SMP enforcement vital for telecom sector in Bangladesh: Robi CEO

Robi MD and CEO Mahtab Uddin Ahmed talks to New Age in an interview

HM Murtuza | Published: 22:31, Feb 29,2020 | Updated: 17:00, Mar 02,2020


Robi Axiata Limited managing director and chief executive officer Mahtab Uddin Ahmed makes a point during an interview with New Age recently. — New Age photo

The enforcement of the Significant Market Power Regulations, 2018 has become vital to protect the small telecom operators as well as the customers from being at the risk of a monopolistic market condition.

Multinational telecom operator Robi Axiata Limited’s managing director and chief executive officer Mahtab Uddin Ahmed said this in a recent interview with New Age at the former’s headquarters in the capital’s Gulshan.

The policymakers should review the taxes on the mobile phone operators as the high taxation has become intolerable for the companies creating hindrances to small operators’ sustainability, observed Mahtab, also the president of Association of Mobile Telecom Operators of Bangladesh.

About the government plan to introduce the 5G services by 2021, the Robi chief said that the formulation of the regulatory framework came first as the operators would prepare for the next generation telecom based on the regulatory requirements.

Mahtab, after serving British-Dutch transnational consumer entity Unilever for 17 years in different leadership capacities, entered the telecom sector in 2010 as the chief financial officer of Robi Axiata Limited.

After he served the firm in the capacity for some three-and-a-half years, Robi assigned Mahtab as its chief operating officer in April 2014.

In November, 2016 he became the MD and CEO of the company, being the first Bangladeshi MD and CEO of any multinational telecommunication entity.

Under Mahtab’s leadership, Robi became a profit-earning concern by attaining Tk 215 crore and Tk 17 crore in profits in 2018 and 2019 respectively despite tussles with the regulator, Bangladesh Telecommunication Regulatory Commission, throughout the year 2019.

Praising the regulator for the formulation of SMP regulations, Mahtab said that the BTRC rightly introduced the significant market power regulations.

But the regulations remain to be implemented, he mentioned.

In February last year, BTRC declared Grameenphone as an SMP operator in terms of its revenue and market share.

If the leading mobile phone operator invests 25 per cent of its profit in the market to acquire customers from other operators, Robi, Banglalink and Teletalk would be at stake, the Robi CEO observed.

‘Unless the government protection is ensured for the small operators, the situation would be grave as we have seen in neighbouring India,’ the Robi CEO said.

The enactment of the SMP regulations is a big initiative as it provides for the introduction of a unified floor price for voice calls at Tk 0.45 per minute at any operator, he mentioned.

But Robi or Banglalink will not be able to survive if the market leader is allowed to offer voice and data to the customers at the same rate as the smaller operators.

The reduction in internet prices by GP is the latest example of how a big operator can allure customers, he added.

Earlier the number of telecom operators in the country was six but it has come down to four, Mahtab said, adding, ‘If two of the existing operators fail to survive then the customers would suffer and big operators would gain greater market shares,’ the Robi CEO.’

For the greater interest of the customers and for the sustainability of all the smaller operators, the telecom regulator should enforce the SMP regulations soon, he viewed.

About the prospect of the country’s telecom sector, Mahtab dubbed Bangladesh as a land of opportunity from the macroeconomic point of view.

‘Considering the 56 per cent unique mobile phone penetration in the country, the telecom sector has another 44 per cent room to grow,’ he added.

Although the year 2019 was tough for Robi, the operator managed to grow at a rate above 10 per cent, he said.

‘However, we have witnessed major imbalances from the regulatory perspective as multiple regulators, including Bangladesh Telecommunication Regulatory Commission, National Board of Revenue and Bangladesh Bank, acted in the sector’ he said.

In terms of taxation, the mobile phone operators have to pay 53 per cent of their revenue to the BTRC and the NBR in taxes and revenue sharing while the operators have to share another 19 per cent as licencing fees, taking the total revenue sharing to 72 per cent, he pointed out.

