internship report on national phone by zareen a.abedin

National telecom National TeleCom Limited (NTC) was incorporated in June 08, 2004 for the purpose of implementing, owning and operating a fixed line network in Bangladesh. NTC was awarded a PSTN license by BTRC, GoB to operate basic telephone services, data and broadband services in all over Bangladesh other than Dhaka the â&#x20AC;&#x153;Central Zoneâ&#x20AC;?. The license was granted for a period of 20 years and is renewable prior to expiry. The authorized capital of NTC is BDT 5,000.00 million divided into 50,000,000 ordinary shares of BDT 100 each. 1.

Name of Company

: National TeleCom Limited

Proposed Product Mix Total Subscriber a) WLL Lines b) PSTN Lines c) DATA service

: 250,000 Subscribers : 225,000 Subscribers : 25,000 Subscribers : 2,500 Subscribers

Directors

: Mr. Anisur Rahman Sinha Chairman : Major (Retd.) Mohammad Jahangir Managing Director

Project Location

: All over Bangladesh.

Employment Potential

: Total 350 Employees.

Total Project Cost

: BDT 2,745 Million.

Plant and Machinery Cost Imported Local Contingency Others Existing

: 1,207 Million : 1,034 Million : 28 Million : 4 Million : 472 Million

Proposed mode of Finance Promoters Loans Suppliers Credit

: 600 Million : 960 Million : 1,185 Million

Debt-Equity Ratio

: 78 : 22

10.

Time Schedule for project Implementation

: 8 Months

11.

Total Population Coverage

: 20 Million (14.00%) of total population Of Bangladesh)

12.

Source of Customer/Service Users: a) Subscribers (Voice, Data,Video Demand) b) Existing Voice Operators c) Existing Data Service Providers d) Video on Demand Operators e) ISP Service Provider f) Educational Institution g) NGOS h) Banks i) Other Organizations.

13.

14.

Annual sales Turnover 1st Year 2nd Year 3rd Year 4th Year 5th Year

: 899 Million : 1,903 Million : 1,780 Million : 1,780 Million : 1,780 Million

Profitability ratios of Fifth year operation: Gross profit to sales Operating profit to sales Income after tax to sales Dividend Dividend payout

94% 64% 42% 67% 54%

15.

Pay Back Period:

2 years 3 Months

16.

Economic Aspects: The project will maintain job opportunity for 276 persons in different units. The telecommunication effect will change the socioeconomic condition of the country as a whole.

17.

Financial Viability: The project has found financial viability. The details are shown in the related chapter of the report.

18.

IRR: The expected IRR (Internal Rate of Return) is 36%

19.

Debt-Service Coverage Ratio: The debt service coverage ratio of the project is expected to be at 1.14, 1.59, 5.24, and 5.58 for 2nd year, 3rd year, 4th year and 5th year respectively.

ABOUT NATIONAL TELECOM INTRODUCTION: The proposed project envisages setting up of a Telecommunication Network to provide Voice, Data and Video on Demand Service with Microwave, Fiber Optic and Copper operating Route Networks for 2.5 million within in next 8 years at North-East, North-West, South-West and South-East zone of Bangladesh. Out of total project the phase-I will be 250,000 lines. A profile of this effect has been prepared about the project design covering in details of its probable cost, profitability and other relevant aspects. The sponsors have gathered sufficient experience in this line and they are well qualified. It is expected that the expertise of the sponsors have already grown in successful operation of their present business and that will be the extra plus point for managing the company. National Telecom’s primary corporate objectives are: • To become the market leader in personal communications unified messaging Products and services within five years. • To become the lowest cost provider and drive an aggressive pricing model through the industry. • To have the best and most responsive customer service by year-end 2008. NationalPhone will provide 3G|4G Integrated Services like Voice, Data and Multimedia. Total Subscribers :

2.5 million Lines.

Coverage Area

4 Zones (NE, NW, SE, SW)

Network Type

IP based Next Generation Core Network with Access Layer1, Layer2, Layer3.

Network Category:

Mixed Network (Wire line and Wireless).

CORPORATE SET-UP: The sponsors already formed a private limited company registered with the registrar of Joint Stock Company & Firms under the company’s act 1994. The authorized capital of the company is Tk 500.00 crore. The paid up capital is Tk 30.00 crore. In order to implement the project further capital of Tk 30.00 crore will be raised by the promoters to cover partial cost of the project.

MARKET SITUATION: There are around four private companies who are already in “Soft” operational stage in the market. By the time National Telecom gets to mass market, we can safely expect to get few more players in it. Thus National Telecom is unlike to get any advantage of being the first private operator in any major market places. The government telephone entity BTTB is already in most prominent places for many years. Therefore we can expect price warfare and a discriminating consumer market.

National Telecom now is going through inter-connectivity issues, AKtel and BTTB already signed interconnectivity papers with National Telecom. We are yet to sign with rest of the companies. Till couple of months ago, leading private companies like Rangs Tel or Bay Phones were not able to agree on the price schedule with the government owned monopoly. We can expect by the time National Telecom sits down with Grameen phone (The largest telephone company in Bangladesh) about inter-connectivity and price issue, there will likely to be a “Template/Benchmark” for National Telecom to follow which would likely to make the very essential inter-connectivity issue less complex. There are four prominent mobile phone companies in the market who will compete with National Telecom at some levels. Since they started few years ago, they are likely to have the “High value customers” in the customer lists well ahead of National Telecom. Another reality National Telecom has to be ready for while following a marketing strategy that it may not enjoy all around co-operations from private and national telephone carrier in future. Couple of months ago two national mobile carriers (Grameen and AKTEL) stopped interconnecting their customers for many hours. This sort of situation is a reality in Bangladesh.

OBJECTIVE OF THE REPORT The study was limited to the following aspects of the project: 1. To assess the financial and technical viability of the project 2. To analyze the demand and prospect of such kind of project in Bangladesh 3. To conduct a financial evaluation and sensitivity analysis of the project. 4. To assess the socio-economic implications of the project. 5. To get an overall idea about the company. 6. To evaluate the particular project regarding the appraisal. 7. To identify limitation and express opinion about the updating for the economy

METHODOLOGY: • • •

The report has been prepared with the following ways: The technical study has been done considering all technical aspects of the proposed project. The market study has been carried out based on data / information collected through field visits, discussion with prominent business personnel and related organizations. The financial and economic analysis has been done based on real data obtained from engineering estimation and professional judgments.

LIMITATION:

The major difficulty faced in carrying out the study was collection of data / information for estimation of demand and market prospect of such kind of project. But it has not been so much difficult because of kind help of different government and non-government organizations of the country. We have received a great help from Lucent, Motorola, Huawei, Nokia, UT StarCom, Stratex etc. in this regard.

2.01 Company Structure: The Company is a private limited company within the meaning of section 2(1) clause of the Companies Act, 1994. The following are the shares taken by each subscriber. Name of the Subscribers Mr. Anisur Rahman Sinha Major (Retd.) Mohammed Jahangir Mrs. Rebecca Jahangir

Designation of the Subscribers Chairman Managing Director Shareholder

% of shares taken by each subscriber 55.0% 31.5% 13.5%

Board of Directors of National TeleCom Limited Shareholder Mr. Anisur Rahman Sinha Major (Retd.) Mohammad Jahangir

2.02 INSTITUTIONAL MANAGEMENT:

Position Chairman Director

POLICIES

FOR

EFFICIENT

1. Mr. Anisur Rahman Sinha shall be the Chairman of the company, and shall remain in the office for a period as the law permits. 1. Major (Retd.) M. Jahangir shall be the Managing Director & CEO of the company and he shall remain in this office for a period of five years until or unless determined & decided by the Board of Directors, unless he voluntary resigns or become disqualified.

Profile of Directors PROFILE OF THE CHAIRMAN: Mr Anisur Rahman Sinha Family

His father Late Mr. Habibur Rahman Sinha was a renowned Jute Trader and Exporter of the then British and Pakistan period. His father initially operated his business from Kolkata later on shifted to Narayanganj, the

main Jute Centre. During his time Mr. Habibur Rahman Sinha enjoyed high position in the business circle and the society. Education

1965

1971

Primary and Secondary Scholing in Narayanganj. Graduation in Commerce from prestigious DHAKA COLLEGE. Joined the then Pakistan Army.

1973

During the liberation war of Bangladesh he was confined in a solitary camp in Pakistan, escaped and later on caught, had to face trial in Pakistan Military Court. Fortunately Bangladesh won its independence before the finalization of the trial. : Retired from Army and started his own business.

Business Ventures: 1974 - 84

: Construction, Supply and Project Indenting

1984 - Onward

: Manufacturing and Export of RMG and Textile. It was solely his vision and sheer efforts that his group (Opex Group, Sinha Textile Group, Medlar Group) which produces all types of garments and woven and knits has achieved a number of milestones like employing about 35,000 people and establishing every link in the textile value chain starting from spinning to stitching including accessories units and washing plants that made his group the largest apparel exporter of the country. Textile plants cover spinning washing dyeing circular knitting, knit dyeing, yarn dyeing and almost all sectors of the textile, which is unique in the region. Recently Sweater and home furnishing have also been added to the list of items, which cover whole gamut of apparel production. Under Sinha’s leadership the annual turnover of the group reached around USD 150 million with 20 percent annual growth.

Other Ventures

In 2001 – Sinha Agro Based Industry was set up, which is now fully integrated starting from World Class Potato Seed Multiplication to Modern Poultry to Cold Storage to Poultry meat processing to Fast Food outlets with the brand name of Best Fried Chicken.(BFC) which has already made its mark in Dhaka City. In 2002- Mr. Sinha became one of the Business Directors in the Lafarge Surma Cement (USD 255, 00 million project) which is the largest FDI so far in Bangladesh. In 2005-Sattar Jute Mills has been acquired which has full-fledged factory buildings, warehouses and 55.00 acre land with a river front.

Social Commitment

Mr. Sinha has set up proper school, night school, college and hospital to serve the community in and around his industrial complex. He is also very keen in organising sports activities.

Awards

: National Awards Bangladesh National Export Gold Trophy for Five Consecutive years since 1996. :

Awards from Clients/Buyers his

For good performance, quality control and reliable supply record group also received awards from its buyers like Sears, Levi’s, Mervyns, J.C. Penny, Mays, Target Stores and other top brand names.

Bangladesh Business Awards Mr. Sinha won the Bangladesh Business Awards in 2001 and was named as Business Person of the year in 2001. The Award is introduced by DHL in collaboration with The Daily Star to Bring Global Corporate Standards to Bangladesh. This Award is considered, as the most prestigious award in Bangladesh and the Jury Board comprises of the most eminent persons of the country, the parameters of nomination are very stringent and comprehensive.

Other positions :

Mr. Sinha was the president of BGMEA (Bangladesh Garment Manufacturer and Exporters Association) for the period 1998 – 2000. Fortunately that period recorded the highest growth rate in RMG exports. Mr. Sinha is also a sponsor director of Bank Asia. He also heads the Eastern Sporting Club of Narayanganj.

Conclusion

Mr. Sinha as a person is very humble and unassuming. But in business circle he is considered as epitome of enterprise, integrity and hard work. His approach towards business may be described in two simple words “World class” and “Integration”. Whatever ventures he has undertaken he always tenaciously pursued for these two features and achieved it. Mr. A.R. Sinha’s standing in the business circle, government and society is highly commendable.

OPEX & SINHA TEXTILE GROUP Brief Business Profile Business Houses

Opex Group (Garments Manufacturing Division) Sinha Textile Group (Spinning, weaving, Dying Division) Medlar Group (Garments Manufacturing Division)

Founding year

1984

Main Line of Business :

Export of RMG Export of Textile Products as backward linkage of RMG

Manufacturing Process:

Yarn, Fabric, Dyeing, Finishing, Printing & Sizing, Button & Label

Service

Washing Plant, Sand Blasting & Embroidery unit.

