Analyst: Mohammad Asrarul Haque [email protected] Phone: +880 1753 509329
Grameenphone Limited Valuation Update (21 June,2021) DSE: GP; BLOOMBERG: GRAM:BD Current Market Price: BDT 343.1 Sector: Telecommunication Target Price: BDT 355.0 Upside Potential:3.5% Rating: Accumulate Exp. Dividend Yield: 3.8% Outlook: Neutral
Grameenphone Limited (GP) is the largest telecommunication Industry Telecommunication service provider in Bangladesh. The immediate parent of GP is Market Cap (BDT mn) 463,287.9 Telenor Mobile Communications AS and the ultimate parent is Telenor ASA; both the companies were incorporated in Norway. Paid-up Capital (BDT mn) 13,503.0 Rating Validity December 2021 Key Catalyst 52W High-Low 238.8 - 391.0 Efficiency in managing solid growth in subscriber acquisition, Forward PE 13.0 revenue and net profit with controlled OPEX even in challenging business environment. Forward PB 7.6 Strong brand image and active subscriber base have Current no. of shares (mn) 1,350.3 positioned the company ahead of its rivals. Free float shares (mn) 135.0 GP recently acquired 10.4 MHz new spectrum at a cost of $391.15 million and currently holds a total of 47.4 MHz 2019A 2020A 2021E 2022E spectrum, highest in the industry. Financial Information (BDT mn): Growing contribution from data indicates growth potential. Net Sales 143,656 139,606 140,422 141,558 Contribution of data revenue increased to 24.4% in 2020 EBITDA 90,103 87,090 85,986 87,480 from only 8.1% in 2015. EBIT 66,652 63,440 61,075 63,504 Handsome dividend payout policy (nearly 100% each year). Profit After Tax 34,517 37,187 33,874 35,307 Risk Factor Total Assets 148,734 148,184 147,154 147,585 Total Debt 23,768 21,716 20,476 20,476 Higher OTT platform use and high voice call rates causing decline in voice call services usage and revenue (6.6%YoY Total Equity 38,347 52,108 50,223 51,773 revenue drop in 2020). Retained Earnings 16,988 30,750 28,866 30,416 Growing use of ISP/PSTN broadband internet services may Cash 13,761 2,599 (525) 5,464 negatively affect long term cellular data consumption. Dividend (C/B)% 130% 275% 250% 260% Failure to successfully diversify business in new and Margin: innovative segments may lead to long-term business OPEX to Sales 31.4% 31.3% 33.2% 32.9% downsizing. EBITDA 62.7% 62.4% 61.2% 61.8% Regulatory pressures and ongoing tussles between the Operating Profit 46.4% 45.4% 43.5% 44.9% operator and the regulator reducing the market value of GP. Net Profit 24.0% 26.6% 24.1% 24.9% Any unfavorable outcome of ongoing dispute may lead to Growth (YoY): massive financial burden for the company and can cause Net Sales 8.1% -2.8% 0.6% 0.8% significant value erosion. EBITDA 13.6% -3.3% -1.3% 1.7% Tougher business restrictions from the regulator may emerge anytime on the ground of being an operator with EBIT 17.4% -4.8% -3.7% 4.0% Net Profit 3.5% 7.7% -8.9% 4.2% significant market power (SMP). Total Asset 7.2% -0.4% -0.7% 0.3% Grameenphone experienced remarkable regulatory challenges Profitability: in the history of Bangladesh telecommunication industry over ROA 24.0% 25.0% 22.9% 24.0% the last couple of years that are yet to fully settle. The year 2020 ROE 91.8% 82.2% 66.2% 69.2% started with the continuation of the tussle between GP and BTRC Payout Ratio 50.9% 50.8% 99.7% 99.4% (telecom regulator) concerning BDT125 bn system audit claim. Dividend Yield 4.5% 7.9% 7.0% 7.3% However, GP managed to mitigate the dispute since the second PEG ratio 3.2 1.6 (1.6) 3.2 quarter after deposit of BDT 20.0 billion against the audit dispute, as instructed by the honorable Supreme Court. Besides, Leverage: Debt Ratio 16.0% 14.7% 13.9% 13.9% the regulator also implemented initial SMP restrictions during Debt-Equity 62.0% 41.7% 40.8% 39.5% the year. Int. Coverage 82.8 51.0 -/ - -/ - Meanwhile, GP’s earnings during the year were in line with our Altman Z SCORE 4.1 5.0 5.0 5.1 expectations. As this point of time, we view GP’s stock as fairly Valuation: valued with its current market prices and our estimated intrinsic EPS (BDT) 25.6 27.5 25.1 26.1 value based on our assessment of the operator’s future business NAVPS (BDT) 28.4 38.6 37.2 38.3 potential while keeping in mind significant uncertainties and P/E (x) 11.2 12.6 14.2 13.6 contingencies. P/NAV (x) 10.1 9.0 9.5 9.3 We have updated our valuation model based on recent EV/EBITDA (x) 4.4 5.6 5.8 5.7 disclosures, our assessment of recent company performance EV/Sales (x) 2.8 3.5 3.6 3.5 and expectation of future outlook, macro-economic and industry Price/Sales (x) 2.7 3.4 3.4 3.4 outlook etc. We are assigning ‘Accumulate’ rating on GP stock Price/OCF (x) 6.7 14.0 8.3 8.1 with a December 2021 estimated intrinsic value of BDT 355.0 *SOURCE; COMPANY DISCLOSURES & EBLSL RESEARCH; per share and 130% expected interim dividend. Our intrinsic ** KEY TERMINOLOGIES ARE PRESENTED AT THE END OF THE price can yield a total 7.3% on holding GP stock till December REPORT 2021.
Page 1 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | 21 June 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report.
EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
Statement of Comprehensive Income Revenue Common Size Revenue Common Size (BDT mn) (% of Sales) (BDT mn) (% of Sales) 2019 2020 Growth 2019 2020 Q1,2020 Q1,2021 Growth Q1,2020 Q1,2021 (YoY) (YoY) Revenue 143,656 139,606 -2.8% 100.0% 100.0% 36,169 34,813 -3.7% 100.0% 100.0% Voice Traffic 104,863 97,962 -6.6% 73.0% 70.2% 25,575 24,770 -3.1% 70.7% 71.2% Data 29,830 34,000 14.0% 20.8% 24.4% 8,500 8,200 -3.5% 23.5% 23.6% VAS,SMS,MMS & Others 230 241 5.0% 0.2% 0.2% 63 63 -0.9% 0.2% 0.2% Interconnection 6,624 5,557 -16.1% 4.6% 4.0% 1,578 1,301 -17.5% 4.4% 3.7% Customer equipment 185 131 -29.4% 0.1% 0.1% 32 47 46.3% 0.1% 0.1% Lease revenues 1,538 1,570 2.0% 1.1% 1.1% 384 407 6.1% 1.1% 1.2% Other Revenue 386 145 -62.4% 0.3% 0.1% 37 25 -33.3% 0.1% 0.1% Cost of operation 31,916 32,463 1.7% 22.2% 23.3% 8,056 7,817 -3.0% 22.3% 22.5% Traffic charges 7,254 7,489 3.2% 5.0% 5.4% 1,902 1,889 -0.7% 5.3% 5.4% Cost of material and services 1,212 1,324 9.3% 0.8% 0.9% 283 472 67.1% 0.8% 1.4% Depreciation and amortization 23,451 23,650 0.8% 16.3% 16.9% 5,872 5,456 -7.1% 16.2% 15.7% Operating expenses 45,088 43,704 -3.1% 31.4% 31.3% 11,074 10,798 -2.5% 30.6% 31.0% Salaries and personnel cost 9,438 10,027 6.2% 6.6% 7.2% 2,333 2,430 4.2% 6.5% 7.0% Operation and maintenance 5,899 4,985 -15.5% 4.1% 3.6% 1,423 1,377 -3.2% 3.9% 4.0% Sales, marketing and commissions 13,480 11,771 -12.7% 9.4% 8.4% 3,229 3,076 -4.7% 8.9% 8.8% Revenue sharing & others 10,107 10,478 3.7% 7.0% 7.5% 2,586 2,435 -5.9% 7.2% 7.0% Other operating (expenses)/ 6,164 6,442 4.5% 4.3% 4.6% 1,503 1,480 -1.5% 4.2% 4.3% income, net Profit From Operations 66,652 63,440 -4.8% 46.4% 45.4% 17,039 16,198 -4.9% 47.1% 46.5% Net Financial Expenses 2,523 376 -85.1% 1.8% 0.3% 606 534 -11.9% 1.7% 1.5% Profit Before Tax 63,899 62,801 -1.7% 44.5% 45.0% 17,234 15,668 -9.1% 47.7% 45.0% Profit After Tax For The Year 34,517 37,187 7.7% 24.0% 26.6% 10,690 8,906 -16.7% 29.6% 25.6%
Key Financial Statement Data (Amount in BDT mn) Year Year Year Year Year Year Year Year Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenue 91,920 96,624 102,663 104,754 114,862 128,436 132,832 143,656 139,606 EBITDA 48,852 48,538 54,553 55,971 62,564 73,291 79,316 90,103 87,090 NPAT 17,505 14,702 19,976 19,707 22,526 27,423 33,363 34,517 37,187 Total Asset 118,029 135,283 130,981 132,450 130,500 134,391 138,713 148,734 148,184 Current Asset 14,005 16,993 14,865 11,928 10,941 19,799 13,369 20,999 9,931 Non-Current Asset 104,024 118,290 116,116 120,522 119,558 114,592 125,345 127,735 138,253 Cash & Cash 3,709 4,624 4,760 4,153 2,912 12,415 5,932 13,761 2,599 Equivalent Equity 35,458 31,141 31,365 30,625 33,572 34,066 36,836 38,347 52,108 Retained Earnings 11,959 9,781 10,005 9,266 12,213 12,707 15,477 16,988 30,750 Current Liability 63,424 78,643 61,710 67,625 68,507 78,274 82,963 90,426 76,656 Non-Current Liability 19,148 25,500 37,906 34,199 28,420 22,051 18,914 19,961 19,420 Total Liabilities 82,571 104,143 99,616 101,824 96,927 100,325 101,877 110,387 96,077 EPS (BDT) 13.0 10.9 14.8 14.6 16.7 20.3 24.7 25.6 27.5 NAVPS (BDT) 26.3 23.1 23.2 22.7 24.9 25.2 27.3 28.4 38.6
Key Quarterly Financials Q1,2019 Q2,2019 Q3,2019 Q4,2019 Q1,2020 Q2,2020 Q3,2020 Q4, 2020 Q1, 2021 Gross Revenue (BDT mn) 34,862 36,037 36,593 36,164 36,169 33,069 35,559 34,810 34,813 Growth (YoY) 11.4% 10.6% 6.7% 4.4% 3.7% -8.2% -2.8% -3.7% -3.7% Voice Revenue (BDT mn) 25,833 26,679 26,353 25,997 25,575 22,745 24,991 24,650 24,770 Growth (YoY) 13.0% 12.2% 3.7% 2.2% -1.0% -14.7% -5.2% -5.2% -3.1% % of Sales 74.1% 74.0% 72.0% 71.9% 70.7% 68.8% 70.3% 70.8% 71.2% Data Revenue (BDT mn) 6900 7200 7800 7930 8500 8400 8700 8400 8200 Growth (YoY) 19.0% 18.0% 18.2% 13.3% 23.2% 16.7% 11.5% 5.9% -3.5% % of Sales 19.8% 20.0% 21.3% 21.9% 23.5% 25.4% 24.5% 24.1% 23.6% EBITDA (BDT mn) 21,289 22,902 23,530 22,382 22,911 20,044 22,429 21,705 21,653 Growth (YoY) 18.0% 16.8% 12.5% 7.8% 7.6% -12.5% -4.7% -3.0% -5.5% EBITDA margin 61.1% 63.6% 64.3% 61.9% 63.3% 60.6% 63.1% 62.4% 62.2% Net profit (BDT mn) 8,772 9,552 7,269 8,924 10,690 7,266 8,899 10,333 8,906 Growth (YoY) 36.1% -8.1% -13.8% 10.3% 21.9% -23.9% 22.4% 15.8% -16.7% Net profit margin 25.2% 26.5% 19.9% 24.7% 29.6% 22.0% 25.0% 29.7% 25.6% EPS (BDT) 6.5 7.1 5.4 6.6 7.9 5.4 6.6 7.65 6.6
Page 2 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
SYNOPSIS
Grameenphone Ltd. leads the telecommunication sector in Bangladesh with 46.5% subscriber market share. It has been leading the industry in almost every aspects such as subscription, revenue, cost leadership, profitability and innovation. The service portfolio of the operator mainly concentrated on voice and data segment only with almost 95% of total revenue contribution. The journey of Grameenphone as a telecom brand in Bangladesh started on 26th March 1997 with an aim to empower the rural population of Bangladesh with network connectivity. It was the first telecom operator to launce pre-paid services in the country and the first telecom company to become listed with the capital market and has been maintaining highest market capitalization in DSE since its listing. Currently, Telenor Mobile Communications AS, Norway owns 55.8% ownership while Grameen Telecom, Bangladesh holds 34.2% ownership of the company. The company grew at a rate of 5.9% over the last 5 years while its bottom-line also witnessed 13.5% CAGR during the same period. GP’s unique ability to control operating costs with higher efficiency led to significant improvement in profit margins that ultimately resulted into noticeable improvement in net profit margins. OPEX to sales reduced to 31.3% in 2020 against 36.4% in 2015 and CAGR in net revenue during the same period was 13.5%. Efficiency in management of operating cost has been acting as the key catalyst for sound improvement in bottom-line over the years. Though ARPU experienced downtrend, stability in APPM and robust data consumption growth contributing towards improvement in EBITDA margin (53.4% in 2015 to 62.4% in 2020). GP’s unstoppable business growth is mostly supported by seasoned management expertise, brand loyalty, innovation in product and service offerings and growing reliance on technological solution in designing business strategy. The company’s growing contribution from data indicates steady growth potential in near future. Contribution of data revenue increased to 24.4% in 2020 from only 8.1% in 2015 with 32% CAGR in data revenue against 5.9% CAGR in total revenue. Data revenue growth in 2020 was driven by only 8% YoY growth in average data revenue per user per month (data ARPU) as a result of 52% data volume growth and 50% growth in Average Data usage per user per Months (AMBPU) despite 28% reduction in data prices (APPMB). Besides, accelerated drive on the expansion of 4G network capacity, along with the continued focus on 4G conversion also contributing towards higher data consumption. However, with higher use of over the top (OTT) calls in an environment of high voice call charges, revenue from voice calls may continue to decline, however, higher data revenue will partially offset the losses. GP recently acquired 10.4 MHz new spectrum at a cost of $391.15 million and currently holds a total of 47.4 MHz spectrum. GP is currently in a better position to offer better services with its highest spectrum holding in the industry and has recently converted all of its BTS (Base Transceiver Station) in to 4G. Dispute on system audit claims by BTRC remains a concern but after initial deposit of BDT20.0 bn, the company’s relation with regulator and government has improved. Meanwhile, GP has been declared as an operator with Significant Market Power (SMP) and as per the SMP act, the regulator may time to time impose some business restrictions to restrict the operator from grabbing more market share. As the local telecom industry is heading towards its maturity stage, with its conventional service offerings, GP is not also an exception. GP’s historical growth engine with steady operating performance is being challenged by slow-down in average minutes of usages by consumers and lower revenue per user per months triggered by higher OTT platform dependency and significant decline in data prices. At present scenario, ignoring the regulatory tussles & pandemic impact, GP’s growth in next few years will be mostly driven by growth in data usage (AMBPU). However, as data price (APPMB) likely to decline further, data revenue growth will slow down. Currently, the country’s total internet penetration rate is 59.5% and internet penetration rate of GP is only 24%. So, we think that there is still room for growth in data subscription as well along with increase in average data consumption per user for the next few years. However, global telecom industry is taking a shift towards innovative product offerings, IOT and cloud based services, video streaming etc. if the company fails to diversify its business landscape with the changing trend in the industry, its future growth potential will become restricted. Meanwhile, the global pandemic, COVID-19 and its spread in Bangladesh and resultant country-wide shut-down/ lock-down also hampered the operational performance of the company and likely to affect the performance in 2021 as well due to persisting virus spread and future uncertainty.
