Financial Performance Evaluation Of Grameen phone Ltd
ORGANIZATIONAL PART
Organization History
The concept of mobile telephony became largely familiar and phenomenal in Bangladesh in the early 90. The government of Bangladesh awarded Grameenphone a nationwide digital cellular license on November 1996.
Grameenphone has been established by a consortium involving Grameen Telecom of Bangladesh, an affiliate of the world famous Grameen Bank.
Telenor AS, the main Norwegian Telecommunication Company Marubeni Corporation,
one the largest trading and investment companies in Japan; and Gonofone Development Corporation, a telecommunication development company in the United States. Besides these shareholder or ownership, GP’s other investors are;
ü Norwegian Agency for Development Co-Operation
ü Common Wealth Corporation
ü International Financial Corporation
ü International Development Bank
Grameenphone launched services in Bangladesh on 26 March 1997 with 72 employees. It has taken lease of Railway fiber optics on September ’97 for 20 years.
In February 2000 Grameenphone received GSM Community Award from GSM World Congress, France and in June 2000, Grameenphone started service in all 6 divisional towns.
Name and location
Grameenphone corporate office is located at GP HOUSE, Bashundhara, Baridhara, Dhaka – 1229.
Client : Grameen Phone
Site Area : 86,400 sft
Built up Area: 6,20,000 sft
Project Status: Design competition
In consideration of the site being situated in a predominantly residential/ institutional area and in further consideration of the GRAMEEN PHONE’s image as a people oriented service organization, the corporate image of its dedication to people had to be reflected in the architecture and accessibility to the customer. The design concept hinges upon a Holistic Design Principle, integrating time-tested models of Vernacular Architecture design lessons and materials with mainstream modernity of environment friendliness of Green Architecture embodying Clean Development Mechanism (CDM), with Intelligent Building Operation and Management systems, and above all with accommodation of functions innovative in use-friendly manner, efficiently and cost effectively. The core features are naturally ventilated and day lighted spaces; shaded openings, shared courtyards, familiar non-intimidating forms with durable and familiar materials and Nature’s elemental resources like greenery water and texture. The outcome is spaces allowing easy access, fellowship atmosphere, physical comfort, practicality and visual contact to outside. A subconscious feel of seasonal changes contributes to well being and is perceptible in through subtle variations in the interiors in the temperature, wind conditions, flora and ambient environment.
The Ministry of post and Telecommunication of the Government of Bangladesh offered Grameenphone a nationwide digital cellular license on November 28, 1996. Grameenphone launched its services in Bangladesh on 26 March 1997, the Independence Day of Bangladesh. It has taken lease of railway fiber optics on September 1997 for 20 years. The service of the company is spread in all over Bangladesh and in 49 foreign countries through 127 international roaming partner operators.
Objective:
Grameenphone Ltd. has a duel objective to receive an economic return on its investments and to contribute to the economic development of Bangladesh through telecommunication. This is why 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.
Strategy:
The basic strategy of Grameenphone Ltd. is for the overall coverage of both urban and rural areas. It builds continues coverage, cell after cell, with an
intention to bring the whole country under its network. Though the priority of the intensity of coverage varies from area to area, the basic strategy of cell-to-cell coverage is applied through the whole country. Presently it has network coverage in 57 districts around the country including all six divisional headquarters, with 749 base stations in operation.
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 Grameenphone 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 1,512,311 which is more than one million. This is really a fabulous achievement in such a short period of business history.
2.2 Shareholders of Grameenphone
Grameenphone was born in 1996 with four shareholders from different places of the world – Bangladesh, Norway, Japan, and the United States. With majority of shares owned by Telenor (51%) and Grameen Telecom (35%), Telenor itself (Fig2) controls the management of GP.
Figure 1: Shareholders of Grameenphone (2004 and before)
In 2005, the two major shareholders bought the 14% share from Marubeni and Gonofone; the current shareholding position is now as follows:
Figure 2: Shareholders of Grameenphone
Telenor
It owns 62% of GP, is the state-owned telecommunication company in Norway operating since 1885. 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. 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
The second largest shareholder owning 38% of GP, has been established by Grameen Bank, which believes that a lack of communication facilities in the rural areas is one of the major obstacles to rapid economic development in the rural areas of Bangladesh. Grameen Telecom’s deep understanding of the people and culture of Bangladesh helps GP to build up convenient and cost-effective communication facilities in the rural areas, which in turn, create more jobs and open up business opportunities there.