Main Clients / Buyers

1. AMC, 2. American Eagle, 3. Celio, 4. Charming Shoppes, 5.Cortefiel, 6. Dorby Frocks, 7.GAP, 8. Gymboree, 9. H & M, 10. J.C. Penney.11. Jhon Forsyth of Canada, 12. Joni Blair 13. Levi Strauss,14. Mervyns, 15. Phillips Van Heusen, 16. Regatta, 17. Scarlet, 18.Sears, 19. Seiden Sticker, 20. Squeeze, 21. Target, 22. V. F. Asia etc.

Total Employment nos :

36,000

Annual turnover

2004 - US$ 250 million

Bankers

Standard Chartered Bank Commercial Bank of Ceylon

Hongkong & Shanghai Banking Corp. Citibank N.A. American Express Bank Dutch Bangla Bank Dhaka Bank EXIM Bank Mercantile Bank Investment

US$ 350 million

Business Target

2005 - US$ 270 million 2006 -US$ 300 million.

Employment Target

2006 - 40,000 nos.

PROFILE OF THE MANAGING DIRECTOR & CEO: Major (Retd) Mohammed Jahangir Major (Retd) Mohammad Jahangir is directly involved with the following organizations: 1. Bangladesh Rural Telecom Authority Ltd.- Chairman 2. Gulf Bangladesh Associates Ltd. – Chairman 3. Gulf Bangladesh Services – Proprietor 4. Oriental Business Incorporated – Proprietor 5. TeleBa Bangladesh – Proprietor 6. National TeleCom Ltd. – Managing Director/CEO 7. Gulf Bangladesh Electronics Ltd. – Chairman 8. La- Cherie Apparels Ltd. – Director 9. La-Cherie Fashion Ltd. Director 10. Fiber Bangladesh Ltd. - Chairman 11. Bangla Comtel – Chairman 12. Pacific Development Ltd. – Chairman Experience Technical Skills

and

 He studied and gathered experiences from the field of Telecommunication and Network Engineering and started practical session in Business arena. In light of above experience he developed himself in skill levels of Communication Network. Key Skills Telecommunication Network Designed and Structured. Integration of Building Services onto a common data infrastructure. Root level of network maintained by creating management systems. Optical Fiber infrastructure design and development. Radio Microwave Transmission management. Frequency management case study and ability to create frequency plan. Skills level works in Wireless Technology. Skills level works in Wire line Technology. Organized Network Management System of communication. Signaling Management System and case study and its proper implementation.  OSP works case study and implementation.  Tele penetration case study of Bangladesh and other countries.  Telecommunication Survey Report study and proper project orientation.          

    

Successful History in Business

Project implementation with proper plan and successful commission of the project. Successful case study and implementation of Business at any level. Financial case study of any project. Determination of cost of any Telecommunication Projects. Pointed out the error of any project that required finance, Capital Management, Administration, Technological plan, Development of Network that required Frequency, Signaling, Switching, Transmission etc.

In the light of above experience he started Business from 1984 by promoting “Gulf Bangladesh Associates Ltd.” that involved in PABX Business in Private Sector and he is the Chairman of the Company. It was the real history of success to him.  Later on different organization like La-Cherie Apparels Ltd., “Gulf Bangladesh Services”, ”Oriental Business Services” that involved in several types of business Including Garment Sector. Started business in Garment Sector in the year 1983. 



In 1989 he started ever first Private Telecommunication Business in Bangladesh under the name and style “Bangladesh Rural Telecom Authority (BRTA) Ltd. and he was the Chairman of the Company till it merged with NationalPhone for which PSTN Operator Licence for 4 X Zones is obtained in January 2005.

 To increase Tele Density of the country, Bangladesh Government decided to create more Telecom Service Licenses in Private sector. With intension to provide Telecommunication Service throughout the country he applied for the License for whole country except Dhaka City under the name of “National TeleCom (NTC) Ltd ” and Government (BTRC) granted PSTN Operator License in favour of National TeleCom Ltd. He is the Managing Director & Chief Executive Officer (CEO) of “National TeleCom (NTC) Ltd.” Education

Service

Job Achievements



As a young boy at the age of 12 years he went to Public School in Murree Hills, Pakistan and later on Joined Pakistan Military Academy, was Commissioned in 1971.



He served in Army upto 1983 when he went on to Voluntary Retirement to join his father’s Business. His service in the Army as an young officer was very good since he served with former President H.M. Ershad as his Staff Officer and also many years in the staff appointments in the Army Headquarters and other important posts.



He got the 1st Private Telecom Licence in Bangladesh in 1989 (Limited Sector – only in Rural Areas) when there was no private concept in India & Pakistan. It was Long & Real Struggle. He is capable to achieve any government approval in any field in the Interest of Public as well as of the country.

Organization Plan

The organogram of the company is shown below.

Chairman/BOARD

Managing Director

Executive Director

Legal Advisor Info Advisor PS to Chairman Tech Advisor

Financial Controller

Executive Director

General Manager Marketing

Admin Branch

O&M Branch

P&D Branch

Network Management Center

Common Support

BTTB / BTRC

Dhaka TAX

HRD Sec

Tower Sec

25Ă&#x2014; Exchanges

Transport

Power Sec

Security Sec

Radio Sec

Technical Store

Switch Sec

Cable Sec

WLL Sec

Repair Sec

O&M Sec

Finance

Revenue

Accounts Sec

Revenue Sec

P&D Sec

Reconciliation Billing Sec Sales Department

EXISTING INFRASTRUCTURE OF NATIONAL TELECOM LTD

NTC is the pioneer and leading organization as well as one of Ongoing Operator in PSTN Services in private sector. By installing large number of Digital Exchanges at different locations under Sylhet, Rajshahi and Dhaka Division, NTC started providing telecom services like Voice, PCO, and Wireless Local Loop (WLL) system to the remotest areas of the country. In order to provide good service and to run local operation and administration efficiently, the company has set up Regional/Local offices in different places such Dhaka, Sylhet, Chittagong and Rajshahi Administrative Division.

Highlights of Existing infrastructure: NTC so far established PSTN Network by installing / constructing the following: a) Radio Transmission Link : 60 b) Exchanges : 55 c) Tandem / TAX : 04 d) Tower Erected : i) 90 Meter : 05 ii) 60 Meter : 02 iii) 40 Meter : 19 iv) 25 Meter : 03 v) Mast : 27 e)

f) g) h)

Cabling Laying : i) 500/.4 Pair ii) 400/.4 Pair iii) 250/.4 Pair iv) 200/.4 Pair v) 150/.4 Pair vi) 100/.4 Pair vii) 50/.4 Pair vii) 30/.4 Pair viii) 20/.4 Pair ix) 20/.5 Pair (Overhead) x) 10/.4 Pair xi) 10/.5 Pair (Overhead)

700 Meter 750 Meter 1,200 Meter 6,710 Meter 2,220 Meter 59,854 Meter 98,747 Meter 16,749 Meter 1,23,885 Meter 38,753 Meter 3,76,108 Meter 1,07,762 Meter

Completed all Power related works PCO : 40 Subscribers : 7,000

Business License and Agreements License Summary Principal Terms

1. Parties. Government of the People’s Republic of Bangladesh Bangladesh Telecom Regulatory Comission (BTRC) and National TeleCom Limited ("Operator"). 2. Licenses. The Company received four licenses from BTRC to build, own and operate a 200,000-line telecommunications network in four Zones of Bangladesh. Under the terms of the License Agreement, BTRC grants to the Operator a. An Operator License and b. Two frequencies, one career for 450 Mhz and two careers for 1900 Mhz renewable every year. 3. Effective Date. January 17, 2005 & January 27, 2005 valid for 20 years a. The issuance of the Radio License with the appropriate frequencies; or b. The Interconnection Agreement is signed by the parties in relation thereto. 4. Performance Bond. The Operator already delivered to BTRC a Performance Bond in the form of a Bank Guarantee for an amount of Taka 10 Crore. 5. Assignment. The Operator can assign the Licenses to an Affiliate in certain circumstances or with the prior consent of BTRC. 6. National and International Networks. Although the Operator is not authorised to build, own or operate a national or international network, it is authorised in certain circumstances and within its Licensed Network to design, build, operate and use certain national and international telecommunications facilities under Build Transfers and Build Transfer Operate arrangements pursuant to the Interconnection Agreement. 7. Applicable Law. The laws of the People’s Republic of Bangladesh govern the License Agreement. 8. Fees & Charges • The Licensee, after the payment of the Entry Fee of Taka 20 million at the time of issuance of license, shall for the second and subsequent years of operation pay annual license fees comprising of the • Fixed Component: a sum of Tk. .03 million payable by the Licensee in advance of each anniversary of the date of the License; and •

•

Variable Component: a sum equivalent to 2% of the annual audited gross turnover of the Licensee, which shall be paid on a quarterly basis within the first 10 days at the end of each quarter; at a rate of 2% of the gross turnover of previous quarter. The total variable component shall be reconciled on an annual basis based on the Licensee’s audited accounts for that year and if there has been any underpayment the balance must be paid within 90 days of the financial year-end of the Licensee. In the event of any over payment by the Licensee, the Licensee may set off any excess amount against quarterly payments in the next year. Interest at a rate of 12.5% per annum form the date of default to the date of payment, shall be payable by the Licensee for any late payment of fees.

MARKETING STRATEGY Past years available numbers show a robust growing market in Bangladesh. From 1994 to year 1999 incoming T&T minutes grown 209.76%, outgoing minutes had shown a growth of 232.45%. [Source: BTTB Annual Report of 1998-99]

Robust growth in cellular market also shows a “Leap forging” market in Bangladesh. This is good news for any new company like National Telecom who wants to invest in nationwide network in Bangladesh. An internal study has projected a 249.87% growth for consumer market in Bangladesh. The development of the infrastructure facilities in Bangladesh is generally limited. The country has one of the lowest fixed and wireless telephony penetration rates in the world at 4.0%. With a population of almost 140 million, Bangladesh has only 870,000 fixed-line phones. Despite these hurdles, and driven by private sector investment, the growth of the mobile phone market experienced rapid growth in the late 1990s. The number of mobile phones surpassed the number of fixed line phones in 2001 and at the end of May 2005 total connection was 61.5 million. In Bangladesh, like in every other nation, there exists a strong demand for telecommunication services. The telecom sector in Bangladesh is still in its infancy and opportunities exist for those companies that can create and execute on a successful business model that addresses the telecommunication needs of Bangladeshis. National TeleCom recognizes this opportunity and the company’s currently proposed project is one that will not only meet consumer demand followed by maintaining a high quality network, but will also flourish the awareness and perception of National Phone brand, position the company as a customer centric organization, and widen its distribution network.

3.1.1 Market understanding The demand for telephone services will mainly emerge from following directions: • New / additional connections from the existing owners • New connections from consumers currently on the BTTB “waiting list” • New connections from potential consumers, who intend to acquire telephone connections in near future.

3.1.2 Telephone Penetration & ownership •

In Dhaka, around 35% business establishments and 18% households own telephones. Average telephone lines owned is around 1.4 for establishments & 1.1 for households.

3.1.3 Satisfaction with BTTB’s service • • •

22% (18,000) of all establishments found BTTB service to be Poor (given choice of “Very Satisfactory, satisfactory and poor”) 24% (40,000) of all households found BTTB service to be “Poor” Large numbers of Lowest and Highest Income households found BTTB service to be “Poor”, suggesting: o An attempt by BTTB to concentrate of higher income households (reflected in neglecting low income households) and o Failing on the attempt (reflected in dissatisfied high income households)

3.1.4 Important factors affecting Telecom Service •

The three most important factors (related to telecom service) that have emerged from the research are: o Ready availability of connection o Cost of service

•

o Quick and clear phone connectivity Large establishments rated low fault / breakdown as a significant factor besides cost and ready availability (mentioned above).

3.1.5 Expectations from private Telecom Operator •

•

As we can observe, the telecom owners have high expectations form the private operator, particularly in terms of ready availability of telephone connections, and quick and clear connectivity. They seem to be somewhat skeptical about the cost / pricing of the service & network maintenance (low fault / breakdown). While most of the respondents were positively disposed towards the proposed service offering of NTCl, they had certain misgivings. Important to note here is that most of these misgivings arose out their lack of trust towards private operators.

