Telecom Industry

Bangladesh has the lowest tele-density and the lowest telephone

penetration rates in the world and even in the South Asia. According to a
report by the International Telecommunication Union (ITU), only 1.56 among
100 people of Bangladesh own or have access to telecom facilities.

The telecom industry in Bangladesh is composed of five players.

Bangladesh Telecom Limited (BTL) was the first entrant in the market back
in 1989 when it was awarded a license to operate cellular, paging and other
wireless communication networks in the country. Since then, it has been
renamed to Pacific Bangladesh Telecom Limited (PBTL) and given the brand
name CityCell Digital to its cellular services, GrameenPhone Ltd., AKTEL and
Banglalink has entered the industry with various changes in between.

BTRC has formed Teletalk Bangladesh Ltd. on behalf of the government with
an aim to bring price levels down and make cellular technology available to
the mass public. The industry is also set to accept several more players,
with licenses to operate PSTN or fixed phone lines in the upcoming months.
While the market for mobile phones, specifically, has been growing steadily
since its introduction back in 1993, in the past 18 months the market has
more than doubled, growing from 1.5 million subscribers in early 2004 to
4.2 million at the end of 20051.

Grameen Phone Ltd

At present GrameenPhone Ltd. is the market leader in the

telecommunication sector in Bangladesh. With the beginning of 2005 the
company completed its eight year of business. GrameenPhone has a very
strong competitive position in the telephone industry in the country and is
able to claim that it has the largest network, the widest coverage, the
biggest subscriber base and more value added services than any other
mobile phone operators in Bangladesh.

1
http://news.yahoo.com (April 21, 2005)

Mousumi Rahman
Historical Background

GrameenPhone Ltd. is a private limited company. GrameenPhone received

its cellular license in Bangladesh by the Ministry of Posts and
Telecommunications on November 28, 1996 and started its operations on
March 26, 1997, the Independence Day of Bangladesh.

During 1996, Bangladesh Government decided to auction off private cellular

phone licenses to four companies. Dr. Muhammad Yunus, founder of
Grameen Bank, took the initiative to set up a not-for-profit private company
called Grameen Telecom which is completely independent of Grameen
Bank. Grameen Telecom, in turn, created a for-profit company called
GrameenPhone and along with a foreign partner.

Capital Composition

The total capital of GrameenPhone was US $120 million 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 GrameenPhone private
partners. These were the Norwegian Telenor with a 51% share, Marubeni of
Japan with a 9.5% share, and the American Gonophone at 4.5%. Grameen
Phones fourth partner is Grameen Telecom (with 35%). Grameen Telecom
borrowed US$10.6 million from the Open Society Institute to set up Village
Phone.

Among the four initial investors, only Norwegian Telenor & Grameen
Telecom remains as the existing shareholders. The total capital of
GrameenPhone now remains US $ 125 million.

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Telenor As

Telenor AS owns 62% share of GrameenPhone Ltd. It is the state-owned

Telecommunication Company in Norway, a country with one of the highest
mobile phone densities in the world. It is almost the oldest and diversified
telecom companies in the world operating since 1885. It has played an
important role in development of cellular communications, particularly, but
not exclusively, GSM technology. It is using the expertise and competence,
both technological and business, gained from its home and international
markets to venture GrameenPhone and flourish an emerging market like
Bangladesh.

Grameen Telecom

Grameen Telecom owns 38% of the share of GrameenPhone Ltd. It is a not-

for-profit organization and a sister concern of Grameen Bank, the
internationally recognized financial institution dedicated to poverty
alleviation through collateral-free small loans for the poor in the rural areas
of Bangladesh. Grameen Bank has an extensive rural network and
understanding of the economic needs of the rural population.

Grameen Telecom, with the help of Grameen Bank, administers the village
phone services to the villagers and trains them regarding all service-related
issues. Its objectives are to provide easy access to telephones in rural
Bangladesh as well as introduce a new income-generating source for the
poor villagers.

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f

Shareholders of Grameen Phone

Figure 1: Shareholders of GrameenPhone Ltd.

The current capital composition of GrameenPhone Ltd. is of the following

manner:

Financial Structure
Equity: USD $56 MM
Telenor 62 %
Grameen Telecom 38 %

Table 1: Equity Structure of GrameenPhone Ltd.

