Organization Structure of Grameenphone Limited
Subject: Finance | Topics:

The report is based on the renowned company Grameenphone Ltd. I have started this report on a detailed description of Grameenphone Ltd. since its birth. I have discussed in the report Grameenphone’s countrywide expansion, diversified business activities, having both brand recognition that they had then and now, Grameenphone has been successfully doing business for years.

In the organization part, I have discussed about the organization structure of Grameenhpone Ltd., SWOT analysis of the company and detailed description of the different divisions that are there in the company.

I have briefly analyzed Grameenphone’s financial performances followed by the competitive analysis in details.

In the project part. I have discussed in details about the department, Corporate finance & Treasury department where I have done my internship. Here, I have discussed the whole procedure how the department make their investment decisions.

Then, i have analyzed the financial performance of three banks and explained which bank grameenphone should choose and why to invest.

Finally, Based on the whole report, I have come up with some findings and based on those, I have made some recommendations as well.

 

Introduction

Once considered a fancy gadget for the elite, the mobile phone has been transformed into an essential tool for all. Mobile phones are now empowering people from all groups in all areas of Bangladesh. And this revolution was first brought about by Grameenphone Ltd.

Grameenphone Ltd., the largest telecommunications service provider in Bangladesh, received its operating license in November 1996 and started its service from March 26, 1997, the Independence Day of Bangladesh. Now, after 10 years of successful operations, Grameenphone is the largest mobile phone service provider in Bangladesh, with more than 22 million subscribers as of July 2010. Grameenphone provides services to rural and urban customers across Bangladesh, where mobile telephony is acknowledged as a significant driver of socio-economic development, both for individuals and the nation.

Grameenphone Ltd. is incorporated in Bangladesh as a private limited company and now it is the market leader in mobile connectivity in Bangladesh. The current market share of GP is around 46%, almost three times more than its nearest competitor, Banglalink. Grameenphone (GP) has been established to provide high-quality GSM cellular service in Bangladesh at affordable prices. Serving the mass market is one of GP’s primary goals. By serving the general public as opposed to niche markets, the Company plans to achieve economies of scale and healthy profits. But serving the mass population is never easy. Organizing the distribution and collection channel for over 14 million clients is a daunting task indeed. That is why Grameenphone has always tried to be innovative in introducing newer and easier channels both for its distribution and collection network to work more efficiently.

The total subscriber number of Grameenphone is currently 22 million. Among them 5 lacs (3%) are post-paid subscribers. These subscribers mainly pay through – Banks, ERS (Flexi Load) and Scratch Card. Banks used to be the main collection mode but recently ERS is more popular whereas Scratch Cards are the least used mode of collection. This report will be explain and make comparative analysis between the different modes of payments through banks such as – ATM, Auto Debit etc. The introduction of ERS for collection of air-time has revolutionized the whole process. This report will also include a cost-benefit analysis of using ERS as a collection method and judge its effectiveness and efficiency.

Title of the Report:

This report will be titled as “ The Investment policy of grameenphone ltd (fund management).” The report will be divided into three basic parts like overview of grameenphone, the investment procedure of grameenphone in different banks, the investment procedure of grameenphone to extend their business.

Objective:

In this report, I would try to endow how grameenphone ltd. craft  their decisions in making their investment. Here I would basically talk about the activities of the department of corporate finance and treasury under finance division and their decision making procedures and techiniques to invest in commercial banks and to extend their own business. Therefore the objective of the report can be summarized as follows:

Broad objective: To give a picture of the department of corporate finance, treasury and fund management in respect to investment policy.

Specific objective:

  • To emphasize the brief description of finance division.
  • To summarize the activities of the deparment of corporate finance and treasury.
  • To know deeply how the concerned department make their investment decisions in banks.
  • To know the factors and tools they rely on when making investment decisions in banks.
  • To focus on the factors the consider when making investment to extend their business.
  • To specify some findings from my analysis.
  • To make some recommendations for the sectors which can be improved.