Page 3 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
Table of Contents
CONTENTS SYNOPSIS...... 3 1.0 Investment Thesis ...... 5 1.1 Valuation/ Determination of Intrinsic Value ...... 5 1.2 Discounted Cash Flow Valuation: ...... 6 1.3 Relative Valuation ...... 8 1.4 Peer Comparison ...... 9 2.0 Business Description ...... 13 2.1 Product & Services Offering ...... 13 3.0 Industry Review ...... 14 3.1 The Industry in Focus ...... 14 3.2 Market Competition Scenario ...... 15 3.3 Cellular Data Market Highlights ...... 17 3.4 Regulatory Landscape ...... 18 3.4 Recent Developments in the Industry ...... 18 3.5 Industry Outlook and Possible Future Developments ...... 19 4.0 Corporate Profile ...... 21 Shareholding Pattern ...... 21 5.0 Assessment of Corporate Governance ...... 22 6.0 Core strengths, Challenges & Business Outlook of Grameenphone ...... 23 7.0 Telecom Regulatory Environment for Grameenphone ...... 25 8.0 Analysis on Financial Performance ...... 27 9.0 Analysis on the Recent Financial and Operational Performance ...... 31 9.1 Latest Q1,2021 Performance Review ...... 31 Key Terminologies ...... 34 Formulas Used ...... 34 Statement of Comprehensive Income...... 35 Statement of Financial Position ...... 36
Page 4 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
1.0 INVESTMENT THESIS
1.1 Valuation/ Determination of Intrinsic Value
Fairly valued with moderate upside based on both DCF and Relative Valuation Matrices At the current market price of BDT 343.1 per share, GP’s shares have a P/E multiple of 13.0 for its Q1, 2021 annualized earnings as on 21 June 2021. Taking into consideration of a number of valuation multiples/ methods, intrinsic value for GP stands at BDT 355.0 per share, based on our estimate. Grameenphone Ltd. appears to be fairly-valued at current market price based on absolute valuation based on projected cash flows and dividends and relative valuation methodologies calculated over 2012 to 2020 audited financial results and historical valuation multiples. Determination of Fair Value Per Share Valuation Methods Estimated Value Weights Absolute Stock Valuation: Terminal Cash Flow Method 339.2 Terminal EV/EBITDA Method 321.0 50% Dividend Discount Model 317.3 Residual Income Model 308.3 Average 321.5 Relative Valuation Hist. Price to net revenue 347.3 Hist. Price to cash flows 356.5 Hist. Price to earnings 427.2 50% Hist. Price to book value 414.9 Hist. EV/EBIT 392.1 Hist. EV/EBITDA 395.2 Average 388.9 Estimated Intrinsic Value 355.2
Current Price 343.1 Target Price 355.0 Expected Capital Gain 3.5% Target Holding Period December 2021 Expected Dividend Yield 3.8% Total Six Month's Return 7.3%
Page 5 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
1.2 Discounted Cash Flow Valuation:
We have updated our DCF based valuation of Grameenphone Limited by forecasting Free Cash Flows up to 2030. To derive the intrinsic value, we estimated terminal value at the end of 2030 using- 1. Constant Growth Cash flow Method 2. EV/ EBITDA Exit Multiple Method Our DCF analysis with a discount rate of 11.14% & terminal growth rate of 3.5% and terminal EV/ EBITDA multiple of 6.5(x) gives us Enterprise Value of BDT 470.1 billion using the constant FCFF growth model and BDT 445.5 billion using Exit Multiple Method. The DCF based fair value using Constant Growth Cash Flow method stands at BDT 339.2 per share for the company and BDT 321.0 per share using Exit Multiple Method considering 1,350.3 million number of shares outstanding. (Figures in BDT million) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 DCF Valuation Based on Terminal Cash Flows Profit for the Year 33,874 35,307 36,691 37,410 37,113 37,966 38,171 37,650 37,054 36,646 Add: After Tax Interest Expenses 1,244 1,207 1,056 930 847 736 587 472 399 130 Add: Depreciation & Amortization 24,910 23,977 22,938 22,013 21,239 19,544 18,027 16,800 15,835 15,081 Less: Investment in NWC -1,383 1,216 18 429 1,040 557 942 1,271 1,159 1,035 Less: Capital Expenditures 26,809 17,553 17,553 17,553 17,553 12,000 12,000 12,000 12,000 12,000 Free Cash Flow to the Firm 34,603 41,721 43,114 42,371 40,605 45,689 43,843 41,651 40,129 38,822 Terminal value of FCF 525,872 Discount Factor 1.0000 0.8998 0.8096 0.7284 0.6554 0.5897 0.5306 0.4774 0.4296 0.3865 Present Value Adjusted Free 266,855 Cash flow to the Firm PV of Terminal value of FCF 203,245 Enterprise Value 470,100 Plus: Cash & cash equivalent 7,530 Less: Interest Debt 19,577 Equity Value 458,053 No. of Share Outstanding 1,350 Value per Share (BDT) 339.2
DCF Valuation Based on using Exit Multiple Method Terminal Value with assumed EV/ EBITDA 513,752 Free Cash Flow to the Firm 34,603 41,721 43,114 42,371 40,605 45,689 43,843 41,651 40,129 38,822 Discount Factor 1.0000 0.8997 0.8095 0.7284 0.6553 0.5896 0.5305 0.4773 0.4294 0.3864 Present Value of Explicit FCFF 266,855 Present Value of Terminal Value 178,657 Total Enterprise Value 445,512 Less: Debt 19,577 Add: Cash 7,530 Equity Value 433,465 Value per Share (BDT) 321.0
Residual Income Model (Figures in BDT million) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Equity Charge 5,516 5,686 5,712 5,668 5,592 5,609 5,649 5,631 5,549 5,495 Residual Income 28,358 29,621 30,979 31,742 31,522 32,357 32,522 32,018 31,505 31,151 Terminal value of Residual 421,969 Income Beginning Book Value of Equity 52,107 Present Value of Residual 201,066 Income Present Value of Terminal 163,088 Residual Income Equity Value 416,120 Value Per Share 308.3
Page 6 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
Dividend Discount Model (Figures in BDT million) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Projected EPS 25.1 26.1 27.2 27.7 27.5 28.1 28.3 27.9 27.4 27.1 Projected Payout Ratio 99.7% 99.4% 99.4% 101.1% 101.9% 99.6% 99.1% 100.4% 100.2% 99.5% Dividend per share (DPS) 25.0 26.0 27.0 28.0 28.0 28.0 28.0 28.0 27.5 27.0 Terminal value of DPS 365.7 Dividend Growth Rate 78.6% 4.0% 3.8% 3.7% 0.0% 0.0% 0.0% 0.0% -1.8% -1.8% Present Value of projected DPS 176.0 PV of terminal value of DPS 141.2 Price per share 317.2
Weighted Average Cost of Capital and Terminal Growth Rate: We also ran a sensitivity analysis to check the effect of changes to our WACC and terminal growth assumptions. We have checked the sensitivity analysis of DCF value per share on various discount rates and terminal growth rates and terminal EV/EBITDA multiple.
Sensitivity Analysis- Constant Growth Model Discount Rates 10.0% 10.5% 11.0% 11.2% 11.5% 12.0% 12.5% 13.0% 3.00% 375.9 353.8 334.3 327.2 317.1 301.8 288.1 275.6
h 3.25% 383.0 359.7 339.4 331.9 321.4 305.5 291.2 278.4 3.50% 390.7 366.1 344.7 337.0 326.0 309.4 294.6 281.3 3.75% 398.9 372.9 350.5 342.3 330.8 313.5 298.2 284.4
Growt 4.00% 407.9 380.3 356.6 348.0 336.0 317.9 301.9 287.7 Terminal FCF Terminal 4.50% 428.2 396.9 370.3 360.8 347.5 327.6 310.2 294.7
Sensitivity Analysis-Exit Multiple Method 10.0% 10.5% 11.0% 11.2% 11.5% 12.0% 12.5% 13.0%
4.00 286.8 279.3 272.1 269.3 265.2 258.6 252.2 246.0 6.00 331.9 322.4 313.3 309.8 304.6 296.2 288.2 280.5 6.50 343.2 333.2 323.6 319.9 314.5 305.7 297.2 289.1 7.00 354.5 344.0 333.9 330.0 324.3 315.1 306.2 297.8
Terminal Terminal
EV/EBITDA 8.00 377.1 365.6 354.6 350.3 344.0 333.9 324.3 315.0 9.00 399.6 387.1 375.2 370.5 363.7 352.8 342.3 332.3
BTRC Audit Dispute: Our valuation of Grameenphone Ltd. based on DCF using Terminal Cash Flows model stands at BDT 339.0 per share. GP’s BDT 125.8 bn dispute have significant potential impact on the valuation. Of the amount, BDT 84.94 Bn (Principle 22.99 Bn + Interest 61.94 Bn) was claimed by BTRC and BDT 40.86 Bn was claimed on behalf of NBR. Meanwhile, GP has already deposited BDT 20.0 billion to BTRC as per the court order. So, there will be no further impact on cash flows from GP for the said amount, even though GP classified the amount as a current asset item (even if GP needs to report the cost as an expenses in its income statement in future period, the amount can be added back as a non-cash expenses for FCF calculation). However, if the final verdict goes in favor of GP, positive impact on GP’s cash flow is expected. Following impact on stock prices may happen if GP has to pay either full or partial payment on the audit dispute (after deducting BDT 20.0 billion already paid amount). Fair valuation of GP Remaining % of Payment Outlay 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% On total amount 105.8 bn 339.2 331.4 323.6 315.7 307.9 300.0 292.2 284.4 276.5 268.7 260.9 On BTRC part (principal+ int) 64.9 bn 339.2 334.4 329.6 324.8 320.0 315.2 310.4 305.6 300.7 295.9 291.1 On principal+ NBR portion 43.9 bn 339.2 336.0 332.7 329.5 326.2 323.0 319.7 316.5 313.2 310.0 306.7 On principal amount only 3.0 bn 339.2 339.0 338.8 338.6 338.3 338.1 337.9 337.7 337.5 337.2 337.0 If GP wins the battle -20.0bn 354.0
Page 7 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
1.3 Relative Valuation We tried to compare the performance of Grameenphone Limited based on its historical earnings multiple.
Earnings Based Valuation Comparable (Time Series Analysis): (In BDT million*) 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR 8 Years A. Total assets 118,029 135,283 130,981 132,450 130,500 134,391 138,713 148,734 148,184 Asset growth 14.60% -3.20% 1.10% -1.50% 3.00% 3.20% 7.20% -0.40% 2.90% B. Net revenue 91,920 96,624 102,663 104,754 114,862 128,436 132,832 143,656 139,606 Net revenue growth 5.10% 6.30% 2.00% 9.60% 11.80% 3.40% 8.10% -2.80% 5.40% C. EBITDA 48,852 48,538 54,553 55,971 62,564 73,291 79,316 90,103 87,090 EBITDA growth -0.60% 12.40% 2.60% 11.80% 17.10% 8.20% 13.60% -3.30% 7.50% D. EBIT 33,675 33,199 36,896 36,964 41,566 49,954 56,777 66,652 63,440 EBIT growth -1.40% 11.10% 0.20% 12.50% 20.20% 13.70% 17.40% -4.80% 8.20% E. Net profit after tax 17,505 14,702 19,976 19,707 22,526 27,423 33,363 34,517 37,187 NPAT Growth -16.00% 35.90% -1.30% 14.30% 21.70% 21.70% 3.50% 7.70% 9.90% F. Net cash flow from 29,936 37,081 31,255 38,791 46,152 57,783 60,413 57,393 33,572 operating activities Cash flow growth 23.90% -15.70% 24.10% 19.00% 25.20% 4.60% -5.00% -41.50% 1.40%
G. Book value of equity 35,458 31,141 31,365 30,625 33,572 34,066 36,836 38,347 52,108 H. Enterprise value (EV) 245,952 291,406 517,343 371,620 407,458 642,456 503,395 395,923 487,806 I. No of shares outstanding 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 J. Price per share 175 200.9 361.9 253 284.1 470.8 367.3 285.8 347.1
Valuation Ratios: Median Price to net revenue 2.6 2.8 4.8 3.3 3.3 4.9 3.7 2.7 3.4 3.3 Price to cash flows 7.9 7.3 15.6 8.8 8.3 11.0 8.2 6.7 14.0 8.3 Price- earnings 13.5 18.5 24.5 17.3 17.0 23.2 14.9 11.2 12.6 17.0 Price- book value 6.7 8.7 15.6 11.2 11.4 18.7 13.5 10.1 9.0 11.2 EV/ EBIT 7.3 8.8 14.0 10.1 9.8 12.9 8.9 5.9 7.7 8.9 EV/ EBITDA 5.0 6.0 9.5 6.6 6.5 8.8 6.3 4.4 5.6 6.3 * All values are in BDT million except no of shares, growth rates & valuation multiples
Earnings & Book Value Based Valuation: A. Historical Average Multiples(x) B. Exp. Values 2021 (BDT mn) C. Per share D. Price Per Share values (A x C) Price to net revenue 3.3 Net revenue 140,422 104.0 347.3 Price to cash flows 8.3 Cash Flows 57,905 42.9 356.5 Price to earnings 17.0 NPAT 33,874 25.1 427.2 Price to book value 11.2 Book Value 50,223 37.2 414.9 Average Value Per Share 386.5
Valuation based on Enterprise Value of the company Based on historical Enterprise Value multiple EV/EBIT EV/ EBITDA Target Multiple 8.9 6.3 Bases (EBIT or EBITDA)- Est. 2021 61,075 85,986 Enterprise Value 541,506 545,724 Plus: Cash & cash equivalent 7,530 7,530 Less: Interest Debt 19,577 19,577 Equity Value 529,459 533,677 Value Per Share 392.1 395.2 Average Value per share 393.7
Page 8 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
1.4 Peer Comparison Robi Axiata Limited (Robi) has recently been enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange on 24 December, 2020. Key financial comparisons between the two companies are provided below.
