Organizational Behavior

Performance Analysis of Grameenphone Limited for 2009

Performance Analysis of Grameenphone Limited for 2009

Chapter 1: Introduction

Background of The Study

MBA curriculum is highly focused on mixture of theoretical and practical studies. As part of the MBA course it is essential that the student submits a comprehensive study during the Internship period and prepare and present a study report. As part of that the study topic was decided in consultation of the supervisor as “Performance Analysis of Grameenphone for The Year 2009”. Under the scope of the topic a comprehensive study was done on Grameenphone which is presented in this paper.

Statement of the problem:

The major objective of a business firm is to increase the wealth of its shareholders. Financials of a firm is the mirror of the ultimate performance of a firm besides its brand preference and some other indices. Even the other indices are used to assure the profitability in both short and long term. The study dealt with the financial indices to indentify the strength, weakness and opportunity for the company and tried to recommend some improvement scope from the theoretical perspective. This study aims to see the performance of Grameenphone for 2009 in various indices.

Objective of the study:

Telecom is the most discussed industry in Bangladesh due to its nature of touching people’s life. Grameenphone Limited is the distinct market leader with more than 43% subscriber market share. In 2009 the company came into the pick of the discussion of local business environment as it went for the IPO which was the largest in the history of the country. The IPO ended with 4 times applications and issuance of more than 1.2 lac shares to individual shareholders. After starting the transaction in the stock markets the shares of the company was dominating all the indices of the market. It is interesting to see how this company has performed in 2009.

This study is primarily intended for analyzing the annual performance of Grameenphone Limited for the year 2009. The main objective of this study is to see how Grameenphone has performed in various financial indices in 2009. Other objectives are –

  • To analyze the performance of 2009 against the performance of 2008
  • To analyze how the company has performed comparing to the major competitors

Limitations of the study:

The performance of a company can be judged in different indices like financial indices, brand indices, CRM indices, CSR indices etc. This study is limited to financial indices only. Another big limitation is Data insufficiency. The fundamental technique used in this study is incapable of providing with a good conclusion if not compared among the close competitors’ or the industry performance in all the indices. In this case, Grameenphone is the only public limited company currently listed in the stock exchange among the companies operating in the same industry. So, the financial or other sort of data for the rival companies could not be collected in all the cases as they are not publicly available. Regulatory body like BTRC, MOPT etc and Associations like AMTOB (Association of Mobile Telecom Operators Of Bangladesh) do not also have any publication on the industry analysis. The analysis of the market could have been bought from internet which was very costly and thus avoided. So, the ratio analysis consists of only the time-series analysis of the financial performance of Grameenphone Limited in 2008 – 2009 and the cross-sectional analysis for the comparison with rival companies is shown only in the cases of the key performance indicators that were available publicly like total subscriber number, ARPU etc.

Chapter 2: Methodology

The methodology used for this study is described below –

 Methods of collecting data:

The data used for the analysis are secondary data by definition. The publicly available information is used to find out the ratios and other performance indicators. Among the sources there are Annual Reports, websites of the telecom operators of Bangladesh, BTRC, MOPT, and mother companies of the local operators are mentionable.

Analytical tools used:

The global method used to analyze the stance of Grameenphone Limited consists much of fundamental analysis. The ratios used are of five different categories. They are listed below –

Liquidity Ratios:

  1. Current ratio
  2. Quick ratio
  3. Net working capital
  4. Net operating working capital
  5. Reservoir ratio
  6. Interval measure
  7. NWC turnover ratio
  8. Cash liquidity ratio

Asset Management Ratios:

  1. Days sales outstanding
  2. Fixed asset turnover ratio
  3. Total asset turnover ratio

Debt Management Ratios:

  1. Long-term debt ratio
  2. Debt to equity ratio
  3. Times interest earned ratio
  4. Cash coverage ratio

Profitability Ratios:

  1. Net profit margin
  2. Operating profit margin
  3. Basic earning power
  4. Return on asset
  5. Return on equity
  6. Payout ratio
  7. Retention ratio

