Grameenphone's Historical IPO in Bangladesh - by Noor-us-Sabbah
The company’s overview Grameenphone is the largest cellular service provider in Bangladesh. The company started its operation in the country on March 26, 1997, which happens to be Bangladesh’s Independence Day. Grameenphone holds the largest cellular network in the country with over 20 million subscribers as of July 1, 2008. Whereas total number of telephone users in Bangladesh is around 30 million. The company owns 10,000 base stations all over the country in more than 5700 locations. The company claims to cover almost 98 percent of Bangladesh’s population with the Grameenphone cellular network. The company provides jobs to thousands of people of this underprivileged South Asian nation. Grameenphone is a joint venture between Telenor and Grameen Telecom Corporation. Telenor is the largest telecom service provider in Norway, and also operates in 12 other countries including Denmark, Austria, Hungary, Russia, Ukraine, Montenegro, Thailand, Malaysia and Pakistan. Telenor holds 68% shareholding in Grameenphone, where as 38% shareholding of the company is held by Grameen Telecom Corporation, which is owned by micro-finance pioneer Grameen Bank (established by 2006 Nobel peace prize winner Muhammad Yunus).
Initial Public Offering (IPO)
The board of Grameenphone approved plans for initial public offering (IPO) of the company’s shares on July 21, 2008 during the board meeting. The company hopes to raise a whooping $300 million through the IPO , which would be the country’s largest IPO ever. Citigroup Global Markets Bangladesh Private Limited has been hired as the issue manager for the deal. Citigroup also serves as Global Coordinator and Lead Underwriter for the IPO. This IPO comprises of two legs. Firstly, half of the funds would be raised by floating shares on the Dhaka and Chittagong bourses, Secondly rest of the equity funds would be collected by selling pre-IPO shares to the public. The company would apply to get listed on the main stock exchanges of the country by the August 1, 2008.
Grameenphone will be a very good addition to the country’s main bourses due to its strong business growth and significance in the business world. It will definitely help the capital markets regain positive momentum and attract more investors. I would like to recommend this stock to the people of Bangladesh, as it would not only enable them to pocket profits, but also give them opportunity to invest in the stock which is at par with international standards.
According to the issue manager Citigroup’s evaluation earlier this year, Grameenphone’s was valued at $3.75. It is going to be the largest Initial Public Offering in the history of Bangladesh so far. In 2007 a privately held bank, Shahjalal Islami Bank managed to raise $13.4 million through IPO, which was the country’s biggest IPO until Grameenphone decided to go public and raise $300 million. Grameenphone expects to raise US$150 million through pre-publich offer of its shares, before the formal IPO. In the next step, the company will conduct the IPO with expected gross proceeds of $150 million. The company will be listed on the Dhaka Stock Exchange and the Chittagong Stock Exchange.
Company’s performance over a decade
The telecommunications sector is one of the most flourishing business sectors of Bangladesh, providing 240,000 jobs in the country. The country’s economy significantly depends on this sector’s growth. Bangladesh is one of the world’s poorest countries, with almost 40 percent of its population earning less than a dollar per day. Grameenphone has emerged as a giant of telecom sector, introducing most up-to-date products and services in the country. There are countless reasons to support the idea of investing one’s fortune in the company. First, Its parent company Telenor is one of the pioneers in developing GSM service in Europe, which makes it far ahead of its Bangladeshi competitors in technological know-how. Second, the company has managed to win over mobile phone subscribers over the years. See the graph 1.
Its tremendous growth rate along with customer retention record makes it a lucrative investment. See graph 2, depicting growth rate of subscription over a decade.
Fourth, the company really pays heed to investing, building and improving its infrastructure. It has so far invested USD 1.6 billion for this purpose. Finally, there is no doubt about the company’s profitability. So Bangladeshi investor must keep their fingers crossed for the biggest IPO in the country’s history.