Significance of the study:

The finance division is the most vital division of any organization. They have to always deal with money i.e. how to invest money, how to collect money, what will be the sources of the money etc. The department of corporate finance and treasury is again very crucial department under finance division. They have to manage the fund coming in to grameenphone ltd. As an undergraduate student, I think I need to know how giant companies like grameenphone make their investment decisions. This study would help me in following aspects :

  1. It will help me to work in finance division of giant companies in future as I would learn their investment policy.
  2. As I would learn the investment decision making process, it would help me to make my own investment decision if I become an entrepenuer in future.
  3. The research will show the performance of different banks and their ratings which is again important in case of investment decision.
  4. This form of research will encouage me to do further researches in Bangladesh or other countries in the same area of interests.

Research Methodology:

The project will require primary and secondary data. I will collect the secondary data by going through different books, journals, online sources etc. The sources will be clearly mentioned in the references according to APA format. There will primary data sources as well because to do my analysis I will require some primary data which I will collect by interviewing different officials of finance division of Grameenphone Ltd.

Limitations of the study:

Grameenphone is a public Ltd. Comapany. Some their financial data is very sensitive to reveal in the public. Therefore I would not be provided with those financial data. So, in case of that I have to do the research with the data available in my hand and in some cases with some hypothetical data.

Grameenphone Limited

Grameenphone Ltd. received its operating license in November 1996 and started its service from March 26, 1997, the Independence Day of Bangladesh. The shareholders established the company realizing the important role telecommunications can play in economic development: Connectivity translates into productivity. They also made a commitment that “Good Development is Good Business”.

Grameenphone is a unique international joint venture between Telenor (62%), a leading telecommunications company of Norway, and Grameen Telecom (38%), a not-for-profit company in Bangladesh, working in close collaboration with the micro-credit pioneers Grameen Bank and Professor Muhammad Yunus, the Nobel Peace Prize winners in 2006. Entrepreneur Iqbal Quadir first had the idea of providing mobile telephony to the poor of Bangladesh. His early discussions with Professor Yunus later resulted in launching the internationally acclaimed Village Phone Program, coupling micro-credit with mobile telephony to make telecommunications accessible to the rural poor. The shareholders also contributed with their unique strengths. Being at the forefront of developing and delivering modern telecommunications facilities for more than 150 years, Telenor provided the managerial expertise and technological know-how to set up a world-class mobile phone operation in an emerging market. On the other hand, Grameen Telecom provided the knowledge and deep understanding of the local economy. At present GP has coverage all over Bangladesh as well as in 100 foreign countries of 6 continents through 250 international roaming partner operators.

Founding Partners of Grameenphone Ltd.

Initially Grameenphone was a joint venture company comprising of four companies from four different countries: Telenor of Norway, Grameen Telecom of Bangladesh, Marubeni Corporation of Japan and Gonofone Development Corporation of USA.

Telenor

Telenor is a state-owned telecommunication company from Norway. It is amongst the oldest, most sophisticated, and diversified telecom companies in the world. The company has a long history of successful cooperation with other operators and governments in and out of Norway. It has operations in Russia, Hungary, Montenegro, Ireland, Bangladesh, Greece, Germany, Germany, Australia, Malaysia etc. Telenor’s home base, Norway, has the highest density of mobile phones in the world and one of the most competitive markets in the field. Telenor has been playing a pioneering role in the development of GSM, one the latest and most successful versions of cellular technologies.

Grameen Telecom

Grameen Telecom, a sister concern of Grameen Bank, has been established to organize and assist the borrowers of Grameen bank. It was established in 1995 as a not-for-profit company for improving the standard of living and eradication of poverty from rural Bangladesh by extending the benefits of information revolution. Grameen Telecom’s objectives are to provide easy access to GSM cellular services in rural Bangladesh, creating new opportunities for income generation through self-employment by providing villagers with access to modern information and communication based technologies.

Marubeni Corporation

Marubeni Corporation is a leading investment and trading company from Japan. It is involved in the operations of import, export and offshore trading. It has major investments in numerous developing countries throughout Asia, Africa and Latin America.

Gonofone Development Corporation

Gonofone Development Corporation is a New York-based telecommunication development company having investments in many companies in USA, Russia and other parts of Europe. It was established in 1994 in New York for organizing the concept of Grameenphone.

These four companies owned shares of Grameenphone in the following manner:

Table- 3.1: Founding Partners of Grameenphone Ltd.

Share Holders

% of share

Telenor

51.0

Grameen Telecom

35.0

Marubeni Corporation

9.5

Gonofone

4.5

About Grameenphone Ltd.