Market Ratios:

  1. Earnings per share
  2. Dividend per share
  3. Book value per share
  4. P/E ratio

Other key Performance Indicators:

  1. Revenue
  2. Average revenue per user
  3. Earnings before Interest, Tax, Depreciation & Amortization
  4. Number of subscribers

Software Used:

The following software have been used to prepare the report –

  1. Data entry, calculation & chart building: Microsoft Excel
  2. Word processing: Microsoft Word
  3. Presentation slide creation: Microsoft Powerpoint

Chapter 3: Company Profile

Grameenphone, the largest company of Bangladesh is a center of attraction to the people of Bangladesh and even of the foreigners. The growth rate in terms of subscribers is really attractive and indeed spits jealousy. A brief description of the company is discussed below:

Historical background:

The history of Grameenphone is full of success for the company and attraction of business literate people. The transformation of mobile phone form a status product to a mass-market product was led by Grameenphone and really is a wonder for a third world country like Bangladesh. The history of Grameenphone is stated below in brief:

Establishment of the company:

Grameenphone was offered a cellular license in Bangladesh by the Ministry of Posts and Telecommunications (MOPT) on November 28, 1996. The Company launched its service on March 26, 1997, the Independence Day of Bangladesh. In 1996, Bangladesh was preparing to auction off private cell phone licenses to four companies. So at the behest of Dr. Muhammad Yunus (Grameen Bank’s founder and the only Nobel Prize winner of Bangladesh) but completely independent of Grameen Bank, a not-for-profit private company called Grameen Telecom was created.

Grameen Telecom, in turn, created a for-profit company called Grameenphone, found a foreign partner, and put in a bid; Grameenphone’s total capitalization was US$120,000,000, including around US$50 million from IFC/CDC, and the Asian Development Bank (ADB). It also received US$60 million in equity from the four partners and received one of the four licenses. These were the Norwegian Telenor with a 51% share, Marubeni of Japan with a 9.5% share, and the American Gonophone at 4.5%. Grameenphone’s fourth partner was Grameen Telecom (with 35%), and Grameen Telecom borrowed US$10.6 million from the Open Society Institute to set up Village Phone program.

Grameenphone afterwards:

From the very early year of operations, Grameenphone broke the monopoly of CityCell and win the heart of people with its offering. It became the market leader in the very early years. Though two other GSM operators had launched their services right after Grameenphone, the company ensured the leadership with continuous expansion of network and brand building activities. After 13 years of operations Grameenphone is still the leading telecommunications service provider in the country with more than 23 million subscribers EOY 2009. As of EOY 2009 , there are more than 54 million telephone users in the country, of which, a little over one million are fixed-phone users and the rest are mobile phone subscribers.

Starting its operations on March 26, 1997, the Independence Day of Bangladesh, Grameenphone has come a long way. It is now a public limited company enlisted in the local browses with 10% shares offloaded to local institutional and individual investors while rest of the shares are owned by Telenor and Grameen Telecom. As per its strategy to take as many people as possible under its umbrella, the company decided to price the share at BDT 10. Though it offered the price in the market with a premium of 600% there are more than 1.2 lacs individual shareholders owning the share of the company.

Now Grameenphone is one of the largest private sector investments in the country with an accumulated investment of BDT 14,950 crore up to December 2009. Grameenphone is also the largest taxpayers in the country, having contributed nearly BDT 14,790 crore in direct and indirect taxes to the Government Exchequer over the years. Of this amount, BDT 3050 crore was paid in 2009 alone.

Over the years, Grameenphone has always been a pioneer in introducing new products and services in the local market. GP was the first company to introduce GSM technology in Bangladesh when it launched its services in March 1997.The technological know-how and managerial expertise of Telenor has been instrumental in setting up such an international standard mobile phone operation in Bangladesh. Being one of the pioneers in developing the GSM service in Europe, Telenor has also helped to transfer this knowledge to the local employees over the years.