3.1.6 • •

Interest in Private operator

74% of establishments and 46% of households are interested in taking service from a private operator. When looked at among those intending to own a telephone connection, 74% of such establishments and 61% of such households are interested in taking service from a private operator

3.1.7

PROMOTIONAL ISSUES TO ATTRACT THE SUBSCRIBERS The Company should have effective promotional issues to attract the subscribers: 1. Quality of Services: Maintenance and operation are to be such as to give adequate, efficient and satisfactory services in observance of the principles of economy and by maintaining standards set by the authority. 2. Users Oriented Services: The telecommunications services shall be oriented towards meeting the users’ demands /needs, not only for new services, but also in respect of performance of the services, transparency of operations, provisions of information and assistance in case of difficulties. Networks shall be planned to be user friendly and shall be equipped with modern technologies and shall be managed by the set procedures. 3. One Point Services: The establishment of one – point service centers by all the operators will be encouraged for the convenience of the users. The authority will be responsible for the preparation and publication of their own subscriber directories and updating of the same at regular interval (e.g. annually) for the information of the public. 4. Staff Standard: National TeleCom Ltd will plan and prepare the staff standard and administer its own staff structure. It will also adopt procedures and methods to run on full commercial terms and optimize the value for money.

5. Billing System: The Company will have integrated door-to-door bill collection system, which will help to recover the initial capital outlay quickly. 6. Low pricing: The bill of per call will minimum in comparison with BTTB. 7. Regular Line checking: Line checking will be a regular work of the company. The technical team will help to repair and maintain the defect line immediately. 8. Technical Trouble Shooting: National TeleCom Ltd will have the provision for trouble shooting in zonal technical center.

3.1.8

NTC POSITION In the SWOT analysis that follows, National Telecom maintains a healthy position. National Telecom has substantial strengths to balance out weaknesses.

i. Strengths: Since National Telecom emerged from former BRTA, it has good understanding of the rural market and practical experience of what works and what does not work in Bangladesh. Besides it has number of experienced staffs, which can deploy network and have practical experience of maintaining a “Live” network. Most other telephone companies are unlike to have such a reservoir of experienced technical staff. Since fixed line rates are much cheaper than mobile call rates, National Telecom can easily get a good chunk of rural phone businesses [Known as Village Phone service to experts] popularized by Grameen phone in Bangladesh. Price advantage plays a great role in Bangladeshi market place. Unlike many other PSTN operators, National Telecom has license to operate all over Bangladesh except Dhaka. Dhaka should open up as soon World Tel settles the lawsuit with telecom authority of Bangladesh. i. Weaknesses: By the time National Telecom gets to consumer market, expecting at least four or five major players in the consumer market. Thus National will miss the first wave of “Easy picking” customer who is likely to sign up for services with negligible marketing cost. This will compel National Telecom to spend lot more of her resources to establish marketing campaigns to draw attention of new customers. Although National has some experienced technical staffs, the very ambitious goal will require a fast moving “Network team” who can deploy “Scalable network” in

little time without compromising with network quality. This will require National to seek a service partner, who will support its network and other related operations. ii. Opportunities: There are plenty of opportunities for National Telecom. If it can support a multilevel modern marketing plan, it has the potential to establish itself as a leading telephone company in Bangladesh. Since there is a semi-mature mobile phone market exists in Bangladesh, the price advantage over mobile phones will give a good slice of mobile market to PSTN operators like National Telecom with very little effort. National Telecom has plans to establish QA concept in its operation and have a “Quality Edge” in the market. For example there is a sizable “High volume customers” who are willing to pay a little more for quality in most urban areas. Success of Grameen Phone is an example of this concept in mobile market. National Telecom can offer, “Bundled services” to customer and increase it’s revenue stream quite easily. An example of this will be giving “One bill” to high volume customer for internet, caller ID, three way calling, video conference and telephone. There are great potential to use “C to C” [Consumer to consumer] Marketing model, which is virtually unknown in Bangladesh. Most companies also do not use any “marketing partnership” models either. For example National Telecom can employ an establish electronic business house to market to it’s high volume post paid customer segment of the market, who are likely to have a computer at home and spend a lot more in telecommunications. There are many Bangladeshis working in different countries all over the world. These families spend considerable amount of money making international calls to and from Bangladesh. National Telecom plans to target such areas like Sylhet and Chittagong to take advantage of this dialing habit. National Telecom can earn significant amount of money by just delivering international calls to its customers. This should remain as a key strategy of National Telecom marketing plan. In the long run, there are too many telephone players in Bangladesh and some are bound to fail to establish themselves. So it will present National Telecom an unique opportunity to sign up those customers and buy networking hardware for very good price. If National Telecom manages to acquire or jointly bill with a mobile phone company, it will give this company an edge over rest of PSTN operators. iii. Threats: Government of Bangladesh issued many licenses for PSTN operators at the same time. So National Telecom must execute its marketing plan for its services otherwise it is destined for future telecom “Garage sale” of Bangladesh. Existing mobile company’s strength is the big threat for PSTN companies.

BUSINESS PLAN

4.1.1 Business objectives The marketing plan has three principle objectives: • • •

Understanding customer needs so as to provide the right product mix of Internet/telephony services to the target segments Adopting the appropriate pricing strategies to maximize revenues through usage driven growth Create appropriate brand positioning in the market.

4.1.2 COMPETITIORS: Here is a “Snap Shot” at current telecom players in Bangladesh. Sl 1

Name Operator

of Present Subscriber Network Position Expanded their Network allover the country, Grameen phone 3.1 million network/Services are available but tariff not comfortable. All the Districts and its surroundings already covered considering competitive AKTEL 1.55 million market with extra facilities for subscriber, based on Tariff. Most of the areas of counties network are available but Citycell 0.6 million services not satisfactory and also technological limitation. Started installation fast under new management to capture the market, their reputation in BanglaLink 0.4 million some Asian countries are very good, already adopted some policies to get market share. New PSTN Most of the New operators Operator working on infrastructure level (As per list like Exchange supplied) Accommodation, Tower erection, and Equipment selection and within very soon 2 or 3 operators will start their commercial operation.

Services Offered

Remarks

Voice, Data, Value Added Services. Voice, Data, Value Added Services and GPRS, Internet service. Voice, Data, Value Added Services. Voice, Data, Value Added Services. In view of Those latest features. who will come early in the market, they will get more

benefit based on purchase ability of the customers.

BTTB

Teletalk

Services are available in district level and also they have planned to install digital exchanges in thana level, 0.85 million already more or less 200 thanas are in operation under digital services. Recently released but not satisfactory. Public demand is 50,000 huge. People are crazy to get Teletalk.

Voice, Data, Internet service

4.1.3 Product The marketing plan has three principle objectives: • • •

NTC plans to offer cutting edge products like data services, videoconferences, three ways calling, caller ID and Internet services in addition to basic phone service. Initially National Phone will market basic voice (NWD, Local and ISD) and data services (Internet) to it’s customers. However the intelligent network should be able to support the following services as well. Eventually National Telecom plans to add various data services which include Frame Relay, ATM service, Managed wave length services, Inter Exchange services, Call center, Point to Point, “On-Net” services, leased and private line and VPN and all other feature provided by Class 4 and Class 5 systems. SL#

Services to be Offered

01 02 03 04 05 06

Hotline With Time-Out Abbreviate Dialing/Speed Dialing Outgoing Call Barring Do Not Disturb Alarm Call Interception Call

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

Registered Call On Busy Call Forwarding Unconditional Call Forwarding No Reply Call Forwarding Busy Absentee Service Calling Number Hearing Calling Line Identification Restriction Call Waiting Hunting Number Emergency Call Telephone Lock/Unlock for Toll, ISD, Total Malicious Call Trace Calling Line Identification Presentation Call Back Three-Way Calling Multi Party Conference Call Black List For Incoming/Outgoing Calls Centrex Internet Service (Broadband, Narrowband) Tele or Net Meeting Video Conference Voice Mail Voice recording SMS Service VoIP Service Pay Phone Service. Leased Line Video on Demand (VoD). National Call Centre Telemedicine. Tele Agro Service. Tele Consultancy. E-Commerce. E-Learning. E-Government/Governance. E-Banking. CaTV, CCTV, Web Camp, Security service IXC (Inter Exchange Carrier)

4.1.4 Market segmentation The market is segmented into two broad categories of users: Business and Residential. Business segment This segment comprises 2 sub-segments â&#x20AC;&#x201C; (1) Large corporate and (2) SMEs (Small and Medium Enterprises). These would subscribe to the complete range of services being offered by the Company.

Residential users High Net-worth Individuals (HNWIs) – HNWIs include individuals whose household income would be above a defined limit. Typically, these households have existing phone connections and their telephone bills are above a threshold limit. Other segments PCOs (Public Call Offices)/Payphones and Internet browsing centres would comprise the resellers segment. Private entrepreneurs would subscribe to NTC lines and would serve the general public for which the entrepreneur will get a commission of 30% from NTC. The ultimate price to the general public would be within the prevailing tariff cap.

4.1.5 Brand positioning and Promotion strategy The landline telecom industry in Bangladesh is a monopoly and BTTB is the only service provider. This has not required service efficiency, quality and branding. NTC expects to capitalize on this situation by establishing a strong market presence with powerful brand equity built primarily on the following platforms: • Features • Reliability, and • Innovation. The following lists highlights NTC’s branding and promotion activities that to be implemented: • Outdoor billboards, roadside light boxes, etc. In an effort to further promote the company brand, NTC will deploy creative and provocative billboards and backlit sign boxes along major roadways and high traffic city streets. This marketing channel greatly helps to communicate the company’s brand to consumers. • Point-of-sale posters, handouts, road banners, stickers, etc. NTC will select dedicated sellers and authorized sellers and will be provided with a variety of point-ofsale advertising and promotional materials that should be placed in highly visible consumer locations. Experiences of National TeleComresulted from operating in other market revealed that this sorts of activity will strengthen band recognition communicate different packages and value added services provided by the company. • Television advertising. Advertising on television is one of the most effective ways to communicate branding and promotion strategy to the consumers. NTC will promote its products through television commercials that run for approximately one month for any particular campaign. • Print media. Newspaper and magazine advertisements will play a supporting role for the company’s television advertising. Print media is extremely effective in providing customers with a wide range of product information. • Premium products. NTC will produce a variety of corporate gifts that will serve both to thank existing clients for their patronage, a well to communicate the brand. Premium products will include organizers, pens, watches, t-shirts, mugs, bags etc. • Corporate signings. NTC will attract large corporate customer base by providing best quality services, which results from installing the most advanced telecom technology first of its kind in Bangladesh. It may be mentioned that NTC will organize highly publicized corporate signing ceremony to communicate the mass through press release.

•

Company newsletter. NTC will publish a newsletter for circulating every month to the valued customers, updating them the company’s latest airtime package, tariff rates, value added services, and technological advancements.

4.1.6 The marketing mix Products and services Two broad categories of services will be provided under the heads: • Services for fixed line customers using o Cable line o WLL connection; and • Internet/Broadband data Services. Under the first category the following services will be offered: • POTS (plain old telephony service); • Intelligent Network (IN) services; • Centrex/EPABX services; and • Value Added Services. Product segment matrix NTC would be offering a range of infocom products to the Dhaka market, each of which would be targeted at a specific target segment. The Product-Segment Matrix has been captured in the table below. Most of the products would be used by most of the segments, but the table below indicates the pre-dominantly used products by that particular segment. Media Campaign National TeleCom has already launched a media campaign in the national dailies. The purpose of these is just to make the public aware of their existence in the Bangladeshi market. National TeleCom does not intend to get any feedback other than awareness from these advertisements, so these are more of a notification rather than an advertisement. Distribution strategy Sales would be affected through a combination of dedicated NTC sales teams and dealer/franchisee networks. These resources would be deployed depending on the type of customer. • Business Segment - The dealer network would be used to effect sales to Small and Medium Enterprises (SMEs), while a dedicated NTC sales force would address sales to large and medium corporate, private institutions with high volume demands. •

Residential Segment - Direct sales to HNWIs would be done through a franchisee network. However, sales to commercial/residential complexes would be done directly by a NTC dedicated sales team, which will also be responsible for managing the franchisee network.

