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Banglalink's Renewed Growth Push and Banglalink's Real Challenges And The Limits Of Strategy

This update is about Banglalink and its business. However, first let us take a detour because in life sometimes you need to take an alternative route to get to your destination!

Robi-Airtel merger was one of the most consequential events that took place in Dhaka’s business scene in a few years. It was, from the perspective of the strategic importance of the event, one of the underappreciated events as well.

If you pay close attention to the intricacies of the operator business, this reality becomes crystal clear. It was (it still is) getting increasingly difficult to acquire new users for both operators, Robi and Airtel, that ultimately led to the merger decision. There is a light network effect in operator business which makes switching cost high for customers discouraging them to switch mobile numbers often. More on that in a moment.

Banglalink’s Real Challenges

In telecom scale matters. Because the marginal cost for an operator to serve one additional customer is almost zero. If Banglalink’s user grows in a particular location where it already has infrastructure ready such as tower and other things, it does not need to set up another tower to serve one more customer. At the same time, it does not need to hire more people.

Which means, the marginal cost of serving one more customer goes down to almost zero, as I already said. This is where telecom operators make money and this is why scale matters for profitability because your investment for serving one customer in a particular location is same as your investment for serving one million customers. The only difference is when you serve one million, you earn more money but your cost remains almost same. Also, note that initial investment to start an operator business is quite high.

Similarly, as I mentioned earlier, there is a subtle network effect in operator business. Let me explain. Robi users enjoy special rate when they make Robi to Robi call. That is the case for GP and Banglalink users as well. This has prompted many users to take service of a particular operator for their entire family or group. This is not as strong a network effect as social media for instance, but it serves the purpose for now. Albeit, operators will lose this advantage when number portability comes into effect in a few years, but for now, they do enjoy this benefits.

Similarly, again, there is high switching cost to changing an old mobile number. I use a Robi number which I have been using since 2007. There was a period when Robi network was really bad, but I suffered through. Now it is almost impossible for me to change this number for several reasons: 1) a lot of people already know my number, if I change this number I will have to make sure that everyone gets notified, forwarding is an option but not that effective one 2) the previously mentioned networking effect also plays a role here. Since I used Robi for all these years, all my close ones also use Robi. It creates, at least theoretically, a kind of disadvantage for me to switch to another operator.

These are the apparent reasons why I think Robi-Airtel merger was a brilliant decision and these are the exact reasons why I think Banglalink will face an uphill battle ahead when it comes to user growth.

Banglalink’s Renewed Growth Push and Path Forward

After a period of hibernation, Banglalink has started a renewed growth push recently. This does not call for an explanation. You can know from the operator's recent activities. It has started a host of communication efforts. I don’t want to count all of them, you can find more here.

It has launched a host of digital initiatives, although I don’t see any significant leverage for the operator in doing small scale digital things, particularly the kind of things it is now doing. In order to get significant leverage it has to either take an operator agnostic route, which GP is tying with its a few new products, or do things that would contribute to growing its data business, Banglaflix can be an example.

Most of the initiatives that it has taken in the recent times are mostly around communication and engagement.

This is important for the company not only to acquire new customers but also to retain old ones. To take the point home, the company has been losing customers for a while now. While the Government imposed e-registration process contributed to that user decline to some extent, there are likely other reasons as well.

This renewed growth push shows that the company is committed to growing its business in Bangladesh. Veon Chief, the parent company of Banglalink, visited Dhaka several times in recent years and announced ambitious plans for the Bangladesh market. However, I think this communication push will not be enough for the operators to grow its business. “Growing business” is an important point here.

My stand regarding Banglalink’s ability to grow its users' number is at best conservative. I have already explained why it is so difficult to increase your users in operator business - in the beginning of this article - due to the network effect, albeit of a particular kind, and high switching cost. The other growth option is attracting entirely new customers. There Banglalink has a chance like all other operators.

But growing your business does not essentially require you to grow your users. There are multiple other ways to grow your business. One way is increasing earning from per users. Data is a potent option for this to make happen. Banglalink has seen a pretty solid growth of its data business in the last quarter. It can try new things in this space.

On the user growth side, it has started to push in the B2B space which I think is a good strategy. The company has entered into a collaboration with Pathao where it is offering SIM cards to Pathao drivers. This is a brilliant strategy to grow users and it can try to scale this push.

To my reading, Banglalink has a few apparent options to grow its business: 1) wooing its existing customers so they spend more for its services, of course, Banglalink has to offer services to customers where they can spend 2) attracting new users and off the grid users 3) expanding its B2B business 4) Jio strategy

Of course, there are other options that being an outsider I probably don’t understand and others I don’t think relevant to our discussion here today.

Among three options, wooing customers, albeit existing ones, sounds a great one to me for several reasons 1) it is easier 2) since number portability is already underway acquiring customers should not be a challenge in the future if you can offer great service and offerings. If Banglalink starts serving its existing users better it is likely that the company will get the advantage of said network effect and once number portability comes into effect, it will likely to help it to acquire users.

On the other hand, data offers a huge growth opportunity which is waiting for the taking, sort of. Superior data service can help the operator grow its business while luring new data users.

On the other hand, what Reliance Jio has done in India, I don’t think is a feasible strategy for Bangladesh market given the regulatory environment as well Banglalink’s current situation.

Mohammad Ruhul Kader is a Dhaka-based entrepreneur and writer. He founded Future Startup, a digital publication covering the startup and technology scene in Dhaka with an ambition to transform Bangladesh through entrepreneurship and innovation. He writes about internet business, strategy, technology, and society. He is the author of Rethinking Failure. His writings have been published in almost all major national dailies in Bangladesh including DT, FE, etc. Prior to FS, he worked for a local conglomerate where he helped start a social enterprise. Ruhul is a 2022 winner of Emergent Ventures, a fellowship and grant program from the Mercatus Center at George Mason University. He can be reached at ruhul@futurestartup.com

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