GP was also the first operator to introduce the pre-paid service in September 1999. It established the first 24-hour Call Center, introduced value-added services such as VMS, SMS, Fax and Data transmission services, International roaming service, WAP, SMS-based push-pull services, EDGE, Personal Ring Back Tone, Call Block Service, Mobile Back-up, Share Market information service (Bull) and many other products and services.

In addition, the Village Phone Program, also started in 1997, provides a good income-earning opportunity to more than 250,000 mostly women Village Phone operators living in rural areas. The Village Phone Program is a unique initiative to provide universal access to telecommunications service in remote, rural areas. Administered by Grameen Telecom Corporation, it enables rural people who normally cannot afford to own a telephone to avail the service while providing the VP operators an opportunity to earn a living.

The Village Phone initiative was given the “GSM in the Community” award at the global GSM Congress held in Cannes, France in February 2000. Grameenphone was also adjudged the Best Joint Venture Enterprise of the Year at the Bangladesh Business Awards in 2002. Besides VP Grameenphone has introduces 500 Community Information Centers to make the sub-urban and village people enable to access internet. Health Line is another project of GP as a part of its Corporate Social Responsibility (CSR) which is awarded and acclaimed internationally. Besides GP operates some orphanage and sponsors national historical places.

From the very beginning, Grameenphone placed emphasis on providing good after-sales services. In recent years, the focus has been to provide after-sales service within a short distance from where the customers live. There are now more than 1000 Service Touch Points across the country covering nearly all upazilas. In addition, there are 70 GP Centers in all the divisional and major cities and they remain open from 8am-8pm every day including all holidays.

GP has generated direct and indirect employment for a large number of people over the years. The company presently has near about 4700 regular, part-time and contractual employees. Another more than 300,000 people are directly dependent on Grameenphone for their livelihood, working for the GP dealers, retailers, scratch card outlets, suppliers, vendors, contractors and others.

Nature of business:    

Grameenphone is engaged in Telecommunication industry as a carrier. It has the license of voice and ISP. In voice the major competitors are Banglalink and Robi. As ISP the company is the leading mobile broadband provider. Major competitors in this field are CityCell, and WiMax companies and local ISPs. As a technology driven business, this business requires extensive network coverage and quality for which network expansion and maintenance is crucial. Grameenphone is well ahead of competitors having the largest and qualitative network. Grameenphone has deployed 2G network all over the country. CityCell is the major competitor with CDMA 1X Technology which is better in terms of faster data communication. The efficiency of hardware and software are also important factors. Though in 2009 Grameenphone has upgraded its billing and customer service system it is lagging behind Warid Telecom as they are using the Next Generation Network (NGN) which is a IP based network and enjoying the facility of late comer in technological aspect. The business requires huge capital and costs a lot for operations and maintenance.

Organizational overview:

Grameenphone Limited was using a tall and complex organizational structure till 3rd Quarter of 2009. In the end of 2009 it cuts its layer from 11 to 7.  The whole management is headed by Board of directors. Members of the board (9 people) are elected in a general meeting of the shareholders and the elected members elect the chairman. Board meets at least four times a year.

The board of directors appoints a Management Team (MT) consists of the CEO and other 6 senior managers of the key divisions who are treated as CXOs. Each member of this team is responsible to spread out company vision, mission, and objectives to their respective division and also to achieve target.

Grameenphone ensures its business excellence by using some committee. Four high power committees, Audit Committee, Treasury Committee, Human Resources Committee, and Health, Safety, Security and Environment (HSSE) Committee are working to help the Board of Directors to make decisions more effectively and quickly and monitor the operations closely. These committees are consisting of members of Board of Directors, representatives from shareholders, members of MT and some departmental heads.  These Committees meet frequently than board and discus all major decisions keenly in details that goes to the Board and summarized to enable the Board on making quick and finest decision.

