Bangladesh Telecom: At a crossroads of decline and digital opportunity

Bangladesh's telecom industry stands at a decisive crossroads. Once a primary driver of digital inclusion, the sector today is underperforming relative to its potential, compared to regional peers as well.

This is not due to a lack of demand or technology adoption but the result of structural, fiscal, and regulatory constraints that have steadily weakened the industry's ability to invest, innovate, and contribute significantly to national growth.

The telecom sector contributes less than 1% to Bangladesh's GDP, compared to 2.8-3% in India and over 2% in Thailand. Despite serving more than 190 million mobile subscriptions and carrying over 95% of the country's internet traffic, telecom's economic footprint remains disproportionately small. These highlights are a structural monetisation problem.

One major factor is excessive taxation. Bangladesh imposes one of the highest telecom-specific tax burdens in South Asia. Depending on the service, over 50% to 55% of operator revenue is absorbed through VAT, supplementary duty, SIM tax, spectrum charges, revenue sharing, and corporate tax. In contrast, India reduced its effective telecom tax burden below 25% after 2019, alongside payment moratoriums and spectrum fee rationalisation. As a result, Indian operators stabilised financially and resumed aggressive investment in 4G expansion and 5G rollout.

The impact of taxation is visible in investment trends. Capital expenditure in the Bangladesh telecom sector has declined steadily over the past five years. While Indian operators invest USD 10 to 12 billion annually, Bangladesh's total sector-wide investment remains below USD 1.5 billion, making it insufficient for 5G readiness, fibre deepening, or advanced enterprise services. This gap directly affects network quality, innovation, and global competitiveness.

A second challenge faced by telecoms is low ARPU. Bangladesh's average monthly revenue per user remains around USD $2.5 to $3, among the lowest globally. Even Pakistan, with similar income levels, reports slightly higher ARPU. Meanwhile, smartphone penetration in Bangladesh exceeds 65%, and average monthly data usage per user has crossed 6 GB, growing at over 20% annually. The disconnect between usage growth and revenue growth signals pricing rigidity and limited service diversification.

Regulatory design also plays a significant role. Bangladesh's telecom framework remains largely connectivity-centric, while global markets have moved toward platform-centric regulation. Lengthy approval cycles, limited sandboxing for new services and rigid licensing structures restrict operators from rapidly deploying IoT, cloud connectivity, edge computing or AI-enabled enterprise solutions. In India and Singapore, regulatory sandboxes and light-touch frameworks enabled telecom-led innovations in fintech, healthtech and smart manufacturing.

Investor sentiment reflects these realities. Over the last decade, Bangladesh's telecom sector has seen declining foreign direct investment, while India attracted major strategic capital, such as Google, Meta and global PE firms, into its digital and telecom ecosystem. Capital flows where long-term policy clarity and returns are visible.

Despite the rough edges, opportunity remains compelling. Bangladesh's digital economy is projected to exceed USD 100 billion by 2030, driven by e-commerce, digital payments, manufacturing automation, logistics, and AI adoption. Telecom underpins this ecosystem already. Operators manage nationwide fibre, serve millions of SMEs and hold anonymised behavioural data critical for analytics-driven services.

The next growth phase requires a deliberate shift toward telecom as a digital platform. Globally, operators derive 20 to 30% of revenue from non-connectivity services, such as cloud, IoT, cybersecurity, data analytics and digital identity. In Bangladesh, this share remains numerically in the single digits.

Policy reforms can be what it takes to unlock the necessary transition. Tax rationalisation would immediately improve sector cash flows. Even a 5 to 7 percentage point reduction in effective tax burden could free hundreds of millions of dollars annually for reinvestment, resulting in long-term revenue loss for the state, as data consumption, device sales and digital services expand the tax base. Regulatory modernisation, which includes spectrum pricing aligned with market realities, infrastructure sharing incentives and faster service approvals, would reduce cost duplication and accelerate innovation.

Most importantly, policymakers must formally recognise telecom as strategic digital infrastructure instead of a high-yield revenue source. India's experience shows that every 1% increase in broadband penetration can lift GDP by 0.8 to 1.4%. Bangladesh cannot achieve its Smart Bangladesh, AI, or cashless economy ambitions without a financially healthy telecom sector. This leads one to ponder two conflicting choices: continue extracting short-term revenue from a weakening industry, or enable telecom to become a growth multiplier for the entire economy. 

Safwan Khan is a seasoned telecom professional with extensive experience in Bangladesh's telecommunications market. Over the years, the author has worked closely with multiple domains, contributing to revenue growth, market expansion, and data-driven decision-making across the sector. He can be reached at: ariesmine@yahooo.com.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.