18 November, 2006
In an auction, which lasted four hours with the bid climbing 168 times, the Tashi Group clinched the deal to operate the first private mobile service in the country with a Nu. 777 million (USD 17.32 million) offer.
The Tashi Group outbid three other joint venture companies in the auction that was held in Thimphu on October 16 to operate the license for a period of 15 years.
The three other local companies vying for the license were the Singye Group, which had tied up with Reliance mobile in India, Druktel Private Limited, a consortium of Bhutanese companies, which had joined Airtel also in India and Bhutan Steel, which had tied up Thai company, Shin Satellite Public Corporation Limited.
The bidding began at Nu. 198 million (USD 4.4 million), the highest of the sealed bid offers made by Bhutan Steel.
The companies were given a maximum of two minutes to call their bids and each subsequent bid increment had to be multiples of Nu. 500,000.
The “open outcry” which began at 11:00 am was initially supposed to close at 12:30 pm, but the bidders argued that the bid should continue until there were no further bids and setting a time limit was unreasonable. The time limit was removed.
In the first few rounds all four companies’ bid increment climbed by Nu. 5 million then it dropped to Nu. 500,000 with an occasional increase by Nu. 20 million.
All four companies bid neck to neck till the amount touched Nu. 497 million when two participants, Bhutan Steel and Tashi Group, stopped bidding further.
The Singye Group and Druktel raised the bid to Nu. 700 million.
The mood became tense as the Indian representatives started walking in and out of the room more frequently to call their companies back home, raising the bid amount by a few more millions each time they returned.
The close competition between the two, however, ended when Druktel raised the amount to Nu. 770 million and the Tashi Group made a surprise come back in the bidding with an offer of Nu. 777 million.
Ugen Wangchuk of Singye Group said that although it was a close bid they couldn’t go higher than the winning bid because they had already gone beyond their maximum ceiling, which was Nu. 700 million.
“We had gone up to Nu. 750.5 million hoping that Druktel would bid out,” said Ugen Wangchuk. “We saw no business beyond Nu. 777 million. It would be difficult for us to sustain the project or make any profits.”
Wangchuk Dorji of the Tashi Group said that the bid amount was worth it because telecom was a business of the future.
“It will be a part of our lives because mobile and its operations will be our day to day appliance,” he said. “We will introduce whatever services there is in the market and whatever changes comes with the industry.”
The Tashi Group will have to start their mobile services in a year’s time. The company will be given a month to finish the paperwork and pay 25 percent of the bid for the license.
Meanwhile, officials of B-mobile, the sole cellular operator in the country, said that the bid value would have a “severe bearing” on their operations.
“Our license expires next year,” said the general manager of B-mobile, Tashi Tshering. “Where will we bring that kind of money to renew the license?”
The Bhutan InfoComm and Media Authority (BICMA) officials told Kuensel that, while there was nothing they could do to control the bid amount from increasing, since it was an open outcry auction where participating companies would bid to their own capacities, the two cellular operators didn’t have to pay the total amount for the license all at once.
Twenty five percent of the total bid-winning price, BICMA officials reiterated should be paid up front and the rest would be spilled over a span of 15 years.
Tashi Tshering pointed out that their first installment payment worked out to about Nu. 194 million to renew their license next year.
“It would be difficult to pay that amount even with B-mobile?s revenue for the whole year,” Tashi Tshering said adding that either the government had to rescue them or the company had to take loan to stay in the market.
B-mobile, which began operations in 2003, has about 70,000 users of the estimated market in Bhutan of 200,000 users. It has already reached 13 dzongkhags and expects to reach at least the headquarters of all the 20 dzongkhags by mid 2007.
The cellular subscriber base in the country was increasing by 4,000 new users every month and 98 percent of the 70,000 subscribers in the country availed prepaid facilities. The average call duration was 33 seconds according to B-Mobile officials.
Cellular clogging in the urban centres particularly Thimphu city, which has more than 20,000 users, has been frequent in recent months.
