The total deal, which will precede a domestic listing, was initially to be broken into two $150 million chunks: a pre-IPO private placement aimed largely at international investors and an initial public offering of primary shares in Bangladesh. The private placement has now dropped to $50 million and been extended until the end of October û though it has an upsize option subject to the level of demand. Meanwhile, the IPO part of the deal has been halved to $75 million, and is scheduled to launch at the end of December.
This is a disappointing result for those interested in Bangladesh's nascent market. "For the Bangladeshi capital markets this is a very important deal," says one Bangladesh-based market observer. "If this is a successful deal, it is going to encourage other large companies to list. But if the IPO of Grameenphone, a company with such strong backing, is not successful, it doesn't send a good signal to the market."
"My sense is that the demand from foreign investors is not as strong as anticipated and that there is little domestic consensus about what it should price at," the observer says. He goes on to point out that the published research on the company has been minimal, making it hard for potential investors to get information about Grameenphone and the local telecom market.
Despite the turmoil in international markets, Bangladesh's stock market has been quite resilient to the downturn. The Dhaka Stock Exchange General Index (DGEN) saw an 87% increase last year, and although it has been unable to repeat that performance, the minimal level of international participation in the market has allowed it to weather most of the storm.
As other Asian markets dipped, the DGEN actually rose gradually, peaking on June 1 at 3,207 points. Yesterday, which was the first trading day after the week-long Eid holiday, it finished at 3,001 points, very close to the 3,017 points at which it opened the year. "You might have thought that this would make Bangladesh more attractive as a diversification play," says the source.
But the turbulence in international markets is not the only factor that may have influenced the decision to cut the size of the deal. Grameenphone has had its own bumps, most notably a public tussle in September between its two shareholders: Norwegian telephone company Telenor, which owns 62%, and Grameen Telecom, which holds the remaining 38%.
Muhammad Yunus, Nobel Laureate and the man behind the Grameen family of companies, claimed at an Oslo news conference in early September that the aims of the two owners were not in accord. Both Telenor and Grameen Telecom, he said, want Grameenphone to succeed, however, "the agenda of Telenor to maximise returns for the benefit of its owners is in conflict with the social and non-profit agenda of Grameen Telecomö. He cited the well publicised case of child labour being used at a workshop belonging to one of Grameenphone's suppliers, which he said helped bring the entire Grameen name into disrepute.
There was also the issue of ownership. Yunus said that when Grameenphone was founded in 1996, Telenor agreed that in six years it would be majority-owned and run by Bangladeshis. This has not yet happened, he said. Yunus may be annoyed that the 10% of the company on offer in the deal is not being offered to Grameen Telecom on a first refusal basis and, that even if it were, the size of the stake would not be enough to hand over control to the minority shareholder.
A few days after Yunus made these comments, a conciliatory press release was put out: "Both the shareholders of Grameenphone, Telenor and Grameen Telecom...have reiterated their continued commitment to the success of Grameenphone and to the ongoing IPO process." Even if the problems had been ironed out, such a high profile disagreement between the major shareholders will not have helped persuade international investors to participate in this frontier market.
Bangladesh's telecoms sector has already attracted international attention this year. In June, Japan's NTT DoCoMo announced that it would pay $350 million for a 30% stake in mobile phone company TM International (Bangladesh). The price values the company at a firm value to Ebitda multiple of 20.4 times, based on the previous 12 months earnings, one of the highest multiples paid for a telecoms company since 2004, and the highest for a non-controlling stake. Citi advised the seller, AK Khan Co, and it is also acting as the sole global coordinator and issue manager for Grameenphone's pre-IPO placement and IPO.
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