4.1.7Tariff strategy NTC expects a fairly competitive environment and therefore will adopt an overall tariff policy framework, which addresses the following essential business issues: •

Pricing to be Long-run IRR driven

• • • •

Ensure optimal network utilization Tariff to drive usage and revenue Achieve business viability of dealers and PCOs Discounts structured on committed usage.

The tariff structure would be competitively lower than most other quality service providers for each category of users leading to primarily a high volume-medium margin business. NTC would be in a position to offer competitive tariffs since it’s service offer is based on a unique platform of total service solution and the business economics are derived from a complete ownership of all network assets.

4.1.8Customer service and retention strategy NTC recognizes the customer retention is a key element of the company’s growth and the successful customer retention must involve a co-ordinate effort from the entire organization. The following list highlights NTC’s plan aims to customer satisfaction, which will enable maximizing customer retention: • Call center. NTC plans to establish a 24-hour call center located in its Corporate Office. The call center will employ necessary personnel helping to operate on three 8hour shifts, and addresses all customer queries, complaints, suggestions, billing inquiries, and any other issue customers may wish to discuss. The call centers operators shall be essentially one of the first lines of communication between potential customers and the company. The call center plans to maintain detail database on all its customers and will be well equipped to address all customer queries. NTC will arrange necessary training for call center operators to actively manage the company’s product, new order or customer queries. • Customer service centers. NTC plans to establish well-designed customer service centers located in various locations of Bangladesh. Each service center will be equipped with modern customer database systems (linked to call center’s customer database) and to be operated by trained customer service executives. These customer service centers would be among the most professional and customer focused in the country. • Dedicated customer support for corporate clients. At the beginning of NTC’s commercial operation a corporate customer support team will be in place to deal exclusively with the corporate clients. PROJECT COST AND FINANCIAL PLAN

Overview Considering the very low tele-density of Bangladesh (with 4.0 phones-both mobile & fixed line per 100 people) and huge latent demand in the context of the current macroeconomic and telecom environment, NTC has developed a business plan to address these issues. This envisages the gradual installation of 677,773 broadband enabled digital lines to cover all the four Zones and Central Zone - Dhaka. The proposed project will install the CDMA 2000 1X or WCDMA or equivalent technology followed by build out of world-class infrastructure to rollout 677,773 access lines/ WLL in operation within first three years of operation by three phases. First Phase will be 46,500 WLL lines as pilot project, which we have started already and the second Phase will be for 78,500 WLL lines, third Phase will be for 552,773 WLL/ Wire lines.

National TeleCom has signed agreements with China’s top telecom manufacturer and worlds one of the top CDMA vendor Huawei for NSS, BSS, IN, MUX, Router, BTS, CDMA services, etc., and with Stratex a USA,s MW company for Radio/Microwave and few local companies for supply and errection of Tower, Generators, Air conditioners etc.

Proposed Project Cost Financing Plan The total consolidated budgeted project cost is BDT 5404.54 million (equivalent to USD 75.06 million) for 636,000 lines including infrastructure and highway link, which is excluding the Interest during Construction Period. The fixed assets (representing Phase # 1) of the project are to be funded by a term loan facility of BDT 386 million (equivalent to USD 5.36 million), Phase # 2 estimated at BDT 621.94 (equivalent to USD 8.64 million) & Phase # 3 estimated at BDT 4396.67 (equivalent to USD 61.06 million) and shareholders equity in the amount of BDT 600.0 million (equivalent to USD 8.33 million). Year 1 Phase # 1& # 2 Bank Finance (%) 41.58% Suppliers Credit (%) 14.66% Equity (%) 43.76% Total Proposed loan BDT( Million) 570.00 Total Suppliers Credit BDT( Million) 201.00 Total Proposed Equity BDT ( Million) 600.00

Year 2 Phase # 3 69.16% 20.46% 10.38% 700.00 207.00 105.00

Year 3 Phase # 3 49.38% 19.75% 30.87% 1000.00 400.00 625.00

Year 4 Phase # 3

100.00% 0.00 0.00 963.00

Total 42.26% 15.04% 42.70% 2270.00 808.00 2293.00

Project Cost The total project cost will be BDT 5.371.00 Million (equivalent USD 75.64 million) for 677,773 lines including infrastructure and highway link. The first, second & third phase expenses are detailed in the following table:

Summarized Cost to Build the Total Network WLL Network including HW {STM-1 (1+1) Link} – 677,773 lines Equipment & Installation Cost SL Item Description Foreign Purchase

Year-1

Year- 2

Dhaka-Sylhet

Dhaka-

Year –3-5 Khulna

Dhaka

Total Cost

Dhaka-Bogura

Chittagong

US $

Number of Subscribers

46,500

47,000

31,500

552,773

677,773

NSS

859,267

352,974

266,474

2,982,147

4,460,862

BSS

1,193,529

1,194,342

839,068

12,130,000

15,356,939

PDS

216,903

581,300

798,203

SMS

1,050,000

VMS

700,000

M2000-V2

157,016

59,018

46,493

576,879

839,406

Miscellaneous

28,878

26,841

194,735

277,295

Spare Parts

16,762

226,289

276,575

Power

162,236

120,982

1,176,000

1,621,455

Total FOB

2,634,592

1,812,173

1,316,620

19,617,350

25,380,735

Freight

52,692

36,240

26,332

639,800

755,065

Service CDMA

176,728

126,928

100,728

947,793

1,352,177

RF Planning Professional Services

37,656

25,128

271,285

371,725

Service Power

25,600

17,600

184,430

253,230

Training

31,180

114,742

208,282

Total CDMA

2,958,447

2,069,777

1,517,589

21,775,400

28,321,214

747,000

97,650

65,100

1,135,531

2,045,281

MUX for A interfaces

FOC

11,301

Router

187,498

562,491

937,487

Total CDMA and IN and Router

3,705,447

2,354,925

1,770,186

23,484,723

31,315,282

Total Price after Discount

2,400,000

1,577,800

1,186,025

23,484,723

28,648,548

CDST on CDMA Equipments

204,000

134,113

100,812

1,996,201

2,435,127

Billing System

383,562

Tandem and Gateway

451,008

Wire line Multi-service equipment

3,673,600

CDST on Wire line Multi Service Equipment

312,256

Microwave/Radio cost

1,050,000

939,793

528,951

5,756,000

8,274,744

CDST on Microwave/Radio

89,250

79,882

44,961

489,260

703,353

Sub Total Foreign Equipment (LC) Cost :

3,743,250 269,513,9 84

2,731,588 196,674,36 2

1,860,749 133,973,91 9

36,546,610 2,631,355,95 3

44,882,197 3,231,518,21 7

Total Taka Local Purchase and Other Cost (Tk.) 25

Tower, Mast, Erection (Spur Link)

45,926,000

15,507,000

139,031,856

200,464,856

Tower, Mast, Erection (Back Bone/ OSP)

52,160,000

27,554,700

54,315,800

894,689,280

1,028,719,780

Earthing Materials with Installation Cost

6,200,000

4,753,350

2,999,000

26,093,088

40,045,438

Power & Accessories with Installation cost

13,150,000

38,235,050

22,187,000

304,057,152

377,629,202

Administration, House Rent & Furniture Cost

27,400,000

4,418,066

3,216,040

19,912,032

54,946,138

Others Cost (Computer, printer, Royalty etc.)

2,900,000

Vehicles (Pickup /Micro/Car)

4,600,000

Advertisement and Marketing

10,000,000

17,500,000

14,000,000

108,000,000

149,500,000

Sub Total Local Equipment & Other Cost:

116,410,000

138,387,166

112,224,840

1,491,783,408

1,858,805,414

Grand Total for Network (Local & Foreign):

385,923,984

335,061,528

246,198,759

4,123,139,361

5,090,323,631

Unforeseen on Total Cost:

2,900,000 4,600,000

23,454,307

17,233,913

240,019,755

280,707,975

Grand Total for Network (Local & Foreign):

385,923,984

358,515,835

263,432,672

4,363,159,116

5,371,031,606

Per line cost of Investment (Taka)

8,299

7,628

8,498

7,893

7,925

Per line cost of Investment (USD)

115.27

105.94

118.03

111,17

111.61

Finance Plan The finance plan for the proposed project includes using a mix of 88.93 % debt and 11.07% equity. The sources of debt would be the syndicated financing from various Financial Institutes and suppliers credit. Source of Finance Out of the total Project cost of Tk. 2,270.00 million will be financed by Bank. Term Loan Bank Loan Suppliers Credit Equity: Revenue (license, bank guarantee etc.)

Taka (million) 2,270.00 808.00 1,000.00 1,293.00 5,371.00

Taka 42.26% 15.04% 18.62% 24.07% 100.00%

Import arrangements and payments Import regulations in Bangladesh require LC to be opened by a bank in Bangladesh on behalf of the importer favoring the vendor. NTC will need to submit the invoice, packing

list, and permission from BTRC to import the equipment. Once the bank issuing the LC receives above documents, a credit line can be established, approval from Bangladesh Bank can be obtained (if necessary), and the LC can be issued.

Key Financial Indicators Net Revenue Operating profit Net profit after tax Capex per line * ARPU (per annum) DSCR (x) IRR (after tax)

Year – 1 792.5 209.3 47.6

Year - 2 2,166.7 1,229.5 592.4

Year - 3 3,682.4 2,185.0 1,103.2

(BDT in million) Year - 4 Year – 5 4,696.6 4,975.9 2,886.4 3,073.0 1,554.2 1,699.6

8,193

6,952

8,699

8,207

8,141

7800

7,680 2.63

6,198 3.45

6,198 3.78

6.198 6.94

38.56%

ARPU = Average Revenue per User and the projected monthly ARPU is BDT 650.00 NATIONAL TELECOM LTD. Estimate of Working Capital Requirement Particulars

Tied up Period

Construction Period

New Clients Cumulative Clients Total Revenue from operation

Stores & spares Accounts Receivable Total Current Assets

Year 1

Year 2

Year 3

Year 4

Year 5

54,000 54,000

61,000 115,000

0 115,000 839.0 4

0 115,000 839. 04

454.14

900.04

0.30

49.32 49.6

45 days

0.30

20 days

31.11

31.11 31.4

31.41

0.3 45.9 46.

4 7 1

0.4 45.9 46.4

53 97 .50

0. 45. 46

Expenses Wages & Salaries

30 days

6.93

7.23

Service Charge

45 days

0.99

2.07

Maintenance

45 days

0.47

0.57

Other Expenses Total Current Liabilities

20 days

4.69

4.69 13.0

8.70 18.5

Working need

13.08

44.49

Capital

44.4

68.1 9

7.5 2.0 0.6 9.3 19.