Company Vision

The vision of Grameenphone Ltd. is  “We are here to help”. Grameenphone exists to help its customers get the full benefit of communications services in their daily lives. It wants to make it easy for customers to get what they want, when they want it.

Company Mission

The vision will be achieved by the following missions:

  • Connecting Bangladesh with ease and care
  • Being user-friendly cellular phone service provider
  • Providing value for money
  • Providing simple and timely connections
  • Having a right and understandable process

Company Values

Grameenphone Ltd. intends to portray its corporate values in all its functions, products and service. These values are:

  • Make it easy
  • Keep promises
  • Be inspiring
  • Be respectful

Company Objectives

The main objective of Grameenphone Ltd. is “Good Business, Good Development”.  Grameenphone believes in providing service that leads to good business and good development. Telephony helps people to be better connected, work together, and thus raises productivity. This gain in productivity is development, which in turn enables them to afford services that Grameenphone offers, generating a good business. Thus development and business go together.

Serving the mass market is one of GP’s primary goals. By serving the general public as opposed to niche markets, the company plans to achieve economies of scale and healthy profits. At the same time, service to the general public means connectivity to a wider population and results in the economic development of the country. The company has devised its strategies so that it earns healthy returns for its shareholders and at the same time, contributes to genuine development of the country. In short, it pursues a dual strategy of good business and good development.

They say that everything starts with a dream. They started their history with a dream to bring change. The dream of changing the future with the strength of technology, of changing lives with the power of innovation.

Products and Services of GP

By bringing electronic connectivity to both urban and rural Bangladesh, Grameenphone is bringing the digital revolution to the country. The products of Grameenphone are categorized in four different segments four different kinds of users. They are:

  • General Users
  • Business Users
  • Youth Segment
  • Rural Users

General User

For general users Grameenphone offers two types of products

  • Prepaid
  • Postpaid

Prepaid product- “Smile”

Introduction of Grameenphone’s Pre-Paid Service is a revolution of mobile telephony in Bangladesh. More than 95% of GP’s subscribers are prepaid users. Smile connections are of two types namely, “Smile” and “Smile PSTN”. The former is only mobile-to-mobile, while Smile PSTN connects to BTTB local, BTTB-NWD (Nationwide Dialing), ISD (International Standard Dialing), all Grameenphone mobiles, and other mobiles and receives calls from the same. It frees the subscriber from the hassles of paying bills, security deposits and line rents. A wide range of value added services are offered with this connection, namely – news updates, downloadable ringtones, wallpapers, data transfer, internet browsing etc.

Postpaid Product- “Xplore” Packages

Grameenphone has around 500,000 postpaid subscribers. For these subscribers it offers two types of postpaid connection – Xplore-1 & 2. “Xplore-1” connects to BTTB local, BTTB-NWD (Nationwide Dialing), all Grameenphone mobiles, other mobiles and receives calls from the same. It has National Roaming facility. “Xplore-2” also gives the same facilities as “Xplore-1” with some additional value added service. Another difference is it gives ISD (International Standard Dialing) facilities. But as it is a post-paid connection so a subscriber has to deposit some security money and pay the bill with a flat line rent.

SWOT Analysis

Strength

• Nation-wide coverage
• Strong distribution channel
• Strong infrastructure
• First mover advantage
• Customer-care Weakness
• Billing inflexibility
• Comparatively higher call rates
• Dependency on prepaid products
• Lack of value added services within SIM

Opportunity

• Unmet demand
• Economic development
• Rapid change/improvement in lifestyle
• Increased socialization
• Demand for new & innovative products Threat
• Aggressive marketing from other operators
• Increased marketing/operating costs
• New entrants
• Churning
• Increased bargaining power of the consumers

Weakness

Billing inflexibility
Comparatively higher call rates
Dependency on prepaid products
Lack of value added services within SIM

Threat

Aggressive marketing from other operators
Increased marketing/operating costs
New entrants
Churning
Increased bargaining power of the consumers

Grameenphone management and organization structure

gp

Description of Different Divisions and Departments

Currently Grameenphone has 11 divisions and 5 departments to run its operations smoothly. The divisions are:

  • Customer Management Division
  • Finance Division
  • Information Technology Division
  • Sales and Distribution Division
  • Human Resource Division
  • Fiber Optic Network Division
  • Regulatory and Corporate Affairs Division
  • Technical Division
  • Projects Division
  • New Business Division
  • Marketing Division

The departments are independent from any divisions. The names of 5 departments are:

  • Administration Department
  • Revenue Assurance and Fraud Management Department
  • Information Department
  • Internal Audit Department
  • Legal and Compliance Department

There are also two projects running under observation of Deputy Managing Director. The projects are independent of Projects division. These are, CHQ Project and Efficiency Project.

