For the time being ....

Some good news (well I hope). I am moving my writing until further notice to Bangladesh Corporate Blog:
http://bangladeshcorporate.blogspot.com/

until further notice. This will allow me to interact with a larger array of talented writers who write for that blog. Also that blog has had a serious lack of posts and publications. So writing for them might spruce up one site. Since they started the aggregation process, so I might as well go over on their side.

King of Thieves finally quits

And about time that he did. The CEO of Grameenphone, Anders Jensen, has decided to resign shortly (December 2008, so we have couple more agonizing months) whereas he was originally contracted to stay until 2010. Telenor hasn't decided when where his next posting will be, but its pretty much guaranteed that Jensen won't be around these parts for some time. Jensen contests its because of 'family reasons' but it is pretty clear it was because in his tenure he managed to alienate everyone in Bangladesh.

When Jensen stepped in, the platform was already there. GP was an admired stalwart and got along with everyone. But now as he is stepping out, things are pretty much in tatters which makes the pervious CEO, Erik Aas look like a miracle. Jensen's failures are listed below.

Alienation
Pretty much everyone was irked by the way Jensen decided to present Grameenphone. GP came off as a completely different company with 'eyes larger than its stomach' to be specific. First Muhammad Yunus was alienated because GP did not appease his demands quickly enough (whatever they finally appeased him with, it was enough to keep Yunus's mouth shut)

Secondly they did not play nice with local banks. First filing a proposal to take over banking by using a first-in-the-world concept mobile banking. GP wanted to have a banking license by paying for the lavish trips of some consultants to the issue. Jensen proposed his own version of mobile banking to Bangladesh Bank which not only shocked the regulatory body but completely alienated it from all local and foreign banks. The bravado attitude was too much.

Thirdly they managed to alienate the SEC and the people of the country. First it was the IPO, they decided to hit the stars, with an unreasonable proposal. They even went out of their way in betraying the people of Bangladesh to see, first, if there were any foreign investors who wanted GP first. Finally when the foreign investors realized that the IPO does not make any financial sense (given GP's cash flow and assets) they came back to Bangladesh with a more reduced IPO. Even then the response has been lukewarm. Better luck next time. The IPO looked like a scam because Jensen wanted to cash out as much as possible as quickly as possible for Telenor. Even if that meant scamming a country of 150 million people.

No new customers in August
GP didn't manage to add 1 new customer for August. They blame BTRC registration process. This is extremely hard to believe as Banglalink reached 100 million customer point. Fingers can be pointed at the Grameenphone bloat. I have seen Grameenphone employees and they are extremely lazy. They expect the food to be handed to them and treat everyone else like Grameenphone is the one doing them a big favor.

GP's bloat does not end ther but continue to the expenses that have gone unhindered. Lack of proper foresight and a lack of synergies between other carriers and companies is also to blame. GP wanted everything and all in its sights. But people in Bangladesh don't sit around in one place too long.

VoIP
It wasn't VoIP. VoIP is GP's scapegoat for all their failures. They got off very lightly on this situation because they were accused by Yunus for money laundering. If things continue the way it is now, I expect GP to keep blaming VoIP for the next 10 years. They took out way more untaxed money through VoIP that make the fines look like a tip.

Finally Something We Can Both Agree On: Grameenphone's sham IPO

This is probably how the conversation went before the Grameenphone IPO filing:

Yunus: "I think we should help the poor partake in Grameenphone's IPO"

Jensen: "How do you suppose we accomplish that?"

Yunus: "Well I thought pricing this share at Taka 1, would be more than enough as the poor will be allowed to get into the stock market with the money with the money borrowed from Grameen Bank"

Jensen: "I think you have a very excellent idea, may I also suggest a 17 taka premium? That would only mean a 18 taka share price, clearly affordable"

Yunus: "Yes 18 taka is quite reasonable considering some shares hover over 2000 taka"

Jensen: "Yes, a 17 taka premium means a 1700% premium. If the SEC rejects this proposal, we will cut it down to a 900% premium. That only means a 10 taka share. The SEC will put up a small fight, but then we will negotiate it at Taka 10. Still a huge premium"

Yunus: "But won't the SEC still object"

Jensen: "Compared to our initial filing, this new 900% premium will look like a bargain. Also think about it this way, for the rest of eternity we will issue dividends on a face value of 1 taka."


