'Banglalink wants to transform Bangladesh’s economy through FinTech'

With licences for digital financial services, Banglalink has the potential to transform economic activities in Bangladesh within three years, mirroring the success of its sister concern in Pakistan, said Kaan Terzioğlu, CEO of VEON Group, the telecom operator's parent company.

The much-needed regulatory reforms could solve several problems simultaneously, especially as Bangladesh is currently making a series of rational decisions, he suggested in an interview with The Business Standard during his recent visit to Dhaka.

"Bangladesh is the only market where VEON operates without a market leadership, and its investors over the past 20 years did not enjoy any dividend out of their cumulative investment of $2.5 billion," Terzioğlu said, blaming fragmented licencing schemes, unhealthy competition, high taxes and spectrum price, alongside restrictions on operators' digital innovation.

"However, we are not seasonal investors, instead we have been counting on Bangladesh's long-term potential that should unfold through the right reforms now. Bangladesh will be one of our highest-return markets if we are welcomed in the digital financial services we can provide in other markets," he said.

VEON's strategy introduced the company as "not only a telecommunication company but also a digital services provider – including entertainment, financial services, education and healthcare."  

For instance, VEON's company in Pakistan has a digital wallet and microfinance operations that helped the South Asian country raise its tax revenue to over 10% of GDP this year as 20 million active customers are using the platform for digital payments bringing small transactions into the tax purview.

We issue 1.40 lakh digital loans daily, enabling individuals like taxi drivers to refuel their vehicles or housewives to purchase items such as flour, sugar, and cookies for resale and income generation.

This role is crucial. Once economic activities are digitised, there is greater visibility over retail operations across the country — only then can the tax base be effectively expanded, he said.

By expanding the tax base, the government can avoid further penalising industries that are already burdened with high taxes," he said, adding that the price of spectrum sold to telecom operators and the taxes collected from them are exceptionally high in Bangladesh.

"I understand that Bangladesh needs higher revenue. How can this be achieved? The answer lies in expanding the tax base, and digitalising payment systems is the only way forward," he said.

Mobile operators contribute to 1% of Bangladesh's GDP which should be at 2%.  That means operators are not at the level where they have to be, Terzioğlu said.

On the other hand, the mobile operators are contributing to 5% of the total tax revenues of the government, he said pointing at the excessive tax burden on the industry.

"We are a digital business and a digital country should be the objective."

Kaan Terzioğlu, CEO of VEON Group, Banglalink's parent company

"We are a digital business and a digital country should be the objective," he said, stressing a liberal licensing regime to let companies try their innovative digital services.

The UAE-based multinational VEON now operates in six countries including Pakistan, Ukraine, Kazakhstan, Uzbekistan and Kyrgyzstan.

VEON's challenges and prospects in Bangladesh

Kaan Terzioğlu said Bangladesh is currently seeing the cheapest telecom services in the entire world.

"It is important for the industry to be profitable. Unfortunately, amongst the mobile operators in Bangladesh around 95% of all the profits go to one company and no country allows such an industry scenario," he said.

"In our industry, there are lots of fixed costs, if we do not reach a certain level that starts from 20%-23% market share, it is difficult to become profitable."

On the other hand, the VEON strategy for frontier markets to tackle the problem — expanding into digital services for consumers and enterprises — remained restricted in Bangladesh.

"Bangladesh went through different government policies that made doing business and creating a fair competitive environment very difficult," he said.

For example, Terzioğlu said, a mobile operator is not allowed to be in the fixed line business or mobile financial services business. Even telecom infrastructure investments for tower or fibre optic cable networks were restricted for mobile operators. These put a lot of dilemma on investment plans as the assets that are being invested cannot be monetised as per need.

According to him, Banglalink's OTT platform Toffee in its second year emerged to be a top-performing app in the country and at a certain point last year its Linear TV streaming was stopped, hurting its growth. 

"Now, with the recent changes, I see the future here in a different way," he said, expressing his expectations for a much more rational regulatory regime that will "encourage a fair competition in the market as well as encourage investments and innovation."

"For a company like ours that has a strategy to become a consumer service business, we would like to serve our customers in the areas where they are underserved," he continued.

"If we can achieve our objective of being in multiple industries, including healthcare and education, we will have a profitable business in Bangladesh.

"In the recent meetings with different authorities here, everyone was saying it is time for reform that does not need to wait for an elected government "We had an opportunity to meet Chief Adviser Dr Muhammad Yunus in Davos and he was amazingly precise in defining what happened on the way and what the opportunities are," Terzioğlu said. 

"Young people empowered with technology but frustrated with not seeing any future of their own decided to make this huge change. "They have expectations and our job is to provide them the best service," said the VEON Group CEO.

"You can count on us that we will do our job. I hope everybody will do their job," he said.

Calling for long pending reforms, Terzioğlu stressed active infrastructure sharing within the industry will save foreign currency.

"If we see the opportunity for our bigger role in digital services verticals, we will be continuing our investments and efforts as we believe Bangladesh can be the world's fastest-growing economy following the right reforms," he said.

Bangladesh is a fantastically important market having 173 million people and almost 8 million live outside the country sending home $2 billion every month as remittance. 20 years later, the country will have 240 million people with a strong middle-income group.

"From all the dynamics I believe Bangladesh is a country that is extremely interesting for us, it fits our frontier markets business model. But our hands are tied today in terms of providing all the services we want to provide," Terzioğlu said. 

Over the last three years, we have invested $350 million into Bangladesh, we have certain levels of customer satisfaction to maintain, and we will continue investing but we need to ensure that we get all the additional licenses we need in order to serve our customers best, especially where they are underserved.

From a growth potential perspective, I would categorise Bangladesh as the highest growth country, in a way even maybe higher than Pakistan especially since the contribution of women in economic activities is much higher here, there is a very strong culture of hard work, people are very resilient here with a never give up mentality, he said.

VEON CEO believes 2025 might be a period of transition for economic activities in Bangladesh and he expects to see the economy's resilience.