Among them the respective directors head ten divisions. Marketing division is headed by a deputy director. A General Manager heads Information Department. He has to report direct to the Managing Director. Head of supply chain management has to report directly to the director of Finance Division. This responsibility is added recently to the Director, Finance Division.

CUSTOMER MANAGEMENT DIVISION

Customer Relations Division is the bridge between the customers and the company. People here are always serving the clients. A total of 210 people in this division providing customer service are strengthening the relationship of GP with its valued customers. This division can be subdivided into three major parts-call center, billing department and trainee development department.

Call center responds to customers’ query. 150 to 190 people working in shifting basis in call center provide 24 hours service to the customers through telephones. They receive queries and complaints related to GP service and network, solve them, provide different types of information to the clients etc.

Billing department is mainly responsible for billing customers for the service and collecting the revenue from them. This department works with the help of its eight units. The units are distribution unit, general banking unit, bank reconciliation unit, bank communication unit, collection unit, credit recovery unit, fraud management unit and revenue assurance unit.

Trainee development department arranges all sorts of in-house and overseas training programs for the employees. Experts from within the GP family conduct in-house training programs. These programs include orientation for new employees, team-building workshops, customized training for the senior managers on management style, motivation, and project management and handling difficult situations. Many GP employees are sent to foreign countries for overseas training, workshops and seminars. All the organization and formalities concerning these programs are done through this department.

SALES & DISTRIBUTION DIVISION

Sales and distribution division has the opportunity to have direct interface with the customers. The number of employees working in this division is 1588. This division is subdivided into two part- sales department and distribution department. The responsibility of sales department is to sell the products and services of Grameenphone. Therefore they have to work in close collaboration with Marketing Division for their success in selling. They also need to keep good relationship with the sellers and also with customers. The responsibilities of the part or the distribution department includes instant delivery of products and services, maintaining relationship with dealers, serving the corporate clients with extra care, follow up existing subscribers and building relationship with new and existing subscribers. One of the most important tasks of sales department is sales-forecast.

HUMAN RESOURCES DIVISION

Human resource department plays a very important role in the functioning of the organization. The main tasks of this department are employee recruitment, selection, transfer, promotion, training, performance appraisal, manpower planning etc. Different divisions send theirpersonnel requirement to HR department. Then HRD sets target, prepare recruitment planning and go for the recruitment process. When an employee is recruited a separate employee file is opened comprising of all information of the particular employee which is regularly upgraded by HRD. This department is also responsible for performance appraisal, manpower planning etc. Different divisions send their personnel requirement to HR department. Then HRD sets target, prepare recruitment planning and go for the recruitment process. When an employee is recruited a separate employee file is opened comprising of all information of the particular employee which is regularly upgraded by HRD. This department is also responsible for performance appraisal of employees that is very important for the confirmation, increment, promotion, transfer of employees. This is done through job analysis, setting up of performance standard and appraisal interview.

TECHNICAL DIVISION

The Technical Division can be considered as the brain of this organization. This division has the highest number of employees, which are 1077 at present. This division is split into three departments- planning department, implementation department and operations department. People working in planning department build the technology while people working in operations department maintain the technology. Implementation is between the two. Most of the people in the technical division are from the engineering and technological educational background.

People in planning department are responsible for planning the network and equipment, taking decision about new expansion, enhancement and up-gradation and closely monitoring network performance. They are also engaged with BSC (Base Station Controller) and MSC (Mobile Switch center) related planning, timely supply of equipment, making roaming agreements with other countries and negotiating with home owners for building base stations on the roofs. This department has three parts: switch planning, radio planning and transmission planning.

The people of implementation department are responsible for the construction and acquisition of base station room, antenna pipe, and power supply etc., installation of new base station hardware, start-up and pilot operation of base station. It is also divided to three units: site acquisition, civil works and roll-out.

