of PSTN licenses in
the Central Zone.
 Very recently (9th Sept’07), BTRC has
accorded approval for issuing 4 licenses to
the existing PSTN operators: (Ranks
Telecom, Dhaka Telecom, Square
Informatics and National Telecom) in the
Central Zone, converting their licenses to
National PSTN licenses.

11. PSTN Market Environment
Analysis:
 BTTB is the main player in the PSTN market with a nation
wide operation. Subscriber base of BTTB stands at 877,500
in 2007. In addition to domestic voice services, BTTB is the
sole operator of handling International calls.
 In addition to BTTB and 15 PSTN operators with Zonal
licenses, Integrated Services Ltd (ISL) was given license to
operate in 195 Thanas and WorldTel was issued licenses to
Dhaka multi-exchange area.
 Information related to these 17 operators is provided in
Table below. As mentioned above, four of these operators’
zonal licenses have been upgraded to National ones.
 Four licenses of Bashundhara Communication and one
license of Dominox Tech have recently been cancelled for
failing to start their operation.

12. No. Operators Date of start of
Operatio
n
Subscribers
June’2006
Subscribers
Dec’2006
Subscribers
June’2007
1 Bashundhara Comm. NA NA NA NA
2 Ranks Telecom July’05 33,728 45,271 82,364
3 Bangla Phone NA NA NA NA
4 Jalalabad Telecom Jan’06 3,430 6,720 4,019
5 Westec (Bay Phone) July’05 20,545 21,300 21,300
6 Tele Barta July’05 27,869 39,728 48,561
7 Dominox Tech. NA NA NA NA
8 GEP Telecom NA NA NA NA
9 One Tel Comm. Jan’06 7,247 10,913 20,139
10 Dhaka Telephone Co. July’06 NA 2,450 6,804
11 Square Informatix NA NA NA NA
12 National Telecom Jan’06 6,735 6,735 4,621
13 Peoples Telecom Jan’06 9,436 9,436 9,446
14 S.A. Telecom July’06 1,465 2,579
15 Nextel Telecom NA NA NA NA
16 Integrated Services Ltd NA 3,430 3,689 5,522
17 WorldTel NA NA NA NA
Total Subscribers 112,420 147,707 205,355
Growth Rate 31.39% 39.03%

13.  From the above Table, it can be concluded that the
growth of this market segment was very low
comparing the growth potential and the growth
enjoyed by the mobile operators during the same
period.
 It may be worth of mentioning that on the back drop
of the PSTNs’ subscribers growth from 112,40 in 2006
to 205,355 in June 2007, mobile subscribers growth
was 7.655 millions during the same period.
 Basically, mobile sector outperformed the PSTN by a
factor of 82, as far as subscriber’s growth is
concerned.

14. Analysis of BTTB Service Market:
Subscribers, Circuit
Capacity and Revenue
2003 2004 2005 2006 2007
Telephone Subscribers 716,720 810,160 857,360 889,170 877,500
Inland Trunk Circuits 37,070 44,810 45,540 47,120 49,230
International Trunk Circuits 3,840 6,110 7,350 10,470 15,000
Internet Subscribers 10,500 15,200 17,340 20,850 25,380
Revenue in Millions Taka 2002-03 2003-04 2004-05 2005-06 2006-07
Total Revenue 15448 15312 14248 13163 16665
Inland Telephone Revenue 11997 11356 10403 10621 13087
International Revenue 3362 3901 3709 2449 3182
Revenue from other Sources 89 55 136 93 396

15.  On the contrary to the high growth of
mobile subscriber base, BTTB’s subscriber’s
growth did not show much progress as
shown in Figure.
 However, BTTB’s Internet subscriber base
grew by almost 250% from 10,500 in June
2003 to 25,380 in June 2007.
 Figure also shows BTTB started
experiencing negative growth in their
subscriber base since 2006-07 period.

16. Figure 5.1: BTTB's Subscribers' Growth
10,500
15,200
17,340
20,850
25,380
716,720
810,160
857,360
889,170
877,500
June'2003 June'2004 June'2005 June'2006 June'2007
SubscribersNumber
Internet
Subscribers
Telephone
Subscribers

17. Figure 5.2: BTTB's Revenue Growth
15448
15312
14248
13163
16665
11997
11356
10403
10621
13087
3362
3901
3709
2449
3182
2002-03
2003-04
2004-05
2005-06
2006-07
RevenueinMillionTaka
Total
Revenue
Inland
Telephone
Revenue
International
Revenue

18.  Although the inland telephone Revenue
grew by 10% during this five year period,
the International Revenue has dropped by
almost 6%.
 This poor performance of International call
revenue is due to the high growth of illegal
International call termination business
using VoIP.
 BTTB’s ARPU from inland telephone
services has also dropped, from Tk 1,394 in
June 2003 to Taka 1,242 in June 2007.

