Grameenphone starts public subscription for $70 million IPO

Grameenphone, Bangladesh's largest mobile phone operator, is currently taking orders for an initial public offering that is expected to raise Tk4.86 billion ($70.8 million). If completed, Grameenphone will be Bangladesh's largest ever listing.

The company is selling 69.44 million shares at a fixed price of Tk70 each. The public offering comes in two stages: the order book for local subscribers opened on Sunday and is expected to close tomorrow. Non-resident Bangladeshis will be able to put in orders until October 18.

There are expected to be as many as a million applicants for the shares, which will make for a time consuming allocation process -- it may take as long as 30 days. The Grameenphone shares are expected to start trading in late November or early December.

The public offering comes after a private placement last December when the company sold shares worth $70.4 million to over 50 local institutional investors. The placement was priced at Tk74 per share, a 5% premium to the public offering. Investors who took part in the private placement also have to wait until the public offering is completed before they receive their shares. And once the shares are delivered, they will be subject to a one-year lock-up.

Although the IPO is only for Bangladeshis, a source said that the deal has stirred interest among international investors who want a stake in Grameenphone. This foreign interest, combined with high levels of local demand, should help the stock perform well when it starts trading.

"International investors will undoubtedly attach a premium to the transparency and liquidity of the [Grameenphone] issue," said a recent report by Dhaka-based Asian Tigers Capital Research. "There is also likely to be demand from a number of frontier market funds that have largely shunned Bangladeshi issues due to a lack of liquidity and other issues with the [Dhaka Stock Exchange]," the report continued.

The IPO is somewhat smaller than the deal originally envisaged. In July last year, the company's board approved a plan to undertake a share sale that was supposed to raise as much as $300 million. This was before the collapse of Lehman Brothers and at the time there was also some international interest in Bangladesh's telecoms industry. Earlier in 2008, Japan's NTT DoCoMo had bought a 30% stake in Dhaka-based mobile phone company TM International (Bangladesh) for $350 million.

The poor condition of the global economy in the latter half of 2008 forced Grameenphone to shrink the deal to a significantly smaller size, to the disappointment of market observers who believed the deal could put Bangladesh on the radar of international investors.

Grameenphone is a mobile telecom company that is controlled by Telenor Mobile Communications, a Norwegian telecom operator, which holds 62%. The remainder of the company is owned by Grameen Telecom, part of Nobel Laureate Muhammad Yunus's Grameen empire. The main selling point for the company is its growth potential. While Bangladesh has one of the lowest levels of mobile phone ownerships in the world, the number of users is growing extremely quickly. At the end of 2005, the country had 9.3 million mobile subscribers, and at the end of last year that number had increased to 44.6 million.

Citi is arranging Grameenphone's IPO.