8 7 2 4 0

66. 04

Year-2

Year-3

2.0 0.8 10.0 20.6

78 07 98 84 .68

67.0 1

National TeleCom Ltd. Year -1

7.6

Taka (in Million) Year-4 Year-5

7. 2. 0. 10. 21

68 .18

Capacity Utilization Cumulative Subscribers New Subscribers No of Cable Line Revenue per Line

Total Revenue from operation

54,000 54,000 0 5,400 0.00 54,000 7,800 421.20 0 2,400 0.00 54.00 21.0 6 454.1 4

Labour

No of WLL Line Revenue per Line No of Data Service Revenue per Line Revenue from Subscription Revenue loss due to disconnection @ 5%

115,000 61,000 0 5,400 0.00 61,000 7,680 883.20 0 2,400 0.00 61.00 44.1 6 900.0 4

64.2

66.9

Depreciation

9 148.0

61.90 148.0

148.02

267.6

839.04 70.43

2 256.4

44.16

55.1

148.0

2 183.8

115,000 0 0 5,400 0.00 0 7,680 883.20 0 2,400 0.00 0.00

70.2 7

49.4

Total

3 41.5

97.5

115,000 0 0 5,400 0.00 0 7,680 883.20 0 2,400 0.00 0.00 44.1 6 839.0 4

70.1

2 22.0

Overhead

115,000 0 0 5,400 0.00 0 7,680 883.20 0 2,400 0.00 0.00 44.1 6 839.0 4

273.4 2

280.34

NATIONAL TELECOM LTD. ESTIMATED INCOME STATEMENT Taka Million) Capacity Utilization Sales less VAT Cost of goods sold Gross profit

(in

Year-1

Year-2

Year-3

Year-4

Year-5

54,000

115,000

454.1

900.0

839.0

86.3

108.4

119.6

125.4

132.3 706.7

367.9

791.6

719.4

713.6

Operating Expenses

61.7

96.8

94.0

96.0

98.3

Depreciation

97.5

148.0

Operating profit

208.7

546.8

477.4

469.6

460.4

Financial Expenses Deffered Expenses Write-off Financial and other Expenses Profit before other income Income from short Term investment

156.1

171.8

101.8

76.4

50.9

35.8

191.9

207.6

137.6

112.2

86.7

339.2

339.7

357.4

373.7

339.7

357.4

373.7

16.7

Income before WPP Workers participation fund

16.7

17.0

17.9

18.7

Profit after WPP

15.9

322.3

322.8

339.5

355.0

Income tex

6.0

120.9

121.0

127.3

133.1

201.4

201.7

212.2

221.9

Tax holiday Reserve Profit after income tax/Reserve

0.8

9.9

339.2

Dividend

Retained Earnings

9.9

Last year Balance Cumulative retained earnings

201.4 9.9

9.9

211.3

20.0

40.0

201.7

192.2

181.9

211.3

413.1

605.3

413.1

605.3

787.1

Ratios (%) :Gross profit to Sales

81.0%

88.0%

85.7%

85.1%

84.2%

Operating profit to sales Income after tax to sales Net profit to paid-up capital :

45.9%

60.8%

56.9%

56.0%

54.9%

2.2%

22.4%

24.0%

25.3%

26.4%

Before income tax

2.6%

53.7%

53.8%

56.6%

59.2%

After income tax

1.0%

20.1%

20.2%

21.2%

22.2%

Dividend

0.0%

3.3%

6.7%

Dividend pay out

0.0%

9.4%

18.0%

National Telecom Limited ESTIMATED CASH FLOW STATEMENT Taka in million Construct.

Year-1

Year-2

Year-3

Year-4

Year-5

Period SOURCE OF FUND Fund Generated for operation : Operating profit Add: Back Depreciation Total fund from Operation Income From short term investment Decrease in current assets Long term Bank loan IDCP loan Paid-up capital: sponsors Short term Bank loan Total Source of fund APPLICATION OF FUND: Investment in fixed Assets

600.00

208.6 97.5 306.2

797.4

2 2 4

546.8 148.0 694.8

38 02 39

477. 148. 625.

59 02 60

469. 148. 617.

40 02 42

148. 608.

44.4 44.49

644.49

470.80

64.00

Suppliers Credit Repayment of interest on: Long term Bank loan

Directors loan Short term Bank

Security Deposit Repayment of Loan: Long term Bank loan

460.

1,148.0

694.8 4

625. 39

915.2

617. 60

608. 42

400.

181.8

181. 81

181.

52.6

111.6

127.2

101.

76.

50.

loan Repayment of income tax Increase in Current Assets Payment of Dividend Short term investments Total Application of Fund Cash Surplus/ (Deficit) for the year Cash Balance Beginning of the Year Cash Balance end of the Year

5. -

95 24.5

24.30

120. 86

121. 03

139.5

127. 33

49.

33.

34. 80

20. -

1,051.3

559.10

85.39

507.1 2

96.7

187.7

85.3 -

9 5

97)

(228.

184.

(226.4 325.

140. 89

369.8 7

834. 84

369. 87

182.1 85.39

432. 80

182.1 5

854. 36

40. 00

325. 70

99. 27

NATIONAL TELECOM LIMITED ESTIMATED BALANCE SHEETS Taka (in Million) As the Closing day of

Construction

Year -1

Year -2

Year -3

Year -4

Year - 5

Period Year-0 ASSETS: Current Assets Cash & Bank Balance Short Term Investment Storage, Spares etc. Receivable

85.4 -

182.1 -

369.9 -

140.9

325.7

99.3

6.2

7.4

8.9

10.6

12.8

31.1

49.3

46.0

Total Current Assets

122.7

219.4

426.6

195.7

382.3

158.0

Fixed Assets at Cost Less: Accum. Depreciation

470.8

1,450.0

1,850.0

2,250.0

97.5

245.6

393.6

541.6

689.6

Net Fixed Assets

470.8

1,352.5

1,204.4

1,456.4

1,308.4

1,560.4

64.0

Other Assets Preli. Expenses Interest During Construction Security Deposit

64.0

Total Other Assets

64.0

1,635.9

1,695.0

1,716.2

1,754.7

1,782.4

TOTAL ASSETS LIABILITIES EQUITY :

657.5 &

Liabilities : Current Liabilities: Short Term Bank Loan Accounts Payable Profit Participation Fund

44.5

13.1

18.6

19.7

20.6

21.7

0.8

17.0

17.9

18.7

Provision for Tax

6.0

120.9

121.0

127.3

133.1

Dividend Payable Total Current Liabilities

20.0

40.0

57.6

64.4

156.4

157.7

185.8

213.5

909.0

727.2

545.4

363.6

181.8

Long Term Liabilities Long Term Bank Loan

Supliers Credit

52.6

Liabilities

961.6

727.2

545.4

363.6

181.8

600.0

9.9

211.3

413.1

605.3

787.1

600.0

609.9

811.3

1,013.1

1,205.3

1,387.1

657.6

1,635.9

1,695.0

1,716.2

1,754.7

1,782.4

Equity: Paid -up Capital Retained Profit Total Equity Reserve

600.0 &

TOTAL LIABILITIES & EQUITRY: Ratios :Current Ratio Value per Share

2.13

3.41

2.73

1.24

2.06

0.74

100.00

101.65

135.22

168.84

200.88

231.19

0.61

0.47

0.35

0.23

0.12

Debts / Equity

National TeleCom limited BREAK EVEN ANALYSIS 1) Revenue excluding other income at Capacity Utilization

3rd Year Subscriber Taka(Million)

115,000 839.04

Item

Total cost

Fixed cost

Raw and packaging Materials

70.1

Wages & Labor

Stores & Spares

Repair & Maintanence

Water,Power,Fuel & Lubricant

Rent, Tax & Insurance

Administrative & General Expenses

Selling Expenses

Loan Interest lease Rent

Depreciation Write-off

Works Profit Participation Fund Other Overhead Expenses

Total

Variable Cost 70.13

4.4 5.5 4.8 6.1 31.0 62.9 101.8 148.0 16.9

3.33

1.11

4.16

1.39

3.65

1.22

6.19

15.55

62.93

101.81 -

148.02 -

16.99 452.0

176.7

275.28

NATIONAL TELECOM LTD. CALCULATION OF IRR Year

Cash

Operating

Non-

Income

Taka in Million Income Net

Present

Outflow 1,450.0 0

cash Charges

Inflow -

208.65

Tax Base

151.2 2

57.4 3

151.2 2

546.82

477.38

469.59

460.40

460.40 460.40

460.40

(137.3

460.40 460.40

115.9

309.1

151.2

115.9

309.1

151.2 9

115.9

309.1

151.2 8

115.9

309.1

151.2 7

119.3

309.1

151.2 6

122.3

318.3

151.2 5

148.3

326.1

151.2 4

21.5

395.6

151.2 3

Tax

115.9 4

309.1 8

115.9 4

Inflow (1,450.0 0) 338.3 3 549.6 9 506.2 8 501.4 2 495.6 7 495.6 7 495.6 7 495.6 7 495.6 7 633.0 1 Total :

IRR

Value 15% (1,450.00) 294.19 415.94 332.91 286.69 246.43 214.29 186.34 162.03 140.90 156.47 986.20

30% (1,450.0 0) 260.2 7 325.5 0 230.4 5 175.5 6 133.5 0 102.6 9 79.0 0 60.7 7 46.7 4 45.9 2 10.4 0

30.24% NATIONAL TELECOM LTD.

Pay-back Period Year

Cash Operating Non-cash Outflow Inflow Charges 0 1,450.00 1 208.65 151.22 2 546.82 151.22 3 477.38 151.22 4 469.59 151.22 5 460.40 151.22 6 460.40 151.22 7 460.40 151.22 PAY_BACK PERIOD = 2 Years and 3 Months

Net Inflow (1,450.00) 359.87 698.04 628.59 620.80 611.62 611.62 611.62

Balance (1,450.00) (1,090.13) (392.09) 236.50 857.30 1,468.92 2,080.54 2,692.15

NTIONAL TELECOM LTD. DEBT SERVICE COVERAGE RATIO

Year-1

Year-2

Year-3

Taka in Million Year-4 Year-5

Fund Generated from Operation 208.6 Operating Profit

546.8 2

127.2 Total Interest on Term Loan

127.2 7

151.2 Add: Back Depreciation

2 3

50.91 151.2

2 730.4

460.40 76.3

151.2

825.3 0

469.5 9

101.8

151.2

487.1 Tatal Fund From Operation

477.3 8

151.22 697.1

662.52

Repayment of Loan: 181.8 Long Term Bank Loan

181.8 1

181.81

52.6 Suppliers Credit

Repayment of Interest : 111.6 Long Term Bank Loan Directors Loan Short Term Loan

Total Liabilities

127.2 7

101.8 1

111.6

283.6

361.6 7

2 2.2

Debt Service Coverage Ratio (Times)

76.3 6 258.1 7

2.5 8

2.7 0

50.91 232.71 2.85

INFRASTRUCTURE AND TECHNOLOGY National TeleCom Limited may install CDMA 2000, or WCDMA or any other equivalent technology to operate the fixed-line telephony. However, initially the proposed project will install the CDMA 2000 1X technology. The proposed technology will provide increased network capacity compared to other available technology for both voice and data services.

CDMA Technology Consumers are demanding more from wireless communication technologies than ever before. More people around the world are subscribing to wireless services and consumers are using their phones more frequently. Add in exciting Third-Generation (3G) wireless data services and applications - such as wireless email, web, digital picture taking/sending and assisted-GPS position location applications - and wireless networks are asked to do much more than just a few years ago. And these networks will be asked to do more tomorrow. This is where CDMA technology fits in. CDMA consistently provides better capacity for voice and data communications than other commercial mobile technologies, allowing more subscribers to connect at any given time, and it is the common platform on which 3G technologies are built. CDMA is a "spread spectrum" technology, allowing many users to occupy the same time and frequency allocations in a given band/space. As its name implies, CDMA assigns unique codes to each communication to differentiate it from others in the same spectrum. In a world of finite spectrum resources, CDMA enables many more people to share the airwaves at the same time than do alternative technologies.

Vendorâ&#x20AC;&#x2122;s View on CDMA 2000

Increased Voice Capacity Voice is the major source of traffic and revenue for wireless operators, but packet data will emerge in coming years as an important source of incremental revenue. CDMA2000

delivers the highest voice capacity and packet data throughput using the least amount of spectrum for the lowest cost. CDMA2000 1X supports 35 traffic channels per sector per RF (26 Erlangs/sector/RF) using the EVRC vocoder, which became commercial in 1999. Voice capacity improvement in the forward link is attributed to faster power control, lower code rates (1/4 rate), and transmit diversity (for single path Rayleigh fading). In the reverse link, capacity improvement is primarily due to coherent reverse link.

Voice/Data Call Paths To Packet Data Network

To PSTN

MSC

PDSN

VPU

AAA AN DACs SDU

Circuit Backhaul IS95A/B

Mixed Backhaul IS-95A/B & 1X BTS Router

Packet Backhaul IS-95A/B & 1X BTS Router

Motorola Confidential Proprietary PBTL – Motorola: CDMA Roadmap Workshop, January, 2005

Voice Path FCH Path SCH Path

Higher Data Throughput Today's commercial CDMA2000 1X networks (phase 1) support a peak data rate of 153.6 kbps. CDMA2000 1xEV-DO, commercial in Korea, enables peak rates of up to 2.4 Mbps and CDMA2000 1xEV-DV will be capable of delivering data of 3.09 Mbps.

