Content

s

Chapter 1: Introduction....................................................................................................................1

1.1 Background............................................................................................................................1

1.2 Description of the Problem....................................................................................................2

1.3 Purpose of the Report.............................................................................................................2

1.4 Limitations of the study.........................................................................................................2

Chapter 2: Representation of the Data.............................................................................................3

2.1 Return on Assets Ratio...........................................................................................................4

2.2 Return on Common Equity....................................................................................................5

2.3 Gross Profit Margin...............................................................................................................6

2.4 Operating Profit margin.........................................................................................................7

2.5 Net Profit Margin Ratio.........................................................................................................9

Chapter 3: Analysis of the Profitability.........................................................................................11

Chapter 4: Conclusion...................................................................................................................13

Bibliography..................................................................................................................................14

List of Figures

Figure 1: Return on Assets..........................................................................................................................4

Figure 2: Return on Equity..........................................................................................................................5

Figure 3: Gross Profit Margin......................................................................................................................7

Figure 4: Operating Profit Margin Ratio......................................................................................................8

Figure 5: Net Profit Margin.........................................................................................................................9

List of Tables

Table 1: Five Years Fiscal Summary...........................................................................................................3

Table 2: Return on Assets............................................................................................................................4

Table 3: Return on Common Equity............................................................................................................5

Table 4: Gross Profit Margin.......................................................................................................................6

Table 5: Operating Profit Margin Ratio.......................................................................................................8

Table 6: Net Profit Margin..........................................................................................................................9

Chapter 1: Introduction

1.1 Background

Grameenphone Ltd. was 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 of the largest trading and investment

companies in Japan; and Gonofone Development Corporation, a telecommunication

development company in the United States. The other principle investors were NORAD

(Norwegian Agency for Development Cooperation), CDC, IFC (International Finance

Corporation) and ADB (Asian Development Bank).

Strong retail channel and distribution infrastructure with more than 350,000 point of sales has

enabled GP to reach in to the deep rural areas from where more than 60% of GP’s new customers

come onboard. With 2.8 million net customer additions during the first six months, GP’s

subscription base stands at 39.3 million with approximately 42% market share.

Grameenphone Ltd. is the market leader in the telecommunication sector in Bangladesh. With

the beginning of 2015 the company completed its Nineteenth year of business. The company

achieved remarkable success during this period. 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. Grameenphone has a very strong competitive position in the telephone industry in

the country.

It has also been one of the most profitable companies operating in Bangladesh. In this report, we

are going to discuss about the Progress Report of Grameenphone’s profitability between the

years of 2009 and 2013.

1

1.2 Description of the Problem

As Grameenphone is enlisted in the stock exchange, it publishes its financial reports every year.

However, they are provided in a form of raw data and it is quite difficult for ordinary people to

understand the profitability of the company.

1.3 Purpose of the Report

The report is created with the sole purpose of reviewing the profitability of Grameenphone

between the years of 2009 and 2013. The reason is to represent the data in a visually appealing

way which will help the potential investor to understand the progress in profit of the company

over the few years.

To present the profit data in a more simplified and visually appealing way, different ratios are

being used in this report such as –return on assets, return on common equity, gross profit margin,

operating profit margin, net profit margin ratio etc.

1.4 Limitations of the study

As the data are sensitive to the company, the report was based mainly on the annual report

published by the company. There was no scope for collecting primary data. Therefore, the whole

report is based on the secondary data available on the Grammenphone and Telenor websites.

2

Chapter 2: Representation of the Data

Below is the table for Five years financial summary of Grameenphone. This table was prepared

with the data from the annual report –

3

Table 1: Five Years Fiscal Summary

2.1 Return on Assets Ratio

Return on Assets is an indicator of how profitable a company is relative to its total assets. ROA

gives an idea as to how efficient management is using its asset to generate earnings. Below is the

ROA of Grameenphone for five years –

Year 2009 2010 2011 2012 2013

Net Income 3060 2984 14968 10705 18891

Total Assets 88461 108194 109162 109502 108905

Return on Assets (%) 3.46% 2.76% 13.70% 9.80% 17.35%

Table 2: Return on Assets

2009 2010 2011 2012 20120.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Return on Assets

Return on Assets

Figure 1: Return on Assets

4

As we can see from the graph, the Return on Assets has increased over the years. This gives the

investors idea of how effectively the company is converting it’s the money it has to invest into

net income. From the graph, it is clear that the profitability of Grameenphone has increased over

the years.

2.2 Return on Common Equity

This is the amount of net income returned as a percentage of shareholders’ equity. Return on

Equity measures Grameenphone’s profitability by revealing how much profit a company

generates with the money shareholders have invested.

Year 2009 2010 2011 2012 2013

Net Income 3060 2984 14968 10705 18891

Total Assets 26111 27588 50154 50374 38883

Return on Assets (%) 11.72% 10.8% 29.8% 21.25% 48.58%

5

Table 3: Return on Common Equity

2009 2010 2011 2012 20130.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

11.72% 10.80%

29.80%

21.25%

48.58%

Return on Common Equity

Return on Common Equity

Figure 2: Return on Equity

6

As we can see from the chart, the Return on common equity has increased from 11.72% in 2009

to 48.58% in 2013. This clearly shows that Grameenphone is generating more profit from its

shareholders’ investment. This is very lucrative and should encourage potential investors to

invest in Grameenphone more.

2.3 Gross Profit Margin

This is a financial metric used to asses a firm’s financial health by revealing the proportion of

money left over from the revenues after accounting for the cost of goods sold. Gross profit

margin serves as the source for paying additional expenses and future savings.