2.3 Grameenphone’s Vision
At the very beginning Grameenphone believes:
ü A clearly defined statement is necessary to achieve the future goals of the company, as well as align regular activities to it.
ü To set new vision for the affiliates so that people work hard to achieve it.
The vision of GP has been revised during the year 2005, and it goes as follows:
We are here to help
The new vision clearly focuses on customer satisfaction. We will some evidence of the recent activities of GP that were clearly guided by this vision statement.
The previous visions of the company were set to meet the necessity of short period. The visions on which GP worked earlier are:
1) 2003-2004: Ideas that simplify.
2) 1997-2002: To be the leading provider of telecommunication services all over Bangladesh with satisfied customers and shareholder, and enthusiastic employees.
Accordingly a standard set of goals i.e., the broader level of objectives and approaches could be determined to accomplish the vision.
Its values:
- Make it easy
- Be inspiring
- Keep promises
- Be respectful
Grameenphone’s Mission
GP’s mission is divided in five parts. These are:
The purpose
Grameenphone has a dual purpose: to receive an economic return on its investments and to contribute to the economic development of Bangladesh where telecommunications can playa critical role.
The Strategy
Grameenphone’s basic strategy is coverage of both urban and rural areas. 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 Grameenphone’s network. The Technology
Grameenphone’s Global System for Mobile or GSM technology is the most widely accepted digital system in the world, currently used by over 1.3 billion people in some 150 countries.
GSM brings the most advanced developments in cellular technology at a reasonable cost by spurring severe competition among manufactures and driving down the const of equipment. Thus consumers get the best for the least.
The People
The people of Grameenphone are young, dedicated and energetic. All employees are well educated at home or abroad, with an even distribution of males and females and social groups in Bangladesh.
They know in their hearts that Grameenphone is more than phones. This sense of purpose gives them the dedication and the drive, producing the biggest coverage and subscriber-base in the country. Grameenphone provides equal employment opportunities and recognizes the talents and energy of its employees.
The Service
Grameenphone believes in service that leads to good business development. Telephony helps people work together, raising their productivity. This gain in productivity is development, which in turn enables them to afford a telephone service, generating good business. Thus development and business go together.
The Technology
Grameenphone’s Global System for Mobile or GSM technology is the most widely accepted digital system in the world, currently used by over 1.3 billion people in some 150 countries. GSM brings the most advanced developments in cellular technology at a reasonable cost by spurring severe competition among manufactures and driving down the const of equipment. Thus consumers get the best for the least.
Human Resources
Employees are the heart of Grameenphone. The vision statements of GP during the period 1997-2002, employees were clearly one the key importance area.
Though the vision has changed over the years, the focus has never been. HR (Human Resources) polices have undergone several changes over the years to meet the demand of the time.
Type of Employee
GP has employees of different status to meet its need. These types are discussed below:
1) Permanent Employee: Some employees join GP Permanent employees; all of them must work for 6 months’ ‘probationary’ period. After successfully completing that, an individual is given the ‘Permanent’ status. There are may be some exception to this.
Permanent employees are entitled to all benefits of the company including Provident fund, group insurance policy, discount on different shops/facilities/diagnostic centers/hospitals, free mobile phone handset & connection, and free talk time up to BDT 3,000/5,000/10,000, two employee quota phone connection, free transport, festival bonus, performance bonus etc.
Permanent employees can participate in different local and foreign exclusive training.
2) Contractual Employee: An employee who has been recruited for a specific period of time for performing specific job. Usually, the period should not be more than one year. Under special circumstance, however, such period may be extended upon than approval of HR Division.
A contractual employee may be employed as a Permanent employee based on his/her performance, vacancy, and recommendation of the current manager.
3) Part-time Employee: These employees work on shift basis. Customer Management Division (CMD) of GP usually employees for the call-center. They are paid on hourly rate.
4) Consultants: Consultants are hired mostly from foreign countries. They are usually experts in particular areas, and are given a certain assignment which may last 1-3 years. Upon completion of the assignment, they return. These employees enjoy quite high remuneration and other facilities.
Employee Growth
GP has grown tremendously in terms of no. of employees. Starting with 160 employees in 1997, 1280 permanent employees work in GP now at 2005. On the average GP maintained 20% growth over the year (Fig1).
Figure 3: Employee Growth of GP<href=”#_ftn1″ name=”_ftnref1″ title=””>[1]
The largest growth GP enjoyed was in the year 1999-2000 when it launched Easy Prepaid connection. There are 3000+ contractual employees as well.
