Some Concerns Over A Merger

Merger of two rivals on foreign shore
Leaves a market with competition no more.
Allow entry of new operator
In exchange of market access for export sector.

In recent years, competition in Bangladesh economy is gradually waning. Cellular phone service offers the apt example. Earlier we had 5 operators. Merger between Robi and GrameenPhone reduced the number into 4. Recently a news broke out that Telenor and Axiata merged their operations in Malaysia. Telenor operates GrameenPhone and Axiata operates Robi in Bangladesh. Back in 2019, the two companies hinted that they would go for a merger and form a bigger GSM service company in Asia. But the communiqué made it clear Axiata and Telenor's Bangladesh operations would not be touched by the merger decision and they would operate as two separate companies. Despite their claim, their decisions may have significant influence over the cellular phone service industry of Bangladesh.

According to Bangladesh Telecom Regulatory Commission (BTRC), there were 68.7 million subscribers in 2010, in 2019 the number rose to 157.5 million. Till January 2019, Grameenphone had 73.06 million subscribers, Banglalink had 33.69 million , Robi had 46.90 million and Teletalk had 3.88 million subscribers (Source: Bangladesh Economic Review 2019). Clearly other operators paled to insignificance besides Grameenphone's subscriber base. Following the merger with Airtel, Robi acquired greater market share too.

Despite the repeated assurance from the operators if the news becomes true, true number of operators will come down to 3. Teletalk is operated by government by the way. This clearly has consequence for government as well as for consumers.

We have seen that relations between government and operators turned sour in recent years over contested tariff, slapping of supplementary duty, termination of employee and quality of services.

As operators become disenchanted with the government, consumers bear full brunt of it. They pay higher prices for existing products and experience poor service.

Back in 2018, I wrote a piece on how a decision by government about raising the duration of smaller data pack led to increase in data pack price and undermined consumers' interest.

When Robi and Airtel merger took place, Axiata paid Tk 1 billion as fees to regulatory authority. In addition, winding up of redundant customer centers and voluntary retirement scheme were introduced to retrench cost.

It puzzled me that how two parent companies merged their businesses in somewhere else but isolate the other one in Bangladesh. No matter how convincing it sounds we have to take it with a dollop of salt. If Grameenphone and Robi exist as two different independent operators , they will offer competing products to consumers. Such competition will allow consumers to attain desirable product at affordable price. Parent company of Robi and Grameenphone has leverage to influence Bangladeshi market. The two operators may cease to offer competing products and thereby shape their anticipated profit.

Furthermore, such decision has other implications at various stages of business. One of the operators may incur loss and file for bankruptcy and shirk responsibility while parent company in Kualalumpur may sit on profits without diverting any part of it to troubled operator.

As mentioned earlier, Robi-Airtel amalgamation yielded Tk 1 billion to government coffer. Moreover, such merger required ample clearance from various branches of government. But parent company 's decision may be based on averting any regulatory intervention as such merger will give the two operators a subscriber base of 119.96 million and overwhelming dominance over the market, pushing the consumers at the mercy of operators. Moreover, declaration of a merger is likely to violate the Competition Act 2012, which was introduced to "prevent, control and eradicate collusion, monopoly, oligopoly, combination or abuse of dominant position or activities adverse to the competition "(Source: Bangladesh Competition Commission,Wikipedia).

So the statement of separate business operations might be a masquerade to eschew the issues involved in any public disclosure of merger.

No matter what the motif is Bangladesh should go for calling new operators to enter its GSM service market.

Prior to introduction of GSM service, tobacco related companies remained as biggest tax-revenue providers. Gradually mobile operators took their place. Merger news casts shadow over government's tax-revenue earnings from mobile operators. Now the biggest two operators are now in far more comfortable position to produce balance sheets that will be favorable to them, resulting in fewer corporate revenues from them.

So government has little choices to allow new entrants into this market.We have to take some strategic considerations while offering new license. We have to make sure that such lucrative license could open new doors for our goods to the uncharted territories. For instance, we may welcome operators from Africa, South America, Turkey, Russia and Japan in exchange of greater market access of Bangladeshi goods like RMG , pharmaceuticals etc. Earlier we had not done it. Now, we should not repeat the same mistake.

No matter what statement the operators trot out, we, the consumers, look askance at them. At the end of the day, consumers pay a heavy toll from their own pockets when some wayward operators are in the thick of undermining the competitive business environment. We are witnessing it with growing concerns in many other areas!