ROBI Grameenphone Comparison Key Fundamentals (As on 21 Jun 2021) Market Cap (BDT mn) 230,993 463,288 2.0x Enterprise Value (EV) (BDT mn) 279,914 482,405 1.7x Stocks Price (BDT) 44.1 343.1 7.8x Number of Shares Outstanding (mn) 5,238 1,350 0.3x Annualized EPS (BDT) 0.28 26.38 94.2x Last Audited EPS (BDT) 0.33 27.54 83.5x Latest NAVPS (BDT) 12.7 45.19 3.6x Year 2020 Year 2020 Balance Sheet Items (BDT mn) ROBI Grameenphone Comparison Total Assets 199,465 148,184 0.7x Current Assets 19,537 9,931 0.5x Non-current Assets 179,928 138,253 0.8x Total Equity 65,956 52,108 0.8x Paid Up Capital 52,379 13,503 0.3x Retained Earnings 6,914 30,750 4.4x Cash & Cash Equivalent 9,833 2,599 0.3x Total Debt (Excl. Lease) 24,337 1,240 0.1x Total Lease 34,417 20,476 0.6x Current Liabilities 73,800 76,656 1.0x Non-current Liabilities 59,708 19,420 0.3x Income Statement Items (BDT mn) ROBI Grameenphone Comparison Revenue 75,643 139,606 1.8x Cost of Operation 47,358 32,463 0.7x Operating Cost 17,758 43,704 2.5x EBITDA 31,917 87,090 2.7x Operating Profit 10,526 63,440 6.0x Finance Expenses 4,889 376 0.1x Profit before tax 5,509 62,801 11.4x Provision for tax 3,955 25,614 6.5x Net Profit 1,553 37,187 23.9x Ratios ROBI Grameenphone ROA 0.8% 25.0% ROE 2.4% 82.2% Debt-Equity 89.1% 41.7% Debt-Assets 29.5% 14.7% EBITDA Margin 42.2% 62.4% NPAT Margins 2.1% 26.6%
Pricing Based on Relative Valuation: Particulars of GP Benchmark Multiple Exp. Value per share(BDT) Peer Forward P/E An. EPS 2021: 26.38 156.43 4,127.1 Peer Forward P/NAVPS Latest NAPVPS: 45.19 3.46 156.3 Peer EV/EBIT EBIT: 63,440 mn 26.77 1,248.8 Peer EV/EBITDA EBITDA: 87,090 mn 8.72 553.5 Peer Price to Sales Sales per share:103.39 3.03 313.6 Peer Price to Cash Flow Cash Flow per share:24.86 9.01 224.1 Based on the above comparison, with most of the popular valuation methods, it appears that Grameenphone Limited is currently undervalued compared to the valuation of Robi Axiata Ltd. However, in terms of the absolute valuation methodologies and relative valuation of Grameenphone based on its own historical multiples, we found that Grameenphone Limited is currently fairly priced with limited upside potential.
Page 9 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
1.2 Key Valuation Assumptions/ Inputs
Our long term business Based on prevailing industry perspective and our own assessment & expectation of forecast of Grameenphone is company performance, we have initiated some changes to our earlier projections. based on the continuation of However, future projection is subject to enormous regulatory unpredictability. We existing service portfolio of the tried to make the best possible forecast of GP’s financials based on available operator. However, if the historical data, present industry insights and our own market observation. operator can successfully position itself in any new Revenue: Grameenphone Ltd. achieved moderate 5.9% CAGR in its topline during business segment with notable the preceding five years (2015 to 2020). The growth in the recent period was mainly revenue contribution, we will driven by increased contribution of data revenue. Even though Voice remained the revise our projections and valuation accordingly. core component of GP’s revenue pie, its contribution is on the decline. Contribution from data revenue in 2020 stood at 24.4% against 20.8% in 2019. Historical Projected Particulars 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Voice ARPU 129.8 125.8 126.1 127.0 124.5 111.0 104.0 96.2 88.4 80.6 72.8 67.6 62.4 57.2 52.0 46.8 AMPU 244 258 256 234 217 210 200 185 170 155 140 130 120 110 100 90 APPM (Inc. Interconnect) 0.53 0.49 0.49 0.54 0.57 0.53 0.52 0.52 0.52 0.52 0.52 0.52 0.52 0.52 0.52 0.52 APPM (Voice Only) 0.46 0.44 0.45 0.50 0.54 0.50 0.49 0.49 0.49 0.49 0.49 0.49 0.49 0.49 0.49 0.49 Data ARPU+ 53 60 63 62 64 69 73 74 71 67 63 59 56 53 52 51 AMBPU 284 488 651 1059 1653 2472 3461 4499 5399 6209 6985 7683 8452 9297 10226 11249 APPGB 192.4 125.3 99.2 60.2 39.7 28.7 21.5 16.8 13.4 11.0 9.2 7.9 6.8 5.9 5.2 4.6 Blended ARPU 155 162 167 157 157 150 143 139 135 129 122 116 110 103 96 90 Blended APPM 0.64 0.63 0.65 0.67 0.72 0.71 0.72 0.75 0.79 0.83 0.87 0.90 0.92 0.93 0.96 1.00 Total BD Population (mn) 158.9 160.8 162.7 164.6 166.5 168.4 170.4 172.3 174.3 176.3 178.3 180.4 182.4 184.5 186.7 188.8 Total GP Subscriber (mn) 56.7 58.0 65.3 72.7 76.5 79.0 82.2 85.5 88.9 92.5 96.2 100.0 104.0 108.2 112.5 117.0 Industry Sub. Penetration 84.2% 78.6% 89.2% 95.4% 99.4% 101.0% 103.0% 105.0% 107.5% 110.0% 112.5% 115.0% 117.5% 120.0% 122.5% 125.0% Growth in GP Subscriber 10.0% 2.2% 12.7% 11.3% 5.1% 3.4% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% GP Market Penetration 35.7% 36.0% 40.2% 44.2% 45.9% 46.9% 48.3% 49.6% 51.0% 52.4% 53.9% 55.4% 57.0% 58.6% 60.3% 62.0% GP Market Share 42.4% 45.9% 45.0% 46.3% 46.2% 46.5% 46.8% 47.2% 47.5% 47.7% 47.9% 48.2% 48.5% 48.8% 49.2% 49.6% Mobile data Users (mn) 15.7 24.5 31.2 37.1 40.6 41.3 45.2 51.3 62.2 69.3 76.9 85.0 88.4 91.9 95.6 99.4 Net Addition (Data Subs. mn) 4.9 8.8 6.7 5.9 3.5 0.7 3.9 6.1 10.9 7.1 7.6 8.1 3.4 3.5 3.7 3.8 Growth in Data Subscription 45.4% 56.1% 27.3% 18.8% 9.5% 1.8% 9.5% 13.5% 21.3% 11.4% 10.9% 10.5% 4.0% 4.0% 4.0% 4.0% Data Volume (Total) Growth 227.7% 168.1% 69.9% 93.2% 70.9% 52.2% 53.3% 47.5% 45.6% 28.1% 24.8% 21.6% 14.4% 14.4% 14.4% 14.4% Data subscriber as % of Total Users 27.7% 42.3% 47.8% 51.0% 53.1% 52.3% 55.0% 60.0% 70.0% 75.0% 80.0% 85.0% 85.0% 85.0% 85.0% 85.0% GP Data market penetration 9.9% 15.2% 19.2% 22.5% 24.4% 24.5% 26.5% 29.8% 35.7% 39.3% 43.1% 47.1% 48.5% 49.8% 51.2% 52.7% Data Sources: Grameenphone Ltd, The World Factbook, CIA and EBLSL Own Estimate. *Historical data as reported by the operator. The key variables for voice revenue forecast are projected subscriber base and average voice revenue per user (ARPU). The subscriber base forecast is further dependent on projected population of the country and expected industry subscriber penetration and expectation of GP’s market share within the industry. Meanwhile, projected average voice revenue per user (ARPU) also depends on expected average minutes of usage per subscriber (AMPU) and average price per minutes of voice calls (APPM). Likewise, our projection of future data revenue is also dependent on a number of variables including data market penetration, average data price (APPMB), data volume consumption (AMBPU) etc. We have used following function to forecast the revenue of GP during our forecasted horizon: ̅ ( ̅ ) ̅̅̅ ( ̅ ) 0 푅1 = 푆푣 ∗ 푀 ∗ 푃푚 + 푆퐷 ∗ 푀퐵 ∗ 푃푚푏 + 푅푂 ∗ (1 + 푔푅표) Where,
푅1 = 푁푒푥푡 푝푒푟푖표푑 푝푟표푗푒푐푡푒푑 푟푒푣푒푛푢푒 푆̅푣 = 퐴푣푒푟푎푔푒 푛푢푚푏푒푟 표푓 푣표푖푐푒 푠푢푏푠푐푟푖푝푡푖표푛 푀 = 퐴푣푒푟푎푔푒 푚푖푛푢푡푒푠 표푓 푢푠푎푔푒 푃̅푚 = 퐴푣푒푟푎푔푒 푝푟푖푐푒 푝푒푟 푚푖푛푢푡푒푠 푀 ∗ 푃̅푚 = 퐴푣푒푟푎푔푒 푣표푖푐푒 푟푒푣푒푛푢푒 푝푒푟 푢푠푒푟, 푖푛푐푙푢푑푖푛푔 푖푛푡푒푟푐표푛푛푒푐푡푖표푛 (퐴푅푃푈) 푆̅̅퐷̅ = 퐴푣푒푟푎푔푒 푛푢푚푏푒푟 표푓 푑푎푡푎 푠푢푏푠푐푟푖푝푡푖표푛 푀퐵 = 퐴푣푒푟푎푔푒 푀푒푔푎퐵푦푡푒 표푓 푢푠푎푔푒 푃̅푚푏 = 퐴푣푒푟푎푔푒 푝푟푖푐푒 푝푒푟 푀푒푔푎퐵푦푡푒 푀 ∗ 푃̅푚 = 퐴푣푒푟푎푔푒 푑푎푡푎 푟푒푣푒푛푢푒 푝푒푟 푢푠푒푟 (퐴푅푃푈) 0 푅푂 = 푙푎푠푡 푝푒푟푖표푑 푟푒푣푒푛푢푒 푓푟표푚 표푡ℎ푒푟 푠표푢푟푐푒푠 (퐶푢푠푡표푚푒푟 푒푞푢푖푝푚푒푛푡, 푉퐴푆, 푆푀푆, 푀푀푆 & 표푡ℎ푒푟푠)
푔푅표 = 퐺푟표푤푡ℎ 푟푎푡푒 표푓 푟푒푣푒푛푢푒 푓푟표푚 표푡ℎ푒푟 푠표푢푟푐푒푠
Page 10 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
Voice AMPU experienced steady decline over the past years and declined to 210 minutes per user per month in 2020 from 258 minutes of usage in 2016. We expect the usage of voice calls will continue to decline in future along with higher OTT (Over the top) service adoption. The downside of average voice call price per minute is protected by the regulation (minimum floor prices in the industry) and that may increase further for GP, if regulator imposes price specific SMP instructions in future. Average Data Consumption Per User (AMBPU) Growth Average Data Price (APPMB) Growth
Growth in AMBPU Linear (Growth in AMBPU) Growth in APPMB Linear (Growth in APPMB )
140.0% 125.4%
0.0%
11.0%
12.0%
-
13.0%
-
14.0%
-
120.0% 15.0%
-
16.0%
- -
-10.0% 18.0%
-
20.0%
20.8%
-
22.0%
-
- 25.0%
100.0%
- 27.7%
-20.0%
-
31.2%
-
34.1%
71.8%
34.9% -
80.0% -
-30.0%
39.3%
62.7%
-
56.1% 49.5% 60.0%
-40.0%
40.0% 40.0%
33.4%
57.2% 30.0% -50.0%
40.0% -
20.0%
15.0% 12.5%
-60.0%
10.0% 10.0% 10.0% 10.0% 10.0% 20.0%
-70.0%
0.0%
2015 2016 2017 2018 2019 2020
-20.0% 2014
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
2014 2015 2016 2017 2018 2019 2020
2022E 2029E 2023E 2024E 2025E 2026E 2027E 2028E 2030E 2021E Source: EBLSL Research & Estimates We expect that revenue from voice traffic will be declining while data revenue will be growing. However, data revenue will be growing at a decreasing rate as the period of faster data penetration is almost over and with continued price reduction and faster ISP/PSTN broadband penetration, mobile data consumption will become less attractive in the long run. Furthermore, even though data consumption is forecasted to grow steadily, in line with industry competition and regulatory pressure, data prices will experience a declining trend in future, hurting the data revenue of the operator. Despite, the forecasted decline in voice revenue, it will remain as a key revenue contributor to the company’s earnings.
Revenue Contribution of Grameenphone Ltd. Historical Projected Particulars 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Voice Traffic 70.3% 67.3% 65.9% 73.4% 73.0% 70.2% 68.1% 65.0% 61.6% 58.5% 56.0% 54.3% 52.8% 51.6% 49.8% 47.5% Data 8.1% 12.5% 16.4% 19.2% 20.8% 24.4% 26.9% 30.1% 33.7% 36.9% 39.5% 41.2% 42.4% 43.3% 44.7% 46.6% VAS,SMS,MMS & Others 7.3% 7.6% 7.3% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% Interconnection 10.2% 8.0% 6.7% 5.8% 4.6% 4.0% 3.6% 3.4% 3.2% 3.0% 2.9% 2.9% 3.0% 3.1% 3.1% 3.2% Customer equipment 2.0% 2.4% 1.9% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% Lease revenues 0.0% 0.0% 0.0% 1.2% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.2% 1.2% 1.2% 1.3% Other revenue 2.2% 2.1% 1.7% 0.2% 0.3% 0.1% 0.1% 0.1% 0.1% 0.2% 0.2% 0.3% 0.4% 0.5% 0.8% 1.2%
Operating performance: Controlled cost of operation and operating expenditures policy has resulted into increased operating profit margin. Higher revenue and operating efficiency contributing towards healthy EBITDA. GP has always focused GP has most effective cost control in controlling its OPEX with efficient control measures, which resulted into growth mechanism in the industry in EBITDA as well as increased EBITDA margin over the years. EBITDA margin increased from 50.2% in 2013 to 62.4% in 2020. Analyzing the recent financials and observing the market scenario, we can expect that GP will continue to optimize its operating performance in line with revenue generation.
Following significant assumptions were applied to our projection of GP’s future financial performance. GP also shares 5.5% of its revenue as ‘revenue sharing’ and 1.0% of its revenue as ‘contribution to social obligation fund’ with BTRC as per licensing conditions. Licensing conditions also require the operator to pay annual fees and spectrum charges.
