92879 May 16, 2007 Links: - What is IDA? - Our Work in Bangladesh More on Bangladesh: - Borrowing History - Data & Statistics - Research - Contact Us At the time of appraisal in 2000, Bangladesh had one of the lowest teledensity rates in the world: 0.26 telephones per 100 inhabitants. The fixed line incumbent, the Bangladesh Telephone and Telegraph Board (BTTB) had only 350,000 lines in service for a population of 125 million. The waiting list for a fixed line totaled 200,000 subscribers with a waiting time of over 10 years. The challenge was to (i) increase access to telecommunications services and improve the quality of service being offered; (ii) increase connectivity to rural areas, which, in turn, would promote the economic development of rural Bangladesh. Promoting private sector development was essential to improve basic infrastructure which, in turn, is key to private sector development. GrameenPhone Limited's strategy was to effectively become the second national operator in Bangladesh. Instead of focusing on a high-end, niche market, it pursued a low tariff strategy designed to compete directly with BTTB. Contiguous investments have assisted in the expansion of GrameenPhone's digital cellular network since 2000. The project supported the company's leading position in the cellular market of Bangladesh and helped increase not only the existing network capacity, but also expanded coverage to a larger part of the population. GrameenPhone has become the leading wireless operator in Bangladesh, with a network covering over 90 percent of the population. The Village Phone Program has had a significant impact especially on the rural population of this low-teledensity country. Highlights: - The Village Phone Program, operated by GrameenPhone, currently provides mobile phone services to approximately 50 million people in villages across the country. It leverages micro- loans from the GrameenBank, providing women with credit to buy cell phones from GrameenPhone. The women then provide mobile pay phone service in their shops, the local market, and elsewhere, charging a markup agreed on with GrameenPhone. Extended cell-phone coverage in poorer areas has had a tremendous social and economic impact on the operators -- mostly rural, poor women for whom income-generating opportunities are rare. - GrameenPhone has also established 500 Community Information Centers (CIC) where citizens in rural areas have access to the internet and information services. - GrameenPhone currently has 6,000 sites in all 64 Districts, covering approximately 95 percent of the total population and 80 percent of the country. (Coverage= access to the network signal.) - Prices have fallen considerably. A prepaid minute of call from a mobile phone cost 5 Taka in 2004 (Exchange rate: US$1 = approx 70 Taka). The rates for the same call have fallen to Taka 1.50 per minute today, due to increased competition and improved interconnection arrangements between operators. With the entry of a fifth operator into the market on May 10, 2007 prices are expected to fall further and more innovative service offerings will be available to customers. - The TeleCommons Development Group (“TDG”) of Canada found that the consumer surplus from a single phone call to Dhaka, which replaces a physical trip to the city, ranges from 2.64 percent to 9.8 percent of the mean monthly household income. The cost of a trip to the capital ranges from 2 to 8 times the cost of a single phone call. - Further, a 2006 Ovum study found that almost a quarter of a million Bangladeshi depend on the mobile industry, directly and indirectly, and that mobile services contribute US$650 million to the economy every year. - Drawing on its experience in other countries, IDA support and policy dialogue focused on establishing a regulatory framework that allows competitive private wireless operators to flourish and provide rapid services. - Through the Telecommunications Technical Assistance Project IDA is helping the government of Bangladesh to (i) separate the policy and operational roles of the government by restructuring the state-owned carrier, BTTB, to operate as an independent commercial entity; (ii) strengthen the policy function of the ministry, MOPT; and (iii) strengthen the regulatory capacity of the Regulatory Commission BTRC, including its spectrum management function. - The work of the World Bank in all of these important areas reduced the regulatory risk faced by GrameenPhone and gave all parties far greater confidence in investing in Bangladesh telecoms market. In 2000, the International Finance Corporation, part of the World Bank Group, provided a loan of US$16.7 million and made an equity investment of US$1.57 million in exchange for 3 percent of the company's shares (GrameenPhone I). This investment funded the initial installation and operation of the company's GSM 900 network. In December 2003, IFC sold its equity stake to the shareholders for TK466 million (US$8 million). In 2004, IFC provided the company with a second loan (GrameenPhone II) of US$30 million, the proceeds of which were partly applied to repay IFC's first loan. In 2006 a third loan of US$70 million was approved and should be finalized in 2007 (GrameenPhone III). GrameenPhone I and II were successful and have recently led to a new investment, GrameenPhone III. IFC has found that the model is replicable in other countries, and has most recently assisted in developing a similar program in Uganda. IFC is also embarking on a similar initiative in Nigeria. Telecommunications Technical Assistance Project (2003-08) Project documents  |  www.grameenphone.com  |  Beneficiary case study