Telenor in Bangladeshi takeover tussle

A simmering battle between Bangladesh’s government and Nobel peace prize winner Muhammad Yunus is threatening the fate of the country’s biggest mobile operator, a lucrative $2.6bn subsidiary of Telenor, the Norwegian telecoms company.

The government of Sheikh Hasina Wajed has fought a bitter battle for control of the pioneering Grameen Bank with Mr Yunus, its widely celebrated founder whom whom Dhaka suspects of harbouring political ambitions.

The battle reached its peak in 2011, when Mr Yunus was ousted as Grameen Bank’s managing director, after running the institution for three decades. Last year, the government established a commission to review Grameen Bank’s governing structure and the status of affiliated companies such as Grameenphone, a joint venture between Telenor and Grameen Telecom Ltd, a venture founded by Mr Yunus.

The commission said in an interim report this week that the original licence for Grameenphone, Bangladesh’s biggest mobile operator with a 40 per cent market share, was obtained illegally.

The report calls for Grameenphone’s licence to be immediately suspended, or for Telenor to relinquish 16 per cent of Grameenphone – a stake valued about $415m – to Grameen Bank, which was set up to provide credit to poor, rural women.

Telenor, which has invested about $1.6bn in Grameenphone, denies any impropriety in obtaining the licence, which was renewed, without any difficulty, last year. But the company is worried, and has warned in a written statement, that it will consider “all available legal options” to protect its interests in Bangladesh.

“Telenor Group is concerned that the ongoing dispute between the government and Professor Yunus impacts our significant investments in Bangladesh,” the company said. “We expect the government to comply with both local laws and international treaties that protect the rights of foreign investors.”

Mr Yunus was not available for comment.

Telenor holds 55.8 per cent of Grameenphone; Grameen Telecom Ltd holds 34 per cent, while the remaining 10 per cent trades on the Dhaka Stock Exchange.

The Bangladeshi mobile operator is Telenor’s most profitable venture, recording a profit margin before tax, depreciation and amortisation (ebitda) of 53.3 per cent last year. Grameenphone accounted for about a tenth of Telenor's 2012 ebitda of NKr33bn but only about 6 per cent of its NKr101bn revenues.

In its report, the Grameen Bank commission called for Telenor’s relinquishing of 16 per cent of Grameenphone to be retrospective from 2002, with all dividends also repaid – an asset transfer it estimated at about $760m.

So far, the government has not made any public comment on the commission report, or Grameenphone.

Mamum Ur Rashid, the commission chair, said he was “sympathetic” to Telenor, but the divestment proposal was “fair.” In its original MOU with Grameen Bank, Telenor said it would hold a 51 per cent stake in the mobile phone venture, but may reduce its stake to 35 per cent after six years of operation, with Grameen given the right of first refusal.

Telenor’s subsequent decision to retain control of the lucrative company was a source of recurring friction with Mr Yunus, who publicly complained about Telenor on several occasions, including during his 2006 trip to Norway to receive the Nobel Peace Prize.

“We want the money back not so much for the government as for the landless women,” Mr Rashid said.

Telenor’s troubles in Bangladesh are the latest example of the difficulties facing western telecoms companies in South Asia. In neighbouring India, Vodafone is engaged in a bitter dispute over taxes, while Telenor has been forced to scale back its Indian ambitions after a Supreme Court ruling cancelling its licences.

Additional reporting by Richard Milne in Oslo