Frequency Band Flexibility CDMA2000 can be deployed in all cellular and PCS spectrum. CDMA2000 networks have already been deployed in the 450 MHz, 800 MHz, 1700 MHz, and 1900 MHz bands; deployments in 2100 MHz and other bands are expected in 2004. CDMA2000 can also be implemented in other frequencies such as 900 MHz, 1800 MHz and 2100 MHz. The high spectral efficiency of CDMA2000 permits high traffic deployments in any 1.25 MHz channel of spectrum.

Increased Battery Life CDMA2000 significantly enhances battery performance. Benefits include: • Quick paging channel operation • Improved reverse link performance • New common channel structure and operation • Reverse link gated transmission

•

New MAC states for efficient and ubiquitous idle time operation

ii. CDMA subscriber trend

The CDMA Development Group (CDG) reported that the CDMA2000® subscriber base surpassed 270 million users in June 2005 and is growing at 5 million per month. Driven by the high demand for CDMA2000 services and with 30 percent annual growth, CDMA continues to outpace other leading technologies. “The CDMA2000 momentum continues, and is setting the pace for the 3G market and changing the landscape of the wireless industry,” as reported by the CDG. “The rapid adoption of CDMA2000 across all regions worldwide, demonstrates the market potential for 3G CDMA technologies. As the CDMA2000 base continues to grow and WCDMA deployments accelerate, CDMA will capture greater market share and become the dominant wireless platform.” CDMA2000 Subscriber Growth History: March 2001 through June 2005*

Source: CDMA Development Group June 2005 CDMA Subscriber Growth History: December 1997 through June 2005

iii. Radio access network CMS 11 R3 is a commercial radio access network (RAN) product that implements the IS2000-A standard for CDMA wireless communication. The CMS 11 is a third generation mobile communications system that is capable of supporting the communication needs of mobile users in a third generation environment. The Radio Access Network uses an IS2000 air interface and the ANSI-41 core network. (Re-use of components in the ANSI-41 network is especially beneficial to TDMA operators who plan to implement CDMA2000 for third-generation services.) The RAN, which consists of the BSC 1120 (base station controller, BSC), the RBS 1127, and the radio network manager (RNM), is interoperable with switches from numerous vendors via the interoperability standard (IOS) interface. Our third-generation CDMA2000 radio access network (CDMA2000 RAN) makes it possible to offer advanced multimedia applications between user equipment (WLL phones, terminals, personal digital assistants, and laptops) and a packet core network linked to Internet applications.

iv. Data services platform Our Internet services platform will be made up of basic enabling nodes, applications, and consulting services. The primary service enablers will be wireless application protocol (WAP) gateways, mobile positioning centers, wireless intelligent networking / service control points (WIN/SCP), and short message service centers (SMS-C). Service network platform solutions will consist of messaging services, iPulse, mobile positioning services, mobile e-commerce, and service network management (including billing mediation, and service provisioning).

MANAGED SERVICE A set of services that takes the contracted responsibility for the continuous management and execution of any or all activities related to the strategy, design & build, operations, performance of the Network within well defined service levels, to maximize cost savings, flexibility and quality and improve revenue. The management of National Telecom Ltd has decided to go for

Managed Service (end to end solution) with a World Class company (like Lucent, Motorola or Huawei) along with procurement of equipment.

Why companies decide to outsource? •

Business

•

– Free the organisation to focus on its core competence – Maximise customer satisfaction – Secure funds and resources for business critical initiatives – Ensure faster response to market changes

•

Operations / Services – Gain access to expertise & better methodologies and tools – Increase performance of network – Adapt to new network requirements at faster than ever speeds – Make better choices of new technology

• Lower cost • More productive • Better quality

Financial – Optimise fixed versus variable costs – Gain visibility and predictability of costs – Ensure value for money – Increase revenue and reduce costs – Reduce headcount on the books

•

People – Free resources for strategic business initiatives – Avoid having to find and retain expertise – Mobilise and demobilise resources quickly – Offer better career paths for network professionals MORE VALUE FOR MONEY

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2005.

Market drivers for Managed Services •

– – – – –

•

Operators Business is Changing

Wireless telecommunications is transforming Voice margins are crashing Subscribers want more for less Competition is global (consolidation) Multi-media convergence The world is going on-line … services

What Outsourcing Model? Driven by the customer’s ‘want’ position – – – – – –

Reduction in cost Access to technical expertise and competency Workload fluctuation and critical mass Improved network performance & utilization Enhanced service flexibility An opportunity to gain a competitive advantage and business focus

Financial Pressures

CORE CORE VERUS VERUS NON-CORE NON-CORE

Competence Need

Operators Business is Changing

It becomes a a Service Company (SERVCO) versus a Network Company (NETCO) debate

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2005.

Potential outsourcing scope (eTOM model) Network Build (end-to-end)

Network Design and Planning

Technology Strategy Technology Strategy & Financial Planning

Network Design & Planning Services

Strategy Creation & Multi-Year Planning

RF Planning & Design

Market Analysis

Traffic & Carrier Design

Network Build

Corporate Financial & Financial Planning

Transmission Network Design (Backhaul)

Business Case Creation, Planning & Analysis

Circuit Core Design (Switch)

Research Development & Technology Solutions

Packet Core Network Design

Network Operations & Management Network Administration

Service Quality Analysis

Spares Management Service Problem Management

Network Security

Network Integration

Site Preparation & Construction (Build Out)

Material & Ancillary Procurement (FAN, Core & Transmission)

Asset Management, Warehousing & Distribution

Network Performance & Optimization

1st

Network Performance

Line Maintenance

RAN Network Optimization

2nd Line Maintenance

Packet Core Network Optimization

3rd Line Maintenance

Circuit Core (Switch) Network Optimization

Software Deployment (System) Service Configuration

Site Acquisition & Permitting

Materials Planning, Logistics Management, Order Management

Network Operations & Maintenance

Network Management

Network Element IC&I

Program Management

Network Operations

Network Operations Centers

Site Surveys

Preventative Maintenance

Any or all components !

Trans Network Optimization (Backhaul) Frequency Planning

Data Management/Mining

User Service Perform Measure & Monitoring

Asset Management, Warehousing & Distribution

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. ÂŠ Motorola, Inc. 2005.

Approach to Managed Services Defined operational performance & options

Solution Framing to Agreement

Discovery Joint Scope Agreed

Feasibility Study

Clear business strategy & priorities

Rapid transition (based on small steps)

Due Diligence

Business Concept and Contract

Transition Service Delivery Transition

Clear & quantified benefits, defined Service Level

Transform

Open relationship and effective governance

MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. ÂŠ Motorola, Inc. 2005.

Network Plan Equipment Type: a) Switch: Access Layer1 and Layer2i) Softswitch ii) Media Gateway (Universal, Intermediate, Multimedia) for Interface.

iii) Router for IP Core. iv) Details as per “Switch Specification”. b) Transmission: i) Microwave (Ethernet and E1) ii) Optical Fiber iii) Major Specification of Microwave in “Technical Specification of Microwave”. iii) MTBF should be very low. c) WLL Type: i) 450 MHz and 1900 MHz. ii) MSC/CDMA Softswitch/V5 Access through PSTN softswitch. ii) Major Specification of WLL in “Technical Specification of WLL”. iii) MTBF should be very low. d) Access Layer 3: NationalPhone’ Fundamental Requirement: a) Wire line Exchange. b) Cable Access line. c) Wireless Access lines. d) WLL (Fixed & Limited mobility) e) Access Capability: i) Connected with Main/LE switch through V5 protocol. ii) Capacity 16 line to 5000 lines. iii) Wireline Access (Mesh & Ring) iv) Wireless Access (Mesh) v) Should be carried all switching features from Switch. vi) Should have provision for E1/FE/GE interface.. vii) Support Internet and Data Service. viii) Support VoIP Call. ix) MTBF should be very low.

NMS (Network Management System): i) ii) iii) iv) v)

Central Network Management System. Monitoring. Remote Maintenance. Reporting of whole Network. 100% Redundant and Backup.

Intelligent Network: i) ii) iii) iv)

Central IN Pre-paid. Postpaid with Debit Billing. 100% Redundant Billing and Disaster Recovery and Backup.

Other equipment: Tower, Power, Cable, Test Equipment, IP and Data Equipment etc.

Key Decision Criteria IP-based Voice/Data/Video Infrastructure:

capabilities

and

Intelligent

Network

Integration of voice, data and video applications with a converged Internet Protocol (IP) solution from Core Network for both Wire line and Wireless subscribers. Ability to provide highly reliable and available switching systems, a wide variety of gateways to the PSTN and legacy TDM equipment, and a strong selection of IP based Soft Switch Core Network.

Vendor support for Open System Standards: The vendor shall be committed to supporting open system industry standards to support all kinds of Telecom platforms and Protocols. Main equipment should be supported all New and Present Technology even if Technology is from 3 rd party. The ability to incorporate future requirements and technological advances could be committed.

System Administration: Maximum flexibility for rapid, efficient, and cost-effective configuration changes, affecting personnel and associated Equipment through Centralized Network Management System

Vendor Experience to Support/Service Capabilities: Evaluation of the vendor's experience in building intelligent network infrastructures and implementing technologies will be prime requirement. Remote service ability, technical support of the entire Network and Applications and vendor reputation should be quite good.

Installation and Commissioning Responsibility: Vendors will take complete responsibility to install all equipment and Commissioning as well within schedule time. Before installation Vendor shall verify conditions at the building, particularly Space, door openings and passages. Any pieces too bulky for existing facilities shall be hoisted and otherwise handled with apparatus as required.

Training Program for NationalPhone: Selected Vendors have to provide comprehensive training at home and abroad to NationalPhone Engineers and stuffs in a skill level to handle the Equipment and Network efficiently. To update and upgrade about new technology manufacturers have to organize workshop sometimes for NationalPhone technical personnel. Training program should be on basis of (1) Technology (2) Equipment (3) Operation and Maintenance (4) Network Management (5) Equipment and Technology up gradation etc.

Optimization of PSTN with NGN  By 2006, optimization market size ~ 75 Million lines



( Analog switch + weak-brand switch) N.America, W. Europe, Japan excluded. Southern ????? Africa

Middle East & North Africa

255 3.4%

Asia Pacific

1627 21.7%

1252 16.7%

Estimated 8~12 Million lines per year for NGN to optimize fixed network

(US$m)

Analog & Weak-Brand Replacement Market Size

500 400

380

420

400

380

340

300 200 1755 23.4%

100 0

2610 34.8%

Latin America

CIS

2002A 2003E 2004E 2005E 2006E (NGN and AN excluded)

Source: Inc.(DAI Source: Dittberner Dittberner Associates, Associates, Inc.(DAI) Inc.(DAI)) 4

WIRELESS SOFTSWITCHING TAKES OFF Operator Spend On Next-Generation Equipment, Worldwide US $ (billions)

Global SoftSwitch spend grows from 36% to 48% (2003 to 2007)

Media Server Voice Application Server Session Border Controller Media Gateway

3 2

Packet-Based SoftSwitch

Circuit-Based SoftSwitch Integrated SoftSwitch

0 2003

2004

2005

2006

2007

Source: Baird, March 2004

Operator Benefits  Cost savings - CapEx / OpEx (50%-70%)  Better QoS – efficient data & IP packet transmission

 Scalable, open and flexible platform  Faster time-to-market for new services and applications

SOFTSWITCH EXPECTED TO REPLACE LEGACY CIRCUIT-BASED SWITCH OVER NEXT 10 - 15 YEARS MOTOROLA GTSS MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. © Motorola, Inc. 2004.