Now readers, if you had any aspirations of being a proud owner of a Grameenphone stock, lets calculate your investment. The SEC has never given a premium over 50% in the last 10 years. Most stocks were limited to a 25% premium. Grameenphone seems to think that they can eyewash everyone with the affordable price but with a 1700% premium. The highest premium ever for Bangladesh, making it the most unaffordable stock at the stock exchange.

Dividends won't add up
How does the economics work out? A 25% dividend is considered a good dividend in the stock market. But with Grameenphone it will be the opposite. Clearly Telenor did not pay 18 taka for a 1 taka stock and this 25% dividend suits them just fine (also they can adjust the machinery invoices easily - i.e. pay Telenor Pakistan for 'new' machinery). But for you, who just spent 18 taka on this stock, what does this mean?

Your returns vs Telenor
It means that you get 25% of the stock's FACE VALUE. The face value is 1 taka. Hence it for your 18 taka investment you are getting a 1.38% return on your investment. This is the price you will be paying when investing in this stock. Telenor is making more than 25% return on their investment (through stock and over invoicing).

But you with the brokerage costs will be lucky to make a 1% return. Now consider the alternatives, letting your investment sit idle in a savings account gets you 7% return, and a FDR gets you almost 15% return. You wanted to be a part of Grameenphone and this is the price you will pay. Telenor is ready to suck the blood out of many 'small investors'.

Further Irregularities: Valuation
Citi Global Markets did the market value for Grameephone and rated it in the neighborhood of $3.5 billion in early 2007. Then Anders Jensen, Grameenphone's CEO, valued it at $3.2 billion. The valuation was done at the right time when Grameephone had a nice market share and VOiP operations to fuel its profits. Now its 2008, when Grameenphone's VOiP operations does not exist. But then Citibank is the underwriting bank that handles the IPO.

Predicted negotiation results:
This is what will happen at the negotiation table with the SEC, which is designed to make the stock look like a complete steal.

Resolution 1: A 900% stock premium. Total price of stock will be 10 taka. An amazing deal considering you had to pay 18 taka earlier. This is reduction is taken in consideration for small investors, as already done with the 18 taka proposal.

Never mind the SEC's history of not allowing any stock premium over 25%. 900% premium sounds like a steal when compared to a 1700% premium.

What predicted negotiation results mean for you?
Relax. For a 25% dividend you are getting a staggering 2.5% return on your investment of 10 taka (when compared to 1.38% with 18 taka stock). You just have to learn to ignore the double digit inflation, returns on other stock and bank savings and FDR rates. Grameenphone IPO is a godsend.

Dividends may exceed 25%
It may, it may not. But regardless of this step, Telenor will still be cashing out. The IPO was designed to look like it was meant for the poor, but instead it is making money off the poor.

Slipping a Bit Too Much

The Dhaka Stock Exchange continues to slide and slide and this worries me. The market was up and running with great momentum in 2007, but now it is almost coming to a standstill. Standstill may still be an euphemism.

I had predicted this scenario a little while earlier here. But I did not think it would be this bad. What's causing this exodus from the stock market?

Economic reality settling in
We knew the economy was in for a tough time because of the food crisis, arrests and political changes. But it usually takes some time for the economic effect to appear in everyday lives. We should brace ourselves for what we merely heard as rumors as the effects are now in action.

On the right is the DSE Index for the last 30 days. I couldn't find the graph for the last 6 months because it would be too horrific and R rated for the DSE to publish.

Grameenphone's sham IPO
I will discuss why it is a sham a little later (still writing it up). But people are really hoping that they will be getting miracles out of this scenario. GP submitting their proposal to the SEC got the whole market bullish for 1 day. But then it continued to slide. (Maybe because people already figured out it was a sham)

Bank Fixed Deposit Rates
Now bank deposit rates are just shy of 15%. That means without doing anything you are getting 15% on the spot for your money, without any risks or worries. This is creeping out to be a contender for stock investments. The FDR rates will continue to rise as banks are reluctant to give loans and while they still think they are in a liquidity crisis.

Fall of AB Bank Foundation
Documented here. It still turns out they provided a large amount of credit/loan for each stock investment. For some time they got away with it, but then they got fined because they loaned too much. AB Bank Foundation were also involved in getting a piece of the lucrative pie. It turns out that they could also manipulate the stock by mass scale buying and selling. Again, AB Bank may not be much of a bank, but their Foundation beating all foundations out there. So 2008 Foundation of the year goes to AB Bank. A foundation that wasn't a drain to AB Bank, but actually managed to give something in return to AB Bank.