Other than these Grameenphone ensure corporate governance by using business plan & budget, financial reporting, functional reporting, asset management, internal control, compliance of internal rules & regulations, statutory audit, investment control, revenue assurance, internal audit etc. In the fast-paced world of telecommunications, vibrant and dynamic Corporate Governance practices are an essential ingredient to success. Grameenphone believes in the continued improvement of corporate governance. This in turn has led the Company to commit considerable resources and implement internationally accepted Corporate Standards in its day-to-day operations.

Being a public limited company, the Board of Directors of Grameenphone have a pivotal role to play in meeting all stakeholders’ interests. The Board of Directors and the Management Team of Grameenphone are committed to maintaining effective Corporate Governance through a culture of accountability, transparency, well-understood policies and procedures. The Board of Directors and the Management Team also persevere to maintain compliance of all laws of Bangladesh and all internally documented regulations, policies and procedures.

Grameenphone is a truly transparent company that operates at the highest levels of integrity and accountability on a global standard. The organogram is shown in the next page in figure-1.

* Not a part of the Management Team

**Deputy CEO has a special role on Stakeholder Relation of the Company. Stakeholder Relation team of Corporate Affairs has a dotted reporting to Deputy CEO

CTO: Chief Technology Officer

CMO: Chief Marketing Officer

CCO: Chief Communication Officer

CFO: Chief Financial Officer

CPO: Chief People Officer

CCAO: Chief Corporate Affairs Officer

Strategies of Grameenphone:

Product & product mixes:

Grameenphone follows a customer segmentation model and designs product according to the segments. It has two major product line – Telco and Reload. Telco includes subscriptions and reloads includes all the forms of recharge. In Telco GP has specialized products like Smile and Explore for the Mass Market, Business Solution for the Business Market, Djuice for the Youth Market and Village Phone and Public Phone for the Emerging Market. The products are bundle of voice, features and data. The mixture is highly dependent on the demography, and customer profile. The major deciding factors are type of mobility of the consumer, use of mobile phone, disposable income, data need, customers’ perception on features etc. Reloads consists of Scratch cards and Flexiloads. The denominations are decided on the basis of income group.

 Pricing Strategy:

Grameenphone follows premium pricing strategy in most of its products. These strategies depend on the demography and psychographic of the specific segment. The prices are mainly set at per or 10 to 15% higher than the competitors. Grameenphone considers its state-of-the-art network quality, integrated coverage, wide spread service touch point and distribution points for the logic of premium pricing.

Promotion mixes:

Grameenphone uses both push and pull strategies to promote its product. The promotions includes-

  1. Advertisement: Grameenphone use hammering policy to imprint the brand into the peoples mind to achieve top of the mind awareness on the brand. The major advertising strategies are –
  1. Awareness: basically brand and image building advertisements
  2. Acquisition: Basically acquisition driven advertisements like product features, attractive tariff etc
  3. Retention: Thank You offers
  1. Trade promotion: Grameenphone runs a lot of promotions to attract the traders to sell Grameenphone products. It includes Below the Line (BTL) activities like road shows, Experiencing Van, local festivals for the retailers, POP materials etc
  2. Loyalty Programs: GP offers loyalty program for its retailers. Retailers are divided into two major types Exclusive retailers (ERO) and Non-exclusive retailers (NERO). Loyalty programs are offered according to type. Loyalty program includes Loyalty commission, Price protection, special product, sellers meet, etc
  3. Sales promotion: Sales promotion includes giving away gifts to the customers while selling or even to the prospective customers. Give-away items include free talk time, free or subsidized handset, branded T-shirts, caps, pens, diary, calendars, umbrella, discount in different shops etc.
  4. Promotional incentives: GP offers promotional incentives to its retailers like acclamation, trade discount, foreign visit etc.