BANGLADESH OVERVIEW Bangladesh Bangladesh is endowed with rich natural resources of minerals and gas, nevertheless is one of the least industrialized nations in Asia and relies on imports and on foreign aid from multi-lateral agencies such as the World Bank and Asian Development Bank.

i. Economic Assessment GDP growth for FY 2005 (ended June 2005) is provisionally estimated has strengthened to 6.27% from 5.5% in FY 2004. If there are no odds, Bangladesh could have achieved a growth of over 6% this year. Current provisional estimates suggest that there will be a negative growth of 3.3% in crop and vegetables sub-sector this year compared to a positive growth of 4.27% last year owing to adverse effect of flood. This might limit economic growth in the vicinity of 5.4% this fiscal year. The growth in manufacturing sector is expected to be 8.43% while export will grow as targeted. Growth in industrial output rose to 8.3% from 6.5% in FY 2005 on account of more robust manufacturing activity. The rise in growth from 4.6% to 6.0% in medium and large scale manufacturing output was underpinned by a recovery in the export-oriented chemicals, processed foods, and knitwear and garment sub sectors. The output of domestic marketoriented small-scale manufacturing also saw strong growth while the power, gas, and water supply sub sectors (which support manufacturing activity) rose significantly. Growth in construction, however, slowed marginally to 8.3% from 8.6% due to an ongoing oversupply of commercial buildings and apartments. Higher export-oriented manufacturing and good grain production led to increases in wholesale and retail trade, and transport, storage and communication activities, boosting growth in overall services sector activity. The following table shows a breakdown of Bangladeshâ&#x20AC;&#x2122;s GDP:

GDP â&#x20AC;&#x201C; Market Prices 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 GDP (Taka billion) At current price 2,002 2,197 2,371 2,536 2,732 At constants 1,844 1,934 2,049 2,157 2,253 (1995/96) prices Percent change 5.2% 4.9% 5.9% 5.3% 4.4% year-on-year GDP per head 16,078 17,395 18,508 19,519 20,760 (Taka) At current prices GDP per head (in 348 362 368 362 361 USD) Source: Ministry of Finance, Bangladesh Economic Survey

3,005 2,373 5.3% 22,525

389

Major Economic Indicators, Bangladesh 2001 – 2005, % Year 2001 2002 2003 2004 2005 GDP growth 5.3 4.4 5.3 5.7 6.0 Gross Domestic Investment / GDP 23.1 23.1 23.2 24.3 25.1 Inflation Rate (Consumer Price Index) 1.9 2.8 4.4 4.7 4.2 Money supply (M2) growth 16.6 13.1 15.6 15.9 15.2 Fiscal balance / GDP -5.0 -4.6 -4.2 -4.8 -4.5 Merchandise export growth 12.6 -7.6 9.5 13.5 11.0 Merchandise import growth 11.4 -8.7 13.0 17.5 15.0 Current account balance / GDP -2.3 0.4 0.5 0.0 -1.5 Debt service ratio 6.6 6.3 5.6 5.3 5.6 Based on constant 1995/96 market prices Represents the ratio of debt service on medium and long term loans to total foreign exchange earning from exports of goods and non factor services plus worker remittances. Source: Bangladesh Bureau of Statistics; Bangladesh Bank; Export Promotion Bureau; Ministry of Finance; Staff estimates

ii. Geography The People’s Republic of Bangladesh is located in the northeastern portion of the Indian subcontinent. It has a total area of 144,000 sq km including 133,910 sq km land area and 10,090 sq km water area, and is bordered on the west, north, and east by India, on the southeast by Myanmar and the south by Bay of Bengal. Most of the Bangladesh lies within the broad delta formed by the Bay of Bengal. Most of Bangladesh lies within the broad delta formed by the Ganges and the Brahmaputra rivers and is flat, low-lying and subject to flooding at times. The principal urban center and capital is Dhaka, with nearly 10 million people, according to a 2001 census. Other major urban centers are Chittagong, Khulna, Sylhet and Rajshahi.

iii. Population Bangladesh, with a population of 135.7 million in 2002, is among the world’s most densely populated countries with around 900 people per square kilometer. According to the World Bank, from 1996 to 2003, population growth in Bangladesh has remained stable at approximately 1.7%. Urban population growth is reported to account for 26% of the total growth. According to the World Bank, Bangladesh is one of the poorest countries in the world, with annual per capita income of about USD 360. Nearly half of the country’s population lives below the poverty line.

8. THE TELECOMMUNICATIONS BANGLADESH

MARKET

8.1.1 Overview The current state of the telecommunications and information technology infrastructure in Bangladesh is extremely poor, with only 4.00 telephones (mobile and Land Phone) per 100 people. Not even 10% of the population has access to a telephone, not to speak of their owning one. Ironically, the country was the first among its Asian neighbors to open up the sector to private sector investments about a decade ago, but it has now fallen far behind some of its neighbors in reforming the telecom sector. Since telecommunications provide the backbone for information technology, the growth of the IT sector is naturally constrained. The country has made significant progress in some major areas such as food supply, and has become almost self-sufficient in food. With an increase in general economic growth over the recent years, the acute shortages of basic infrastructure facilities like telecom and IT are increasingly felt by a larger percentage of the electorate. So, it is expected that Government will get on with long awaited reforms of the sector, and gradually open up the sector fully to the private sector. Consequently, significant investment opportunities may open up for local and foreign investors. Opportunities are likely to emerge in almost all facets of telecom and IT, including network equipment, terminal equipment, design and delivery of the whole gamut of telecom and IT services, consulting, training, and management services.

8.1.2 BTTB BTTB is a government establishment under the Ministry of Posts and Telecommunication. BTTB operates urban fixed line services as well as national and international trunk services. As of April 2005, the BTTB operated 850,000 fixed lines (85% of exchange capacity) with 652 exchanges followed by 695 Public Call Office and 1,515 Card Phones located in major cities and towns - of the country. The growth of the BTTB network has been unable to meet local demand for telephone services. The recorded pending demand for telephones has been increasing at a faster rate than the telephone expansion rate. The average waiting period for a new BTTB fixed line is 12 to 18 months and also in some cases itâ&#x20AC;&#x2122;s beyond 24 months depending on location. There is no doubt that many people do not apply for a telephone line because of the known difficulty and long waiting period associated with such an application. Telephone penetration (both fixed and mobile) in Bangladesh is approximately 4.00% and, as such, is one of the lowest in the world Bangladesh has a telephone penetration rate well below the Asian standard (Source ITU). In comparison with neighbors such as India (telephone penetration: 8.24% as of October 2004), Sri Lanka (telephone penetration: 8.10% as of 2003) and Vietnam (telephone penetration: 11.4% as of September 2004). Low penetration rates for fixed line telephone services in Bangladesh have accelerated fixed line phone to mobile phone substitution. Mobile technology has allowed a rapid

expansion of telephone penetration in Bangladesh as fixed line infrastructure of BTTB has suffered from decades of under-investment.

8.1.3 Fixed Line Statistics (BTTB) No. of telephone exchanges (as of 2003) Total Telephone in use in Bangladesh (Fixed line and Mobile) Exchange capacity (as of 2005) Telephone connections (as of April 2005) BTTB (T&T) Private Telecom (Fixed line and WLL) Public call offices & card phone (as of 2003) Fixed â&#x20AC;&#x201C; line teledensity

: 652 6,575,000 : 920,993 : 850,000

: 25,000 : 2,210 : 0.69% (716,721 / 134.6 million) International outgoing telephone traffic (as of : 76.6 million minutes 2003) International incoming telephone traffic (as of : 564.0 million minutes 2003) International circuit (as of 2003) : 3,700 Internet capacity â&#x20AC;&#x201C; backbone (as of 2003) : 10 mbps Internet connection (as of 2003) : 10,500 Network digitalization (as of 2003) : 85% NWD circuits working (as of 2003) : 33,781

8.2.1 Mobile Market Overview Bangladesh, a developing country where the vast majority of people line in 68,000 rural villages, has felt the radical impact of the mobile phone. Whilst the country has a low per capita GDP of USD 361, mobile phones have greatly improved communications in the country. Between 1993 and 1996 mobile telephone services were provided by a single company, Pacific Bangladesh Telecom Limited, and a targeted the wealthier sections of the population. Then, in 1997, the market took a giant leap forward when three new licenses were granted for GSM mobile networks. This meant that four private companies were offering mobile services in Bangladesh: PBTL, branded as CityCell; Grameen Phone, as GP; TMIB, branded as Aktel; and Sheba, branded as Sheba World. While all the operators were licenses to rollout nationwide networks, only GP achieved this by leasing a 1,600 kilometer fiber optic network from BR. GP was also the leading investor in the sector, with USD 125 million invested during 1997-2001. Further investments of USD 467 million by 2004 will make GP the single largest telecom investor (at USD 592 million) in Bangladesh. 8.2.2 Cellular Operators With only four cellular operators in the private sector, mobile market is still an oligopolistic market. Although the first cellular operator, Pacific Bangladesh Telecom Limited, commenced its operation in 1991, true competition started from 1996 when the monopoly in the cellular sector was lifted.

Average year to year cellular industry growth rate from 1997 to 2001 has been around 96% and cellular operators now cover 58 districts of the country while BTTB covers 49 districts. But due to difficulty and long waiting period associated with the connectivity of BTTB line, potential customers are considering cellular phones as an alternative to fixed line phones. However, considering that the mobile phone sector of Bangladesh is in a growth stage due to major unmet demand of telephone as well as poor infrastructure BTTB, the only fixed line service provider, the telecom industry is still a sellers market.

8.2.3 Mobile Statistics Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 (May)

: :

Subscribers 32,995 61,160 114,168 243,492 532,536 906,541 1,561,715 3,400,000 5,608,000

Growth 85% 87% 113% 119% 70% 72% 112% 64%

With a population of 140.0 million, Bangladesh is one of the most densely populated countries in the world but its telecommunications and information infrastructure is among the weakest in Asia. At the end of May 2005, only about 4.00 telephones (both fixed and mobile). Almost 200,000 potential customers are currently on the waiting list for telephone service. The share of post and telecommunication sector in the countryâ&#x20AC;&#x2122;s GDP, however, increased from 0.84% in 1998-99 to 1.30% in 2002-03.

8.3.1 Regulatory Overview The telecom sector in Bangladesh is still regulated by the Telegraph Act of 1885, and the Wireless Telegraphy Act of 1933. The Bangladesh Telecommunications Act came into light in December 1998. The introduction of competition has created certain regulatory issues, many of which pertain to interconnection and commercial agreements with BTTB. All phone operators, urban and rural, are constrained by the number of interconnections provided by BTTB. In addition, they are subject to a monopolistic control by BTTB that limits revenue sharing arrangements for ISD calls and denies them NWD (national trunk) calls. There have been many calls for a review of interconnection agreements and revenue sharing arrangements. The lack of an independent regulator had thus far allowed BTTB to maintain a monopolistic outlook in these two areas. An independent regulator for the telecom sector has been formed in January 2002 â&#x20AC;&#x201C; this is the Bangladesh Telecom Regulatory Commission (BTRC) with 5 commissioners. The

structuring of the BTRC has been done so that it can take over all regulatory and policy decision-making abilities of the telecom industry in Bangladesh, in due course of time.

8.3.2 Legal framework for the telecom sector One of the key recommendations in the NTP-98 was the establishment of an independent regulator – the BTRC. Although earmarked as a priority initiative, the BTRC remained pending with the government from September 1999 until it was established in January 2002. The NTP-98 was the start of an important process of sector reform. The NTP-98 included the following areas of strategic policy: • • • • • • • •

Exchange of information Promotion of national integration Universal access Digitalization Competitive framework Private sector development Resource mobilization Service standard

• • • • • • •

Liberalized tariff policy Access to new technology Private sector investment Foreign investment Implementation strategy Information technology Regulatory framework

8.4.1 Privatization and liberalization Until 1989, the BTTB was the sole monopoly telecom operator. Liberalization began in 1990 when four private companies were allowed to operate different types of telecom services. Two companies were permitted in rural areas (BRTA and Bangla link – the then Sheba), one company was authorized to operate mobile phone services (Pacific Bangladesh Telecom Ltd), and another to provide radio trunking and radio paging services. In 1996, three new operators (GP, TMIB, Sheba) were licensed to operate cellular telephone services. Competition was initially only present in wireless and the fixed-line local loop; domestic, international (terrestrial), and fixed satellite remained a monopoly.

8.5.1 Transmission System in Bangladesh Bangladesh is a riverine country, as the country’s long distance transmission systems are mainly composed of microwave, UHF and VHF radio links. The use of optical fiber is still limited within city areas for interconnecting local exchange and Remote Switching Units (RSU) in Multi Exchange Networks and also for interconnections between switching exchanges and microwave stations. As of June 2003 BTTB has 21 microwave links are in place out of which 15 microwave links are of digital type and 6 microwave links are of analog type. All Upazilla headquarters are connected with their respective district headquarters through UHF links most of which are now digital radio systems. Also some of the district headquarters are interconnected through digital UHF links.