Picture on the right is a little funny. It is the signing ceremony where AB Bank would handle the securities of Trust Bank. Read the sign board in the background ; )

US Economic worries
The largest economic entity is in trouble and you think Bangladesh will be spared? Due to the wonders of globalization, when someone goes down the entire world is in the dumps.

Expansionary vs Precautionary

Bangladesh Bank in the last few weeks, rejected IMF's advise on following a conservative economic policy. But as with most issues in Bangladesh, people say one thing and does another.

Why IMF wants a conservative policy

• High inflation
• Investor lack of confidence
• Liquidity crisis amongst banks
• Food crisis
• Natural gas crisis
• Political crisis
• Power crisis
• Global economic slowdown
• ACC witch hunt against the corrupt
• Exodus of the business community
• Labor unrest/strikes
• Call rate is too high and fluctuates too often

Why Bangladesh Bank wants expansionary policy

• Bangladesh is smart enough to deal with themselves (micro lending is enough to show the world)
• A stunt to show its power
• To convince the banks (and people) that there isn't any liquidity crisis

Why Call Rate is important
Call Rate reflects the rate which banks lend to each other. Although it hasn't been high consistently there are some points to note. It is limited to 20% by Bangladesh Bank, so if it hits 20% we will never know the seriousness of the issue. The call rate also reflects the amount of deposits and money that banks have between themselves to work with and to distribute. This depends on multiple factors such as deposits, cash, successful loan payments, and interest rates. It is sufficient to say when the call rates fluctuate the way they are doing now something is terribly wrong.

This means that Bangladesh Bank is not clear to its goals. It may want an expansionary policy (which causes the call rate to lower) but when its actions doesn't suggest what it is saying, the call rate spikes. This also means that the commercial banks don't know what is going on or what to expect. So it means they are also less reluctant to give out loans and stay conservative at times of uncertainly. This also leads to more conservative economy. So do you get my drift? No one is sure what to do and aren't doing what they are supposed to do.

Reality vs Desirability
On one hand Bangladesh Bank does not want to startle everyone by taking a conservative path. It doesn't want to make a bad situation worse by taking a skeptical view. But then again can it afford not to?

Tata says tata to colonization

But Mittal is apparently still interested.

Tata formally withdrew its $3 billion colonization proposal from Bangladesh. They wanted to set up multiple industries if the government ensured them a gas supply despite a national gas crisis and disregarding all the other local companies that have been wanting more gas.

The Indian corridor
This withdrawal is also on the heels of India's corridor policy -to use Bangladesh in its transportation route to Nepal and Eastern India. But doing very little to help Bangladesh in the process. The government was right in this aspect of rejecting the deal.


Is it not funny that India, despite being a strong player in this region is detested the most in the region? It tries to muscle its way in one way or the other.

Bangladesh is too nationalistic, India isn't
The first thing to come out of the mouths of the FBCCI president, Annisul Haq, is that how this deal will 'tarnish' Bangldesh's image. Bangladesh is too nationalistic. But India is not, except that they had 3 decades of a nationalistic policy that prevented foreign companies to enter their country. They nurtured their own industries before they lifted their policy.

Industrialization vs Microlending
But Bangladesh does not know how to deal with its own people. It must open up, not to the world, but only India to declare itself a free-trade country. It also gets numerous visits from Gandhi Jr, and other Indian officials who are there to scout out Bangladesh's success in microlending whereas India is satisfied with its large scale industrialization and technology accomplishments.

No India does not want to make any sort of agreement regarding this advantage they have. All Indian officials are happy enough to observe the success of microloans. Bangladesh's strategy should be to expand micro loans to create a hoard of farmers, chicken farms and fish hatcheries. India will take care of everything else. India will take care of industrialization while Bangladesh continues to live in the Middle Ages.

Message to Annisul Haq, (he made his money on garments btw): Maybe power plants and fertilizer goes to Tata. What is preventing Tata from dumping another $3 billion on garments?

Final message
I am not criticizing India, I am just saying, India has moved beyond the feel-good economics of microlending to a point where their companies are setting up base in Bangladesh. Bangladesh can survive on microloans while India will rake in the billions. Unless Bangladesh changes its outlook and goals, it will continue this way. There needs to be more incentives for businesses in Bangladesh to expand and make money.

In case you were wondering, the pictures are of Indian Generals: Ratan Taka, Mittal, Ambani 1, Ambani 2. Bangladesh hardly makes the list or takes the pride of their businessmen. The Bengali tiger tears them to shreds whenever possible. India just likes to promote them. Now do you see the difference?