Operations department is responsible for smooth operations and maintenance of the network. Their main tasks are operation, maintenance and overall management of the networks, fault detection and fault handling of networks. This department always closely monitors the network performance.

MARKETING DIVISION

Marketing is responsible for all types of Product development and launch, Branding and communication, International Roaming, Value Added Services and all types of Research activities. The Division comprises the following departments: Product and Market Development Department (PMD), Market Research and Planning Department (MRP), Market Communications Department, Brand Development and Management Department International Business Department, Value Added Services Department.

The Product and Market development Department includes Products & Prices Section (Business Solution, Djuice and, Mass), New Product development and Innovation lab, and Forecasting and Analysis Section. Market Research and Planning Department includes Segmentation, Research & Planning Section and Market Intelligence – acting as a central research point for Grameenphone. The International Business Department is involved in international roaming services while the Value Added Services Department includes Service Development and Management Section, Content Provider / Aggregator Management Section, CPA/CSF Platform Section and Advanced Services section. The Market Communication Department deals with media management, event management and regional marketing.

PROJECTS DIVISION

The responsibility of projects division is to manage the process of initializing, prioritization, monitoring of execution of all major change request (projects). This division is responsible for overall performance, measure and report of IT in delivering project-based services. This division develops, maintains, and evolves standards, tools, templates, and documented processes for project management within IT. Another responsibility of this division is to develop tools to assess the effectiveness of project management efforts within IT. This division gathers project information and maintains a list of current project activity for IT including project timeframes and resource utilization.

INTERNAL AUDIT DEPARTMENT

This department, with a direct reporting to the Managing Director, is responsible for monitoring the activities in the light of policies or procedures set by the Board of Directors and/or the Management Team. In addition, this unit has to follow the Group Internal Auditing Guideline as a part of subsidiary of Telenor Mobile. On the basis of reports of the Internal Auditor, actions are taken to bring about developments and rectifications of systems or policies and procedures.

LEGAL AND COMPLIANCE DEPARTMENT

This is a one unit department whose major functions comprise as follows:

  • To ensure sufficient legal coverage and minimum exposure to risk
  • To establish high standards of corporate governance
  • To build GP’s image as a compliant organization both among its customers its other stakeholders.

INFORMATION DEPARTMENT

Information department is managing the efficient flow of information. It is responsible to manage the relationship with media and newspapers, publish news bulletins regarding different events of the company. It is also publishes monthly newsletters of GP. It also publishes the GP Annual Report. It determines the contents of Grameenphone websites and Grameenphone@work intranet site.

Telecom Industry in Bangladesh

The telecommunication sector in Bangladesh is poised for rapid growth in the coming years. The concept of mobile telephone has become largely familiar and phenomenal in Bangladesh from the early 90s. The sector, particularly which of mobile phones, is one of the fastest growing areas of the economy. The growth potentials will continue to remain robust for the foreseeable future.

There are six mobile telephone operators in Bangladesh at the moment. Among them one is Government owned telephone operator: Bangladesh Telegraph and Telephone Board (BTTB) and the other five are privately owned companies namely Grameenphone Ltd., Telecom Malaysia International Bangladesh (TMIB), Orascom Telecom Bangladesh Ltd., Pacific Bangladesh Telecom Ltd. (PBTL) and Warid Telecom Bangladesh Ltd.

Grameenphone Limited

Grameenphone Ltd. is the market leader in the telecommunication sector in Bangladesh. It is a joint venture of four different companies in four different countries. Starting operating from 26th March, 1997, Grameenphone Ltd. has recently completed its 11th year of dominant present in the market. It is now able to say 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. GP has a very strong competitive position in the telephone industry in the country.

Orascom Telecom Bangladesh Limited (Banglalink)

Banglalink was previously known as Sheba Telecom which began operation in 1998. It was a joint venture between a Malaysian Conglomerate, Technology Resources Industries Berhad and a local firm named Integrated Services Ltd. (ISL). In 2005 Orascom Telecom Holding (OTH) acquired Sheba Telecom and gave a new trading name ‘Banglalink’.

When banglalink entered the Bangladesh telecom industry in February 2005, the scenario changed overnight with mobile telephony becoming an extremely useful and affordable communication tool for people across all segments. Within one year of operation, banglalink became the fastest growing mobile operator of the country with a growth rate of 257%. This milestone was achieved with innovative and attractive products and services targeting the different market segments; aggressive improvement of network quality and dedicated customer care; and effective communication that emotionally connected customers with banglalink. At present it is holding the 2nd position in the cell- phone industry with respect to market share.