 Channels of distribution:

Grameenphone follows a simple distribution strategy that a customer should get subscription in approximately 20 minutes drive (average) and reload in approximately 10 minutes drive (average). It follows a two tear distribution strategy consists of Distributor and retailer. Grameenphone has 9 regional logistics center and more than 100 distributors in major cities from where it serves more than 20000 Telco Retailers and 1 lac reload retailers. Grameenphone uses different sales channel to cater the customers. It use both company owned, franchised, distributor and retailer channels to sell product to the customers. The channels are –

ChannelTypeCaters to
Corporate SalesCompany owned direct sales channelStrategic and corporate customers
Distributors Sales AgentsDealers with their direct sales forceSmall organization
Grameenphone CenterCompany owned and franchised shopsAll
Exclusive Retail OutletRegistered retailersMass Market
Non- Exclusive Retail OutletRegistered retailersMass Market
Brand promotersIndividual Direct Sales forcePCO Businessman

Table – 1: Channel to segment distribution of Grameenphone

 Human resources management:

Grameenphone runs its operation to serve 23 million subscribers with near about 4700 regular, contractual and part-time employees. Regarding HR GP wants to be the most preferred employer. To attract and retain employees GP offers various facilities to the employees including life insurance, bonus, training and improvement facility, performance evaluation and performance based promotion, pension gratuity, loyalty acclamation, internal clinic with doctors and ambulance, discounts in various hospitals and diagnostic centers etc.

 6 Service Strategy:

The company wants to be the best service provider in the country. To be the best it has a strategy that customer has to reach a telephone service agent in 5 minutes and a human service agent to meet physically in 30 minutes drive. It is providing service to the customers through a telephonic hotline (24 x 7) with IVR (interactive voice responder) backed by a bunch of trained Customer Managers, 84 Grameenphone Centers, 1000 Service Touch Points. Customers can also take service from a web-based portal by chatting with customer managers. To be the best GP emphasize on analyze customer insight. Insights are taken from all the service point and through arranging some customer programs like Grahok Kotha. All the insights are managed through software and service is developed according to that.

7 Customer Retention Strategy:

Grameenphone has designed a customer retention strategy and started to act according to that. Grameenphone has started to classify the customer and on the way to implement a compact retention strategy merged with customer life cycle. Primarily the company has classified its best customers into Crown and offering special offers to them. It has also offered a Thank You offer which enables customers to have bonus talk time and special discount in partner outlets on staying a specific period with GP and bearing a minimum bill in a quarter.

 Company vision:

 The vision of the company is “We exist to help our customers get full benefit of communications services in their lives. We’re here to help.”

 Company Mission:

 Grameenphone is the only reliable means of communication that brings the people of Bangladesh close to their loved ones and important things in their lives through unparallel network, relevant innovation and services.

Company Values:

Grameenphone follows following values –

  1. Make it Easy
  2. Keep promises
  3. Be inspiring
  4. Be Respectful

Chapter 4:

Financial Performance Analysis

Analysis of the Key Performance Indicators

Revenue: The annual revenue is an important criterion of measuring the company performance. Below the annual revenue for the three companies (Grameenphone, Banglalink and Robi) are shown and accordingly interpreted.

Chart 1: Annual revenue in BDT

In 2009, Grameenphone held their leading position in terms of generating sales revenue comparing to Robi and Banglalink.[1]  The reason behind this is of course the company’s largest subscriber base and the premium tariff rate. But it is seen from the graph that though the company had managed to hold the premier position the competitors had managed to have better year on year growth.

Subscribers: As of 2009, the subscriber number for the three rival companies is shown below.

Chart 2: Annual subscribers (Data Source: Footnote 1)

Though Grameenphone leads by a vast difference in both subscriber capturing and revenue generation, it is important to look into the growth in both the indicators the three companies had from the year 2008 to year 2009.






10.79 %

34.34 %

36.78 %


6.42 %

21.81 %

36.30 %

Table 2: Growth rate in 2009 (Refer to appendix 1 for details)

Having a huge subscriber base, Grameenphone has reached a phase that; with its current propositions and marketing strategies, it can’t attract more subscribers and thus increase revenue drastically. Rather the rival companies are doing far better in terms of growth. Also due to the heavy tax imposed on the SIM sales, the company has taken a policy focused more on retaining customer rather than attracting new ones.