Foreign cattle/slaves get deported

Lets see what makes sense here. Kuwait's inflation is at an all time high of 11%. Laborers revolt (although they revolted violently and I don't support this type of street rampage) to force Kuwait to change its labor laws. The minimum wage is significantly raised to 40 dinars. Then they finally deport 217 (and still counting) workers back to Bangladesh for causing this.

The man pictured on the left, took out a loan for his travel expenses, cannot contain his emotions as he was forced out of Kuwait, with a huge debt.

What caused this rampage
In short, the food crisis. Kuwait's inflation is to blame a little, but the woes of Bangladesh continue to put pressure on its laborers abroad. Poor families just do not have enough to survive the high costs. This ultimately led to the worker's revolt. Also Bangladeshi laborers are used to revolting and burning down garment factories. Kuwait is nothing new to them, its just a procedure that they must follow.

Revolt, especially violent revolt, seems to be a Bangladeshi national past time these days.

What it means for the rest
Revolts will happen soon if prices are not adjusted to the prosperity that the middle east is gaining from this labor. Currently all foreign labors are treated, not like second class citizens, but like cattle. They have their own compounds and are routinely segregated.

Similar situations will follow because Kuwait, possibly under international pressure, caved into the demands (China is the good guy these days because of its benefits and the Olympics). Kuwait also is very inept in dealing with revolts, because lets face it, they have never faced a mass uprising because they never had the population 'mass' to begin with.

Soon these revolts will happen in other Middle Eastern countries that have this huge mismatch, and also because economic conditions for the poor get worse in Bangladesh every year.

The Decisive Quote
Asked about implication of Kuwait's new decision, Expatriates' Welfare and Overseas Employment Secretary Abdul Matin Chowdhury said implementation of the decision does not mean a stop to hiring workers. Kuwait now prefers hiring skilled workers, he added.

Something strikes me as wrong. When did Kuwait prefer 'skilled workers'? Does Kuwait have a software/engineering industry that I am not aware of? It has oil, and oil is a labor intensive project.

What will Telenor do with the IPO?

Not only does the Grameenphone IPO has a 1700% premium attached on it, it also gets Telenor $300 million to fool around with. (As a sidenote, companies give dividends on the face value of a share, so a 25% dividend will yeild you Tk 0.25 for a Tk. 18 investment). So what will Telenor do with this cash?

Just for comparision, Grameenphone makes around $150 in profits a year, of which they get to send $75 million to Oslo. So this IPO is bigger than their profits, so to speak.

Invest in another industry
Makes the least sense, but still something Grameenphone would like to do. They already have a huge network of retail centers which they could use for better things. This could include a remittance or other retail services such as insurance. But given the current headaches that they have with their sliding market share, its better to focus on what they know best.

Buy Spectrum
This is the obvious choice to adding more users. Reserve more spectrum than what Grameenphone really needs. Yes spectrum is like real estate, and the prices can only go up in the future as Banglalink and AKtel gear up.

Invest in Bangladesh
The Fixed Deposit rate in Bangladesh is at a all time high, just hovering below 15%. This may make good sense to invest the money in an account and continue to get a nice yeild.

Invest in the stock market
Yes, not only the stock market, but in their own stock. Play with it a little. Push it up then sell, sell, sell. Only the small investors are set to lose money. This strategy was useful for many stock brokers (mainly those associated with a bank).

Invest in infrastructure
Very UNLIKELY. You can forget about a Grameenphone 3G network. The only reason Citycell stopped providing the outdated AMPS network was because no one would produce an AMPS phone. Same goes to Grameenphone. They will not invest in upgrades. You can also forget about network expansion as you can't really expand beyond Bangladeshi borders. (Maybe try running a secret VOiP in India?)

Buy Teletalk
The only compatible company that has more spectrum than it really needs. SK Telecom is also bidding for a piece of Teletalk. Would make sense if Grameenphone to pick up this company as soon as possible.

Send money back
Telenor has had a very tough year. They blame the Asian market for slowing down while their home market is still solid. You can see in the 6 month stock price (on the NYSE) graph on the left, what's going on with the Telenor stock.

Telenor Pakistan didn't do too well despite a lack of VOiP activities. The 20 million customers landmark in Bangladesh was achieved under some duress. They reduced their outlook. But still its nothing as major as a lack of cash.

