Grameenphone

Last updated June 2012

Having started its operations in 1997, Grameenphone now provides voice, data and other value added services on prepaid and contract basis. Grameenphone has been a pioneer in bringing innovative mobile-based solutions to Bangladesh. Notable among these is the Healthline, a 24 hour medical call centre manned by licensed physicians. Other innovations include Studyline, a call centre-based service providing education related information, Mobicash, for electronic purchase of train and lottery tickets, Billpay, for paying utility bills through mobile phones and over 500 community information centres across Bangladesh. These centres bring affordable Internet access and other information based services to people in rural areas.

As at 31 March 2012, Grameenphone had 37.6 million subscriptions, while the estimated mobile penetration (SIM cards) and number of inhabitants in Bangladesh were 56% and 160 million, respectively.

Grameenphone became stock listed in November 2009, with, as at the date of this Base Prospectus, the largest public offering in Bangladesh. It is listed on both the Dhaka and Chittagong Stock Exchanges. As of 31 March 2012, Telenor held 55.8% of the shares in Grameenphone, while Grameen Telecom, the other main shareholder, held 34.2%. The remaining 10% of the shares were held by general retail and institutional investors.

Network and licences

Grameenphone holds a mobile cellular licence with both GSM 900 MHz and GSM 1800 MHz spectrum which expired in November 2011, along with three other mobile operators’ licences.

The renewal process of Grameenphone’s existing 2G licence and associated spectrum was taken to the High Court given certain ambiguities around the payment mechanism, particularly as to the treatment of VAT on payments. In addition, the Bangladesh Telecommunication Regulatory Commission (BTRC), the principal telecom regulator of Bangladesh, applied a “Market Competition Factor” (MCF) additional charge to the spectrum purchased in 2008.

In its judgment dated 13 February 2012, the High Court declared that the MCF claimed for 2008 spectrum was illegal, and resolved the ambiguity as to the payment of VAT by ordering that Grameenphone will have to pay 100% of applicable fees due to the BTRC, pay an additional 15% as VAT to the National Board of Revenue and then claim a rebate/return of such VAT, thereby restricting Grameenphone’s total cost to 100% of applicable fees due to the BTRC. Grameenphone has sought clarification on the VAT rebate/return mechanism before the Judge-in-Chamber of the Appellate Division, which is in the process of hearing the case before the full bench.

In addition, by the order of the High Court, the BTRC issued a letter to Grameenphone on 11 November 2011 permitting Grameenphone to continue its operations until finalisation of the renewal of Grameenphone’s existing 2G licence and associated spectrum. Grameenphone and three other operators deposited the first instalment of licence and spectrum renewal fees with the BTRC on 31 October 2011.

In respect of 3G services, the BTRC has sent draft 3G licensing guidelines to the Ministry of Post and Telecommunications (MoPT) with recommendations for an open auction in September 2012 for five licences for 3G and beyond, but limited to the new frequency in 2.1 GHz.
The present Grameenphone network is EDGE/GPRS enabled and covers over 99% of the population and 90% of the geographic location. In the year 2011, Grameenphone completed swapping of its entire network with Huaweii equipment that entailed the network to be future-ready and significantly cost efficient.

Competition

As at 31 March 2012, Grameenphone had a market share of 42.2%. In addition to Grameenphone, there are five other mobile operators in Bangladesh. These operators and their market shares as at 31 March 2012 are: Banglalink (27.5%), Robi (19.8%), Airtel Bangladesh (7.1%), Citycell (2.0%) and Teletalk (1.4%). Competition among operators is intense and tariff levels are among the lowest in the world.

Regulatory matters

The BTRC was established under the Bangladesh Telecommunication Act 2001 as an independent regulator. However, as per amendments to the Telecommunication Act 2001 in 2010, certain powers to regulate the telecommunication sector have been transferred to the Ministry of Post and Telecommunications.

Under previous licensing arrangements, all mobile operators were required to pay an annual licence fee of BDT 50 million, quarterly spectrum charges and 5.5% of revenues. However, under the new licensing framework, operators will have to pay 6.5% of revenue (inclusive of 1% on account of a social obligation fund) and revised spectrum charge rates. On 9 June 2011, the applicable SIM tax was reduced from BDT 800 to BDT 605. SIM tax has to be paid for the purchase of a SIM, and furthermore handsets have 12% duty applied at the import stage. Corporate income tax is 45% for mobile service providers, which reduces to 35% if a company maintains a 10% listing on the country’s exchanges.

Domestic interconnection calls are operated through Interconnection Exchange Licensees (ICX), while international interconnection calls are operated through International Gateway Licensees (IGW). For each outgoing call, operators will have to pay BDT 0.22 per minute (of which BDT 0.18 is payable to other operators and BDT 0.04 to ICXs), and will receive BDT 0.18 per minute for each incoming call, irrespective of peak and off-peak hours. Voice tariff levels are defined by a tariff circuit set by BTRC along with specific directives on promotions.

Passive network infrastructure sharing is obligatory. As at 31 March 2012, Grameenphone has signed infrastructure sharing agreements with Banglalink, Robi, Airtel Bangladesh, Augere (a WIMAX operator) and BIEL (a local ISP) in line with the guidelines.