HR policy
GP has a clear and well defined HR policy. The policy undergoes through modification every year based of HR research and employee feedback. The HR policy is easily accessible to all employees over intranet.
Internal Value Creation
Starting in the year 2003, all Telenor affiliates, including GP, arranges a HR survey; this is known as IVC or Internal Value Creation. IVC attempts to seek employees’ feelings, satisfaction, complaints, and provides section/department/division/affiliate specific feedback.
So far IVC has been working as a very effective tool to set HR specific changes, they way managers work, the way employees take the challenges and respond. The best of it is that IVC has been able to convert more and more employees as motivated.
Training
GP arranges training both in local and foreign location. The trainings are clearly triggered by the skills to be acquired to perform existing technical jobs and new assignments.
More than 50% of all the employees enjoy at least one training every year. GP encourages employees to go to training to improve their day to day communication skills.
Telenor Leadership Development Program (TLDP)
Telenor Leadership Development Program or TLDP is a unique program under taken by Telenor itself. Managers and employees working in different affiliates of Telenor groups have skills to lead at level of the Telenor Group itself. TLDP creates a set of specific areas according to which all employees are guided.
Figure 4: Core Features of TLDP
This scheme ensures the company values and leadership ideas are passed to all level of employees. This will enhance the possibility of birth of a new leader in Telenor.
2.4 Organization Chart
Grameenphone Ltd. has a nine-member management team leaded by the Managing Director. There are one Deputy Managing Director and seven Directors in the team as well. These eight persons represent eight different divisions of GP (See Appendix C for the chart).
These divisions are:
1) Deputy Managing Director’s Division
2) Technical Division
3) Marketing Division
4) Information Technology Division
5) Sales and Distribution Division
6) Finance Division
7) Human Resource Division
8) Corporate Affairs Division
2.5 Products and Services of Grameenphone Ltd.:
Telephone sector is a service-oriented sector. Grameenphone offered various types of new and innovative telephone services to both the urban and rural people of Bangladesh during the last six years. The GP-GP or mobile-to-mobile service, the EASY and EASY Gold pre-paid service, GP smile, the village phone program are among its largest innovations.
Besides these largest ones Grameenphone also introduced a number of value added services like;
· The news update service,
· international roaming facility,
· Voice Mail Service,
· Text Mail Service,
· fax and data transmission services, Wireless Application Protocol (WAP service etc.
The company is the pioneer in most of its services. Handsets or the phone-set and the SIM Cards are the only physical products provided by the company. Grameenphone as able to reach telephones in many remote areas of the country and connects those areas with the foreign countries.
The prime services provided by Grameenphone are broadly categorized in the three types- the post-paid service, the pre-paid service and the village phone program.
Prepaid: Subscribers pay before they use the service. There is no monthly fee for prepaid user. But the call rate is usually high.
Postpaid: Subscribers pay at the end of the month for the service they use. There is a fixed monthly; but the call rate is restively low.
GP-GP National:
Grameenphone introduced the GP-GP or mobile-to-mobile service in June 1998. Faced with limited interconnection channels with the fixed-line telephones of Bangladesh Telegraph and Telephone Board, the company took the step of lunching a very new concept in the country, the mobile-to-mobile service. This service went on to become a very successful product and now accounts for over 156,500 subscribers.
GP-GP national connects to all Grameenphone mobile and to other mobile, subject to interconnection agreement with other mobile operators, within Grameenphone’s coverage aria. This product has a credit limit of Tk. 1000 on airtime usage without any security deposit. There is no incoming charge.
GP Regular:
GP regular is another addition of post-paid products of Grameenphone. This phone can connect all mobiles within the home zone and all GP mobiles throughout GP’s coverage area as well as all BTTB fixed line telephone connections. It has National Roaming facility.
The GP-GP post-paid service holders that are both GP Regular and GP-GP National subscribers enjoy a number of GSM Features and Value Added Services:
The GSM Features:
Grameenphone subscribers enjoy the following GSM features without bearing any additional costs:
i) Caller ID:
Display of the phone number of an incoming call in your handset before the call is answered.
ii) Call Waiting:
While talking to the first caller, you will hear a special tone informing you about the second call on the line. At that moment you can put the first caller on hold and talk to the second caller.
iii) Call Conference:
Receiving calls from multiple callers can be supplemented by joining these multiple callers to enable them to talk to each other. You will be able to communicate with a group consisting of maximum five callers. This feature depends on handsets.
iv) Call Divert:
Call Divert lets you redirect or re-route your call to another Grameenphone mobile or any other fixed (if you have BTTB connectivity) or mobile phone.
v) Call Barring:
It enables you to restrict certain types of calls to be made from your mobile. This feature is especially important for security purposes.