What do you think they should do?

Any time now ....

The stock market is due for a major crash. A $300 million Grameenphone IPO is headed its way and it is going to consume a lot of cash. Kudos to GP for timing this IPO correctly, right in the middle of a liquidity crisis. (I can only speculate about this liquidity crisis, as newspapers seem to run this story every few days).

The last biggest IPO was only for $13 million. Even though 1/2 of the $300 million GP IPO will be in private placement, it still means that the market will suddenly lack $300 million that was floating around. This is so small change my any means.

What will Grameenphone do with $300 million?
With the new precautionary and cost-cutting strategy they are more likely to buy spectrum with it rather than expand manpower. This means $300 million is hooked up in a service that doesn't yield much in terms of cashflow or employment. So more woes to continue for the Dhaka Stock Exchange.

Real Results
Sad thing is, even though the entire market will crash, nobody will recognize it because the GP stock will be more than enough to average out everyone else who sunk. The brokers won't lose money, they make it both ways, but the people who were manipulated to invest into particular stocks will. Watch Boiler Room to find out what currently happens in terms of speculation and manipulation with Bangladeshi brokers.

Grameenphone finally goes public

Grameenphone's new IPO is the talk of town. Its a $300 million IPO, the largest ever for Bangladesh. The foreign press still considers the Bangladeshi stock market to be too small to be considered an 'emerging' market. They prefer the term 'frontier' market.

A $300 million IPO is not small for Bangladesh by any means. To put this into perspective, the record holder was Shahjalal Bank who had an IPO of $13 million (for a 50% stake). GP's IPO is for a 10% stake. Citibank is the manager to this issue, but there are some funny things happening.

A $300 million IPO (for 10%) would value Grameenphone company at $3 billion. Citi Global Markets (a division of Citigroup) did the valuation in early 2007 when it valued Grameenphone at $3.5 billion. Then it was reduced to $3.2 billion. Is it not funny that Citibank is the manager to the issue while its sister concern does the inflated valuation?

Why Inflated?
Citi Global Markets has not noticed that the playing field has drastically changed from early 2007 to July 2008. Grameenphone's slide continues as its profits continue to decline at an alarming rate. (GP keeps blaming it on fines, but we all know VOiP took a major chunk out of its profits). GP was conveniently valuated at its peak, which right now, they are far from it. Citi Global Markets does the valuation, Citibank picks up the check. Get the drift?

AKtel has a new Tk 1 plan where it shows they are about to get serious. And Orascom's Banglalink is no exception. Orascom seems to have more infrastructure set up globally to rival Telenor's expertise

Strategy of the IPO
Chances are the valuation will stay inflated. Telenor is really smart about the IPO. If any outsider gets hold of 10% of the share, they may raise objection at board meetings. It is especially dangerous if the billionaire patriarch of Orascom, Naguib Swariris, decides to swoop into that 10%. Don't get me wrong, anyone will want that scenario but Swariris has more to gain from this and he will do anything to fight for a board seat (kind of like Carl Icahn).

Swariris is very canny about his deals, which he executes with lightening pace. Telenor wants to prevent this sort of situation by placing a staggering $150 million (HALF of the IPO) into private placement. Chances are its being placed with people they know won't sell.

Its a big IPO, but not much when you factor these precendents.

Immediate Results
All the stocks as a result of this news rebounded. The ugly duckling of the Dhaka Stock Exchange, Mutual Funds even rebounded because 10% of the public IPO would be spread into their hands.

In the long term will the stock market continue to grow? YES, there is $8 billion worth of remittance being sent to Bangladesh. And stock market (usually blue chip stocks) are the best place for these investments.

The AB Bank Foundation scam

Most people create foundations to do beneficial things. Foundations are meant to do CSR and donate. But the AB Bank Foundation is a completely different story. From what is going around the AB Bank Foundation has been involved in:

• Merchant Banking
• Supporting the parent company, AB Bank
  
• Holding as much as 18% of IFIC Bank (later reduced to ~7%) on behalf of other parties

This all may have been excusable if we had seen the money from these activities trickle down into hefty donations. But no, not a single taka was donated. So we wonder whom this foundation was created to benefit? Did we ever hear any CSR from AB Bank. We hoped of things to come when we heard about a 'foundation' only to discover

They have been penalized when Bangladesh Bank took the foundation's 7% stake (worth Tk 100 crore) from them. And asked them to seize all merchant banking activities of the foundation. Then when AB Bank Foundation ceased all their activity, it sent the Dhaka Stock Exchange crashing.