Telecom Malaysia International Bangladesh (Aktel)

Telecom Malaysia International Bangladesh (TMIB) commenced their venture in 1997, the same year when Grameenphone inaugurated its business. TMIB is a joint venture between Telecom Malaysia and A. K. Khan and Co. The company used GSM network technology and its brand name is Aktel. It has now become the third largest mobile phone operator in Bangladesh in terms of revenue and subscribers (7.57 million as of April, 2008) unable to hold its 2nd position due to fierce competition from Banglalink. AKTEL has the widest international roaming service in the market, connecting 315 operators across 170 countries. It is the first operator in the country to introduce GPRS to its subscribers

Warid Telecom Bangladesh Ltd.

Warid Telecom Bangladesh Limited is a GSM-based cellular operator in Bangladesh. It is the sixed mobile phone carrier to enter the Bangladesh market. It is wholly owned subsidiary of Warid Telecom International LLC which is the part of The Dabi Group based in the UAE.

In May 10th, 2007, Warid Telecom launched its commercial operations in Bangladesh with a network encompassing 26 districts. By November 2007, the network had been expanded to cover 61 districts and being used by 2 million customers. Based on the NGN (Next-Generation) network, Warid Telecom’s operational activities in Bangladesh aim to achieve a new and modern corporate identity, which is congruent with the dynamic changes taking place in the telecom industry today. With a reflection of a new strategy, Warid aim to be perceived not only as a telecommunication operator of voice services, but also as a universal provider of comprehensive communications services for both residential and business customers.

Pacific Bangladesh Telecom Limited (Citycell)

Among the other four mobile phone operating companies who are running their businesses in the private sector, Pacific Bangladesh Telecom Ltd. (PBTL) is the pioneer. In 1990 Hutchison Bangladesh Telecom Ltd. was formed as a joint venture of Bangladesh Telecom Ltd. (BTL) and Hutchison Whampoa of Hong Kong. The company began their operations as the analog cellular operator using the CDMA technology in 1993. In 1996 this company was renamed as pacific Bangladesh Telecom Ltd. (PBTL) with brand name of Citycell. At present the ownership of PBTL belongs to the Pacific Telecom Ltd. a concern of the Pacific Group and Hutchison Whampoa Ltd. a Hong Kong based diversified multinational conglomerate.

Teletalk Bangladesh Limited

Teletalk Bangladesh Limited is a public limited company owned by Bangladesh Telegraph and Telephone Board (BTTB) in other words by the Government of the Peoples Republic of Bangladesh. It was incorporated on 26 December, 2004 being the only government sponsored mobile telephone company in the country. Teletalk Bangladesh limited was established keeping a specific role in mind. It has forged ahead and strengthened its path over the years and achieved some feats truly to be proud of, as the only Bangladeshi mobile operator and the only operator with 100% native technical and engineering human resource base, Teletalk thrives to become the true people’s phone – “Amader Phone”.

Market Scenario

Telco industry in Bangladesh is intensely competitive. According to Bangladesh Telecommunication Regulatory Commission (BTRC) the total number of subscribers in the telecom industry of Bangladesh is 40.34 million as of April, 2008.

Table – Subscriber base of the Mobile Operators in Bangladesh

Telecom Operator

Subscribers (in millions)

GP

20.82

Banglalink

10.14

Robi

7.63

Warid

3.86

Citycell

1.74

Teletalk

0.99

Source – Bangladesh Telecommunication Regulatory Commission (BRTC)

ssFrom illustration 2.1 and 2.2 it can be clearly seen that Grameenphone Ltd. dominates the market with a subscriber base of 18.60 million having 46.12% market share. Its nearest competitor is Banglalink with a subscriber base of 6.64 million and 21.42% market share, closely followed by Aktel. Other three players are Warid, Citycell and Teletalk. Among its competitors Banglalink and Warid pose the greatest threat. Banglalink is turning out to be the fastest growing mobile operator where as the growth of Warid is also threatening. All this players together make the telecom market very competitive in nature.

Industry Analysis

Although Grameenphone dominates the market with around 46% of market share, the nature of the industry is oligopolistic in nature. It is characterized by price transparency, very little product differentiation and intense competition in the market. For a competitive environment analysis, Porter’s 5 forces model is most useful.