19. Figure 5.3: BTTB's ARPU/Month During Last Five Years
1394
1168
1011 995
1242
2002-03 2003-04 2004-05 2005-06 2006-07
ARPU/MonthinTaka

20. Analysis of Private PSTN
Operators Service Market:
 The subscriber base of private PSTN
operators has been steadily increasing as
shown in Figure placed in the following
page.
 Although the total subscriber base of
205,355 appears to be much smaller than
that of BTTB.
 It should be noted that during this period,
mobile subscriber base crossed 30 million
marks.

21. Figure 5.4: Subscribers' Growth of Private PSTN Operators
112,420
147,707
205,355
June 2006 December 2006 June 2007
SubscribersinThousand

22.  Among the top ten PSTN operators,
RanksTel experienced the highest
growth followed by Tele Barta as
shown in Figure 5.5.
 Westec and One Tel’s subscriber base
reached to the same level by the end
of 2007 with 3rd position.

23. Figure 5.5: Subscribers' Growth by PSTN Operators
33,728
45,271
82,364
3,430
6,720
4,019
20,545
21,300
21,300
27,869
39,728
48,561
7,247
10,913
20,139
2,450
6,804
6,735
6,735
4,621
9,436
9,436
9,446
1,465
2,579
3,430
3,689
5,522
June 2006 Dec 2006 June 2007
SubscribersinNumber
Ranks Telecom
Jalalabad Telecom
Westec (Bay Phone)
Tele Barta
One Tel Com.
Dhaka Telephone Co
National Telecom
Peoples Telecom
S.A. Telecom
Integrated Services

24.  In terms of market share occupancy among
the top ten private PSTN operators,
RanksTel leads the market with 40% share,
followed by TeleBarta in 2nd position with
24% market share.
 Westec and One Tel have the 3rd position,
both with 10% market share. Market share
distribution among the top ten PSTN
operators is shown in Figure placed in the
following page.

25. Figure 5.6: Market Shares of Private PSTN Operators
One Tel
10%
Dhaka Telephone
3%
National Telecom
2%
Peoples Telecom
5%
S.A. Telecom
1%
ISL
3% Ranks Telecom
40%
Jalalabad Telecom
2%Tele Barta
24% Westec (Bay Phone)
10%

26.  All these companies are relatively very
small and they are treating their financial
information very secret.
 SRGB market survey found that on an
average each PSTN user has been paying
Taka 395 per month, which turns that the
estimated total revenue of those PSTN
operators would be about Tk 81 millions
per month.
 Based on that estimate yearly total revenue
of those private PSTN operators should be
about Tk 972 millions.

27. Interconnection Issues:
 The regulatory requirement as well as the regulatory obligation of
interconnection, as incorporated in the Interconnection Regulation, is equally
applicable to the PSTN operators. BTTB is the oldest and the only PSTN operator
for a long time before the mobile operators came in the Telecom market. So, for
quite some time since late 90’s, the mobile operators used to get interconnected
with BTTB and they had to invest in BTTB exchanges to get interconnection. The
scenario has been changed since last 2-3 years when there is virtually explosion
in the mobile market, while the BTTB’s subscriber base almost remained
stationery.
 During this period, two private PSTN operators (BRTA and ISL) also came in the
market but they provided service in a limited scale and only in Thanas.
Performance of these operators as well as their interconnection with BTTB was
not satisfactory. In 2004/05, licensees were given to 15 PSTN operators to work
in 1-4 out of 5 Zones (excluding Central Zone) of the country. Those private
PSTN operators made Interconnection with all mobile operators and BTTB, as
required under Interconnection Regulation.
 The charges in all these cases with and between PSTN operators and also the
mobile operators have been fixed at Tk 0.66 per call per minute.

28. Network Infrastructure
 BTTB as the oldest and the only Telecom operator, built up their
long distance networks at various time from primitive open wire
carrier system to the latest STM 64 optical fiber line. The
changes/improvement made by them however, were slow,
compared to the need of the market.
 It took long time to give licenses to the private PSTN operators
(practically given from 2004-05) and that too excluding the most
important Central Zone. As such their subscriber base is still quite
low even compared to the only public sector PSTN operator BTTB,
where it is virtually stagnant from last 3-4 years.
 This is why there is no growth in the long distance traffic
generated by the PSTN operators and consequently no growth in
the long distance networks. During this time no license has also
been given for providing the NLD (national long distance) service,
leaving practically BTTB as the lone PSTN operator giving the long
distance service. Other PSTN operators are meeting their
requirement of long distance circuits through lease line of mobile
operators and BTTB.