Some facts about AB Bank

• Not really a bank (anymore)
  
• More money comes from merchant banking than actual banking
• Uses highly unethical merchant banking practices
• Previously fined Taka 10 crore for violating merchant banking rules
• Needed logo change to wipe out 25 years of dismal performance
• Needed name change, now instead of being called Arab-Bangla Bank, its simply 'AB' Bank

The Most Hideous Redesign Ever

...and the worst way to revive a company. The City Bank (not to be confused with the international banking giant Citibank) has revealed its new logo. It looks like crap. Their explanation is:

The Official Explanation

It's a simple logo. Its beauty is in its simplicity of arrangement which is also bold. Since it is simple, it connects with people easily.

The red and silver shape may mean a chess board. Chessboard stands for wisdom & vision. Since we are 25 years old, we are expert, wise & experienced. Chess is the game of the smart people who knows all the moves. Our game is to deal with your money matters and - as wise & experienced bankers, we are experts in that. The red and silver shape may also mean something dynamic. It may mean the checkered flag of Formula One Racing. Then it signifies speed and agility & fast pace. The red and silver shape may also mean a kite. It's a beautiful colorful kite, nose up, going to reach for the sky. In that case, it means the bank is soaring high into the skies of many possibilities in order to make customers' financial dreams come true The red and silver shape may also mean it's a flying chessboard. It's a chess-board that has taken wings and is flying. In that case it indicates to what extent this bank can go to serve customers better

The logo has a dynamic shape. Such dynamism stands for modernity, the 21st century. That signifies, this is going to be a techno-savvy bank, a state-of-the-art tech-powered modern bank

The color 'red' stands for emotion, passion, strength, vitality, action, confidence & courage.

The color silver symbolizes riches, just as gold does. Silver is glamorous & distinguished. Silver is the traditional 25th anniversary color or Silver Jubilee color. Another thing is: "Pieces of silver" means money or coin. And our pay-off line is "Making Sense of Money".

What it really is
With so many explanations, they don't know what it is. Its the flag of the Czech Republic with a horrendous typeface from the 1980's. When in doubt, stick to traditional typefaces rather than typefaces that are the result of a fad (in this case the Robocop movie). This logo makes AB Bank's redesign look good.

Mobile operators need a logo every couple of years. But banks, less so. Also considering how close Citybank is with Citibank, a rename would have been better with the hideous logo.

You can't change dismal performances of 25 years by changing your logo. But I guess you can always try. You don't see some other more successful banks trying to change their logo. From what I hear, Citybank's MD is the highest paid MD in Bangladesh. And yet he has been unable to produce anything from this lackluster bank but the hideous logo.

The Revival of Citycell

The arrival of Singtel changed everything almost overnight. Michael Seymour, CEO of the revived Citycell pictured left (person on the left).

Minimum charges:
Citycell at one time, under Singtel leadership, were giving away free calls. YES free calls. But Telenor got the most of this and soon used its own influence to convince the regulator that this was a bad thing (something along the lines of depriving Bangladesh revenue, as if gp's VOiP was a good thing).

Regulator pinned the call rates at Tk 0.25 per minute. Grameenphone rejoiced. Citycell hit back with setting all their calls at the lowest possible rate.

Citycell now has the lowest rates than anyone in the market. If they hit the consumer base, they know their bottom lines are lower than gp because of CDMA technology. They can offer Tk 0.25 rates without worrying about the construction of a new 10 acre headquarters (unlike GP).

Minimum/shared expenditures
No multiple headquarters, no expensive sales channels. Citycell is buckling up a lot faster than any other operator. In 2007, Citycell reduced losses by 75%. Grameenphone in 2007 had record layoffs and a 32% dip in profits. (GP's marketshare went from ~60% to ~46%).

Infrastructure sharing contracts with Warid (although confusing, because Warid uses GSM, but I guess they will use the same base stations) futher reduced costs. GP continues to build new buildings and headquarters.

Citycell went ahead and took the pre-paid mess out of their hands by letting a bank handle that mess. It wants to be a mobile operator. Cutting extraneous weight where ever possible is a good thing.

Focus not diversification
GP continues to diversify its cell phone business. Diversification comes at the expense of making new enemies as it muscles its way into different target markets. Pretty soon they will have more competition than they can deal with. Its easy to be number 1, but tougher to stay at number 1. And it is not going to be smooth sailing as GP thinks it will monopolize all markets that it enters. In the best case scenario they will lose their mobile market or lose both.

