Management Comments & Analysis on 3Q’2013 Financial Result

Ending the 3rd quarter with strong financial performance GP has managed to be in a forward leaning position with revitalized market machineries to secure the fair share of growth being generated from the market.

Resilient macroeconomic outlook amid political uncertainties

Solid FX reserve levels of USD 16.15 Bn along with easing 12 inflationary pressure has put in a better position 10 amidst despite the ongoing political uncertainties. This was 8 derived as a result of prudent monetary and fiscal policies. 6 4 Overall, the country is now in a better position to withstand 2 adverse global shocks. 0 General inflation stands at 7.39% under the new base. Non food inflation was the major contributor of reduction with food General Food Non Food inflation also demonstrating lower trend. Domestic harvest was favorable for the subdued food price index. Inflation Y-o-Y% (New base 2005-06)

Local currency appreciated marginally by 0.03% against US Dollar during the quarter. The major contributing factor was USD 3.25 bn remittance and slowing down of import payments. Unrest and political uncertaintyY in the run-up to elections are affecting economic activity by disrupting supply and curbing investment appetite. Exports and remittances have also slowed, posing downside risks to the outlook. Maintaining fiscal prudence via tax collection increase, strengthening the financial sector by stronger regulatory and supervisory powers of Bangladesh Bank over the state-owned commercial banks and steps for improving labor conditions will be crucial in maintaining the economic growth momentum.

Industry growth amidst competitive landscape

The Q3 has been an exciting period for the industry with the 3G license auction taking place on 8 September 2013.Four operators 110.7 secured 25 MHz of spectrum in the 2100 Mhz band with the price 109.4 106.9 of $ 21 Mn/ Mhz. GP secured the highest 10 Mhz slot while 104.7 103.0 , and Airtel opted for 5 Mhz each. GP and BL 101.2 99.9 98.3 98.6 launched commercially so far with limited coverage. 97.5 97.2 97.4

Tough competition continued in the subscriber acquisition front fuelled by SIM tax reduction effective from 16th May’13. Overall, subscriber base grew by ~5.8% with 6.1 Mn new acquisitions mainly coming from the rural areas. Oct'12 Nov Dec Jan'13 Feb Mar Apr May Jun Jul Aug Sep

Telecom players continued promoting various attractive Industry sub base in Mn discounts, bonus, churn/silent back and bundle offers focusing on usage increase and subscriber retention. Top 3 operators out of 6 (GP, Banglalink & Robi) still comprise 90% of SIM market share. 19.68% Robi continued with subscriber acquisition induced by affordable campaigns, customer centric initiatives and execution. Banglalink was active with rate cutter promotions with good organic growth. 9.31% Airtel is building up its network coverage in the wealthy eastern 4.72% 4.55% 4.38% part of the country with network support from other operators. Teletalk expanded their 3G services into new areas with revision of their tariff structure as reaction towards competitor service GP BL Robi Airtel Teletalk launch. -4.40%

Sub base growth QoQ The SIM penetration for the quarter is estimated at 68%. Considering multiple SIM issue, real penetration is estimated at 43%.

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Encouraging top line growth with a healthy bottom line

Revenue & Subscriber: 25

GP secured BDT 25.0 bn revenues for the 3rd quarter of 2013, 23.9 23.5 9.4% 9.4% increase from the same period of 2012. GP managed this 22.9 22.6 growth amid competition, sluggish economic activity, 3.0% apprehension of political unrest and slight respite from a strong 1.3% 0.4% tailwind of EID festivity. The growth is attributed to increase in -0.9%

traffic, induced by attractive recharge based campaign and rate

cutter promotions. Growth in interconnection minutes, higher 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13

device sales and adjacent business also contributed Revenue (BDT Bn) YoY Growth % significantly.

255 245 254 The AMPU increased by 9.8% from usage growth of 24.0% 232 230

against 12.4% sub base growth. The APPM fell by 13.3% 187 178 183 180 178

resulted from implementation of 10-sec pulse, continued rate

cutter promotions and a shift in product composition. 0.80 0.77 0.75 Consequently ARPU drop was 4.8% (YoY) compared to 8.7% of 0.71 0.70

last quarter.

3Q'12 4Q'12 1Q'13 2Q'13 3Q'13

GP was very active in subscriber acquisition and managed to ARPU (BDT) AMPU APPM (BDT)

capture 2.07 Mn net subscriptions, taking the total to 46.04

million. With this, GP’s will be maintaining its SIM market share 43.9 46.0 41.0 41.8 going forward. GP subscriber grew by 12.4% YoY with 34.2% 40.0

contribution of the quarterly industry net addition.