Porter’s 5 Forces Model

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Competitive Rivalry

The mobile telecom industry is fiercely competitive. Even a few years back the industry was not as robust as it is now. Initially, Citycell enjoyed total monopoly in this sector. After the entry of Grameenphone and Aktel, the industry condition changed. Citycell lost its place as a monopoly player as Grameenphone took over most of the market share and Aktel took the second position.

The scenario further changed with the entry of Orascom Telecom, the mobile giant from the Middle East. They entered the market by acquiring 100% shares of Sheba Telecom and re-launching the brand as Banglalink. Aggressive marketing and promotion were one of their main entry strategies and it worked. The airtime rates and connection prices came down because of the competition. This was an awakening call for the other operators. Grameenphone and Aktel, who were quietly enjoying their market positions, suddenly became aggressive as well. There was a huge increase in promotional activities of all mobile operators. The prices also started climbing downhill.

Companies focused on segment marketing as well as mass marketing. GP launched its youth brand Djuice to cater to the needs of young generation. Citycell came up with their Aalap Super and Aalap Super Plus providing free airtime whole night. Aktel also came up with new offers like Aktel JOY that catered to the need of couples. Overall, the industry became a hubbub of activities.

Threat of New Entrant

Although the industry is fiercely competitive, the overall mobile penetration rate is only 21.66% of the whole population. This huge untapped market makes the sector quite lucrative for big investors. Foreign investors are quite keen in investing in this segment. Infact, all the current players are either partially or fully foreign owned – 62% of Grameenphone is owned by Telenor from Norway; Telecom Malaysia owns around 70% of Aktel and Banglalink is 100% owned by Egyptian Orascom Telecom. Singapore Telecom (Singtel) has entered the market by acquiring 45% share in Pacific Bangladesh Telecom. Warid Telecom of Abu Dhabi has got the license and has already started their operation. And now the US giant Vodafone is investing in the mobile telecom sector of Bangladesh by acquiring significant share of Aktel.

This plethora of foreign investors shows that the threat of new entrants is very high. However, the barrier to entry and exit are also high. High setup cost and high level of sunk cost acts as a screening for small investors from crowding the sector.

Threat of Substitutes

Mobile industry is a technology based industry and like any other technology has the danger of becoming obsolete by new technology. Thus, the threat of potential substitutes is always there.

Currently, the biggest substitute of mobiles is land phone. The land phone market, until very recently, had been a government monopoly. Private land phone licenses were issued in 2005 and the PSTN (land phone) companies are yet to capture a significant portion of the market. Moreover, it was found that people keep mobile phones even if they have land phone connection. Thus, the threat from land phones is not that high.

Another threat to the mobile phone industry is the expansion of broadband technology. People, especially youngsters, are finding it cheaper to chat online with their friends rather than talking. Broadband provides with quite a few advantages over mobile phones: chance to communicate with more than one person, cheaper rate are a few examples. However, lack of proper infrastructure is acting as a barrier to expansion of broadband countrywide. Thus, it is yet to materialize as a real threat to the mobile industry.

Bargaining Power of Suppliers

The bargaining power of suppliers is moderate in this industry. Since the number of mobile phone companies are limited the suppliers cannot switch frequently or pressurize the buyers. On the other hand suppliers like Ericsson, Nokia, Siemens and Motorola are pretty big player themselves and have specialized sales units. Thus, there was always a good understanding between the suppliers and buyers. This situation is now tipped a little bit in the favor of the mobile phone companies by the entry of the Chinese company Huawei. They are offering to supply at lower rates than the previous suppliers. As a result, companies now have the option to go for cheaper suppliers.

Bargaining Power of Buyers

Initially, the mobile market was a sellers market. When Pacific Telecom first introduced their brand Citycell, the startup connection used to sell for more than Tk.100,000. The airtime was over Tk.16 per minute. However, with the increase in competition, buyers gained more power. Currently, it is now a market mainly dominated by buyers. The prices have come down a lot. The low level of product differentiation and very low cost of startup connections have led the buyers to switch operators very frequently. Companies are undertaking various promotional and product strategies to reduce churn.