Citycell's strategy has been the opposite. They focused on cellphones and the basics of cutting their rates. While Grameenphone wants its retail centers to be multi-functional, they are losing track of their mobile business and Citycell is keen to pick up. At this point, GP has made too many competitors from the various market it decides to enter to succeed in even one. Citycell's focus has been more successful in gaining market share.

The Natural Gas conspiracy

Everyone was under the impression that Bangladesh was floating on gas. TATA, the Indian giant who was so eager to step into Bangladesh and set up a fertilizer plant (to export fertilizer back to India, where else) suddenly backed down. The TATA deal was rejected by the previous government because TATA did not raise their offer.

TATA conspiracy
The caretaker's government got a renewed and raised offer, but not enough. But still the caretaker government opted to push through. And the government only stopped when TATA decided that enough was enough.

Dual Standards
What strikes me as odd, is that even though local industries are lacking gas and have been steadily deprived of their energy requirements, the caretaker government goes out of its way make all amends from TATA. The same can be said for Mittal's steel mills (a memorandum was signed to this effect). But the government does not notice that a newly minted Tk 300 crore local steel mill is not getting enough gas to run the plant properly.

Yet the caretaker government is still willing to lay down the carpet for TATA and Mittal.

Citycell and its shortcomings

Citycell is the first mobile operator in South Asia. Very rich history and even a richer history of robbing clients whenever possible. They have failed miserably, being second last in the list of mobile operators in Bangladesh. Why?

Grameenphone
Grameenphone basically did what Banglalink is doing to Grameenphone. Cutting rates. In the mid nineties, Citycell refused to budge on rates and did it less quickly.

Lack of partnership
Singtel came a little too late in the partnership with Pacific Telecom (owned by Morshed Khan). Pacific Telecom did not have the expertise or the resources to fight a growing and experienced Telenor. Singtel's partnership was new as Singtel itself did not have CDMA framework.

Changes in market
This is the sort of thing Grameenphone is experiencing right now. Citycell struggled to the changing market as they were used to being a monopolist but suddenly finds out it was harder to cope with the growing presence of Grameenphone.

CDMA2000 1x
CDMA allows more efficient use of mobile frequencies than GSM. The reason to go with CDMA rather than GSM was a foresight that future frequencies would be more costly to acquire from the regulator. And yes the decision was right. But Grameenphone was already gobbling up more frequency than they needed at really cheap prices.

Citycell did not push the regulator, due the lack of foreign expertise/bribes/favors (yes Singtel came a little too late). Grameenphone got the lions share, but Citycell, even by using a more superiror technology did not take advantage of it. Pacific Telecom was more interested in maintaining the short-term bottom line rather than acquiring long-term customers. But this soon changed when Singtel stepped in.

Reliance Communications of India is their second largest mobile phone company. They use CDMA. Reliance went ahead to abuse the strengths of CDMA.

Lack of a Business Solutions
Grameenphone does this part very well. They push business solutions because businesses are less finicky about changing operators. (But this may soon change as Grameenphone keeps stepping on/into other businesses). Citycell did not push business solutions even with nothing to lose with their superior CDMA network.

GP even went ahead to get the Blackberry as a fashion statement. (its the most overpriced phone in the market). But Citycell just sat around with nothing.

Bangladesh: The New Frontier for Banks article

An article was published in BusinessWeek (link at bottom of the post). It message was that banking is the last place in Asia for foreign banks to come in and gobble up. Its a New frontier at least for Mamun Rashid (for now). Citibank has done well through correspondence banking. But HSBC still is beating them by a large margin. Check out the diagram on the left. (tax rate is about 50%). [Chart shows highest 'taxpayers' with the picture of the NBR Chairman].

Citibank ups publicity in Bangladesh
They really have stepped it up a notch. First they hooked up with some local banks, namely Dutch-Bangla Bank (for their ATMs I suppose). Then they put up pointless ads in newspapers which just said 'Citibank' without any real message. Just telling everyone they are there. Then Mamun Rashid goes on to write articles in a relatively biased newspaper called 'The Daily Star'. But hey that newspaper is the most circulated one out there and he wants to get Citibank out.