During the quarter, GP also focused on strengthening its 41.6% 41.2% 41.8% 42.0% 41.6% competitive advantages by capitalizing massive POS expansion, improved market visibility, hyped trade engagements and 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13* positive price perception. Significant traction was also gained in Subscriber (Mn) Market share % the field of financial services with the new service launching.

Opex and Capex

During the 3rd quarter, GP witnessed marginal de growth in Opex of 0.5% from the same period of last year. The increase was attributed to advertising and marketing expense, increased start up commission due to higher SIM sale , higher reload commission and revision of commission modality. Higher provision of WPPF and revenue sharing also contributed. These items were offset by savings from subsidy due to SIM tax reduction, lower consultancy fee and lower personnel expenses due to de-consolidation of GPIT employees.

About BDT 3.2Bn was invested to improve quality and efficiency of both 2G and 3G network. Around 15% of it was utilized for roll out of 3G services. Intangible asset of 3G frequency of BDT 17.2 bn was added during the quarter. 14.3 3.2 11.8 12.3 12.3 2.9 11.2

2.2 2.1

1.2 12.6% 12.8% 54% 57% 52% 48% 51% 9.8% 8.7% 5.1%

3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13

Capex (BDT Bn) Capex/Sales % EBITDA (BDT Bn) Margin %

With 8,550 BTS sites, the population coverage is standing at 99.17% and the geographic coverage at 89.43%.The EBITDA before other items increased by 13.5% mainly from higher revenue and lower opex development during the quarter. EBITDA margin improved by 2.1 percentage points which in turn developed the cash flow margin.

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Profitability 5.7

4.6 4.5 The net profit increased by 78.13% during the quarter. Profit had substantial boost due to higher revenue, lower operating expense 3.2 23% induced by lower subscriber acquisition cost from SIM tax 20% 19% reduction, lower consultancy and one time effect of gain on 14% disposal of shares in GPIT of BDT BDT 1.02 Bn. Due to the IFRS 0.6 principle, GP treated the transaction as 100.0% sale and 2% subsequent reacquisition of 49.0%, which resulted in a larger 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 impact on the gain on sales. However, the underlying NPAT margin for the quarter was 18.81%. NPAT (BDT Bn) NPAT %

GP in Dhaka Stock Exchange 1st tranche of GPIT share refinancing Dhaka Stock Exchange transfer approval 240 scheme received 5.0 in EGM 2Q2013 by ICB Approval of Financial 4.5 Buoyancy marked the beginning of demutualization 220 Publication Bullishness scheme 4.0 the quarter but lost its momentum over MNC 200 3.5 eventually by the end of July due to stock 3G spectrum 3.0 profit taking. Since then, potential 180 auction warm -up in political frontier, 2.5 160 Going Ex Trade Share 2.0 investment repositioning to small Dividend and mid cap stocks, sectoral Price GP Share 140 1.5 earnings surprises and RMG unrest; 1.0 120 all contributed towards confusion 0.5

and uncertainty over the future 100 0.0

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18 20 22 26 29 13 Grameenphone Share Trade (Mn) Closing Price (BDT) Average Price (BDT)

GP stock price movements were mostly in tune with the market. From Jun’13, GP price increased by BDT 10.50

(+5.87%) with closing price of BDT 189.40 on 30 Sep 2013. Average daily turnover was BDT 253.48 Mn with last twelve months (LTM) trailing P/E (30 Sep 13) of 14.08. GP’s market capitalization in DSE on 30 Sep 13 was USD

3.26Bn, representing 10.11% of total market. Share register comprises of 54% institute and 46% retail.

Regulatory Highlights

NBR’s claim against replacement SIM

With regard to NBR’s claim of TK 15.84Bn on SIM replacement made on May 2012, GP had challenged this in the

Court. The high court division disposed of the writ petition of GP and other operators on June 6, 2013 and instructed the commissioner of large tax payer unit (LTU) to decide on the matter within 120 days and not to make any demand in the meantime. A committee was then formed by the LTU commissioner consisting of members from operator,

AMTOB, BTRC and NBR. Committee is still working for finalization of the report and GP is expecting a good outcome from NBR in light with the committee report.

Directives for implementation of MNP

BTRC have published directives on MNP on 13 June 2013 with 3 phases execution plan as per which the MNOs have to form the MNP governance model and consortium within 3 months, establishment of MNP system in next 3 months and 1 month more for testing and reporting. GP appreciates the concern of BTRC in developing the MNP directives but the very ground reality says that the directive along with its stringent stipulated time frame will create customer sufferings amidst the absence of central database. GP and other operators have urged BTRC for consultation with

AMTOB before finalizing the guidelines.

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