News From Telecom World

BTCL wary of ‘forced’ partnership (WiMAX)

Posted on: November 11, 2008

The decision to take WiMAX licence would push Bangladesh Telecommunication Company Ltd (BTCL) to have private partnership, form a separate company, invest in excess of $250 million and take significant long-term business and technological risks.

The state-owned company has decided to ask Bangladesh Telecom Regulatory Commission (BTRC) to relax its November 16 deadline to obtain the licence by paying $31.6 million. This request is being made as the BTCL decided to take a “strategic” partner from the private sector to minimise the “risk factor”.

BTCL’s decision for WiMAX (Worldwide Interoperability for Microwave Access) licence was almost imposed by the regulator that awarded three WiMAX licences to private companies through an auction in September. The BTRC said the state-owned telecom company could take one WiMAX licence at the highest auction rate or at $31.6 million. The deadline for obtaining this licence expires on November 16.

Following the BTRC proposal, the BTCL formed a committee headed by a general manager. Sources said the committee in its report recommended taking strategic partner and suggested that BTCL’s presence in WiMAX operations will prevent syndicated market control by the three private operators.

“Our experience from Teletalk shows that BTCL’s WiMAX operations will also stimulate the broadband market,” said a high official.

To have the strategic partner, BTCL will have to select a partner through an open tender, for which the state-owned company will at first publish an Expression of Interest (EoI) and do the legal vetting on the proposed framework of partnership.

After a partner is found, BTCL will form a separate company for WiMAX operations since the partner cannot own or take credit for existing assets and operations of the state-owned company.

A committee is now working on assessing the Internal Rate of Return (IRR) and risk factor of the WiMAX venture of BTCL.

While BTCL officials believe that it can buy the WiMAX licence right away, a telecom expert asks if the state-owned company actually has the $31.6 million ready to pay BTRC.

The government’s objective is to offload shares of BTCL to the public. “Strategic partner or not, the WiMAX venture will certainly hit the financial health of BTCL and it will inevitably impact the state-owned company’s book value… That is the biggest blow to public interest,” said the high official.

Again international telecom and broadband experts say that the BTCL’s WiMAX venture would need investment of at least $250 million to build a nation-wide WiMAX network. “Any new WiMAX venture will take six to nine years to reach the break-even point,” said an expert.

“The same broadband network would cost half the price if it is done through 3G technology [fast wide area cellular telephone network],” said the expert, adding, “It will take less than a year to hit the break-even point because of wider availability of 3G devices in the market.”

“But the main argument is why push BTCL into such a risky venture. It should concentrate on land-line telecom business while letting the private sector take risks in wireless broadband,” he said.

Of the three private winners of WiMAX licences, the highest bidder Bangla Lion immediately admitted of quoting too high and ultimately failed to make timely down payment for the licence. Another local bidder BRAC also missed the payment deadline. The BTRC, citing global investment crisis, granted both defaulters 30 days of grace period that would end on November 16.

The third bidder, owned by a foreign entity named Augure, has made the payment timely and bagged the only WiMAX licence as yet. “It shows that the global investment crisis is not quite a just excuse for rescheduling the deadline for the payments,” notes an official.

“Why does the BTCL need a strategic partner in the first place to run this business? It has been running the domestic and international voice and data services pretty well,” he says, adding, “Is this proposed partnership required? WiMAX technology has no proven track record of commercial success anywhere in the world.”

He said back in the late 90’s, the government had forcibly made BTTB (Bangladesh Telegraph and Telephone Board now turned into BTCL) forge a 50 percent partnership with a private company named BBTT (Bangladesh Broadcasting Telephone & Technology) for Personal Handiphone System operations. This operation never saw the light of day and the current government cancelled the licence of BBTT, he added.

Despite such criticism, BTCL officials see future in WiMAX. “WiMAX is the future of broadband technology,” said an official when asked if depending on WiMAX could be too risky especially since there is no instance of commercial success of any WiMAX network around the world.

Developed internationally by the WiMAX Forum, a WiMAX tower provides broadband speed without the requirement of cables up to 50 square km.

Supporters of 3G and Long Term Evolution (LTE) technology argue that the present 3G technology allows data transmission at the rate of 3.6 Mbps and 7.2 Mbps, which busts the myth of WiMAX superiority.

“There are 3.21 billion GSM, WCDMA-HSPA subscriptions worldwide and the GSM, WCDMA has 87.95% market share of mobile communications subscriptions worldwide,” said an expert, “Bangladesh cannot swim against this global stream and be benefited by it.”

Source: Daily Star

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