Of the rest 28 per cent revenue, the operators have to pay different claims from government agencies, leaving the mobile phone service providers in a difficult situation to make profit, said the AMTOB president.

Besides, the policymakers do not seem to understand the situation the telcos are facing as they are consistently not allowing us to explain our actual picture in detail, the AMTOB president further said.

‘Unless the policymakers understand our problems, how can we motivate the shareholders who have invested huge amounts of money in our company over the last 21 years as Robi could earn very little amounts of profit in last two years,’ Mahtab said.

About the shareholders’ impression of Robi, he said, ‘Of course, they are not happy with the development,’ adding, ‘Multinational companies do not want to make a huge profit, rather they want to see consistency in performance.’

A consistent business performance requires consistency in policies as well, Mahtab said, adding, ‘We were hopeful of making around Tk200 crore or above in profit but the projection did not materialise due to the imposition of higher taxes on us in the 2019-20 fiscal budget.’

The imposition of 5 per cent supplementary duty, doubling of the SIM tax and some three-fold increase in the turnover taxes resulted in an effective tax rate of 96 per cent on the telecom entities, the Robi MD lamented.

No shareholder would like to face such a shock, he went on.

He observed that due to the saturated market condition and the current regulatory environment the government failed to attract any further foreign investments to the telecom sector even after several attempts to issue fresh licences.’

Despite the obstacles, mentioned Mahtab, Robi has been growing significantly over the last three years in terms of attaining market share, generation of revenue and pre-tax earnings by utilising its operational efficiency.

About the scope for Robi to expand further, the CEO argued, ‘Although we have the capacity to provide different services but we are barred from providing those, resulting in non-utilisation of our resources while customers are also being deprived of quality services.’

Opening up business scopes for the telecom operators would help develop the sector and attract more foreign investment to the sector, Mahtab suggested.

With a view to ensuring the best possible results with its capacity, Robi has focused on digital and IT-enabled products development, he said.

In reply to a question about the country’s preparedness for launching the 5G service by 2021, the Robi CEO said, ‘The preparedness of the regulator is essential for the launch of 5G.’

For example, spectrum and its pricing are key factors but the government is yet to give any guidelines in this regard, he said, adding, ‘How can it be possible for the telecom operators to get prepared without such guidelines?’

If the spectrum prices remain high none of the operators would be interested to go for 5G as it will require huge volumes of spectrum, he said.

He also mentioned the development of fiber connectivity, supporting tower setup and uninterrupted power supply to the towers as major issues which should be addressed.

Speaking about Robi’s decision to float shares in the capital market, Mahtab said, ‘It’s our second attempt to get enlisted with the stock market after the first attempt in 2014.’

‘In 2014, there were few conditions from Robi but those were not met and that’s why our shares were not offered then,’ he said.

This time, Robi has proposed to the government to reduce the turnover tax to 0.75 per cent from 2 per cent along with lowering the corporate tax rate by 10 percentage points to 35 per cent for 10 years, he revealed.

He added that the Robi proposals were very much rational and the response from the government agencies concerned was positive too.

On fixing the floor price for international call termination at 0.6 US cents per minute in place of 1.75 US cents, the CEO said, ‘The government would lose Tk 300 crore and the telecom operators Tk 200 crore even if the incoming international calls go up by 30 per cent.’

Besides, it would not be that much beneficial for the customers as well, he said.

‘We have requested the BTRC and hope that the regulator would take measures to rectify the rate,’ the AMTOB president said.

Speaking about Robi’s success in the mobile number portability service, he said that Robi became successful in this regard but the hike in taxes posed a major barrier in making the service popular.

Regarding the reservation of Robi and its shareholders about the BTRC’s audit claim of Tk 867 crore, he said that the operator would comply with the court order and it hoped to get proper judgment when the full hearing on the audit report would take place.

Following the High Court order, Robi has started to make payment to the BTRC.

About the fixing of the bank lending rate at the highest 9 per cent, Mahtab expressed his satisfaction at the lowered lending rate as a borrower.

But, he said, it may not be the balanced way of running the money market.

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