But Mr. Mamun Rashid's writing isn't bad but neither is it moving nor inspiring. But he knows his banking so he is the head of Citibank in Bangladesh. Then Citibank have a lot of small and meaningless awards/donations that is geared towards getting the attention of head office/foreign press but does not move a leaf locally. Their Citibank Micro enterpreneurship Award is very much pointless, only manages to startle the foreign press who are already being entertained by Mohammad Yunus. Other than that Citibank and micro-entrepreneurs have nothing in common. If it were the case, Yunus would be hugging Mamun Rashid.

The Profits in the Asian Citis
Citibank gets record profits from Asia every year. And Bangladesh is no exception. But in reality Citibank wants to be HSBC. Hence the push for Bangladesh. Recently HSBC has made a string of investments in Asia. But Citibank has yet to make their move. Even though Mr. Mamun Rashid knows the way forward, Mr. Vikram Pandit is too busy sorting out the american losses to notice. But atleast HSBC is getting the drift.

Link to the BusinessWeek article
http://www.businessweek.com/globalbiz/content/jun2008/gb20080630_096327.htm?chan=globalbiz_asia+index+page_top+stories

Citibank likes to pointlessly woo Bangladesh Bank

Something interesting popped up bangladeshcorporate.blogspot.com

I could not believe that Mamun Rashid would stoop so low [pictured left, on the right].

Decisive quote
"Citibank usually employs up-heel, pretty women who work as the corporate ambassadors while dealing with government counterparts and/or industry peers. It is heard that middle-aged or nearly old Bangladesh Bank officials sometimes find it really hard to say ‘no’ or behave impolitely to polished female fleet of Citibank N/A (Not Applicable huh?). So as the drooling eyes keep on relishing the eye candies, the deal gets sealed with a smile."

This procedure is pointless
All is fine, but as Grameenphone has shown us, Citibank does not need to go to this extent to get things done. It can be done cheaper. Just ask Anders Jensen, CEO of Grameenphone. GP made Bangladesh Bank redefine banking -to a point that GP is now becoming a full-fledged bank.

Grameephone aspirations to become a bank

Grameenphone, with swindling profits and huge competition (thank you Banglalink for ending GP's dictatorship) has set its eyes on banking.

First stage in this process was to convince Bangladesh Bank (this is usually easy to do, because all it takes is paying for a few foreign trips and money). Lo and behold the Governor of Bangladesh Bank, Salehuddin Ahmed (who hasn't really been neutral from the moment he stepped into office) [pictured left] now recommends that mobile remittance through SMS is the way forward.


The Lingo
GP terms this as mobile banking license. GP's lingo for these services are twisted to confuse the incumbents of Bangladesh Bank. But they all mean the same thing - a full fledged banking license. The currency of exchange will be the internationally renown GP talk-time, over the ever-so-secure SMS framework. These shortcomings are all accepeted if GP can send you abroad for free. Not to mention breaking all applicable anti money-laundering measures currently in place.

GP has gone ahead making as many enemies in the process as possible. None-the-less local banks are not happy.

More mobile licenses anyone?
Maybe local banks should apply for bank-mobile license? This license would allow them all to set up cell towers on all their branches to create a mesh network for a new cellphone company. But I am sure just to get even there will be even more mobile licenses issued because almost all high profile Bangladeshis are associated with a bank. GP could be digging their own grave.

Brac Bank's view
Brac Bank is also heavily invested in remittance. How this idea slipped through the influence that Rumi Ali in Bangladesh Bank is beyond me. Rumi Ali is the chairman of Brac Bank and has an astounding amount of influence in banking policies despite his sacking from Stan Chart. How these two NGO supported companies go head-to-head will be interesting.

Grameenphone is the largest tax payer because ...

How many times have we not heard Grameenphone advertising that its the highest tax payer. Hence it plays a significant part in the 'development' of Bangladesh.[Photo]

Here is where things are a little messy. They were involved in illegal VOiP business which let them siphon of more money outside. So they are the highest taxpayer because they evaded even more taxes. Makes sense?

Political view
Lets not bring politics into this scenario, but, correct me if I am wrong. There are people currently in jail because they miscalculated that their wealth. (such as valuing your home less/more than its worth, but the judge folds on the accusers' valuation). Discrepancies as low as Tk, 1,000,000 ($14,200) can land that person and this entire extended family in jail. This is after being held without any charge.

Now even after fining GP $50 million why hasn't there been a single arrest in GP? GP were raking in so much money through VOiP, that their first quarter profits dipped 32% the moment they were told to cease these operations.

Telenor, may pay the highest taxes, but more money lands outside than inside Bangladesh.