Page 11 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
Cost Item Sources of Cost Historical Rates Forecast 2016 2017 2018 2019 2020 2021 to 2030 Traffic charges %of revenue from voice 6.62% 6.00% 5.75% 6.51% 7.23% 6.50% traffic & interconnection Cost of material and services % of revenue from 35.42% 33.54% 59.99% 51.80% 63.45% 61.00% material and traffic charges Salaries and personnel cost % of net sales 7.21% 6.87% 6.45% 6.57% 7.18% 7.20% Operation and maintenance % of net sales 3.27% 3.12% 4.20% 4.11% 3.57% 4.00% Sales, marketing and commissions % of net sales 10.88% 8.76% 10.60% 9.38% 8.43% 9.50% Revenue sharing, spectrum charges, % of net sales 7.75% 7.64% 7.21% 7.04% 7.51% 7.50% licence fees, & Contribution to Social Obligation Fund Other operating income (expenses), % of net sales 7.14% 8.50% 6.32% 4.29% 4.61% 5.00% net
Dividend history and projections: Like most other MNC’s, GP has a good track record of handsome cash dividend disbursements in the form of both interim and final payment. We expect that GP will continue to follow the same payout policy, unless there arises any unforeseeable needs for retaining income. Historical Dividend Payout 2012 2013 2014 2015 2016 2017 2018 2019 2020 Interim 90% 90% 95% 80% 85% 105% 125% 90% 130% Final 50% 50% 65% 60% 90% 100% 155% 40% 145% Total 140% 140% 160% 140% 175% 205% 280% 130% 275% DPS 14.0 14.0 16.0 14.0 17.5 20.5 28.0 13.0 27.5 EPS 13.0 10.9 14.8 14.6 16.7 20.3 24.7 25.6 27.5 Payout Ratio 108.0% 128.6% 108.2% 95.9% 104.9% 100.9% 113.3% 50.9% 99.9% Source: GP Annual Reports and EBLSL Research
Forecasted Dividend Payout 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Interim 130% 130% 140% 150% 150% 150% 150% 150% 150% 150% Final 120% 130% 130% 130% 130% 130% 130% 130% 125% 120% Total 250% 260% 270% 280% 280% 280% 280% 280% 275% 270% DPS 25.0 26.0 27.0 28.0 28.0 28.0 28.0 28.0 27.5 27.0 EPS 25.1 26.1 27.2 27.7 27.5 28.1 28.3 27.9 27.4 27.1 Payout Ratio 99.7% 99.4% 99.4% 101.1% 101.9% 99.6% 99.1% 100.4% 100.2% 99.5% Source: EBLSL Research Estimates
Potential Litigation Risk: Grameenphone experienced significant disruption in its operation in last couple of years caused by the regulatory tussles with BTRC, notably BTRC Audit dispute for BDT125.8 Bn yet remain unresolved for BDT125.8 Bn information system audit claim from the operator. Of the amount, BDT 84.94 Bn (Principle 22.99 Bn + Interest 61.94 Bn) was claimed by BTRC and BDT 40.86 Bn was claimed on behalf of NBR. In 2011, BTRC conducted its first audit on Grameenphone Ltd. but the operator then disputed the audit process. Again another fresh audit was conducted in 2015 for the period of 1997 to 2014 but GP continued to deny the claim by questioning the validity and process of the audit. Meanwhile, NOC’s for various services were also halted by the regulator to pile up pressure on the operator that has hampered the operating activities of the company significantly during the year 2019 and early 2020. The government was also preparing to appoint administrator at Grameenphone Ltd. However, as per the order of the Appellate Division of Supreme the court, GP has deposited BDT 20 billion to BTRC in first half of 2020. After the said deposit, GP’s relation with the regulator eased and several restrictions were withdrawn. The matter is now under the jurisdiction of the Court. Significant uncertainty still prevails there regarding the final settlement of the dispute. Any unfavorable verdict may cause large one time cash outlay from the operator’s book.
Page 12 of 36 This research report is a property of EBL Securities Ltd. | Bangladesh Equities | June 21, 2021 N.B.: Disclaimer of the EBL Securities Ltd, the author(s) certification and rating definition have been provided at the end of the report. EQUITY RESEARCH Grameenphone Ltd. (DSE: GP; BLOOMBERG: GRAM:BD)
2.0 BUSINESS DESCRIPTION Grameenphone Ltd. operates a digital mobile telecommunications network based on the GSM standard in the 900 MHz, 1800 MHz and 2100 Mhz frequency bands, under the license granted by the Bangladesh Telecommunication Regulatory Commission (BTRC). The company was awarded with license of 4G/LTE cellular mobile phone services on 19 February 2018. Over the last decade, Grameenphone has added 13,443 users per day on average. GP provides all kinds of telecommunication related services In addition to existing 37 MHz spectrum, GP has acquired fresh 10.4 MHz spectrum available in the country with its largest network coverage in March 2021 at a combined cost of $378.75 million plus 15% VAT. Total spectrum holding of the company as on date stands at 47.4 MHz. Mobile spectrum licenses held by Grameenphone Ltd. Spectrum Bandwidth (MHz) Expiry 900 MHz 2×7.4 2026 2×7.2 + 2×7.4 2026 1800 MHz 2x5 2033 2x0.4 2036 2×10 2028 2100 MHz 2x 10 2036
Grameenphone LTD: Key Statistics No of Subscribers 80.75 mn* Pre-paid user % of total 98.0% Mobile data Users 41.7 mn* 4G Subscriber 21.5 mn # of 4G sites 15,590 Geographic Coverage 96.3% Population Coverage 99.6% 4G Population Coverage 95.8% Smartphone Users having GP connection 28.4 mn *As on March 2021; in April No of Subscribers declined to 80.50 mn
2.1 Product & Services Offering
Until now 70% of the company’s revenue are generated for voice traffic service. Voice traffic is the main service offering of the company with 98% of the pre- Data service revenue is continuously increasing its share of pie while contribution paid user base. from voice traffic service is declining due to robust growth in data revenue. Grameenphone is continuously diversifying its product offerings to retain its growing momentum in the digital marketplace. The operator has been focusing on simplification of its voice call offerings and in line with this, several of the Voice Call packages has been discontinued over the years. GP’s 98% of subscribers are prepaid package subscribers. Currently, in pre-paid segments only 4 packages are available. Grameenphone Pre-paid Packages Nishchinto Bondhu Djuice Smile (Attractive Flat Rate for All) (Highest F&F Numbers) (Exclusive Community Rate) Call Rate: 24 poisha/ 10 Call Rate: 27.5 poisha/10 Call Rate: 26 poisha/ 10 Call Rate: 28 poisha/ 10 second second second second FNF: N/A FNF: 1 Super FnF (7.5 FNF: 10 FnF (12 poisha/ 10 FNF: 3 FnF (12 paisa/10 SMS: 50 poisha / SMS poisha/10 second) & 17 second) & 5 Super FnF (7.5 second) and 25 Poisha/ Bangla SMS FnF (12 poisha/10 second) poisha/ 10 second) SMS: 50 poisha / SMS Pulse: 10 second SMS: 50 poisha / SMS and SMS: 50 poisha/SMS and 25 Poisha/ Bangla 25 Poisha/ Bangla SMS and 25 Poisha/ Bangla SMS SMS Pulse: 10 second Pulse: 10 second Pulse: 10 second Source: Grameenphone website & EBLSL Research; As on 09 May 2021.
Along with those voice packages, Grameenphone offers customer with more simplified & user-friendly services through customized bundle packs and flexi plans (where customers can make their chosen voice and data bundle with chosen duration of validity). GP has multiple data offerings ranging from 1 day to 30 days
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of validity and very small to large volume packs. Data price has been reduced Key Product/Service Portfolio over time in line with the market competition. Despite the reduction in data prices, the company has been able to achieve robust data service revenue growth due to large addition to data subscriber base and increased data usage Data, per subscriber. 24.4% Besides voice traffic and data service offerings, the operator has also diversified its businesses in different VAS, GP online shop for selling mobile Voice Interconnection, communication devices to end customers, financial services like GPAY and Trafic, 4.0% 70.2% MobiCash along with several IoT & cloud based services including MyGP, Other WowBox and GP Music etc. app based digital services. Innovation in these Revenue, 1.5% digital services has the potential to reshape the business model of the operator in future even though nothing such services could have visible impact on the
Source: Company disclosure financials of the operator yet.
3.0 INDUSTRY REVIEW Two major telecom service offerings in Bangladesh are “Voice Calls” and “Internet Data” services. Revenue from voice calls still dominate the industry while Revenue from voice calls dominate the contribution from data revenue is growing exponentially since the launching of 3G industry in Bangladesh. Meanwhile, introduction of 4G in 2018 has further uplifted the data service revenue even though the country is yet to reap the full potential of 4G. However, voice revenue is expected to remain key revenue drivers over the next few years despite the declining trend over the last few years against increased data usage growth and increasing trend in OTT (Over the Top) usage. Bangladesh Telecom Industry Subscriptions (In Mn) The surge in Covid-19 pandemic in Bangladesh since the early 250.0 2020 has increased the adoption of digital lifestyle and working 225.0 culture has also become more digitalized and relevant 200.0 regulatory barriers have been removed. Mobile telephone 175.0 services has become a key players in today’s economic 150.0 activities and other essential services. However, COVID-19 has 125.0 triggered deepest recession globally since the last year and 100.0 ultimate outcome is yet unknown. The pandemic is expected 75.0 to trigger major contraction across countries and also could 50.0 have lasting impact on the productivity and potential output. 25.0 Likewise, the economy of Bangladesh also comprise of large -
number of daily wage earners and salaried persons, who lost
2016 2017 2018 2019 2020
2015 their jobs all on a sudden. While the economic recovery from
2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2021F the slowdown will depend on multitude of factors, most of the Source: BTRC data and EBLSL Projections; F=EBLSL forecast. Asian countries including Bangladesh has shown faster recovery than expected.
3.1 The Industry in Focus: . Favorable macro-economic dynamics helping the industry growth: The growing MAC population, large number of young age population, increased Bangladesh Age Distribution Structure urbanization, and consistent GDP growth, digitalization of public and private services along with increased access to data connectivity are 45.00% 40.72% 40.00% the key growth drivers for the industry. Young and middle-aged people 35.00% 26.48% 30.00% are the major users of mobile communication devices and around 60% 25.00% 18.56% of the entire country belongs to these two groups. The country has a 20.00% 15.00% 7.41% 6.82% large population base with steadily increasing disposable income along 10.00%
5.00% with comparatively low penetration of internet connectivity. The 0.00% country is now undergoing a transformation period towards getting 0-14 years: 15-24 25-54 55-64 >65 years: more digital that will have a major contribution from years: years: years: telecommunication industry and the industry is also expected to enjoy Source: CIA (US Central Intelligence Agency) World Fact Book 2020 est. sound growth along with this transformation journey.
. A multi-SIM market with growing subscriber base: The telecom sector is Bangladesh is expected to witness modest growth in terms of subscriber acquisition as unique subscriber penetration is lower and favorable macro- economic dynamics are expected to make positive contribution towards
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increased digitalization and higher adoption of telecom services. With current smartphone penetration of 38.76% of mobile users and 59.76% real SIM penetration in the country population, there remains significant room for growth.
. The ‘Digital Bangladesh’ vision has accelerated the industry growth: The Digital Bangladesh Journey is gaining momentum with the increased collaboration between government and the telecom industry. The government of Bangladesh, through its 7th five year plan had reinforced its goals and objectives for digital Bangladesh with adoption of IT practices and tools on a wider scale to enable economic, cultural and social development and particular attention has also been given to greater adoption of e-Governance and e- Services solutions. The government is working towards digitalizing 90% of its services by 2021 and currently serving more than 60 million people through 6790 digital centers, setting up 39 IT parks and has already digitalized 600 public services and currently in the process of digitalizing 2800 more public services.
3.2 Market Competition Scenario
. Due to increased competitiveness among few players, the industry has Telecom Industry Market Share witnessed some major events in the past few years: With two mobile phone operators having been merged and another shutting down, a six-player GP Robi Banglalink Teletalk market has turned out to be a four-player one. Robi (Axiata) got merged with 3% Airtel (Bharti Airtel) to attain operational efficiency in 2016, which made them 21% the second largest operator by number of connections. Meanwhile, Citycell, the country’s first telco left the battle after a long period of struggle to survive in 46% the industry. BTRC has suspended its operating license due to nonpayment of dues in Q4, 2016. Banglalink, another leading operator in the industry has been operating with steady growth in the number of subscribers but its market share 30% is continually on the wane. Teletalk, the only state-owned operator, failed to attract users despite having significant government support in various issues. The only operator that has been continually outperforming the industry in terms Top three players hold 97% of the of both subscriber acquisition as well as profitability is ‘Grameenphone’, a market share with leading position seized by GP concern of Norway based ‘Telenor’.
. Highly competitive market with major focus on value driven growth strategy: The competitive landscape in the local telecom industry can be identified based on price and value offerings. An estimated 70% of consumers puts high value on the quality, coverage, service, security, differentiation and Telecom Market Positioning: Brand Perceptions innovation while rest 30% of the consumers looks for mostly low price. Among the local market players, leading operator Grameenphone has successfully positioned itself as a premium brand with best network coverage and higher price. Meanwhile, Robi has been strategically executing dual brand (Robi & Airtel) proposition targeting specific user segments and value proposition for each segment. VEON’s subsidiary Banglalink has positioned itself in low price and low network coverage segment for Value for Money user base. State-owned telecom brand Teletalk operates with poor network coverage and mostly offers services at significantly lower prices. The operators are also implementing their service upgradation in line with respective user segmentation. For example, while Robi pursued to gain 4G leadership in the market after launch of 4G in the local market, actual service quality was compromised. GP expanded 4G coverage on a slow and steady basis
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with optimal utilization of their 2G and 3G networks based on geographical preferences and brought whole country under 4G coverage and achieved 4G leadership by 2021. GP always strived to maintain better quality data speed and uninterrupted service in their respective bandwidths.
Competitive Landscape Operator Name Brand Name Major Shareholders Market Share Technology Grameenphone Ltd. Grameenphone Telenor Norway, Grameen 46.5% GSM Telecom Trust Robi Axiata Ltd. Robi/ Airtel Axiata Group Berhad 29.9% GSM Banglalink Digital Communications Banglalink Veon Group Netherlands 20.7% GSM Limited Teletalk Bangladesh Ltd. Teletalk Govt. of Bangladesh 2.9% GSM Source: BRTC & EBL Securities Ltd. Research
. Grameenphone dominates the oligopoly market: The telecommunication sector in Bangladesh is oligopolistic in nature where only few operators serving the market while nearly half of the industry subscribers belong to only a single operator. GP dominates the telecom industry with 46.5% of the total market share in terms of active mobile user as on March 2021. Banglalink was in the second leading position before the merger of Robi with Airtel. However, 8.2 million subscribers from Airtel have been added to Robi’s subscriber base through this merger and that uplifted the operator (Robi) into the second- leading position.
PORTER'S FIVE FORCES
Potential New Entry Very Low potential of new entry due to huge capital investment requirement, saturated industry, restricted entry into the industry by the regulator Buyer Power Easy to switch between operators, Multi SIM market, MNP facility etc enables high bargain power of buyers in the Supplier Power industry. Buyers can go for the best Allocation of Spectrum Frequency is prices bundles and network availability. controlled by the government and power of the government as supplier Substitutes is very high IP telephony services, OTT platforms are the cheapest available substitutes for voice and messaging Competitive Rivalry services. Increased penetration of ISP/PSTN broadband services and Intense completion among the WIFI connectivity are the low cost existing players in terms of price, alternatives with unlimited volume. market campaigns, bundle offers, subscriber acquisition etc.