The Value Added Services:
The following additional services are available upon request:
(ii) Voice Mail Service (VMS):
Ø VMS is a unique answering machine.
Ø It provides clients with a personal electronic mail box in GP’s voice mail center.
Ø It records your personalized greetings as well as stores your incoming voice messages.
Ø It records incoming voice messages if you are Outside GP’s coverage area or Busy or Simply switched off your mobile.
Ø It provides 24-hour automatic secretarial service
Ø Make you available to your calling party anytime.
(ii) Short Message Service (SMS):
Ø SMS in your mobile acts like an advanced pager.
Ø You can send and receive text messages of up to 160 characters, directly, from one GP mobile to another GP mobile.
(iii) Fax and Data Service (currently available only to corporate clients):
· You can use your mobile Phone attached to a computer to send faxes or transfer data.
· No need to have connection with a fixed line.
· You can use this service even when you are on the move within GP’s coverage area.
(iv) Wireless Application Protocol (WAP) Service:
WAP provides easy, secure access to the Internet in text format through the mobile phone within the GP coverage area.
Pre-Paid Service:
Grameenphone became the first mobile phone operator in the country to introduce the pre-paid service in the field of mobile phone in September 1999. The company named the service “EASY” pre-paid service”. This product was offered in March 2000. At present the number of GP pre-paid subscribers is 1,240,000.
Introduction of Grameenphone’s new EASY Pre-Paid Service is another development of mobile telephony in Bangladesh. EASY have National Roaming facility and a flat airtime charge of Tk. 6 per minute and no incoming charge. It’s very economic. It frees the subscriber from the hassles of paying bills, security deposits and line rents. But it contains nearly all services available in other GP products. To start with, subscribers have to buy the EASY Starter Kit that contains a pre-activated SIM card and a handset. A Green EASY card worth of Tk. 300 is provided free with The Starter kit.
EASY features:
Ø No monthly bills
Ø Flat rate of Tk. 6 per minute.
Ø No security deposits
Ø No incoming charge
Ø No monthly access fees
Ø No waiting for activation
Ø Instant connection
Ø EASY Voice Mail Service, free of monthly rents
Ø EASY cards of four different colors with four different values.
Ø National roaming facility
Ø GSM features like caller ID and call divert to Voice Mail Service.
Village Phone – Mobile phone for the poor
Village Phone Program began from a social commitment made by the shareholders of Grameenphone that “good development is good business”. The program is implemented by Grameen Telecom (GTC) in cooperation with Grameen Bank, the internationally renowned micro- credit lending institution.
The program facilitates women borrowers of Grameen Bank to the GSM technology through the village phones. They become effectively mobile public call offices. This not only provides rural poor with new, exciting income-generating opportunities, but it also helps to enhance the social status of women from poor rural households.
It allows the rural poor who cannot afford to become a regular subscriber, to avail of the service with loans from Grameen Bank. The loan usually is for BDT 12,000 and pays for a handset, the subscription and incidental expenses. The VP operator receives training from GTC about mode of operation, user charges etc.
Initiated in 1997, the VP Program has continued to grow at a robust pace over the years. As of August 2005, there are more than 165,000 VP subscribers. The average revenue per user (ARPU) of VP subscribers is double that of the average GP business user. The revenue growth has been significant over the years. Beginning with BDT 0.53 million in 1997, the figure has risen to BDT 1,114 million in 2002 and to BDT 2,070 million at the end of 2003.
Coverage
Grameenphone has created the record of launching 2100 BTS (Base Stations) in the year 2005 (Fig8). Now 90% population of Bangladesh is under the coverage of Grameenphone’s mobile network (See Appendix E).
2.6 SWOT ANALYSIS
Strengths and weaknesses are the micro environmental factors influencing a business, which are within the organization. Opportunities and threats are the micro environmental factors that influence all the firms in the industry. They are present in the whole industry.
The SWOT analysis elements that are related financial performance of GP are given below:
strength
1) Good Owner Structure.
2) Availability of Backbone Network (Optical Fiber).
3) Financial Soundness.
4) Market Leader.
5) Brand Name/ Grameenphone Image.
6) Largest Geographical Coverage.
7) Access to the widest rural distribution network through Grameen Bank.
Weaknesses
8) Different departments not working together.
9) Poor interconnection with BTTB.