Year 2009 2010 2011 2012 2013

Gross Profit 29946 28667 32222 38730 51221

Sales 54303 61359 65300 74733 89060

Gross Profit Margin

(%)

55.15% 46.72% 49.34% 51.82% 57.51%

Table 4: Gross Profit Margin

7

2009 2010 2011 2012 20130.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Gross Profit Margin

Gross Profit Margin

Figure 3: Gross Profit Margin

The gross margin is not an exact estimate of the company's pricing strategy but it does give a

good indication of financial health. Without an adequate gross margin, a company will be unable

to pay its operating and other expenses and build for the future. In general, Grameenphone’s

gross profit margin is stable. It does not fluctuate much from one period to another, which shows

the stability in profitability of the company.

2.4 Operating Profit margin

Operating margin is a measurement of what proportion of a company's revenue is left over after

paying for variable costs of production such as wages, raw materials, etc. A healthy operating

margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

8

Year 2009 2010 2011 2012 2013

Income from

Operation

16287 15350 20518 20207 32572

Sales 54303 61359 65300 74733 89060

Gross Profit Margin

(%)

30% 25.02% 31.42% 27.04% 36.57%

Table 5: Operating Profit Margin Ratio

2009 2010 2011 2012 20130%

5%

10%

15%

20%

25%

30%

35%

40%

Opearating Profit Margin Ratio

Opearating Profit Margin Ratio

Figure 4: Operating Profit Margin Ratio

It shows that the operating profit margin has increased over the years. This means that

Grameenphone is earning more per taka sales. This shows increased profitability.

9

2.5 Net Profit Margin Ratio

Net Profit Margin is the percentage of revenue remaining after all operating expenses, interest,

taxes and preferred stock dividends (but not common stock dividends) have been deducted from

the company’s total revenue.

Year 2009 2010 2011 2012 2013

Net Income 3060 2984 14968 10705 18891

Sales 54303 61359 65300 74733 89060

Net Profit Margin

(%)

5.64% 4.86% 22.92% 14.32% 22.21%

Table 6: Net Profit Margin

2009 2010 2011 2012 20130.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Net Profit

Net Profit

Figure 5: Net Profit Margin

10

Net Profit Margin is one of the most closely followed numbers in finance. Shareholders look at

net profit margin closely because it shows how good a company is at converting revenue into

profits available for shareholders. From the chart above, we can see that the net profit margin of

Grameenphone has been consistently increasing over the years.

11

Chapter 3: Analysis of the Profitability

Grameenphone has maintained its leadership in the mobile industry once again in the year 2013

amidst heavy competition and unprecedented macroeconomic challenges. While competition

opted for price position, GP continued with its quality acquisition and added 6.5 million

subscribers to its subscription base. Macroeconomic factors like double digit inflation, currency

devaluation, multiple price hikes for fuel and power brushed a dent in operating expenditure,

however, business performance was strong and still due to impressive revenue performance and

operational efficiency measures in spending areas.

In the year of 2009 & 2010 there current ratio and quick ratio was smaller than other years. We

see their current assets were much lower and current liabilities were much higher than other

years. If we analyze this situation we see that in these two year there cash is lower than other

years on the other hand payable to government and autonomous bodies and other operators,

provision for expenses was high than other years. It was the reason for that decrease. Comparing

to other years Grameenphone did well in 2010 & 2011 indifferent sectors of it.

Net profit margin increased to 21% from 14% of 2012, which was driven by BDT 819 crore

increments in profit in 2013 compared to last year. Increase in profit after tax for the year 2013

compared to 2011 was mainly driven by revenue growth and lower depreciation expenses, which

was partly offset by higher income taxes and losses on foreign exchange during the year.

Increment of 19% (BDT 1,433 crore) in total revenue was driven by traffic revenue from the

subscription growth and revenue from wholesale business. The reasons for increasing income

from operation are high gross profit and low operating expenses.

12

GP subscribers are also increasing year by year. Because there network is better than other and

they give so many offer for their subscriber. One of the major initiatives of 2011 was the network

up gradation. A total of 7,272 base stations were modernized and upgraded to enhance GP’s

network in less than a year. Company’s returns towards its stakeholders is quiet satisfactory and

they do have expert to maintain their every operations. Innovative offers towards customers,

better employee engagement, standardization in every official aspect has made them unique in

the field of Telecommunication Business. Grameenphone do strongly believe that, Better and

Sustainable performance is the only way to be Successful.

13

Chapter 4: Conclusion

GrameenPhone is one of the largest multinational companies of Bangladesh. They earn lots of

profit from their business. In market their investment is also huge. Back in 2007 they have

introduced their IPO.

Bangladesh is a developing country. For a developing country which is trying to move towards

industrial society from agricultural society, communication is very important. Grameenphone

provides the best sound quality and the network while it comes to telecommunication. Therefore,

their subscribers are increasing in a substantially higher rate than its competitors each year.

Moreover, they have already secured a huge customer base and the company is charging premier

prices to them. This makes Grameenphone a very profitable company in the foreseeable future.

Therefore, it is the correct time for the investors to invest in Grameenphone.

14

Bibliography

Annual Report

GrameenPhone’s Annual Report 2011

Web Sites

www.telenor.com

www.grameenphone.com

www.dscbd.org

Books

Corporate Finance (Ross/ Westerfield/ Jaffe)

Intermediate Financial Management (F. Brigham/C.Gapenski)

15