Source: EBL Securities ltd. Research
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. High market competition posits downward pressure on Porter's five forces analysis ARPU: ARPU in telecom sector has been witnessing a downward trend owing to increased price competition mainly in terms of data service Competition in revenue. Even though prices of voice traffic services are protected from the industry market competition with the introduction of floor price system in the 5 4 industry, data usage getting momentum in the country and Threat of 3 Potential of new correspondingly voice services experiencing down-trend in terms of 2 substitute entrants into the volume of usage. products 1 industry 0 . More pricing power generated by Robi-Airtel merger: Even though Robi has become the second-largest market player in the industry Power of Power of customers suppliers with highest spectrum holding, it could not pose any significant threat to GP. Rather, the threat of a price war by Airtel has eroded due to reduced Nil=0; Very Low=1; Low=2; Moderate=3; High=4; Very High=5 market competition and GP has successfully capitalized the opportunity with increase in the prices of its voice calls.
3.3 Cellular Data Market Highlights
. Market for mobile internet is enjoying hefty growth driven by subscriber addition and increased penetration: Bangladesh has advanced significantly in terms of internet connectivity. Last 5 years CAGR in total number of internet subscribers in Bangladesh was 13.4% and that of mobile internet was 12.6%. Contribution of data revenue to total revenue of the country’s leading mobile operator GP increased to 24.4% as on 2020 compared to meagre 3.4% in the year 2013, reflecting the overall industry scenario. The total number of Internet Subscribers has reached 116.14 million at the end of March 2021. Of the total connections, 91.6% are through the mobile network snd 8.4% through the internet service providers (ISP & PSTN). Even though Contribution of data revenue to total revenue WiMAX services were getting popularity in the past, since the launching of 3G, of the mobile operators growing gradually WiMAX service providers were experiencing de-growth in subscription and has lost the market completely in mid-2020. Qubee, Banglalion Communications and Ollo had been providing WiMAX connection in Bangladesh. As of March 2021, there are around 106.33 million mobile internet connections in Bangladesh i.e., 60.9% of mobile users are now using internet with cellular phones. The country’s data penetration is still far below than other countries in the region. Mobile data subscription penetration in Bangladesh is around 62.5%, however, estimated unique data user penetration (headcount) is still at around 35-40%. This significant deviation between mobile data connection penetration and mobile data user penetration is due to having multiple number of connections by the same users. Industry Mobile Data Subscription Trend Bangladesh Mobile Internet Penetration
Mobile Data User (mn) Mobile Internet Panetration % of Industry sub. base 110.0 65.0% Linear (Mobile Internet Panetration) 100.0 60.0% 90.0 55.0% 70.0% 60.8% 50.0% 56.3% 60.0% 52.0% 80.0 45.0% 70.0 46.1% 40.0% 50.0% 39.0% 60.0 35.0% 40.0% 32.4% 50.0 30.0% 26.9% 40.0 25.0% 30.0% 22.1% 20.0% 30.0 20.0% 15.0% 20.0 10.0% 10.0% 0.0% 10.0 5.0% - 0.0% 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020 Source: BTRC & EBLSL Research
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. Increased broadband penetration to challenge cellular data growth: Last 5 years CAGR in ISP+PSTN connections were 25.0% against 12.6% CAGR Broadband internet (ISP/PSTN) is in mobile internet subscription. This clearly indicates that even though gaining popularity in Bangladesh contribution of broadband internet is still insignificant, it is getting momentum in Bangladesh. Currently 91.6% of the total internet connection is supported by mobile internet while rest of the connections are provided by ISP+PSTN operators.
3.4 Regulatory Landscape
. The sector experiences rigid regulatory environment and high taxation: The telecom industry is highly regulated and highly taxed sector in Bangladesh. Publicly traded/ listed corporations are imposed with a 40% income tax while unlisted telecom operators are exposed to a 45% income tax, a much higher rate compared to any other industry. Besides, 5.5% of the revenue sharing will remain unchanged up to 2032 as per the decision taken in a telecom operators’ meeting with Prime Minister’s ICT Affairs Adviser in 2017. VAT, TAX and other Regulatory Charges for Telecom Industry Besides, the Companies under Gross Revenue Sharing 5.5% of annual audited gross revenue telecom sector undergo very strict Social Obligation Fund 1% of annual audited gross revenue and unpredictable regulatory SD on sale of new and replacement SIM 35% environment which put its earnings Supplementary duty (SD) 15% into vulnerable position. Several VAT inclusive of SD 5% on Mobile Internet unresolved and long pending 15% on Voice & other telecom services regulatory issues remained a key Surcharge 1% concern for the company. The Income Tax 40% (For publicly traded companies) operators have various unresolved 45% (For non-listed companies) issues with Bangladesh SIM Tax BDT 200 each Telecommunication Regulatory Source: EBLSL Research Commission (BTRC) and National Board of Revenue (NBR) in the ground of illegal broadband internet services, audit, tax on replacement SIM, VAT rebate etc. which is currently on trial of court.
. The telecom service prices are controlled by the regulator: For regular Approved voice call charge ceiling & voice calls, there is currently a BDT 2 ceiling and a floor price of BDT 0.25 for limit is BDT0.25 to BDT2.0 per minute each minute, which the regulator fixed in 2008 after a cost modelling analysis supported by the International Telecommunication Union (ITU). After a few years, the BTRC set the ceiling at BDT 0.50 for each local SMS and BDT 2 for international SMS. There is no lower price limit in this segment. At present, the data service prices are set by the operators, with the regulator having no benchmark to check the rationality of the pricing.
3.4 Recent Developments in the Industry . Robi, the second leading mobile operator of the country, became listed in the capital market: The long-waited debut of the country’s second leading mobile operator, Robi Axiata has finally taken place in December 2020. The operator offloaded 10% of the shares (including ESPP) to raise about BDT5,237.9 million for network expansion at face value of BDT 10.0 each (at par). Of the total 523.8 million IPO shares, 387.8 million has been offered to Robi offloaded 10% of its shares in the the public and institutional investors in Bangladesh, while the remaining 136.1 stock market in December 2020. million was set aside for employees and directors of Robi under the employee share purchase plan (ESPP). The operator formally launched its operation in Bangladesh with the brand name of Aktel in 1997 as Telekom Malaysia International (Bangladesh). After acquisition of its share by Axiata Group Berhad, a Malaysian telecommunications conglomerate, it was rebranded as Robi and changed its name to Robi Axiata Limited. Later got merged with Airtel Bangladesh, the merged company, in November 2016.
Fresh development in regulatory landscape might bring changes in existing business operations of telecom operators: The government of Bangladesh and telecom regulatory body, BTRC is working to bring various new regulatory developments.
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3.5 Industry Outlook and Possible Future Developments
Bangladesh remains one of the attractive markets for telecom industry with enormous potential as cellular network is the primary means of voice and data connectivity for the people of the country. With the progressive support from the government for digitalization of services the sector is expected to witness better days ahead. Meanwhile, with the governments incentive in locally assembling of mobile phone will make smartphones more affordable and penetration of mobile internet is also expected to grow in line with higher smartphone adoption over the The future of the telecom sector in next few years. However, the future of the telecom sector in Bangladesh will depend Bangladesh will depend on successful on successful implementation of emerging new digital services, convergence of implementation of emerging new digital services and technology. technologies/IoT, entertainment & video streaming platforms and increased digital financial inclusion etc. Rigid and uncertain regulatory environment remains a key concern for the operators as strict regulation, high taxation and several pending disputes between mobile operators, BTRC (the regulator) and NBR are yet to be resolved. Fresh development in regulatory landscape might bring changes in existing business operations of telecom operators. The government of Bangladesh and telecom regulatory body, BTRC is working to bring various new regulatory developments.
. Teledensity is expected to go up further: According to GSMA Intelligence, the number of unique mobile subscribers is projected to reach to 107 million with 60% real penetration rate by 2025 from prevailing 100 million penetration. Besides total SIM connection is expected to be 190 million with 102% penetration rate by 2025 from prevailing 174.63million (as on March 2021). Meanwhile, unique mobile internet subscription is also expected to grow at a CAGR of 10% and will reach 73 million by 2025 with 41% penetration rate from The industry steel has 40% space for around 65 million presently1. Over the next decade, increasing consumers’ growth, in terms of unique mobile affordability, falling prices of smartphones, technology advancement users (4G/LTE/5G) and wider network coverage etc. are key factors that will drive the growth. Considering the 60% unique mobile phone penetration in the country, the telecom sector has another 40% room to grow.
. Increased data consumtion, driven by 5G, will result in heafty revenue from data: Introduction of 4G in early 2018 helping to amplify data service growth as service quality has increased and resulted in additional data subscribers across the country. Data consumption will uplift further with the introduction of 5G in local telecom industry.
. Telecom operators are eying towards operating cost optimization to retain profit growth as the industry heading towards its mature stage: Given the intensifying market competition and ever increasing regulatory barriers, transformation of the company from traditional telco to a digital one and simplification of the cost structure has become an ever more vital issue. It With saturated industry scenario, has become apparent over the years that in today’s highly competitive industry short-term profitability will come from cost leadership strategy landscape, survival of a telco depends highly on having an efficient cost structure.
With a view to reducing operating cost, Voluntary Separation Scheme (VSS), also known as Voluntary Retirement Scheme (VRS), has become a common practice in the industry that was first floated by Banglalink that was even followed by the market leader. Grameenphone reduced the number of its permanent employees to one fifth under voluntary retirement schemes (VRS) over the last few years. With a view to reducing cost in a competitive business context, Robi Axiata has also moved to cut jobs by offering voluntary separation scheme (VSS) for its employees for the first time in 2019. Along with VRS/VSS, operators are eyeing towards other point of cost cutting and increasing efficiency by using sophisticated technology and digitalization.
1 EBL Securities ltd. own estimate
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. Further regulatory intervention can be expected to improve the industry competitiveness: Looking forward, the potential for further merger/ consolidation in the industry cannot be overlooked if present state of industry competitiveness prevails, even though the regulator will attempt to protect competition in the industry. Top three players are in a battle to acquire new subscribers with aggressive marketing strategy. The government has already Frequent regulatory intervention is introduced Significant Market Power (SMP) regulation to protect the industry expected to prevail from becoming monopolistic by any single operator. BTRC already declared Grameenphone as an SMP operator in terms of its revenue and market share and imposed some restrictions on its operations. GP’s competitors are lobbying to the regulator for more stringent restrictions on the market leader to protect themselves from the competition. Implementation of unified floor pricing and MNP service were also made in an attempt to hold GP’s unstoppable business growth and market share acquisition but nothing such could have noticeable impact on GP’s operating performance. Enforcement of SMP regulation may bring GP under more3 tighter regulatory supervision in the future.
. Revenue from voice traffic might witness declining trend due to increased over-the-top (OTT) service as a result of data user growth: Globally, telecom companies have started facing competition from non- traditional players such as over-the-top (OTT) service providers. The pace of technological advancements and the magnitude of user benefits derived from Industry outlook for voice call business is shaky OTT services will make them the default choice of customers. Voice ARPU may decline in the long run due to increased OTT (Over-The-Top) calls and price competition in the industry but data ARPU is expected to grow further in the years to come due to increased data consumption and new data subscriber addition.
The telecom sector has been experiencing a rapid change around the world. The average revenue per user (ARPU), a long-standing metric for measuring financial performance, has been steadily declining over the last decade. Worldwide, telecom companies are now experiencing big challenge of shifting their focus to non-voice Industry ARPU will continue to decline services to continue growing. As the industry is maturing while industry experiencing tremendous competition, especially in the area of voice call segment, MNOs (Mobile Network Operators) are eying towards redesigning their business models by introducing more customer friendly products as well as trying to reap the benefit of country’s digital growth by offering cloud based services and business diversification. However, in the near future, growth will be driven by data and the internet services, customer analytics services and new technology-led capabilities.
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4.0 CORPORATE PROFILE Grameenphone Ltd., a successful venture by Telenor Group, is the market leader in local telecom industry Grameenphone Ltd. (GP) is the leading telecommunication service provider in Bangladesh that provides voice, data and other related services diverse set of subscribers. The company also provides international roaming services through Grameenphone is the all-rounder market leader in Bangladesh telecom international roaming agreements with various operators of different countries industry across the world. GP is the first operator to introduce prepaid connectivity in Bangladesh. GP is a public limited company incorporated in Bangladesh in 1996 and commenced commercial operation in 1997. The immediate parent of GP is Telenor Mobile Communications AS and the ultimate parent is Telenor ASA; both companies were incorporated in Norway. Key Personnel: Jørgen C. Arentz Rostrup (Chairman), Yasir Azman (CEO) and Karl Jens Becker (CFO).
Shareholding Pattern
GP offloaded 10% of its shares in the capital market by listing with DSE and CSE in 2009. GP is a a joint venture enterprise between Telenor and Grameen Telecom, where 55.8% of the shares of the company are held by Telenor Mobile Communications AS and 34.2% of the shares are held by Grameen Telecom. Remaining 10% shares of the operator are held by various institutional and foreign investors as well as general public. The detailed shareholding position as on date has been presented in Appendix-I at the end of this report. Sponsor/Director Govt. Institute Foreign Public As on May 31, 2021 90.00% 0.00% 4.66% 3.16% 2.18% As on Apr 30, 2021 90.00% 0.00% 4.66% 3.18% 2.16% As on Mar 31, 2021 90.00% 0.00% 4.62% 3.22% 2.16% As on Feb 28, 2021 90.00% 0.00% 4.55% 3.32% 2.13% As on Dec 31, 2020 90.00% 0.00% 4.49% 3.38% 2.13% As on Dec 31, 2018 90.00% 0.00% 4.02% 3.92% 2.06% As on Dec 31, 2018 90.00% 0.00% 4.23% 3.64% 2.13% As on Dec 31, 2017 90.00% 0.00% 4.55% 3.42% 2.03% As on Jun 31, 2017 90.00% 0.00% 4.82% 3.14% 2.04% As on Dec 31,2016 90.00% 0.00% 5.19% 2.40% 2.41% Source: DSE Website, Company Annual Report and EBLSL Research
Sponsor’s profile Telenor Mobile Communications AS (TMC): TMC is an indirectly wholly- owned subsidiary of Telenor ASA. Telenor ASA is the leading Telecommunications Company of Norway listed on the Oslo Stock Exchange. In addition to Norway and Bangladesh, Telenor owns mobile telephony companies in Sweden, Denmark, Finland, Thailand, Malaysia, Pakistan and Myanmar. Telenor has 187 million consolidated mobile subscriptions worldwide as of March 31, 2021.
Grameen Telecom (GTC): Grameen Telecom is a not-for-profit company in Bangladesh established by Professor Muhammad Yunus, winner of the Nobel Peace Prize in 2006.