10) Not good enough public relation.
11) Sometimes a tendency to be arrogant.
12) Complicated high pricing structure.
13) Network problem.
14) Line disconnection’s without any information.
15) No long term Distribution/Channel Strategy.
Opportunities:
16) Economic growth of Bangladesh.
17) New and better interconnect Agreement.
18) Huge need for telecom services.
19) Increased intentional activities in Bangladesh.
20) Declining prices for both the handsets and SIM card.
21) Future privatization of the fixed network.
22) New International gateway.
23) Demand for the inter-city communication.
24) Growth in other operator will give more connection.
Threats
25) More rigid Government regulation.
26) More influence of competitors on the fixed network.
27) Change of government might lead to competitors having more clout.
28) Devaluation of BDT.
29) Sabotage of installation.
30) Risk of fire in the GP’s Installations.
31) Price war
3.1 Telecom Industry in Bangladesh
Background
Since the introduction of mobile phones in August 1993, the telecom industry in Bangladesh has undergone dramatic changes for the last 8 years. The potential growth of the telecom industry in Bangladesh is very prospective due to the country’s large population and relatively a small number of phones.
History
Competition in the cellular industry has increased among the operators and now a day’s customer has more alternatives. As a result of this, start up prices has gone down and, eventually market penetration in all possible segments has become possible.
Huge demand, a combination of competitive markets, private ownership and foreign investment has created an environment for rapid growth in the cellular industry in Bangladesh.
Although the demand of the mobile phone is very high, some of the constraining factors have hampered the industry’s growth. The main obstacle to the growth of this industry is insufficient interconnection with BTTB. Many potential clients are being discouraged to subscribe mobile phone due to this reason.
The growth in the cellular industry is contributing very positively in the local economy. Lot of job opportunities has been created for the country where thousands of people are jobless. Moreover, cellular network all over the country has built a basic communication infrastructure for the country, which will definitely attract the FDI in the country.
.3.2 Bangladesh Telecommunication Regulatory Commission (BTRC)
Background
Bangladesh Telecommunication Regulatory Commission (BTRC)is an independent Commission established under the Bangladesh Telecommunication Act, 2001 (Act no. 18 of 2001). BTRC effectively controls telecom regulatory activities e.g. offer new license to companies, control signaling, assign numbers etc.
Vision
To facilitate affordable telecommunication services of acceptable quality for all regardless of their location.
Mission
ü Increase the telephone density to at least 10 telephones per 100 inhabitants by 2010.
ü Establish a phone in every village by 2006.
ü Promote ICT applications to support socio economic development.
ü Create an enabling environment and customer choice for ICT services.
ü Encourage joint Public-Private cooperation in ICT development.
üEncourage ICT applications, which stimulate poverty reduction.
3.3 Mobile Operators
At present there are five mobile operators in Bangladesh i.e. Pacific Bangladesh, the analog cellular operator, Grameenphone (launched its GSM services in the second quarter of 1997), TMIB (launched its services in the summer of 1997), Sheba Telecom (launched its services in the middle of 1998, now branded as BanglaLink), and TeleTalk (govt. owned, launched in 2005). A sixth operator named Warid Telecom Ltd. has just got permission to launch their services in Bangladesh.
CityCell
CityCell is the only CDMA and the oldest mobile operator in Bangladesh. In 1989, Bangladesh Telecom Limited (BTL) was awarded a license to operate cellular, paging, and other wireless communication networks. Hutchison Bangladesh Telecom Limited (HBTL) was incorporated in Bangladesh as a joint venture between BTL and Hutchison Telecommunications (Bangladesh) Limited. In Dec-93, Pacific Motors Limited acquired the entire 50% share holding of HBTL, and in 1996 launched the brand name “CityCell Digital”.
Aktel
TM International (Bangladesh) Limited (TMIB) started its commercial operation on November 15, 1997as a joint venture company of Telecom Malaysia Sdn. Bhd. of Malaysia and A. K. Khan & Company Ltd. of Bangladesh. TMIB started its operation in Chittagong in March 26, 1998. TMIB uses the Global System for mobile (GSM) communications as the digital cellular system and an integrated and fully computerized Customer Care Billing System (CCBS), which supports virtually all subscriber-related functions.
Banglalink
Banglalink is new brand name of Shebaworld (019), which has been providing Global Service of Mobile (GSM) in the country since 1998. Orascom Telecom bought 100% share of Sheba Telecom and gave its new name as BanglaLink aiming to provide quality service in Bangladesh.
