Banglalink Seeks Merger with AKTEL in Bangladesh

Naguib Sawiris, the chief executive officer of Orascom Telecom, which owns Banglalink, told the World Economic Forum in Jordan this week that the Egyptian group is looking at the possibility of a merger with AKTEL, the Financial Express (Bangladesh) reports. Sawiris said there was a need for more consolidation in markets like Bangladesh, because in the "long term the smaller companies won't be able to compete", and said that Orascom was "in discussions now with Telekom Malaysia, meaning to combine our operations". Seventy per cent of AKTEL is controlled by Axiata (formerly named TM International), which was spun off from Telekom Malaysia in April 2008. The rest is owned by Japan's NTT DoCoMo, which bought the stake from Bangladesh's AK Khan Group for US$350 million in 2008.

Local officials of both companies are quiet about the latest development, although insiders said a merger between the two companies looks increasingly likely, given that neither has been making any profit for years. "Except Grameenphone, all other operators have been bleeding for [a long time] in the Bangladesh market. So it's logical for the companies to merge and the alignment would lead to profit," said Fazlur Rahman, a former director of AKTEL who has just retired from the company.

Outlook and Implications

• Consolidation to Enhance Competitiveness: The merger of the two companies would create a company almost as big as Telenor-owned Grameenphone, which has been maintaining its dominance in Bangladesh ever since its launch in 1998. According to the latest statistics issued by the Bangladesh Telecommunications Regulatory Commission (BTRC), Grameenphone had 21.02 million mobile subscribers at end-April 2009, a market share of approximately 45%. Meanwhile, Banglalink had 10.90 million subscribers, with AKTEL at 8.83 million. The move echoes a similar deal recently reached in Australia, where Hutchison and Vodafone agreed to merge the country's third- and fourth-largest mobile operators to challenge bigger rivals Telstra and SingTel-owned Optus (see Australia: 9 February 2009: Hutchison and Vodafone to Merge Australian Businesses).
• Increased Competition to Drive Market Growth: The merger of the two companies would also inject new growth momentum in the market, which has markedly slowed down since the middle of 2008. The country's six operators including Grameenphone added only about 6 million subscribers in the year ending 30 April 2009, compared with 15 million in the year-earlier period. The operators have complained that over-taxation has killed growth, making smaller players suffer from losses and causing Grameenphone to hang on a diminishing profit. "The alignment would not only create the largest merger in Bangladesh, but also bring a fresh air in an increasingly sluggish scenario," an unnamed top official of a leading operator was quoted by the media.