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5.0 ASSESSMENT OF CORPORATE GOVERNANCE Grameenphone Limited has sound corporate governance practices among the listed companies in Bangladesh Capital Market
Grameenphone has one of the best corporate governance practices in place and maintains good relations with all of its stakeholders including shareholders, subscribers and employees. The operator possess experienced management team guided by board of directors having diversified background and backed by Telenor’s global operational experience. Overall the quality of financial reporting appears to be transparent & fair enough. The company has the policy towards developing its human resources by providing adequate training and enabling the key management to gain global experiences by working in different parts of the Telenor’s global operation. In conjunction with its global experiences and local expertise, its management team can choose the right strategic direction in right time in such a highly regulated and competitive local market. The company’s strategic leadership has been proven by successfully handling various challenges like BTRC audit claims and SMP regulations. The overall corporate governance practices of the company can be summarized as;
Seasoned professionals in board consist of diversified professional background. Have 3 independent directors along with seven non-executive directors and two female directors in the board, meeting the standard governance criteria Regular attendance in the board meetings and other committee meetings by the board members. None of the independent directors possess any shares of the company as on date. Non-executive directors do not take part in any day-to-day business operation of the company. Policy to recruit highly talented graduates and proving high quality training both at home and abroad so that they can serve the company in line with the company’s strategic vision and achieve organizational goal. Have reasonable and necessary disclosure of material facts and figures in its annual reports as well as quarterly disclosure. Has the best investor’s relation practice in the Bangladesh capital market and key management personnel regularly holds earnings calls, press conferences along with AGM to talk with analysts, journalist and investors. GP is the trendsetter in offering superior investor relation services and pioneer in introducing earnings calls and press conference for each quarterly earnings disclosures. Have sound internal audit, control and risk management policy Possess unique ability to differentiate service offerings to meet diverse consumers’ needs and successfully achieved superior brand loyalty and positioned itself as a premium brand in the local telecom industry. Regularly disburses handsome cash dividend from its earnings to the shareholders
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6.0 CORE STRENGTHS, CHALLENGES & BUSINESS OUTLOOK OF GRAMEENPHONE
SWOT ANALYSIS OF GRAMEENPHONE LTD. 1
STRENGTHS WEAKNESSES • Market leader in local telecom • Occasional unfriendly relation with industry W the government and the regulator • Backed by the Telenor, Norway S • High tax burden on the industry • Largest network coverage • Slow growth in voice traffic • Strong Brand Loyalty
THREATS
• Aggressive market competition in OPPORTUNITIES advertising and marketing O • Increasing data market penetration campaigns to retain growth momentum • Unsettled disputes with regulators • Opportunity to offer diversified and linked to large financial claims T innovative products and service bundles among its large subscriber • Threats of new SMP related base t expand business and retain restrictions over the operations of market presence. Grameenphone.
COMPANY NAME Source: EBL Securities Ltd.
Grameenphone has been maintaining value driven growth strategy in a highly price competitive market: While the saturated telecom industry has been experiencing high price completion in service bundles and switching telecom operator has become much easier than before due to MNP, Grameenphone has been successfully maintaining its market leadership with value driven growth strategy. GP has been offering differenced bundles & packages such as flexi plan, personalized packages etc.
With comparatively lower industry penetration compared to regional peers, the industry still offers room for subscription growth: GP managed to record steady revenue growth over the years that was driven by an increase in number of subscribers, despite intense market competition among the four telecom service providers operating in the country. The telecom market still offer subscriber growth potential as unique mobile subscription is still around 59.8% and total subscription penetration is also lower compared to other markets. In line with GP increased purchase power and affordability by the population, more subscribers are Holds joining the telecom network. Superior network coverage, service quality strong spectrum holding and 46.5% brand loyalty positioned Grameenphone as a preferred brand in local ̴ telecom industry: Grameenphone has the strongest & widest network coverage of the SIM in the country with 99.6% of the country’s population is under the network coverage market in Bangladesh of the operator. Besides, with better quality and simplified service offerings, consumer friendly packages, superior customer services over the years placed itself a most preferred brand in the industry. While other operators are targeting middle and lower income class consumer segments, GP successfully positioned itself as a premium brand, even though its journey started with an aim to facilitate mainly rural segment. Meanwhile, Grameenphone also started to rollout and strengthen its fibre network for future 5G technology readiness.
Growing market share placed the operator in the leadership position: GP has been maintaining leadership position in the telecom industry of Bangladesh for
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GP Subsrciber and Market Share the last two decades. Currently GP is the largest telecom operator Total Subscriber (mn) having 46.5% market share, in terms of industry subscriber. Along Market Share 50.0% 90.0 with the voice segment, GP is also leading the mobile data market and 45.9% 46.3%46.2%46.5% 80.0 47.5% 45.0% 52.3% of the total subscribers of the operators are currently availing
70.0 45.0% 42.8% 41.4% 42.4% GP’s mobile internet services, as of December 2020. 41.2% 60.0
42.5%
50.0
40.0%
40.0 The market share of the operator experienced declining trend up to
37.5% 30.0 2012 due to increased competition from other operators in the market. 35.0%
20.0
32.5% However, inauguration of 3G enabled the operator to further
10.0
40.0 47.1 51.5 56.7 58.0 65.3 72.7 76.5 75.3
30.0% 0.0 strengthen its position with growing market share. The market share Year Year Year Year Year Year Year Year Year of the operator increased to 46.5% in 2020 from 41.2% in 2012. 2012 2013 2014 2015 2016 2017 2018 2019 2020 However, GP’s market share in last three years remained almost flat as several regulatory constraints and tussles along with COVID-19 pandemic restricted the subscriber acquisition of the company.
Declining voice revenue growth posit challenges for the future potential of the company: Even though almost half of the entire population of the country are yet to get connected with mobile network on the basis of unique mobile phone subscription penetration, the voice traffic segment in Bangladesh has reached almost saturation point driven by a number of forces. Active mobile subscription penetration has reached to 100%+ and almost every person has access to mobile phone services either directly or indirectly. With increased access to internet services along with high cost of telecom voice call services mostly caused by regulator led minimum floor prices for voice calls and growing security concern on privacy issues leading towards increased use of Over the Top (OTT) platforms such as WhatsApp, Messenger, Viber, Telegram etc. It is expected that use of OTT app based call and services will continue to increase and voice calls over cellular network will be declining further in future in line with greater internet access.
Though data revenue bears attractive short term growth potential, long term growth is questionable due to high price competition and slow consumption growth: Data revenue is expected to be one of the major revenue contributor in future driven by the significant increase in higher data consumption Active Data Users and % of (AMBPU) and increased penetration. Since the implementation of 3G in the country, Sub-base use of mobile internet increased significantly. GP’s data users increased from Mobile data Users (mn) meager 4.6 million at the end of 2013 to 41.7 million by the end of March 2021. Data subscriber as % of Total Users Countrywide 3G & 4G network expansion has been driving the high growth in Data
45.0 51.0% 53.1% 52.3% 60.0% Segment in both 3G and 4G. Increased internet penetration, cheaper smartphone
40.0 47.8% 42.3% 50.0% devices and the government’s motive towards digitalization of the country has been 35.0 acting as the key catalyst for huge growth in the data consumption.
30.0 40.0%
25.0 27.7% 30.0% Last 5 Years’ CAGR in revenue from data segment was robust 32% and last 3 Year 20.0 21.0%
15.0 20.0% CAGR of data revenue was 17%, which depicts phenomenal performance in data 9.8% 10.0 service business by the operator. In 2020 revenue from data sales stood at BDT 34
10.0%
5.0
10.8 15.7 24.5 31.2 37.1 40.6 41.3 4.6 billion which is 14% higher than the preceding year. However, we expect that hefty 0.0 0.0% price competition in data segment will prevail and data ARPU will start to experience 2013 2014 2015 2016 2017 2018 2019 2020 negative growth after next few year, and data revenue will experience meagre growth in the long run.
Fresh investment will improve service quality: GP continues to invest in network, technology and capacity to improve its capability, coverage and service quality. In 2020, the company invested BDT 13.8 billion amidst the pandemic to rollout more 4G sites, expand network coverage and enhance capacity to cater higher data and voice volumes as well as enhancement of IT infrastructure for better product and service offerings. The company acquired further 10.4 MHz spectrum in March 2021 with a combined cost of USD 435.5 million (including VAT), of which, 25% has to be paid as down payment and remaining amount will be paid in five equal installments.
Successful innovation and diversification of service offerings are the key to survival in the future: GP is a pioneer in introducing new products and services in the local telecom market. The operator was the first to introduce GSM technology
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in Bangladesh, pre-paid SIMs, mobile to mobile telephony and was the first company to cover 99% of the population. It introduced first 24-hour call center, value-added services such as SMS, fax and data transmission services, international roaming service, SMS-based push-pull services, and personal ring-back-tone. It was the first to launch e-commerce venture in Bangladesh (cell-bazar later rebranded as ekhanei.com as a concern of Telenor). The company is now working on IoT & cloud based services and segments such as entertainment and plans to roll out more digital services. Unfortunately the company could not successfully position itself in most of the non-core business segments and data & voice remain the key revenue drivers of the company.
Grameenphone currently generates 95% of its revenue from voice & data only whereas its closest competitor Robi generates 85% of the revenue from these two sources. Grameenphone has taken initiatives to diversify its business further. It plans to translate from a commodity-based telco to a platform-based digital technology company that will offer exciting opportunities and partnerships in IoT and digital content. Its users can now provision for and enjoy video on demand & communication pack service bundles (i.e. Bioscope, Zee5, Zoom, Google Duo, Teams etc.) on GP data packs as new service bundling capabilities were implemented in 2020. Other digital services such as MyGP 4.0,GPAY, Flexiplan, Retail App, and the Franchisee’s App have been revamped under a new User Interface and design. Grameenphone users can now enjoy voice calls with HD voice quality and reduced (1-2 second) call set up time launched as VoLTE (Voice over LTE) over the 4G network waslaunched in last year. MyGP capacity has been enhanced; POL (payment orchestration layer) has been introduced and launched with Recharge capability from MyGP, bKash etc. SSC result registration and other hotline services for health have also been provided to customers. However, if the company fails to successfully position itself in innovative solutions such as IoT & video streaming businesses, it will not be able to retain business growth in future.
External forces challenging the company’s operation and performance: A number of external forces also creates disruption to the performance of the company. Heavy rains, floods and other natural disaster damages the infrastructure setup of the company and affect the service quality as well. Meanwhile, external regulatory forces also posits some challenges to the operator. For example, In June 2020, as soon as the lockdown was lifted, the entire telecom industry faced a significantly higher number of fibre cuts in 2020 due to the massive construction projects by the government, which caused great challenges maintaining network availability. Challenging economic and unprecedented dysfunctional environment created by the pandemic also brought newer challenges to the operator.
7.0 TELECOM REGULATORY ENVIRONMENT FOR GRAMEENPHONE The regulatory environment for the Grameenphone limited remained challenging in the last few years. The Telecom Regulatory Framework continues to present challenges and the industry has been urging for amendment of Bangladesh Telecommunication Regulatory Act (BTRA) for ensuring predictability and sustainability in the framework. In 2020, the Ministry initiated the consultation process for amendment of BTRA and MNO’s participated and collectively provided their observations under the AMTOB (Association of Mobile Telecom Operators of Bangladesh) banner. Along with several regulations for the telecom watchdog, new challenges also came from the tax authority in last year too. In the 2020-21 national budget, supplementary duty on mobile usage has been increased from 10% to 15% on top of other applicable taxes. Now, 15% Supplementary Duty, 15% VAT inclusive of SD, and 1% Surcharge are applicable on mobile services. Besides, at the beginning of 2020, BTRC and the Ministry kicked of consultations regarding 5G launch in 2021, however, this consultation process shall continue further. At the end of 2020, the industry and the regulator (both Ministry and BTRC) also went for consultation with respect to the fibre network regime were happened as the current NTTN regime is facing a challenge to drive the country’s digitalization
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needs. In early 2021, BTRC conducted fresh auction from allocations of spectrum for all mobile operators after Robi renewed several bands for another 10 years.
Tower & Infrastructure Sharing Tower company operation under the new guideline has already started. Grameenphone is now able to start rolling out new sites under the new Tower Co framework and this will enable the operator to expand 4G coverage at faster speed. As demand for network coverage increased with volume growth potential, the Company teamed up with a TowerCo to start building new sites across the country. The regulator has approved agreement between Grameenphone Ltd. and TowerCos on 18th October 2020. Grameenphone has signed an agreement with one of the TowerCos to roll out new towers under the new regime. Regulation for industry protection: Grameenphone as an operator with Significant Market Power (SMP) SMP regulation is also in effect from 01 July 2020. After 16 months of regulatory declaration as an SMP operator, Bangladesh Telecommunication Regulatory Commission (BTRC) has finally issued three restrictions on Gramenphone ltd. 1. Asymmetric approval process for all campaigns, packages & services: Grameenphone will have to secure prior approval from the BTRC before rolling out any packages or offers. The carrier would not be able to change or amend any of the conditions of approved packages or offers without consent from the commission. 2. Asymmetric MNP lock-in Period: Subscribers can abandon Grameenphone after 60 days instead of existing 90 days of staying with the carrier under the mobile number portability facility. 3. Asymmetric interconnection charge: BDT 0.7 per minutes for GP against BDT 0.10 per minutes for other operators with effect from 16th July 2020. Though we expect that further directives will appear in future with some more stringent restrictions on the operator having distinguished impact, some barriers and impact on the financial performance will be there but we do not expect any significant impact and barriers to be introduced by the regulatory body on the business operation of the operator. However, material impact in Grameenphone’s financial result may result from potential future regulatory directives time to time but no such restrictions and immediate significant financial impact is expected considering present industry landscape. GP’s growth journey will continue in line with the industry but lower promotional activities under the company discretion as per the new restriction will hinder faster customer acquisition, though overall impact is likely to be minimal. Growth will be mostly driven by increased efficiency and normalized industry growth mostly to be supported by the higher data consumption. MNP service in Bangladesh haven’t get popularity yet and we don’t expect a major threat to Grameenphone Ltd. in future. Only a small portion of the subscribers availed the service. A market with multi-sim users in Bangladesh have little intention to switch between operators and high cost of switching operator along with high floor prices in the industry for all operator also kept the subscribers unwilling to avail MNP service. So, impact of reduced lock-in period for staying with GP will not have any material impact on the business of GP.
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8.0 ANALYSIS ON FINANCIAL PERFORMANCE Steady business performance supported by continued subscriber acquisition and rising mobile data market penetration: Grameenphone managed to secure 5.4% CAGR in gross revenue over the last 7 years despite several challenging business circumstances and aggressive market competition. The growth was mostly supported by rising number of loyal subscriber base along with steady increase in voice call prices (average price per minutes of usage).The success came despite decline in service ARPU to BDT 150 in 2020 from and BDT 176 in 2013. Average minutes of usage per subscriber (AMPU) also declined to 210 minutes in 2020 from 249 minutes in 2013. ARPU, AMPU & APPM
0.72 300 0.74 0.71 0.71
0.72
250 0.68 0.67 0.70 200 0.65 0.68 0.64 0.66 150 0.63
0.64
100 0.62
0.60
50
0.58
176 165 155 162 167 157 157 150
217 249 243 244 258 256 234 210
0 0.56 Year 2013 Year 2014 Year 2015 Year 2016 Year 2017 Year 2018 Year 2019 Year 2020
Reported ARPU (BDT) Reported AMPU (Minutes) Reported APPM
Source: Grameenphone Ltd.