29. Evolution of International Service:
 Till 1975, the International communication was fully manual, using the
primitive HF Radio system with ionospheric refraction as the mode of
transmission.
 With the commissioning of the Satellite Earth Station at Betbunia in 1975,
the transmission system was replaced by a reliable means of
communication through Satellite; but the manual system for connection of
calls continued.
 In 1986, the International Trunk Exchange (ITX) was installed, through
which automatic routing of international calls were made through subscriber
dialing or operator dialing.
 The mode of transmission however remained through Satellite; until from
2006 additional transmission media through submarine cable were brought
into the system.
 At present, nearly 50% of over 19,000 international voice circuits are on
submarine cable, with more than 80% of its bandwidth still remaining
unutilized.
 The number and capacity of International Gateways (IGW) or ITXs were
also increased substantially, resulting in the increase of international trunk
circuits during the five year period from June 2003 to June 2007 by 400% .

30. Future Outlook :
Economies of scale are the key success factor in the
telecommunication business. It has been gathered that all these
PSTN operators have very limited equity investment capacity. As a
result, their borrowing capacity from Banks is also very limited.
Due to this weak investment capacity, these operators failed to
develop large scale networks for leveraging the benefit of
economies of scale.
It has also been gathered that none of these operators have
reached to a level where operating expenses could be met by
revenue. We came to know that there has been no significant
development in the investment capacity front.
These companies must increase their investment capacity
substantially in order to expand their network capacity to an
optimum level.

31.  The opening up of the central zone to PSTN operators appears to be
a positive development. But, in order to capitalize this opportunity
they must build large scale network.
 If they failed to do so, most of the calls originating from their
networks will be ending up in the networks of mobile and BTTB
operators resulting in huge payment of interconnection charges.
 As a result, they will face serious limitation to lower their tariff
below interconnection charges, which was recently Tk 0.66 /minute.
Some mobile operators have already lowered their tariffs below Tk
1.0/minute.
 Very recent reduction of interconnection charges by 40% will reduce
the hurdle for PSTN. But, the continued reduction of mobile phone
tariff is eroding such source of competitive advantage very soon.
The offering of CityCell’s tariff of Tk 0.25/minute anytime (24 hours
a day) between any CityCell numbers does not keep room of
offering any tariff advantage for PSTN operators to customers..

32.  Lack of mobility, low tariffs of mobile operators, and
interconnection charges are major limitations faced by
these small PSTN operators.
 To over come those limitations, they must built large
scale network and bring service level innovations.
 These operators should work with BTRC for allowing
them to offer data, video and other services in
addition to voice to make their offerings cost
competitive in the market place.
 Until and unless they do so, their future does not look
bright.

33.  Moreover, the BTRC’s approval of allowing ISPs to offer IP
telephone services have increased the competition level of
fixed phone services in the city area.
 It should be noted that there is no niche market segment for
them.
 They need to compete with mobile operators, ISPs and BTTB
for their phone services. It has been gathered that BTTB has
been lowering tariff and increasing their responsiveness to
customers’ need.
 It is worth of mentioning that almost 40,000 BTTB
subscribers have surrendered land phone connection in most
places outside Dhaka in recent months.
 As a result, the future prospect of the PSTN industry appears
to be not so bright.

34.  It was also learned that instead of focusing on PSTN
business development, those operators were primarily
involved in illegal call termination business using VoIP
over last couple of years.
 As a result, they missed the opportunity of building
customer base when there was serious demand
among customers for low cost land phone
connections.
 SRGB market survey reveals that most of the PSTN
operators are planning to diversify their services by
offering Internet service. Ranks Telecom has already
been offering Internet service.

35.  With the development of highly competitive mobile
industry, there appears to be no unique competitive
advantage in the voice segment for the PSTN
industry.
 In order to succeed, they should focus on developing
a large scale network for leveraging the economies of
scale benefit and must offer diverse services such as
data, video and leased line (i.e, bandwidth) in
addition to voice.
 The success factor appears to be investment capacity
for leveraging economies of scale benefit and service
diversification in the data, B2B bandwidth, and video
segments.

36.  Households and offices are major customers of this service. In
Bangladesh, there are more than 500,000 small and medium sized
enterprises. Most of these enterprises do not have BTTB’s fixed
phones. These enterprises are target customers.
 In Bangladesh, there are more than 2 millions CATV subscribers,
mostly urban households. More than 50% of these house holds do
not have BTTB’s fixed phone connections.
 These households are target customers of PSTN services. There are
almost 500,000 educational institutions, government offices, NGO
offices, hospitals, clinics and other office establishments.
 A significant portion of these establishments do not have BTTB’s
connections. These are also PSTN target customers.
 It’s worth of mentioning that BTTB has so far given approx 1 million
fixed phone connections. Therefore, it could be estimated that the
target customer segments for PSTN services is as high as 2
millions.