No space for a third telecom operator

ICT: While the Bhutan Telecommunications and Broadband policy, approved by the cabinet earlier this year, opens the market for a third telecommunications company, it is unlikely that more competition will be introduced.

The policy points out that the market may be opened up based on proposals and market trends.

In an earlier interview, information and communications minister DN Dhungyel, told this paper that the government may evaluate the need for one more company sometime this year.

The evaluation is yet to take place.

“Ministry will first do the ground work, which can be done anytime, and submit a note to the government,” lyonpo DN Dhungyel said. “Since evaluation is not yet done, it cannot be said whether market will be there for a third operator or not,” he added.

In the policy, it is pointed out that the existing duopoly of Bhutan Telecom and Tashi Cell ended in 2013. However, both companies are of the view that the market will not be large enough for three competitors.

Tashi InfoComm managing director, Tashi Tshering said that despite being in the business for the past decade, the private company is yet to recover its investment. He added that it is the company’s view that the sector is already “congested” with just two companies in competition.

He also pointed out that the market in Bhutan is comparatively small at around 700,000. He said that the customer base in the neighbouring Indian city of Silliguri would be between 2-5 million. “So you see, we’re not even a fraction of a small town in India.”

Similarly, Bhutan Telecom CEO, Tshewang Gyeltshen, said that while not aware of any government intention to introduce a third operator, he is confident that the government will not open up the market to more companies.

He also pointed out that the customer base in Bhutan is too small to be divided up among three companies.

However, he added that if to improve the quality of services, the government ever decides to introduce a third operator, then he would say that rather than a third company in the market, more subsidies for both telecom companies would be the better move.

However, he explained that the quality of services in Bhutan was already much better than in many Asian countries like Bangladesh, India or Nepal. He added that reliability of Bhutan Telecom services was also over 97 percent despite being required to be only 95 percent. He pointed out that no telecom company can achieve 100 percent reliability.

The CEO also explained that the mindset in Bhutan is for the best services at the cheapest cost. “This is not possible,” he said. “Ours is not that expensive, ours is reasonably cheap,” he added.

Some of the challenges for a company operating in Bhutan is the mountainous geography which increases the cost of investment far higher than on flat land.

“In Thimphu alone we’ve over 80 towers,” he said, pointing out that in flat areas, one tower could cover a 1.6km radius. On top of that, one tower in a flat area would serve thousands while in Bhutan the number would be significantly less given the size of the population. As a result, investment can be recovered in a year or two in highly populated flat areas whereas in Bhutan it takes much longer.

For instance, Tshewang Gyeltshen said that more than Nu 700 million has been spent to address congestion and other network problems that Bhutan Telecom has been experiencing. He pointed out that this investment would take at least three years to recover.

Tashi InfoComm managing director Tashi Tshering said the government can intervene to further improve the telecom sector in three ways. One is that mobile handsets imported from a country other than India are currently taxed a 20 percent customs duty in addition to a 10 percent sales tax. “While we’ve network, services, people cannot afford handsets,” he said.

Another challenge is acquiring land to set up equipment and infrastructure. He pointed out that the process is slow and should be sped up. While he agreed with the Bhutan InfoComm and Media Authority’s recent decision to allow infrastructure like telecom towers to be shared, he said the authority must also ensure that newcomers into the market can avail space on such infrastructure.

The third problem is the five percent tax recently imposed on users which is a deterrent.

The two telecom companies had a combined subscriber base of a little over 628,000 mobile cellular subscribers at the end of 2014 which was 84 percent of the population.

In addition, there were a little over 349,000 internet subscribers in the country last year, with the majority subscribed to the two companies.

Gyalsten K Dorji

1 reply
  1. online
    online says:

    I think BMIA should not waste time n resource in conducting evaluation and instead let 1 or 2 new players compete in the market so that fittest will survive. Otherwise gov corporate like B mobile will continue with its poor services for eternity. The height of contradictory is their slogan ” keeping bhutan connected.” Forget about the whole country, they cannot even keep Thimphu connected especially towards the evening. Not so good is also their mobile internet service. When technology has advanced to 5 G , here bmobile is struggling to provide a decent 3G service even just for the capital city. Their very lame and frustating explanation is oversubscription and congestion as if a third party is responsible for the subscription. I think it is not about affordability but rather having to endure humiliation for having to pay for poor or no services ….so BIMA get in more players n let go non performers

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