8.5.2 Optical Fiber Link High capacity optical fiber system with spur link is in operation in the country from the year 1998. Optical fiber networks between Dhaka – Chittagong, Dhaka – Brahmanbaria, Lakshmipur – Maizdi – Choumohani _ Feni, Kushtia – Meherpur – Chuadanga & Bogra –

Panchagarh (along with Spur link Rangpur – Nlphmari, Rangpur – Kurigram, Rangpur – Lalmonirhat, Netrokona – Mymensingh – Serpur, Pabna – Sirajgonj, Rangamati – Betbunia, Khulna _ Satkhira) hav been completed by June 2003. The installation work of optical fiber networks between Dhaka – Bogra & Brahmanbaria – Sylhet are in progress. After completion of these networks by June 2004 BTTB will have a complete backbone optical fiber network from Chittagong to Panchagarh & Dhaka to Sylhet.

8.5.3 Telecommunication Satellite & Earth Stations A single telecommunication satellite in geo-stationary orbit 36,000 kilometers above the earth can provide telecom services to one-third of the entire world. Advanced digital transmission technologies and more sophisticated use of radio wave in recent years have facilitated large volume of satellite transmission around the globe. To facilitate transmission of incoming and outgoing overseas calls through satellite BTTB has established 04 earth stations till to date. The first earth station was installed in Betbunia near to Chittagong in 1975. At present 462 International circuits with 08 countries are working through this earth station. The second earth station was installed in 1982 at Talibabad. At present 331 international circuits with 02 countries are working through this earth station. The third earth station, which consists of largest international circuit facilities, was installed in 1994 at Mohakhali. Now, 2,741 international circuits with 20 countries are working through this earth station. At last the fourth earth station has been established at Sylhet in 1995 by British Telecom assistance to facilitate only BT – Sylhet traffic. 120 international circuits are working through this earth station. Moreover 100 terrestrial international circuits between 02 countries are working via microwave. These earth stations operating with different INTELSAT satellites located in the Indian Ocean Region. Name of earth Standard Carrier station Betbunia A IDR Talibabad B IDR Mohakhali A IDR Sylhet F3 IDR Source: BTTB Annual Report 2002 – 2003

Working with INTELSAT 60° E IOR 60° E IOR 60° E IOR 60° E IOR

8.5.4 International Switching Centers International switching centers are mainly responsible for immediate selecting and connecting the appropriate circuit for incoming calls and sending the necessary information to the receiving country’s switch to complete the calls. At present the BTTB has three international switching centers (ISC) of which two are located at Moghbazar & one at Mohakhali. ISCs of Moghbazar are of type NEAX- 61 K & NEAX- 61E while ISC at Mohakhali is of NEAX- 61E type.

8.5.5 International Maritime Satellite Communication INTELSAT satellite links with fixed earth station for overseas communication while INMARSAT (International Maritime Satellite Communication) provides mobile communication services for ships and aircrafts. INMARSAT service is the mobile satellite

communication system that links the mobile earth station on vessels or aircrafts with land earth stations around the world via INMARSAT satellite in geo-stationery orbits 36,000 kilometers above the equator. This service makes it possible to get in touch with virtually any location around the world 24 hours a day with high quality communications ranging from telephone & telex to facsimile and data communications. Till to date BTTB has five INMARSAT-A terminals which are operating through one LES (Land Earth Station) located in Jeddah. Besides this according to IMN number allocated by BTTB, there are two numbers B type (Land Mobile), 34 numbers C type (Maritime Mobile) and 5 numbers Mini-M type terminal working in commercial basis.

8.5.6 Submarine cable networks Bangladesh declined to connect with the SEA-ME-WE-3 network in the 1990s resulting in the country lagging behind other countries in the region in terms of telecom industry growth. However, BTTB has recently become involved in planning the construction of a 3,200-kilometer Bangladesh – Singapore submarine cable system that will link Bangladesh with Singapore across Indian Ocean and also link into some of the major undersea cable systems that land in Singapore from around Asia, Europe and North America. The proposed cable would connect Bangladesh with the second APCN-2 cable, which became operational in 2001. Directly accessing APCN-2’s 2.56 Tbps network will relieve BTTB and the private operators from struggling with over congested international telephone circuits. Upon completion, the cable is expected to have an initial capacity of 40 gbps, expandable to 640 gbps by using the WDM technology. Landing points will be in Chittagong, Bangladesh and Tuas, Singapore. The installation and operation of the cable is expected to considerably boost Bangladesh’s international voice, data, and Internet connectivity and fuel competition in the telecom market. It may be mentioned that BTTB has signed a contract on March 27, 2004 among the sixteen parties of fourteen countries SEA-ME-WE4 consortium rather independently install the Bangladesh – Singapore leg. The consortium solution was expected to cost the BTTB less than USD 65 million. When complete the system would directly link Bangladesh with Indonesia, Malaysia, Singapore, Sri Lanka, India, Pakistan, the UAE, Saudi Arabia, Egypt, Italy, and France. It is expected that Bangladesh will get connectivity with the International Super Highway through sub marine cable by July 2005.

CURRENT MARKET SCENARIO OF FIXED LINE TELEPHONY To promote the private sector into the operation of fixed line telephony, Bangladesh Telecommunications Regulatory Commission (BTRC) has segmented Bangladesh into five zones namely Central, Southeast, Northeast, Southwest and Northwest zones. It awarded licenses for four zones to different newly formed Tele-companies including National Telecom in the year 2005. BTRC also awarded fixed phone license to forteen more private operators.

RISK FACTORS The Project would be subjected to risks typical of similar Telecom infrastructure projects. The majority of these are commercial business risks which would be mitigated by adopting global best practices and which are planned to be adopted and implemented by professional teams, managing the company. The primary risks have been described below: 9.1.1. Market risk The primary risk arises out of subscriber demand and there may not be enough demand to pick up connections laid down by NTC However, based on market surveys, it is seen that there exists a huge latent demand for quality voice service provision. In addition, it is the Company’s estimate that there is likely to be huge bandwidth constraints for data services due to the burgeoning data transmission requirements and the growth of regional ISP services. Moreover, projects of this nature are dependent on “time to market” NTC would be in a position to convert such a risk into a strong opportunity. Finally, another “market risk” could be the under-achievement of Average Revenue Per User (ARPU) figures for the planned subscriber base. In the financial projections, the starting ARPUs have been taken as the existing performance of NTC & BTTB and then grown by rates typical of developing markets, without taking into consideration the under-supply of lines. So, the projections for ARPUs are quite conservative and should pose little undue risk on the returns of the Project. 9.1.2 Competition risk NTC’s business plan takes into account all competitive pressures from BTTB and that is reflected in the tariff strategy and the demand pick-up in NTC’s business model. For a country with a tele-density less than 4%, we believe there is enough scope for more operators in the market before demand starts posing a problem for business viability. This is covered from a business model perspective since the model is for 250,000 lines only and such operators could take anything over and above that up. 9.1.3 Project Implementation (Network Construction) Risk Construction risk in a project of this nature would arise primarily due to: Systems Integration issues if the components will be sourced from multiple vendors; and Time Overrun for each Phase of activity leading to delays in “Time to Market” by NTC These issues are being addressed as follows: • •

NTC’s Network Architecture would be based on Open Standards interconnecting the various Network Elements. This ensures smooth integration of all the network elements; The Systems Integration process however needs to be managed by skilled Project Management resources with an understanding of the functionality and integration of all

• •

network elements. The proposed Organization structure addresses the various skill-sets that would be required to manage the systems integration process; and Moreover, NTC’s contractual relationship with the Vendors would ensure that there is an ongoing Technical support from the Vendor to resolve any Interface issues. Thus, Construction risk will be mitigated through proper selection of Technology, formulating a robust contractual structure for ensuring committed and continuous Technical support from Vendors and by having a highly skilled Project Team readily available in Dhaka to implement the Project.

In case of delays in supply and installation as compared to the committed Time-Lines and attributable to the Vendor, Liquidated Damages (L.D.) will be recovered to compensate for the comparable business loss due to delays in time-to-market. 9.1.4 Technology risk Telecom projects are subject to technology risks arising from either technology reaching obsolescence quickly or being too futuristic (thereby becoming a capex sink). The right type of technology solution has to be chosen for each market, with judgmental technology forecasts being done for the particular market. The technology risks of the NTC project are being mitigated through a comprehensive evaluation process for the varying implementation solutions and a rigorous contract awarding process. Future-proof technology from world-class vendors would be selected for the switchingrouter-backbone portion, which forms a substantial part of the project, cost and is capable of delivering multiple services with proven QoS (Quality of Service).

Findings: From the internship program and study data about the telecommunication industry, its projects, the office spaces and the officials and other related things, there are many things to identify. The findings have both of the positive and negative sides. The findings from the study are the following: 1. National Telecom has plans to establish QA concept in its operation and have a “Quality Edge” in the market. 2. Existing mobile company’s strength is the big threat for PSTN companies. 3. Price advantage plays a great role in Bangladeshi market place. 4. Moreover, projects of this nature are dependent on “time to market” NTC would be in a position to convert such a risk into a strong opportunity. 5. NTC’s Network Architecture would be based on Open Standards interconnecting the various Network Elements. This ensures smooth integration of all the network elements; 6. The technology risks of the NTC project are being mitigated through a comprehensive evaluation process for the varying implementation solutions and a rigorous contract awarding process.

Recommendation: Though there are some problems in the overall procedure of the National Phone, the performance is not so dissatisfactory. If the above stated problems were not presented in the telephone, the performance and contribution to the economy would be more satisfactory and better than the present condition. The following recommendations can be followed to do better in the actual field of the telecommunication – 1. Networks shall be planned to be user friendly and shall be equipped with modern technologies and shall be managed by the set procedures. 2. The bill of per call will minimum in comparison with BTTB. 3. The Company will have integrated door-to-door bill collection system, which will help to recover the initial capital outlay quickly. 4. Line checking will be a regular work of the company. 5. The establishment of one – point service centers by all the operators will be encouraged for the convenience of the users. 6. National Telecom can offer, “Bundled services” to customer and increase its revenue stream quite easily. An example of this will be giving “One bill” to high volume customer for internet, caller ID, three way calling, video conference and telephone. 7. NTC will attract large corporate customer base by providing best quality services, which results from installing the most advanced telecom technology first of its kind in Bangladesh. 8. NTC should establish a 24-hour call center. 9. NTC should establish well-designed customer service centers located in various locations of Bangladesh. Each service center will be equipped with modern customer database systems.

Conclusion: The detail feasibility shows that the project is viable considering all aspects. The sponsors are educated and experienced in various leading businesses especially in telecommunication sector. They are also financially sound and have the real capacity for efficient management. The demand of the services is very high in Bangladesh. Therefore it can be concluded that the project has the potential for investment and the Investor may consider providing loan assistance for the implementation of the project successfully so that they can contribute to the ultimate development of the country.

Reference: 1. 2. 3. 4. 5. 6.

Annual Budget 2005-2006 Asian Development Bank – Asian Development Outlook 2004 (www.adb.org) Bangladesh Bank – Economic Trends (www.bangladesh-bank.org) Bangladesh Telecommunication Regulatory Commission (BTRC) Bangladesh Telegraph and Telephone Board (BTTB) – Annual Report 2002 – 2003 Board of Investment (BOI), Bangladesh (www.boibd.org)

7. BanglaLink (the then Sheba Telecom) 8. CDMA Development Group (www.cdg.org) 9. CIA – The World Fact book – Bangladesh (www.cia.gov) 10. Ericsson – (www.ericsson.com) 11. Grameen Phone – (www.grameenphone.com) 12. Huawei (www.huawei.com) 13. International Monetary Fund, International Financial Statistics (www.imf.org) 14. International Telecommunication Union (www.itu.com) 15. Lucent (www.lucent.com) 16. Ministry of Finance, Bangladesh – Bangladesh Economic Survey (www.gobfinance.org) 17. Motorola (www.motorola.com) 18. Pacific Bangladesh Telecom Limited – (www.citycell.com)