Teletalk
Teletalk is the govt. owned mobile establishment. The people of Bangladesh have been waiting for several years for its arrival. At last, it launched its service in 2005. Teletalk offers lower tariff rate; the coverage of Teletalk is not much vast yet, but they are expanding.
Warid Telecom
Warid Telecom is the last entry in the mobile communication market of Bangladesh. BTRC awarded to the sixth license in an open bid to Dhabi Group of Dubai in the end of 2005 for a one time license fee of USD 50M, and revenue sharing 1% every year. Dhabi Group has their mobile establishment in other countries as well.
3.4 Procedures and Major Financial activities of Grameenphone
Introduction
Grameenphone has well defined procedure and activities that it follows. Top management activate some of these, some are external bodies.
Corporate Governance
Good Corporate Governance practices are a hallmark of a successful and efficient company. Grameenphone has also implemented internationally accepted Corporate Governance standards in its day-to-day operations.
Some areas of Corporate Governance specifically address financial areas. These are:
1) Treasury Committee
2) Control environment in Grameenphone.
A) Business plan and budget
B) Financial reporting
C) Management of assets
D) Internal control
E) Statutory audit
F) Sarbanes Oxley compliance
G) Compliance with rules and regulations of the country.
H) Internal audit
I) Codes of conduct
J) Internal value creation
K)
Financial Statement Compliance
GrameenPhone Ltd. operates in an environment where external bodies need access to certain financial information. GP follows well-accepted guidelines for them. And being an affiliate of Telenor Group, some other standards apply to GP. The following table shows the financial standards.
Table 1: Financial Statement Standards of GP
| ?????????????? | ???????????? |
| IFRS | International Financial Reporting Standard(s) |
| GAAP | Generally Accepted Accounting Principles |
| US GAAP | US Generally Accepted Accounting Principles |
| BAS | Bangladesh Accounting Standards |
Sarbanes-Oxley Act (SOA)
The U.S. federal Sarbanes-Oxley Act was created to protect investors by improving the accuracy and reliability of corporate disclosures.
The act came in the wake of a series of corporate financial scandals, including those affecting Enron, Tyco International, and WorldCom (now MCI).
3.5 Mode of Payment
ü Automation of payment
· Transfer rent directly to the respective HO’s AC
o Through Citi Directory
ü Manual checks
· Issue request letter towards Banks for DD & PO.
o Send drafts to GP
ü Cash payment
· Only in case of new agreement (on request)
Description of function
Step-1:
· Receive agreement from SA.
Step-2:
· Check signature & Supporting documents.
Step-3:
· Maintain excel sheet and prepare vouchers.
Step-4:
· Process payment including invoice creation into ERP.
Step-5:
· Get approval from Financial Control.
Step-6:
· Give payment entry and send to higher level for final approval.
Step-07:
· Send to Bank either through letter/Citi directory.
Step-08:
· Update project wise information in DFF module.
|
3.6 Scenario of land capitalization cost during the year (2003, 2004, 2005, 2006, and 2007)
Grameenphone initiates mobile to mobile service in June 1998.Faced with limited interconnection channels with the fixed-line telephones of Bangladesh Telegraph and Telephone Board, the company took the step of lunching a very new concept in the country, the mobile-to-mobile service. This service went on to become a very successful product and now accounts for over huge subscribers.
Grameenphone Ltd. is the market leader in the telecommunication sector in Bangladesh. After few years it started on its business, the company achieved remarkable success during those periods. With the beginning of the year 2004, the company completed its seventh year of business. It is now able to say that it has the largest network, the widest coverage, the biggest subscriber base and more value added services.
During the years 2004, 2005 and 2006, so many sites are purchased by Grameenphone. In Bangladesh, to speculate potential growth of telecommunication industries, it has established strong base transmission service all over the country.
At first we focus the last five years scenario of land capitalization. These are most vital years of Grameenphone. It enlarges its network all over the country during those periods. That’s way now it is possible for Grameenphone to make strong coverage of network all over our country.
In the below, the statement of land cost during the year 2003-2007 is given:
| YEAR | 2003 | 2004 | 2005 | 2006 | 2007 |
| Cost of land | 21,139,503 | 68,883,195 | 587,080,069 | 59,136,028 | 27,448,392 |
| Number of sites | 54 | 180 | 667 | 143 | 28 |
Table 3 :Scenario of land capitalization
We graphically see, the ups and downs purchasing behavior of Grameenphone.