Mousumi Rahman
 Senior Lenders
Debt: USD $ 25 MM
IFC
Nor Fund
Table 2: Debt ADB Composition of
GrameenPhone Ltd.
Debt: NOK 75 MM/USD $ 12
MM
Company Performance NORA

Year Achievement
Mar 97 Launch
Jun 00 Coverage of all 64 districts
Jun 00 100,000 Subscribers
Aug 03 1 Million Subscribers
Sept 04 2 Million Subscribers
Apr 05 3 Million Subscribers
Nov 06 10 Million Subscriber

Table 3: Milestones of GrameenPhone Ltd.

Currently GPs subscriber is more than 7 million which is expected to be

continuing. Because of its cost effective customer solution, user friendly
packages and lots of other supplementary features and special customize
packages (GPPP, Business Solution, and SME).

The organization earned 350 MM USD in 2004, 500 MM USD in 2005 and
targets to achieve 700 MM USD in 2006.

Mousumi Rahman
 Source: Internal Records

The year of 2006 is milestone for GP as well as telecom industry,

because in this year GP along achieved subscriber growth of
1billion and within 40 days it achieved 1 million subscribers which
is record forever in telecom industry.

Mousumi Rahman
Achievements:

As a telecommunication service provider GrameenPhone Ltd. plays a very

important role in the economic development of Bangladesh. National Board
of Revenue (NBR), Ministry of Post and Telecommunication, Bangladesh
Telephone and telegraph Board (BTTB) and Bangladesh Railway (BR) are
Government bodies that are directly or indirectly benefited by Grameen
Phone Ltd.

By bringing electronic connectivity to rural Bangladesh, GrameenPhone is

brining the digital revolution to the doorsteps of the poor and unconnected.
Grameen bank borrowers are engaged in a business by providing valuable
phone service to their fellow villagers. For them mobile phone is a weapon
against poverty.

The growth trend of the number of subscribers of GrameenPhone Ltd. is a

unique example in the telecommunication field in Bangladesh. The total
number of GP subscribers at present is 1,1600000. This is really a fabulous
achievement in such a short period of business history.

Nov 1996-Received license from the Ministry of Post and

Telecommunications.
Mar1997-Launched services in Dhaka.
Sep1997-Leased Railway Fiber Optic.
Mar 1999- Launched International Roaming.
Apr 1999-Final interconnection agreement with B.T.T.B.
Sep1999- Launched pre-paid services of GP.
Oct1999- 50,000 subscribers
Jan 2000- Implemented new credit policy.
Feb2000- Launched its services in Sylhet.
Apr 2000 Launched services in Barisal

Mousumi Rahman
 Jun 2000-100,000 subscribers.
Dec2001-Expect to achieve the coverage of the whole
country.

Sep2004 2, 00,000 subscribers.

Nov2005- 50, 00,000 subscribers.
Jan 2006- 60, 00,000subscribers.
August 2006- 96,34,515 subscribers
November 2006 1 billion subscriber

Figure: Growth of grameenphone subscriber.

Mousumi Rahman
A comparative scenario of GPs market growth

GrameenPhone Ltd. is the market leader in the telecommunication sector in

Bangladesh. The market share of GP is highest in the year of 2004 because
the numbers of subscribers are increasing more rapidly than competitors.
But in the present day the market of GP is reducing because of high
competition and decreasing rate of subscribers growth.

Year Company Percentage

GP 65%
Aktel 18%
2000
City Cell 13%
Sheba 4%
GP 66%
Aktel 16%
2001
City Cell 13%
Sheba 5%
GP 69%
Aktel 14%
2002
City Cell 13%
Sheba 4%
GP 62%
Aktel 21%
2003
City Cell 14%
Sheba 3%
GP 61.00%
Aktel 24.20%
2004
City Cell 13.40%
Sheba 2.40%
GP 62.0%
Aktel 28.0%
2005
City Cell 7.0%
Banglalink 3.0%
Table 4: Market Growth of GrameenPhone Ltd and other Telecoms

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 Mousumi Rahman
Vision, Mission, and Goals

Company Vision:

The vision of GrameenPhone Ltd. is

To be the leading provider of
telecom services all over Bangladesh
with satisfied customers,
shareholders and enthusiastic

Company Mission:

GrameenPhone Ltd. aims at providing

reliable, widespread, convenient mobile and
cost effective telephone services to the
people in Bangladesh irrespective of where
they live. Such services will also help
Bangladesh to keep pace with other
countries and reduce her existing disparity
in telecom services between urban and rural
areas.