The middlemen played a major role in the determining the buyer power. Previously all the companies used external dealers to ensure the smooth flow of their distribution. The commission paid to dealers was very high. However, the dealers paid a very low level of commission to retailers, thus controlling the market to a great extent. Grameenphone is the first company to deal with this situation. They have started their own distribution network. This has not only reduced cost in the form of dealer commission but also increased satisfaction of retailers. Thus, in a market with strong buyer power, a self-owned distribution network can only help GP in maintaining its market leader position.

Overview of Finance Division

The Finance Division holds 330 employees in its various departments. The Division encompasses all financial activities – both internal and external. The purpose of each of the activities is given as follows:

Financial Statement Analysis

  • Business plan
  • Strategic plan
  • Budgeting
  • Product profitability analysis
  • Statistical analysis-financial
  • Revenue analysis
  • Telenor quarterly review
  • Adhoc reporting to board, Telenor management and other related parties
  • Presentation- company, BM, OCM and related parties

Investment Control

  • Review new investment proposal as project or programs
  • Prepare business case
  • Advice management and investment committee
  • Re-rank the investment options

Financial Control

  • Implementation of IFRS in preparing the financial statements
  • Maintain and develop internal control structure aiming at the Sarbanes Oxley Act 2002
  • Check compliance of financial and procurement policies
  • Compliance with tax related issues
  • Review policies and procedure in place and pass suggestion for continuous improvement

Strategy and Training

v  Develop and follow-up strategy of Finance Division

v  Coordinate recruitments in Finance Division

v  Coordinate training for Finance Division employees

v  Follow-up IVC of Finance Division

Payroll and Taxation

  • Payroll management
  • Corporate tax management
  • VAT management
  • Board of Investment (BOI), Bangladesh Bank and others regulatory affairs

Capital Market

  • Ensure and monitor compliance to the financing agreement
  • Responsible to lender, Telenor and Bangladesh Bank related to financing issues
  • Liaison with foreign lenders, sponsors, bankers and regulators

Reporting & Accounting & System Administration

  • Financial reporting to Management, Telenor, OCM and Board
  • Financial and management accounting- actual and budget
  • Budgeting (preparation/implementation/monitoring)

Assets and Insurance

  • Asset addition
  • Capitalization WIP
  • Land and land advance
  • Insurance – fire and business interruption

International Settlement & Insurance

  • Letter of Credit for all imports
  • Leasing, insurance and contracts
  • International roaming and receivables, payables and invoicing
  • All foreign payment and employee foreign travel and training payments and advances

Treasury

  • Fund management
  • Cash rolling forecast
  • Local payments
  • Bank reconciliations
  • Employee gratuity and provident fund

Revenue Accounting

  • Collection of prepaid, post-paid and international roaming bill from subscribers
  • Recognition of prepaid, post paid revenue and revenue from all sub leases
  • Reconciliation of all collections
  • Handset payment management
  • Banking arrangement for collection
  • Costing of inventories
  • Invoicing to subleases and collection
  • Participation in revenue assurance activities

Grameenphone Ltd. Invest their money for two purposes-

1.To extend their business

2.Invest in banks to get profit.

 

Findings

  1. Grameenphone Ltd. Acute calculations before making their invetments in banks and other financial institutions.
  2. The financial performance of grameenphone was not that good in last three years compare to previous years.
  1. Grameenphone often try to get special interest rate from banks for their investment.

Recommendations

  1. Grameenphone can invest their money in comparatively less stable banks for short term because they earn higher interest from those banks but in case of long term investment financial stability is more important to get their money back.
  1. Grameenphone should invest their in dfferent terms so that they can earn interest of every single day from bank and at the same time they don’t suffer from liqudity crisis i.e. they should invest their money in such a manner which will help them not to keep their money idol for a single day and at the same  they get cash at hand at the right time.

 

Conclusion

Bangladesh is a country of immense opportunities. With a huge population density and only 22% penetration rate, there is a big untapped market waiting to be discovered. Grameenphone is the biggest market player in the telecommunication industry and should think about these opportunities for retaining the market leader position.

Grameenphone Ltd. is a huge organization. Corporate finance & Treasury department is a very small department. However, regardless of its size, it performs a very important activity for the organization. By doing my internship there I learned a lot of things about revenue collection and investing that money. The employees there were very helpful and friendly to me. This internship experience really helped me to be prepared for the upcoming future.

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