Average Revenue Per User (ARPU): Now, definitely Grameenphone leads in both categories of performance measurement. But, looking at the average revenue it generates from every user, Banglalink and Robi is doing quite good, it must be said. They do not lag behind by that much difference in this category.

Chart 3: Average revenue per user in BDT (ARPU)

However, in the case of all the companies, ARPU came down by 4 – 6 %, which means the service providers are being forced to reduce tariffs in order to attract customers.

Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA): Another performance indicator for telecom companies is its Earnings before interest, tax, depreciation and amortization expenses (EBITDA). In this category, Grameenphone leads the other rivals again. But, when it comes to the EBITDA margin, the rivals are not doing that bad.

That indicates that Grameenphone has a greater operating expenditure behind their revenue generation. However, EBITDA margin for Grameenphone has gone up by 22.67% in 2009[2].

Chart 4: EBITDA: Source: Annual report 2009, Grameenphone, Axiata and Orascom

In all the categories, Grameenphone is the market leader in terms of profitability and also efficiency, which is discussed in the later part of the analysis.

Liquidity Ratios

Current Ratio & Quik Ratio: Grameenphone, in comparison with the previous year has increased its Current Asset to Current Liabilities ratio (Current Ratio) by almost 100%. So the company has more current asset now to cover its current liabilities.

Net Working Capital & Operating Net Working Capital: In 2009, Grameenphone managed to lift up the Net Working Capital by more than double of the previous year (a negative 16 billion from a negative 35 billion)[3]. But the Operating Net Working Capital didn’t change as the major change occurred in the interest bearing short-term liabilities and the cash assets[4].

Chart 5: Current Ratio Source: Annul Report 2009, Grameenphone

During both 2008 and 2009, Grameenphone had maintained a current ratio below 1 and also its Net Working Capital was negative. Theoretically it might sound unhealthy for the financial condition of a company. But if analyzed further, the high current liabilities give Grameenphone leverage on the turnover of the assets. At the same time not having too much long-term liability gives the company a far more efficient financing with low interest expense.

Chart 6: Reasons behind Current Ratio & Net Working Capital growth

The reasons behind Grameenphone’s upward move in current ratio is that in 2009, Grameenphone uplifted its liquid asset holdings to almost double of the previous year, which gave it a more liquid stance in terms of satisfying cash outflows. The short-term liabilities also came down by 22.45% as shown in the chart. So the company achieved greater solvency to cover current liabilities with the current assets held. As the company is not inventory centered,  the acid test ratio in the analysis is ignored.

Interval Measure: In terms of possessing liquid assets to promptly respond to the cash outflow demands, Grameenphone performed a lot better than the other two companies under consideration.

Chart 7: Interval Measure & Current Asset Breakdown

The bar chart above shows that Grameenphone, in 2009 had enough cash assets to cover up the daily expenses for roughly 106 days. The reason is Grameenphone kept around 66% of the total current assets as cash and equivalents. Also Grameenphone incurred less total expense comparing to the revenue it had incurred in the year 2009, a decrease of around 10%[5].

Asset Management Ratios

Total Asset Turnover & Fixed Asset Turnover Ratio: These two ratios indicate that how mush sales the company is generating through the utilization of BDT 1 worth of total asset or fixed asset. Now let’s look at the charts to see how the company is doing from this aspect.

   Chart 8: Fixed Asset & Total Asset Turnover Ratio

Source: Annual Report 2009, Grameenphone

Due to an increase in sales of around 6.42%, Grameenphone has managed to increase its asset utilization efficiency by 14.72% and 5.48% in terms of Fixed Asset and Total Assets respectively comparing to the year 2008. It’s a good sign that Grameenphone had a growth of more than 14% in terms of using fixed asset as fixed asset is the part of asset that earns most of the revenue for a telecom company.