In 2020, the business of the company was disrupted due to slowed-down in the country’s overall economic activities as a result of country-wide general holidays along with restriction on public movement for more than two months (April-May), with a view to controlling the spread of pandemic. However, the situation started to depict signs of gradual recovery from the end of May and performance of the company during the second half of the year also resounded the same tune with improved business performance. On a full year basis, total revenue experienced 2.8% de-growth on YoY basis with 6.6% de-growth in voice revenue while 14.0% increase in data revenue. (In BDT million) 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR 8 Years Net revenue 91,920 96,624 102,663 104,754 114,862 128,436 132,832 143,656 139,606 Net revenue growth 5.10% 6.30% 2.00% 9.60% 11.80% 3.40% 8.10% -2.80% 5.40% EBITDA 48,852 48,538 54,553 55,971 62,564 73,291 79,316 90,103 87,090 EBITDA growth -0.60% 12.40% 2.60% 11.80% 17.10% 8.20% 13.60% -3.30% 7.50% EBIT 33,675 33,199 36,896 36,964 41,566 49,954 56,777 66,652 63,440 EBIT growth -1.40% 11.10% 0.20% 12.50% 20.20% 13.70% 17.40% -4.80% 8.20% Net profit after tax 17,505 14,702 19,976 19,707 22,526 27,423 33,363 34,517 37,187 NPAT Growth -16.00% 35.90% -1.30% 14.30% 21.70% 21.70% 3.50% 7.70% 9.90%
GP witnessed de-growth in overall revenue on a year on year basis despite moderate growth in data revenue as the operator is yet to recover fully from the effect of the persisting COVID-19 pandemic and its impact on overall economy. The pandemic led locked-down has also affected the company’s subscriber acquisition to a great extent and as a result, GP witnessed negative net subscriber addition in first half of the year. However, as the economic activities of the country started to recover while the regulator has withdrawn NOC restrictions (imposed to settle the system audit claims by BTRC), GP managed to secure positive net addition in its subscription base in second half of 2020 which has also contributed positively towards the earnings of the company. The voice segment witnessed negative growth in 2015 due to intense price competition and voice bundle offers despite 10% growth in subscription and stable uses per subscription during the year. However, the company successfully revived the situation as it managed to retain its subscriber base and enjoy higher growth in later years. Thanks to the mandatory bio-metric reregistration of SIMs during the year 2016 and price hike of voice tariff. To widen the market share, all the mobile
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operators including GP had to penetrate in the lower ARPU (Average revenue per user) generating segment. ARPU continued to decline over the years as the operator had to make downward price adjustment to support increased market competition. ARPU increased slightly in 2016 compared to that of 2015 as the operator has increased its voice call rates during the year with simplified product offerings. Overall subscriber base of the company at the end of March 2021 stood at 80.75 million with 7.1% increase on YoY basis.
Saturated voice market along with increased OTT usage causing lower contribution from voice segment The country’s voice market has reached almost saturation point as its industry penetration is now almost 103%. Though there still remains some scope for expanding market as unique market penetration is much lower (estimated 100 million unique mobile user penetration) due to multi-sim market nature in Bangladesh, the market for GP is becoming increasingly tougher due to aggressive market competition while there are existing and potential restrictions over GP including restrictions on aggressive market campaigns for subscriber acquisition. During the year 2020, de-growth in GP’s voice revenue was partly offset by double digit growth in data revenue. Besides, even though higher OTT use has been reducing voice calls volume over cellular network significantly, it on the other hand resulting into higher consumption of data.
Growth in Voice Traffic Data Revenue Growth
Growth in Voice Traffic Data revenue growth 20.0% Linear (Growth in Voice Traffic)15.2% Linear (Data revenue growth)
80.0% 69.7% 15.0% 66.0% 9.4% 70.0% 61.1% 7.6% 10.0% 5.1% 60.0% 46.4% 5.0% 1.4% 2.1% 2.2% 50.0%
40.0%
0.0% 30.0% 21.0% 17.0% 17.0% 14.0%
20.0% -5.0% -3.9% -6.6% 10.0% 0.0%
-10.0% 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cooling-down of regulatory tussle helped in maintaining steady business operations The operator has been experiencing long pending tussle with the regulator for a regulatory claim of BDT125.8 billion (including principal & interest) against a system audit conducted by the Bangladesh Telecommunication Regulatory Commission (BTRC). Grameenphone was also barred from rolling out new packages/services, importing network equipment and issuing new number series in Q1,2020 in an attempt to pile up pressure on the operator by the regulatory body to clear unsettled dues of BDT125.8 billion as per audit claims. Suspension of issuance of NOCs impacted network expansion and created challenges for Grameenphone to ensure its network readiness under the COVID-19 context. Meanwhile, Grameenphone has deposited BDT 20 billion (BDT 10 billion in February and BDT 10 billion in May) with the Bangladesh Telecommunication Regulatory Commission (BTRC) against the audit claim in line with a Supreme Court order. As per the court order, BTRC started to release NOCs in phases and subsequently BTRC has eased pressure on the company. GP’s relation with the government and regulator has also been soften after payment of BDT 20.0 billion to BTRC as per court order. Sizable BDT 125.8 billion dispute is yet to resolve and the original title suit is pending at the district court. In 2020, GP’s legal proceedings for audit claim dispute delayed as there were limited court activity due to the ongoing pandemic situation. Even though GP has deposited BDT 20 billion as per the court order, they have presented it as non-current receivables in their financial reports and has not made any provision against such regulatory claims. GP has disputed the whole audit demand claiming them based on errors in substance, methodology and procedure. To recover the BTRC’s Audit claim, Post and Telecommunication Division (PTD)
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proposed to form a committee. Through a letter dated 31 December 2020, Grameenphone requested BTRC chairman for a discussion on this issue. A meeting took place on 13 January 2020 chaired by the BTRC Chairman and subsequent discussions may take place on this matter. However, if the final verdict goes against the operator (either fully or partially), GP will have to report significant amount against the disputed amount. As the operator maintains almost 100% payout, it might have to depend on debt financing for payment of audit claim, if required. This will also result in large finance expenses along with large impact on the bottom line.
Effective cost management leads to quality shareholder returns Grameenphone has been successfully controlling its operating expenditures despite regular investment in its countrywide network expansion. GP’s OPEX to sales ratio declined from 40.2% in 2013 to 31.3% in 2020. Net profit margin of the company increased from 15.2% in 2013 to 26.6% in 2020, mostly supported by the effective cost control.
Controlled operating expenditures along with increase in revenue have resulted into improvement in profit margins over the year. Efficient market spending, reduction in operation and maintenance expenditures, lower subscriber acquisition cost, IT cost reduction through application optimization and virtualization and cost savings by workforce reduction etc. enabled the operator to control its operating expenditures.
Cost of Operation to Sales OPEX to Sales Ratio Cost of Operation to Sales Expon. (Cost of Operation to Sales) OPEX to Sales Expon. (OPEX to Sales) 28.4% 41.1% 29.0% 27.6% 42.0% 40.2% 28.0% 26.5% 26.2% 40.0% 27.0% 37.5%
26.0% 24.6% 38.0% 36.4% 36.2% 25.0% 34.9% 34.8% 23.2% 23.3% 36.0% 24.0% 22.5% 22.2%
23.0% 34.0% 31.4% 22.0% 31.3%
32.0%
21.0%
20.0% 30.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020
The operator has been eventually reducing its work force by offering Voluntary Retirement Schemes (VRS) to control staff cost in the long run. Replacing technology against staff cost will help the company to reduce salaries & personnel expenditures for the coming years.
EBITDA Margin Operating Profit Margin EBITDA Margin Expon. (EBITDA Margin) Operating Profit Margin Expon. (Operating Profit Margin) 65.0% 62.7% 62.4% 48.0% 46.4% 45.4% 63.0% 59.7% 46.0% 61.0% 42.7% 44.0%
59.0% 57.1%
42.0% 57.0% 54.5% 38.9% 40.0%
55.0% 53.1% 53.1% 53.4%
38.0% 36.6% 36.2% 53.0% 35.9% 50.2% 35.3% 36.0% 34.4% 51.0%
34.0% 49.0%
32.0% 47.0%
45.0% 30.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020
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To control OPEX further, GP has been optimizing its shifting towards digital media for market spending, digitalizing sales process, increased recharge through digital channels. GP has been working to make digital recharge more convenient and tools and processes have been redesigned to ensure efficiency of digital channels.
Profitability Ratios 2012 2013 2014 2015 2016 2017 2018 2019 2020 Gross Profit Margin (GPM) 76.8% 75.4% 73.5% 71.6% 72.4% 73.8% 77.5% 77.8% 76.7% Operating Profit Margin (OPM) 36.6% 34.4% 35.9% 35.3% 36.2% 38.9% 42.7% 46.4% 45.4% EBITDA Margin 53.1% 50.2% 53.1% 53.4% 54.5% 57.1% 59.7% 62.7% 62.4% Pre Tax Profit Margin 32.8% 34.0% 34.0% 33.3% 33.2% 36.8% 41.3% 44.5% 45.0% Net Profit Margin (NPM) 19.0% 15.2% 19.5% 18.8% 19.6% 21.4% 25.1% 24.0% 26.6% Return on Total Assets (ROA) 15.4% 11.6% 15.0% 15.0% 17.1% 20.7% 24.4% 24.0% 25.0% Return on Equity (ROE) 47.1% 44.1% 63.9% 63.6% 70.2% 81.1% 94.1% 91.8% 82.2% Earnings Per Share 12.96 10.89 14.79 14.59 16.68 20.31 24.71 25.56 27.54
The operator is also working towards simplification & personalization of products and services that will result in reduced cost and digitalizing customer services. Customer hits in online-based self-service platform are increasing while calls in the call center are declining which will ultimately result in better customer service at reduced cost. The operator’s efficiency in cost control with innovation and business model restructuring will continue to yield better profitability.
In line with historical trend and management declaration to give more focus in controlling the operating expenditures, we expect that OPEX to sales ratio will remain stable and likewise EBITDA margin is also expected to remain stable.
High price competition forced GP to reduce its prices. However, driving on the growth of data sales and increased 3G and 4G coverage with controlled operating expenditures the company managed to maintain a healthy margin during the last few years. As the market has become less competitive with the elimination of two operators, GP has the opportunity to charge higher prices on its services with wider network coverage that will have a positive impact on the margin. Besides, as the operator will no longer need to invest heavily for providing 4G services, the margin for GP is expected to remain stable in the coming years.
Maintained sound business health with low dependency on debt based financing to meet working capital and capex needs for business expansion
Though in the past GP opted for low cost foreign loan for its capital investment, overall dependency on debt is insignificant. In the last 4 years it didn’t have any new borrowing at the year-end though some short-time borrowings were made to payout interim loans that were paid within the respective years.
Though, over the long term, both current ratios and quick ratios of the company remained stable. GP retains lower amounts of cash and cash equivalent after paying out dividends to its shareholders and meeting ongoing working capital as well as capital expenditures. As per the latest Q1, 2021 financial result the company doesn’t have short-term or long term bank borrowing but have lease outstanding and pays charges on lease servicing, which is in line with the industry.
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9.0 ANALYSIS ON THE RECENT FINANCIAL AND OPERATIONAL PERFORMANCE
9.1 Latest Q1,2021 Performance Review
Increased market campaigns in the form of lower service prices along with the reduction in local call termination rate amidst pandemic led economic uncertainty resulted into the de-growth in earnings
Industry continued to suffer due to persisting COVID-19 pandemic The country’s telecom industry was severely affected due to global COVID-19 pandemic since March 2020. On a YoY basis, revenue of the company experienced 3.7% decline in Q1,2021. The pandemic has slowed down the economic activities Particulars Revenue (BDT mn) Growth Rev. Contribution of the country that also impacted the use Q1,2020 Q1,2021 YoY Q1,2020 Q1,2021 of the telecom services to a great extent. Voice Traffic 25,574.8 24,770.1 -3.1% 70.7% 71.2% With the stressed economic reality as a Data 8,500.0 8,200.0 -3.5% 23.5% 23.6% result of pandemic and reduced VAS,SMS,MMS & Others 63.4 62.9 -0.9% 0.2% 0.2% disposable income, people have reduced Interconnection 1,577.6 1,301.0 -17.5% 4.4% 3.7% their expenses on telecom services as Customer Equipment 31.8 46.5 46.3% 0.1% 0.1% well. So, change in the consumers Lease Revenues 383.5 407.1 6.1% 1.1% 1.2% behavior led to lower earnings of the Other Revenue 37.3 24.9 -33.3% 0.1% 0.1% company during the quarter compared to Total Revenue 36168.5 34,812.6 -3.7% 0.0% 0.0% the corresponding quarter in last year.
Increase in supplementary duty has further affected the revenue from voice segment The government has increased the supplementary duty (SD) on telecom services from 10% to 15% with effect from 11th June 2020. The said increase in SD has resulted in reduction of overall voice calls throughout the industry as users are now moving towards more OTT platforms. Average minutes of voice calls declined to 207 against 215 in corresponding quarter of the last year due to increase in cost of usage.
High price competition caused downward pressure on data revenue despite higher volume consumption GP’s revenue from data segment experienced decline for the first time in its history with 3.5%YoY de-growth. De-growth in data revenue was a result of increased market campaigns owing to higher market competition and large reduction in data prices. Data subscription increased by 400,000 during January-March 2021. However, on YoY basis the number of data subscribers increased by 3.2% to 41.7 million. Even though data usage volume has seen 35.5% YoY growth while Average Data usage per user per Months (AMBPU) also achieved almost 31.3%YoY growth, 29.2%YoY reduction in APPMB led to 5.9% YoY de-growth in average data revenue per user per month (data ARPU). Growth in AMBPU was mainly driven by 4G conversion. In the latest quarter (Q1), average price per megabytes (APPMB) witnessed 29.2% decline due to increased market competition. Meanwhile, Grameenphone added only 0.4 million data users in Q1, 2021 even though the industry witnessed 3.98 million net addition during the quarter.
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Decline in voice and interconnection have contributed largely in the reduction in ARPU The service ARPU declined by 8.5%YoY in Q1,2021. Reduction in ARPU was mainly triggered by reduction in voice, data and interconnection revenue. Lower voice calls along with reduced call termination rate further contributed to the decline in revenue. Total revenue of the company was also impacted by reduction in local and international call termination rate. As a part of SMP restriction, asymmetric interconnection charge was imposed at a rate of BDT 0.7 per minutes for GP against BDT 0.10 per minutes for other operators (30% reduction in local call termination rate) with effect from 16th July 2020. Amidst the pandemic, GP’s recovery for total revenue was further impacted by such reduction in local call termination rate and contributed to 17.5% YoY decline on interconnection revenue during the quarter. Though revenue from interconnection revenue is insignificant, it has marginally affected overall revenue and contribution of interconnect revenue declined to 3.7% in Q1, 2021 from that of 4.4% in Q1, 2020.