Mousumi Rahman
Company Objective:

GrameenPhone Ltd. has a dual objective to receive an economic return on

its investments and to contribute to the economic development of
Bangladesh through telecommunication. Thus GrameenPhone, in
collaboration with Grameen Bank and Grameen Telecom, is aiming to place
one phone in each village to contribute significantly to the economic benefit
of the poor. By attaining the success factors, GrameenPhone would like to
be recognized as a reliable, honest and committed company to its valued
subscribers and stakeholders. In short, it pursues a dual strategy of good
business & good development.

Company Strategy:

The basic strategy of GrameenPhone is coverage of both urban and rural

areas. In contrast to the island strategy followed by some companies,
which involves connecting isolated islands of urban coverage through
transmission links, GrameenPhone builds continuous coverage, cell after
cell. While the intensity of coverage may vary from area to area depending
on market conditions, the basic strategy of cell-to-cell coverage is applied
throughout the network of GrameenPhone.
Presently it has network coverage in all the 64 districts around the country
of all six divisional headquarters.

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GP Coverage:

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Investment Scenario:

Business investment of GP is increasing at an increasing rate. GrameenPhone plans to invest

300 MM USD in 2005 to build new network and establish 800 new base stations.
GrameenPhone is also laying its own fiber optic.

Year Achievement
1997 0
1998 10 MM USD
1999 28 MM USD
2000 23 MM USD
2001 52 MM USD
2002 51 MM USD
2003 60 MM USD
2004 189 MM USD
Total 465 MM USD
Target 750 MM & 900 MM USD by
2005 and 2006 end.

Table 5: Investment by GrameenPhone Ltd.

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Organizational Structure:

GrameenPhone is divided into several departments namely Technical, Sales & Distribution,
Marketing, Customer Relations, Administration, Human Resource, Finance, IT, FON,
Information & Supply Chain Management.

Board of Directors

Treasury Operational Committee

Committee
Erik Aas
Managing Director (1107) + BRs (140)
MDs Secretariat (2)

Kafil H. S. Muyeed
Director Marketing (49)
Syed Yamin Bakht
GM Information (2)

Ingvald Lyche
Director Sales and Distribution (114)
Ahmed Raihan Shamsi
Company Secretary & GM Internal Audit (4)
N K A Mobin
Director Finance (91)

Khalid Hasan
Stein Nvdal-Larsen Director Corporate Affairs (48)
Director Information Technology (79)

Emad Ul Ameen
Yogesh Malik Director Human Resources (18)
Chief Technical Officer (380) + BR (140)

Frank Fodstad
Deputy Managing Director (320)

A M M Yahya Director Bidyut Kumar Basu Bjorn Harald Broderson

Fibre Optic (8) Head of CR (274) GM Procurement (23)

Figure: Organ gram of grameenphone Ltd.

Mousumi Rahman
 SWOT Analysis

Strengths Weaknesses

Financially Sound Coordination between different

Brand Name / Image departments is weak
Skilled Human Resource. Bureaucracy
Largest Geographical Coverage. Complicated package & price
Access to the widest rural structure
distribution network Inadequate promotion in the current
Excellent relations with media & competitive market
channel partners

Opportunities Threats

New and better interconnection Import duty of Tk. 1200 on every SIM
agreement card
Economic growth of Bangladesh More rigid government regulation
Huge need for telecom services More influence of competitors on the
fixed network.
Declining prices for handsets Non-cooperation of government and
fixed PSTN operators

Price war

Mousumi Rahman
Competitive Environment:

Threat of Intense Rivalry:

Until even a few months back, the telecom companies had enjoyed secured
positions in the market and were sitting back. However with intense
competition all the companies have started to take the consumer in mind.
Since the end of 2004, AKTEL has stepped up all its promotional activities
and become aggressive in its campaigns. Suddenly, it is now more visible
and more people are now aware of the brand. And Orascom Ltd. brought
competition into the industry by publicly announced that it was buying
100% equity interest in Sheba Telecom Ltd. With the purchase of 45% of
City Cell from PBTL by Singapore. Telecommunications Limited (SingTel),
early this month and with an option to purchase up to 60% total, rivalry
from this corner of the field may also increase soon.

Very recent thread is UAE based giant warid telecom with more than 2
billion investment.