By Samten Wangchuk
samme@kuensel.com.bt
2 Comments
Chaitali Sinha (Ms.)
After spending nearly two months in Bhutan – in both rural and urban areas – I can attest to the problem of cellular clogging in urban centres. In my experience 8 times out of 10, one cannot make a voice call from 4:30 PM to 10:00 PM. Sending text messages are marginally more reliable. Initiating mobile services in 2003, it is obvious B-Mobile (Bhutan Telecom) grossly underestimated the uptake of mobiles in the country.
A recent article published in the Bhutan Times (one of two new privately owned newspapers, which began operations in Bhutan within the last 12 months) commented on the issue of cellular competition. As the article has not been posted on the newspapers web site yet (http://bhutansearch.com), I have typed out the contents from the hard copy I bought earlier this week. The online version should be available in the coming weeks.
Cellular competition: who will benefit? – Bhutan Times November 19, 2006
By Kinley Tshering
Thimphu: The conclusion of the open auction for a private mobile operator has fielded a strong rival for Bhutan Telecom. One with pockets deep enough to outbid the competition with a Nu 777 million hammer stopper. As the Tashi Group of Companies and Bhutan Telecom gear up for the battle ahead, what can the consumers expect?
Bhutan Info Comm and Media Authority (BICMA) had opened the mobile market with the objective of improving the quality of cellular services in the country through better choices, prices, packages and services. Is this a reality now given the colossal license fee or will the consumer eventually end up bearing the burden?
Doubts have been expressed in various quarters that either the quality of services will be compromised or the burden will be shifted to the consumers.
Speaking to BT, Wangay Dorji of BICMA said: “We agree that the amount of the license fee is huts, and that the operators would look at their customers as a means to recover the investment, but it would not have any direct impact when it comes to the market. The new operator will come up with a price scheme which is reasonable.”
However, he said that there could be possibilities of customers being targeted to shed the burden of the investment by the two mobile operators. “But as a regulatory body, we will come out with mechanisms so that the customers are not affected and that the operators also recover their investment,” he added.
Matters could probably take a turn if the two competitors engage themselves in a price war in their effort to out do each other. “Definitely there will be a price war but not the threatening kind. This would be good for the customers but not for the industry as a whole. Therefore, they should do cost based pricing which is reasonable and beneficial to all the parties involved,” said Wangay Dorji.
He also said that the quality of the service will increase despite all these speculations, as the private operator will try to bring innovative services and othe rpackages with a cost as attractive as the B-mobile. Likewise, the B-mobile will have ot introduce changes to their present services in order to keep their business running which will boost the overall quality of cellular service in Bhutan. “The present network clooging will be solved and national roaming will be improved,” he said.
Talking to Bhutanese media, Wangchuck Dorji of Tashi group had earlier said that mobile and its operation would be a part of the Bhutanese life and a day to day appliance. He had also added that the bid amount was worth an investment as telecom was a ‘business of the future’. “We will introduce whatever services there are in the market and whatever changes come with the industry.”
In the wake of this event, B-mobile is already feeling the heat. B-mobile will have to pay Nu 194 million as an instalment payment to renew its license next year. “How B-mobile will pay the money will be decided by the government as it is a government-owned corporation,” said a telecom official, adding that they are not really threatened by the newcomer. “We knew a new operator was coming and we have been preparing ourselves for the competition.”
When asked if either of the operators could be at risk of losing out to the other, given the small cellular market in Bhutan and a massive competition at hand, Wangay Dorji said, “Up till now we cannot foresee any such dangers. We will have only two mobile operators for the next 10-15 years. And the new operator has enough room with 200,000 potential subscribers in the country, which will only increase with time. It will be difficult to have a third operator till 2013.”
Tashi group can start work after the acquisition of the license from BICMA, for which Tashi will have to pay 25% of the bidding price to the government along with a project proposal. The 75% of the amount will be paid in equal instalments over the next 15 years.