Figure: 2
Here we observe, in the year 2003 and 2004, Grameenphone rapidly changed its purchasing behavior. In the year 2005, it goes to high. Suddenly 2007, its actions were changed, behind this, there are some reasons:
ü In the year 2006 and 2007, Grameenphone engaged in taking lease instead of acquire the land.
ü To acquire land, it takes more time to generate revenue than to take lease.
ü For the regular expense of rent it gets tax shield.
In the below, now we notice the initial five years statement of land capitalization of Grameenphone.
| Table:4 | |||||
| Year | 1998 | 1999 | 2000 | 2001 | 2002 |
| Cost of land | 1,211,466 | 1,402,464 | 4,831,650 | 7,160,153 | 17,116,630 |
| Number of sites | 6 | 5 | 14 | 12 | 21 |
Figure:3
At the initial stage, Grameenphone acquired few sites for BTS purpose. At the first five years, it gradually increases land capitalization.
Here, now we observe the over all scenario of fixed cost (land purchase and capitalization) for the period of 1998 to 2007.
| Table:5 | ||||||||||
| Year | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| Num
ber of sites |
6 | 5 | 14 | 12 | 21 | 54 | 180 | 667 | 143 | 28 |
| Land
cost |
1,211,
466 |
1,402
,464 |
4,831
,650 |
7,160
,153 |
17,11
6,630 |
21,13
,9,503 |
68,88
3,195 |
587,
080, 069 |
59,13
6,028 |
27,4
48,392 |
Figure:4
In the figure, the over all scenario of Grameenphone land capitalization is specified. Very few sites are acquired at the preliminary stage. After four years its scenario totally changed.
Growth of land capitalization
From the very beginning, each and every year the growth of land capitalization has changed. But there is no consistency in their acquisition. It basically depends on company specific decision which is basically based on company’s financial and other benefits. Like;
ü Tax benefit
ü Early revenue generation
ü Other barriers
In order to receive these kind of benefits, Grameenphone taking lease as an alternative of purchasing land.
| Table:6 | ||||||||||
| Year | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| Growth | 15.80% | 244.51% | 48.20% | 139.05% | 23.50% | 225.90% | 752.30% | -90
.92% |
-53
.60% |
|
| Land value | 1,211,466 | 1,402,464 | 4,831,650 | 7,160,153 | 17,116,
630 |
21,139,
503 |
68,88,3195 | 587,0
80,069 |
59,136,028 | 27,448,392 |
Figure:5
Here we see, in the year 2006 and 2007, the growth of land capitalization goes to negative. It gives the impression that decrease of land acquisition.
3.7 Performance Analysis Against Land Value
The entire expenditure endow with huge amount of yield. The number of subscribers depends on strong network coverage all over the country. In this way financial performance of telecommunication industries directly depend on well-built network coverage.
There are mainly three indicators that can be used to measure financial performance. These are:
32) Revenue
33) EBITDA
34) Market share based on subscriber.
35) Return on capital employed
Analysis of Key Performance Indicators
During the year 2000-2003
At first the statement of total revenue, EBITDA, market share and return on capital employed are given in the following table of the year 2000-2003 which are considered as top level performance indicator.
Table 7: Key performance indicator data for GP
| Year | 2000 | 2001 | 2002 | 2003 |
| Revenue
(000’) |
3,173,057 | 7,319,368 | 11,771,424 | 12,962,627 |
| EBITDA
(000’) |
7,25,137 | 2,069,884 | 4,502,020 | 6,969,627 |
| Market Share
(000’) |
69% | 69% | 69% | 69% |
| ROCE
(000’) |
.12 | .24 | .35 | .40 |
Revenue
ü The total revenue of GP for the year 2003 was BDT 12,962,627 Million. That of year 2002 was BDT 11,771,424 Million.
ü This means that GP has achieved about BDT 1,191,203 Million more revenue for the year 2003 than in 2002. In the year 2000, the total revenue was 3,173,057 million. That of the 2001, the total revenue was 7,319,368.
ü This means that GP has achieved about BDT 4,146,311 million more revenue for the year 2001 than in 2000.
Figure:7
Now we see the growth of revenue during the year 2001 to 2003.The percentage of growth were rapidly changed.
| Table:8 ;Growth of revenue | |||
| Year | 2001 | 2002 | 2003 |
| % of growth | 130.67% | 60% | 10% |
The year 2003 was not a good year for GP at all. Its growth of revenue was only 10%. The market share dropped to 62% from 69%.
On the other hand, the year of 2001 and 2002,the growth of revenue rapidly changed.