Controlled OPEX led to margin stability despite unfavorable business context caused by the pandemic In spite of 4.2% overall increase in salaries & personnel cost, operating expenses of the company reduced by 2.5% in Q1,2021 mainly driven by 4.7% reduction in sales, marketing and commissions expenses and 3.2% decline in operation and maintenance cost. However, despite 8.1% increase in cost of material and traffic OPEX to Sales Ratio charges, GP’s cost of operation in Q1,2021 declined by 3.0%YoY from the last year due to 7.1% lower depreciation expenses. GP outperforms industry peers in terms of cost efficiency and has been continually
41.1% improving its efficiency with cost control and efficiency driven margin improvement. 42.00%
40.00% Meanwhile, there has been a significant shift in the adoption of digital recharge
37.5% 36.4%
38.00% 36.2% during this pandemic, digital recharge volume increased compared to the same
34.9% 34.8% 36.00% period last year, according to the operator, which helped in reduction of sales,
34.00% 31.4% 31.3% marketing and commissions expenses. Moreover, this will create the way for future 32.00% cost reduction for the company by reducing dependency on agent based recharge 30.00%
28.00% channel.
Grameenphone experienced 5.5% YoY de-growth in EBITDA in Q1,2021 mainly
2014 2015 2016 2017 2018 2019 2020 2013 driven by the lower revenue along with slightly higher salaries & personnel cost and cost of material & traffic charges during the quarter. With 3.2% lower subscriber and traffic revenue compared to the same period of the previous year along with higher cost of operation and increase in effective tax rate (from 38.0% in Q1,2020 to 43.2% in Q1,2021), net profit of the company witnessed 16.7% de-growth on YoY basis even though profit before tax has seen only 9.1% YoY de-growth.
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Telecom Subscriber Base (in Mn) Bangladesh Mobile Data Subscription Trend
90.000 80.510 Mobile Data User (mn) 120.0 70.0% 80.000 % of Industry sub. base 105.0 60.0% 70.000 90.0 60.000 51.650 50.0% 75.0 50.000 40.0% 36.190 60.0 40.000 30.0%
30.000 45.0 20.0% 20.000 30.0 5.750 10.000 15.0 10.0%
- - 0.0% GP Robi & Airtel Banglalink Teletalk 2013 2014 2015 2016 2017 2018 2019 2020
Bangladesh Mobile Internet Penetration Industry Subscription Penetration GP Banglalink 70.0% 60.8% Robi+ airtel Citycell 56.3% 110.0% Teletalk Cellular subscribers 60.0% 52.0% 100.0% 46.1% 90.0% 50.0% 39.0% 80.0% 95.4% 40.0% 32.4% 70.0% 84.2% 89.2% 26.9% 60.0% 73.6% 76.8% 78.6% 30.0% 22.1% 50.0% 40.0% 62.4% 20.0% 30.0%
10.0% 20.0% 0.0% 10.0% 0.0% 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Average data usage (MB per month) Data Revenue Contribution of GP
3000.0 30.0% 2472.0 24.4% 2500.0 25.0% 20.8% 19.2% 2000.0 1653.0 20.0% 16.4%
1500.0 12.5% 1059.0 15.0% 8.1% 1000.0 651.0 488.0 10.0% 5.0% 3.3% 500.0 284.0 3.0% 90.0 126.0 5.0% 0.0 0.0% 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividend & Payout Ratio (Historical & Projected) Historical EPS (BDT) & Growth
300% Total Dividend (Cash) Payout Ratio EPS Growth 30.0 40.0% 250% 27.5 35.0% 25.0 30.0%
200% 22.5 25.0% 20.0 20.0% 128.6% 150% 17.5 15.0% 108.0% 108.2% 113.3% 95.9% 104.9% 100.9% 99.9% 15.0 10.0% 12.5 5.0% 100% 50.9% 10.0 0.0% 7.5 -5.0%
50% 5.0 -10.0%
175% 140% 160% 140% 205% 280% 130% 275% 140% 2.5 -15.0% 0% 0.0 -20.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Projected EPS Price (BDT) & Volume
EPS Growth VOLUME ('000) CLOSE PRICE 29.00 6.0% 550 1,600 28.50 4.5% 500 1,400 28.00 3.0% 450 27.50 1.5% 400 1,200 27.00 0.0% 26.50 350 1,000 -1.5% 300 26.00 800 25.50 -3.0% 250 25.00 -4.5% 200 600 -6.0% 24.50 150 400 24.00 -7.5% 100 23.50 -9.0% 50 200 23.00 -10.5% 0 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Nov-17 Jul-18 Mar-19 Nov-19 Jul-20 Mar-21
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KEY TERMINOLOGIES 1. AMPU: Average Minutes Per User Per Month 2. ARPU: Average Revenue Per User Per Month 3. APPM: Average Price Per Minutes 4. AMBPU: Average Megabytes Per User Per Month 5. APPMB: Average Price Per Megabytes 6. APPGB: Average Price Per Gigabytes 7. DPS: Dividend Per Share 8. EBIT= Earnings before Interest and Tax 9. EBITDA= Earnings before Interest, Tax, Depreciation & Amortization 10. EPS= Earnings per Share. 11. Free Float Share= Total shareholding- Sponsor or directors holding 12. GP: Grameenphone Ltd. 13. LTM: Trailing 12 Months 14. NAVPS= Net Asset Value Per Share 15. NPAT: Net Profit after Tax 16. OPEX= Operating Expenditure 17. PBT: Profit Before Tax 18. ROA= Return on Average Assets 19. ROE= Return on Average Equity 20. SMS: Short Message Service 21. VAS: Value Added Services 22. 2G, 3G & 4G/LTE: Second-Generation, Third Generation, Forth Generation/ Long-Term Evolution Cellular Technology
FORMULAS USED 1. 퐸푃푆 = 푁푒푡 푃푟표푓푖푡 퐴푓푡푒푟 푇푎푥 ÷ 푁표. 표푓 푆ℎ푎푟푒푠 푂푢푡푠푡푎푛푑푖푛푔 2. 퐸퐵퐼푇 = 푁푒푡 푃푟표푓푖푡 + 퐼푛푡푒푟푒푠푡 퐸푥푝푒푛푠푒푠 + 푇푎푥 3. 퐸퐵퐼푇퐷퐴 = 퐸퐵퐼푇 + 퐷푒푝푟푖푐푖푎푡푖표푛 퐸푥푝푒푛푠푒푠 4. 퐶푢푟푟푒푛푡 푟푎푡푖표 = 퐶푢푟푟푒푛푡 퐴푠푠푒푡푠 ÷ 퐶푢푟푟푒푛푡 퐿푖푎푏푖푙푖푡푖푒푠 5. 푄푢푖푐푘 푅푎푡푖표 = [퐶푢푟푟푒푛푡 퐴푠푠푒푡푠 – 퐼푛푣푒푛푡표푟푦 – 푃푟푒푝푎푖푑 푒푥푝푒푛푠푒푠] / 퐶푢푟푟푒푛푡 퐿푖푎푏푖푙푖푡푖푒푠 6. 푅푂퐴 = 푁푒푡 푃푟표푓푖푡 ÷ 퐴푣푒푟푎푔푒 푇표푡푎푙 퐴푠푠푒푡푠 7. 푅푂퐸 = 푁푒푡 푃푟표푓푖푡 ÷ 퐴푣푒푟푎푔푒 푇표푡푎푙 퐸푞푢푖푡푦 8. 푇푖푚푒푠 퐼푛푡푒푟푒푠푡 퐸푎푟푛푒푑 = 퐸퐵퐼푇 ÷ 퐼푛푡푒푟푒푠푡 퐸푥푝푒푛푠푒푠 9. 푃퐸퐺 푟푎푡푖표 = 푃/퐸 푅푎푡푖표 / 퐸푎푟푛푖푛푔푠 퐺푟표푤푡ℎ 푅푎푡푒 10. 푁퐴푉푃푆 = 푆ℎ푎푟푒ℎ표푙푑푒푟′푠 퐸푞푢푖푡푦 ÷ 푁표. 표푓 푆ℎ푎푟푒푠 푂푢푡푠푡푎푛푑푖푛푔 11. 퐺푟표푠푠 푃푟표푓푖푡 푀푎푟푔푖푛 = 퐺푟표푠푠 푃푟표푓푖푡 ÷ 푁푒푡 푆푎푙푒푠 12. 푂푝푒푟푎푡푖푛푔 푃푟표푓푖푡 푀푎푟푔푖푛 = 푂푝푒푟푎푡푖푛푔 푃푟표푓푖푡 ÷ 푁푒푡 푆푎푙푒푠 13. 퐸퐵퐼푇퐷퐴 푀푎푟푔푖푛 = 퐸퐵퐼푇퐷퐴 ÷ 푁푒푡 푆푎푙푒푠 14. 퐸푉 = 푀푎푟푘푒푡 푐푎푝푖푡푎푙푖푧푎푡푖표푛 + 푂푢푡푠푡푎푛푑푖푛푔 푑푒푏푡 + 푀푖푛표푟푖푡푦 푖푛푡푒푟푒푠푡 – 퐶푎푠ℎ 푎푛푑 푐푎푠ℎ 푒푞푢푖푣푎푙푒푛푡푠
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STATEMENT OF COMPREHENSIVE INCOME
Particulars (in BDT thousand) Year 2019 Year 2020 Year 2021Ex. Year 2022Ex. Year 2023Ex. Revenue 143,656,271 139,606,161 140,421,824 141,558,072 142,811,499 Voice Traffic 104,862,690 97,961,691 95,609,234 92,036,103 87,983,634 Data 29,830,000 34,000,000 37,718,330 42,663,859 48,183,095 VAS,SMS,MMS & Others 229,957 241,355 246,182 251,106 256,128 Interconnection 6,624,277 5,557,429 5,001,686 4,751,602 4,514,022 Customer equipment 185,351 130,928 124,382 118,163 112,254 Lease revenues 1,538,272 1,569,720 1,569,720 1,569,720 1,569,720 Other Revenue 385,724 145,038 152,290 167,519 192,647 Cost of Operation 31,916,322 32,462,855 32,726,404 31,552,709 30,250,290 Cost of material and traffic charges 8,465,283 8,812,905 7,816,180 7,576,170 7,312,104 Traffic charges 7,253,612 7,488,776 6,539,710 6,291,201 6,012,348 Cost of material and services 1,211,671 1,324,129 1,276,470 1,284,969 1,299,757 Depreciation and amortization 23,451,039 23,649,950 24,910,224 23,976,539 22,938,185 Operating expenses 45,088,121 43,703,701 46,620,045 46,501,827 46,913,577 Salaries and personnel cost 9,437,578 10,027,226 10,110,371 9,696,728 9,782,588 Operation and maintenance 5,898,863 4,984,745 5,616,873 5,662,323 5,712,460 Sales, marketing and commissions 13,480,018 11,771,112 13,340,073 13,448,017 13,567,092 Revenue sharing, spectrum charges 10,107,313 10,478,334 10,531,637 10,616,855 10,710,862 and license fees Other operating (expenses)/income, net 6,164,349 6,442,284 7,021,091 7,077,904 7,140,575 PROFIT FROM OPERATIONS 66,651,828 63,439,605 61,075,375 63,503,536 65,647,632 Net Financial Expenses 2,523,060 376,473 2,163,331 2,099,541 1,836,839 Foreign Exchange (Loss)/ gain -229,809 -262,226 0 0 0 PROFIT BEFORE TAX 63,898,959 62,800,906 58,912,043 61,403,995 63,810,793 Provision for Income Tax 29,028,970 28,407,143 25,037,618 26,096,698 27,119,587 Provision released during the year 1,220,596 -1,241,332 Provision for Deferred Income Tax -867,367 -1,551,942 PROFIT AFTER TAX FOR THE YEAR 34,516,760 37,187,037 33,874,425 35,307,297 36,691,206 EPS 25.56 27.54 25.09 26.15 27.17
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STATEMENT OF FINANCIAL POSITION
Particulars (in BDT thousand) Year 2019 Year 2020 Year 2021Ex. Year 2022Ex. Year 2023Ex. Non-Current Assets: 127,735,251 138,253,346 140,376,910 134,759,660 129,297,573 Property, Plant and Equipment- 56,341,823 51,190,221 49,516,962 46,377,114 43,352,436 Carrying Value Intangible Assets, net 1,583,860 1,755,811 2,777,958 3,274,816 3,553,361 Right-of-use assets 58,028,533 53,532,673 52,931,730 49,957,469 47,241,515 Capital Work in Progress 6,745,678 6,271,747 9,647,366 9,647,367 9,647,368 Contract cost 4,480,157 4,934,438 4,934,438 4,934,438 4,934,438 Other Non-Current Assets 555,200 20,568,456 20,568,456 20,568,456 20,568,456 Current Assets: 20,999,171 9,930,971 6,776,843 12,825,164 18,610,174 Inventories 225,441 201,068 280,844 283,116 285,623 Trade Debtors 7,013,053 7,131,165 7,021,091 7,077,904 7,140,575 Cash and Cash Equivalents 13,760,677 2,598,738 -525,091 5,464,144 11,183,976 TOTAL ASSETS 148,734,422 148,184,317 147,153,754 147,584,824 147,907,748
SHAREHOLDERS' EQUITY AND LIABILITIES: Shareholders' Equity: 38,347,405 52,107,614 50,223,387 51,773,184 52,006,290 Share Capital 13,503,000 13,503,000 13,503,000 13,503,000 13,503,000 Share Premium 7,840,226 7,840,226 7,840,226 7,840,226 7,840,226 Share Money Deposit 1,880 0 0 0 0 Capital Reserve 14,446 14,446 14,446 14,446 14,446 Retained Earnings/ Revenue Reserve 16,987,853 30,749,942 28,865,715 30,415,512 30,648,618 Non-Current Liabilities: 19,960,795 19,420,329 18,921,182 18,959,814 19,002,431 Net defined benefit plans 936,703 1,641,383 1,404,218 1,415,581 1,428,115 Obligation under finance lease 13,484,106 14,146,840 14,146,840 14,146,840 14,146,840 Deferred Tax Liability 5,216,029 3,350,834 2,808,436 2,831,161 2,856,230 Other Non-Current Liabilities 323,957 281,272 561,687 566,232 571,246 Current Liabilities: 90,426,222 76,656,374 78,009,185 76,851,825 76,899,027 Current portion of LTD 2,934,284 1,240,000 0 0 0 Lease Liabilities 7,349,549 6,328,697 6,328,697 6,328,697 6,328,697 Trade Creditors 22,676,406 23,988,115 26,448,673 25,480,453 25,706,070 (including liability for Capex) Current Tax Liabilities 28,137,225 24,870,650 24,870,650 24,870,650 24,870,650 Provision for operating expenses 18,839,102 14,402,559 14,042,182 13,801,912 13,567,092 Other Current Liabilities 10,489,656 5,826,353 6,318,982 6,370,113 6,426,517 TOTAL SHAREHOLDERS' EQUITY 148,734,422 148,184,317 147,153,754 147,584,824 147,907,748 AND LIABILITIES
Net Asset Value (NAVPS) Per Share 28.40 38.59 37.19 38.34 38.51
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