Threat of New Entrants:

Organizations are slowly realizing the potential of the telecom market. This
is quite evident from the number of foreign investors eyeing Bangladesh as
a place for potential investment. Telenor, a leading Norwegian company
owns a majority stake in GrameenPhone, and Telecom Malaysia went into
joint venture to form AKTEL. Then OTH, a leading telecom provider in the
Middle East purchased 100% equity of Sheba Telecom and renamed it
Banglalink and now SingTel buys a huge portion in City Cell.

Mousumi Rahman
Threat of Substitute Products:

Mobile phone operators are constantly under the threat of being replaced
by new technology. Plus at the beginning of the year, BTRC approved the
licenses of 19 private companies to operate PSTN lines, which will enable
them to provide fixed phone lines similar to BTTB in all regions of the
country.

Bargaining Power of Buyers:

With prices coming down significantly everyday and switching cost coming
down mobile phone operators have to worry about maintaining their
customers. It is likely that customers can expect to see more changes in the
industry, with many more players fighting for market share. This will give
them opportunity to choose from a number of packages from any operator
they wish.

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Contribution to Society

GrameenPhone believes that good business leads to good development,

since high level of productivity is development. The activities of GP
contribute to the socio-economic development of Bangladesh in many
different ways. In addition to employing nearly 1500 people, more than
100,000 people are directly dependent on GP for their livelihood, including
the people working for the dealers, agents, contractors, suppliers, and a
major portion of that figure includes the Village Phone operators.

According to the International

Telecommunications Union, the Geneva-
based UN body, the addition of each new
telephone in a developing country like
Bangladesh, adds USD 2,500 to the
countrys GDP. The Village Phone
Program of GrameenPhone is a unique
initiative which provides access to
telecommunications facilities in remote
rural areas where no such service was
available before. The Program enables
mostly poor village women to own a
Village Phone subscription and retail the
phone service to her fellow villagers
while providing them with a good
income-earning opportunity. It is
administered by Grameen Telecom in
cooperation with Grameen Bank, the
internationally renowned micro-credit lending institution.

Mousumi Rahman
Set up in 1997, the Village
Phone Program has continued
to grow at a robust pace over
the years. By the end of 2004,
the number of Village Phone
subscriptions stood at 95,000,
in 61 districts. The average
earning of a Village Phone
Operator is about BDT 5000
per month, which is more than
twice the per capita income. GrameenPhone also actively participates in
promoting different socio-cultural activities and sports events in the
country. It sponsored many activities over the years including the Zainul-
Quamrul International Childrens Art Competition, the 11th Asian Art
Biennale, publication and launching of an anthology of contemporary
Bangladeshi paintings, the Independence Day '04 Photography & Painting
Exhibition, and many other activities.

Moreover, GP has also restored the exterior of

the historic Old Railway Station Building in
Chittagong as per its original architectural
design. It has sponsored a scholarship fund for
the poor and meritorious students of the
Finance and Banking Department of Dhaka
University in cooperation with the Finance and
Banking Alumni Association. GP has also donated 16 computers to two
schools for underprivileged children.

In the sports arena, GP is currently sponsoring

the Bangladesh National Cricket Team for a
period of two years through 2003-2005, and
also sponsored the National Under-19 and
Under-17 cricket teams. It was also one of the
main sponsors of the live telecast of ICC World
Cup Cricket 2003. GP also sponsored the

Mousumi Rahman
President Cup Golf Tournament, and sponsors the visits of newspaper
reporters abroad to cover major sports events.

Corporate Social Responsibility: an integral part of GP

The shareholders of GrameenPhone

believe that Good development is
good business. Since its inception,
GrameenPhone has always considered
Corporate Social Responsibility (CSR)
as an important function of the
company.

Thus, CSR is an integral part of GrameenPhone. The goal of a good CSR

program is to make the company a good corporate citizen of the country it
operates in. The aim is to initiate or support social development programs
which have a direct impact in the development of the society, thus making
a company socially responsible.

Along with providing telecommunication services to more than six million

people, providing direct income-earning opportunities to more than 200,000
people and being one of the top corporate taxpayers in the country,
GrameenPhone takes its CSR activities quite seriously.

An independent organization called Ideas & Insights conducted a survey

late last year, among people from different walks of life, on the CSR
activities of different companies. CSR was the central issue of this survey.
According to the survey, GP has been recognized as among the most
socially responsible companies in the country.

Mousumi Rahman
 Mousumi Rahman