Figure:9
Market Share
Market share is the third and final performance indicator for GP. Though it is not a direct financial component, we need to consider it with equal importance with other factors.
The rational is that mobile connectivity is a service; and a service is nothing without a customer base. The more the growth of your customer base, the more the other financial indicators look better – this is the simple formula.
GP’s hold on market share at the end of the year 2004 was 69%. GP bagged 1.7 Million more customers in 2004, and the total subscriber count was 2.8 Million. This showed a 146% growth than that of 2003. The total subscriber count was 1.1 million at 2003.
Figure:10
Figure:11
EBITDA
ü EBITDA which means earning before interest, tax, depreciation and amortization. Total revenue does not show the actual investment behind all the efforts. That is why EBITDA is another performance indicator for GP.
ü In the year 2003, GP earned an EBITDA of BDT 6,969 Million. That of for the year 2002was BDT 4,502 Million. So, EBITDA of 2003 is more than BDT 2,467 Million than that of 2002. This is a 45% growth than 2003.
Fig: 12
ü Comparing 2003 with 2002, GP enjoyed an EBITDA growth of 54%. In 2002 and 2001, GP enjoyed EBITDA growth of 117% and 185%.
| Table:9 | |||
| Year | 2001 | 2002 | 2003 |
| Growth of EBITDA | 185% | 117.50% | 54.881% |
Debt Equity Ratio
| Debt Equity Ratio = | Long term debt |
| Equity |
| Year | 2000 | 2001 | 2002 | 2003 |
| Long term debt | 2,459,045 | 3,737,565 | 3,696,172 | 4,758,500 |
| Equity | 1,193,055 | 2,574,429 | 4,694,942 | 8,399,358 |
| Ratios | 2.06 | 1.45 | 0.79 | 0.57 |
Table:10
By this ratio comparison of ownership between the long term creditors and owners can be shown. The higher the ratio is the more dependability it shows on outside liabilities. The higher the dependability on outside liability holder, the more they influence in company’s decisions. Moreover, dependability also increases on them for current capital purpose. The ideal ratio is less then two for it.
Fig:13
Debt equity ratio in GP is falling as GP is depending more and more on internal equity and paying off debts. Since 2000, GP has begun to earn positive net income from its operation, and it boomed in recent years. So, GP is paying of all of its long terms and debt, and putting the retained earning into equity.
Return on capital employed
We get return on capital employed from earning before interest, tax, depreciation and amortization divided by total asset.
| Table:13 | ||||
| Year | 2000 | 2001 | 2002 | 2003 |
| EBITDA | 725,137 | 2,069,884 | 4,502,020 | 6,969,627 |
| Total Asset | 6,116,449 | 8,711,054 | 13,027,965 | 17,238,430 |
| ROCE | .12 | .24 | .35 | .40 |
ü This ratio shows the capability of returns using the assets another name of this ratio is net profit to total assets ratio.
ü With this ratio we can find how much return we get against BDT 1 asset.
ü Considering the above ratio of GP, we see that the ROCE is gradually increased year by year.
ü Each and every year total asset increased. It generates total revenue, EBITDA last of all ROCE. Acquisition of land included in this total asset.
Fig:14
Analysis of Key Performance Indicators
During the year 2004-2006
In the year of 2004, 2005 and 2006, so many sites were acquired and capitalized. In these years Grameenphone made strong network coverage.
At first the statement of total revenue, EBITDA, market share and return on capital employed are given in the following table of the year 2004-2006 which are considered as top level performance indicator.
Table14: Key performance indicator data for GP
| Year | 2004 | 2005 | 2006 |
| Revenue
(000’) |
19,700,695 | 29,627,949 | 45,640,415 |
| EBITDA
(000’) |
10,127,776 | 11,761,490 | 17,019,506 |
| Market Share
(000’) |
69% | 69% | 69% |
| ROCE
(000’) |
.38 | .24 | .25 |
Revenue
ü The total revenue of GP for the year 2006 was BDT 45,640,415 Million. That of year 2005 was BDT 29,627,949 Million.
ü This means that GP has achieved about BDT 16,012,466 Million more revenue for the year 2006 than in 2005. In the year 2004, the total revenue was 19,700,695 million.
ü This means that GP has achieved about BDT 9,927,254 million more revenue for the year 2005 than in 2004.
Fig:15
Now we see the growth of revenue during the year 2004 to 2006.The percentage of growth were rapidly changed.
| Table:15: Growth of revenue | |||
| Year | 2004 | 2005 | 2006 |