Days Sales Outstanding: In terms of receivables management or collection efficiency; Grameenphone performed close in both years; maintaining around 25 days to collect the receivables. No significant change in this area means the company is satisfied with the ongoing practice.

Debt Management Ratios

Long-term Debt to Asset Ratio: Grameenphone doesn’t follow a highly leveraged financing strategy, while the closest rival does it extremely. Grameenphone had only around 2 times of financial leverage multiplier (Total asset divided by total equity). Moreover, this multiplying effect is achieved mostly by the current liabilities as long-term debts financed only 7% of the asset in 2009. The Long-term Debt to Asset ratio has fallen by around 44% due to the payoff of a large financial lease obligation.

Chart 9: Long-term Debt Ratio: Source Annual Report 2009, Grameenphone

Times Interest Earned: Relying heavily on equity financing gives Grameenphone a very good TIE ratio that establishes the company’s credibility to the creditors. It means Grameenphone in 2009 earned 10.68 times more than it has to pay as interest expenses, which was 44.1% more than the previous year.

Chart 10: Times Interest Earned Ratio. Source: Annual Report 2009, Grameenphone

It is obvious from the above shown chart that Grameenphone might not be able to maximize its return on investment by leveraged financing, but it certainly has greater interest paying capability, which booms its credit rating. So, Grameenphone has better immunity to instant financial distresses when the company needs prompt loans at better conditions.

 Profitability Ratios

Net Profit Margin & Operating Profit Margin: After generating a very low net profit in 2008 comparing to the industry, in 2009 the company booms to 22.92% (growth rate above 300%).

The noteworthy fact here is, though the company shows a very substantial difference in net profit in the two years; its operating profits don’t behave the same way. They are rather close in this case.

Chart 11: Net Profit & Operating Profit Margin. Source: Annual Report 2009,Grameenphone

To find the reason behind this, please refer to the expenses incurring after the operational costs.

Chart 12: Expenses Breakdown. Source: Annual Report 2009, Grameenphone

With interest expenses remaining at pretty much same level, Grameenphone by becoming a public limited company has reduced their tax expenses by approximately 50%. This tax benefit provided by the government boomed the company’s net profit by over 400%. Another factor is that Grameenphone tried to retain the existing customers rather than acquiring more as the tax on the new lines was very high. So due to low sales of new Sims, the company incurred a low tax expenses.

Basic Earning Power: While the Total Asset Turnover Ratio show how much sales the company can generate by using its assets, Basic Earning Power gives a more specific measure of the same idea. It shows how much operating profit the company generates by using its assets.

Chart 13: Basic Earning Power, Source: Annual Report 2009, Grameenphone

Grameenphone has increased its asset utilization efficiency in terms of operating profit generation by more than 50%. The reason behind this increase is the asset management efficiency and of course the growth in operating profit.

The remaining profitability ratios are discussed by the Du Pont Analysis method later[6].

Market Ratios

There’s not much to talk about market ratios as Grameenphone is the first company in the telecom sector to dive into the capital market and it’s been only a year since they have capitalized the public money. The consistent well performance has given the company very good market credibility[7]. The other rival companies are not yet listed in the stock exchanges. So we are not able to compare the performance in the market.

The indicator ratios are shown in the following table –

Market Ratios




Dividend Per Share


Book Value Per Share(BVPS)


Market To Book Value Ratio


P/E Ratio


Dividend Yield (As of the closing price of 2009)


Table 3: Market ratios for Grameenphone. Source: Annual Report 20009, Grameenphone

Du Pont Analysis

We performed the Du Pont analysis for the three companies for the year 2009 in order to evaluate the relationship between the financing strategy and profitability.

Grameenphone, with a more efficient use of the assets (healthy Total Asset Turnover) converted its 22.92% Net Profit into a 13.71% return on the assets. Now, when it comes to the return of the equity holders, they get 29.84% on their investment as the assets are leveraged by 2.18 times amount of debt over the equity.

A larger amount of debt could earn a much greater amount of Return on Equity for the company owners.

Considering the total performance analysis, it can be seen that though the company has done well in many aspects, it some crucial aspect the company has performed in terms of year on year growth than its competitors.

Chapter 5:

Recommendation & Conclusion

From the above discussion over the analysis of Grameenphone’s financial performance, we conclude with the following derivations.

1)      Grameenphone is far ahead of the competitors in terms of Revenue, Subscribers, ARPU or EBITDA. But the competitors are on the way to catch up Grameenphone as their subscriber acquiring rate is much higher than Grameenphone. Though it hasn’t started to lose market leadership possession yet, but in near future the gap with competitors will become close.

2)      Grameenphone’s operating expenses excluding the non-cash expenses is very high comparing to the other players in the industry. That blurs the high revenue towards a comparatively low EBITDA margin.

3)      Overall liquidity position has become better in the year 2009 with a growth in Cash Assets and a decrease in Current Liabilities[8].

4)      Asset management efficiency grown in the year 2009 comparing to the previous year.

5)      Grameenphone relies mostly on equity financing, which makes the company less risky than the other leveraged financing strategy followers. So, the creditors have more confidence on Grameenphone regarding its capability of paying off the loan obligations. However, the company has brought down their long term obligations to even a lower level by paying off a large liability. It indicates that it has the provision of taking new debt in the upcoming years.

6)      The Net Profit Margin jumped in the year 2009 while the Operating Profit showed a decent growth as the company incurred a tax expense as much as half of the previous year[9].

7)      Grameenphone’s capital structure doesn’t allow it to convert its high return on asset into an even higher return on equity. As it doesn’t maintain a high debt-equity ratio, the low amount of leverage gives it very low ability to generate high return for the equity holders[10]. So, the company isn’t generating as much return as it can for the equity holders.

Based on the above mentioned findings, the following recommendations are proposed for the betterment of the overall performance of the company.

1)      To have a boost in the customer acquiring rate, Grameenphone must provide the target market with aggressively differentiated value propositions or slightly lower tariff keeping the “premium service provider” image intact. The scope of penetration is more in the rural areas than any other portions of the country. In addition, in the current portfolio of products and tariff plans isn’t that enriched. To attract the rural subscribers, the company must offer new differentiated tariff plans catered for their exclusive needs.

2)      The operations might be inspected to find out the excess expenses that contribute in the high operating expenses. The operating expenses that are unnecessary should be cut down to bring the most out of the high revenue advantage.

3)      The liquidity position should be held no less than the current stance. If possible, scopes might be sought to increase liquidity. But it’s not a significant sector to emphasize on.

4)      As the company now has low debt ratio and very low tax expenses, it should think of taking more long term loans to finance its previously mentioned aggressive growth plan. It would help Grameenphone to generate more annual revenue and accordingly more return on equity. The return on equity growth will be resulted from the increased financial leverage for taking more loans.


 Book References

  1. 1.       Brealey, Richard A, and Myers, Stewart C. Principles of Corporate Finance,  Tata McGraw-Hill Companies, New Delhi 2004
  2. Khan, M Y and Jain, P K. Financial Management, Text and Problems, Tata McGraw Hill Publishing Company Limited, New Delhi 2003
  3. 3.       Jackson, Mary. Advanced modeling in finance using Excel and VBA, Wiley, New Jersey, 2001
  4. Pandey, I M. Financial Management, Vikash Publishing House PVT Limited, New Delhi, 1999
  5. Damodaran, Aswath. Corporate Finance: Theory and Practice, Wiley, New Jersey,  2001

 Web References

  1. Yahoo! Finance, last visited on 22nd March 2010
  2. Bangladesh Telecommunication Regulatory Commission, last visited on 22nd March 2010
  3. Grameenphone, last visited on 22nd March 2010
  4. Banglalink, last visited on 22nd March 2010
  5. Robi, last visited on 22nd March 2010
  6. Axiata: last visited on 22nd March 2010
  7. Orascom:  last visited on 22nd March 2010

Grameenphone Limited