1.

Introduction:

Grameenphone is the biggest mobile telecommunication operator in Bangladesh.

Grameenphone widely known as GP is also most important telecommunication service
provider in Bangladesh. Grameenphone received a license for cellular phone operation in
Bangladesh from the Ministry of Post and Telecommunications on November 26, 1996.
Grameenphone started operation on March 26, 1997, The Independence day of Bangladesh.
With more than 35 million subscriber as of October
2010, Grameenphone is the largest cellular operator
and to cover most part of the country. It is joint
venture between Telenor and Grameen Telecom.
Telenor is the largest telecommunication company
in Norway, owns 55.80% shares of Grameenphone,
Grameen Telecom owns 34.20% and the remaining
10% is General Public & other institution.

GP House

1.1 Objective of the report:

1.1.1

Broad objective:-

The objective of the report is to find relationship between Service Pricing and Financial
Liquidity (Liquidity), Profitability and Efficiency of Grameenphone.
1.1.2

Specific objectives:-

Develop a new service and make pricing and financial forecasting.

To compute and analyze the financial Liquidity, Profitability and Efficiency through
Ratio Analysis of last 5 financial years.
Find the relationship between Service pricing and Financial Profitability, Liquidity
and Efficiency

Analyze the Feasibility of the new service and its financial impact.
1.2

Problem Statement:

How Product/Service Pricing and Offering affects Financial Liquidity, Profitability and
Efficiency of Grameenphone.
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1.3

Scope of the report:

I began with theoretical aspects of Financial Ratios of Grameenphone which includes

Liquidity Ratios, Profitability Ratios, and Efficiency Ratio. Then I move to find the ratios of
last 5 years and analyze how these ratios changed according to the change of Product Pricing
and New Service Offering of GP

1.4

Methodology:

This is a financial analysis report where I have collected financial figures from secondary
sources, input the data on Excel for analysis purpose. Then I have collected information
internally about product pricing in various financial years. After analyzing the Financial
ratios, I have shown the relationship between the financial Liquidity, Profitability and
Efficiency and the product pricing decision of Grameenphone.

1.5

Source of Information:

I have collected data from secondary sources

Secondary sources:
Website of Grameenphone
Annual report of Grameenphone
Website of Daily News Papers
Visit to GP finance department
Meeting with Product Department Personnel

1.6

Limitations:

I have faced some limitations also

As most of the information of finance department is confidential so
that I cannot collect sufficient information.
Available information may not be exactly accurate, some information
related to product are on assumption from the official personnel
Management are very strict to provide numeric information data
Primary data was not ample.

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2.
2.1

Grameenphone Ltd.
Introduction:

Grameenphone now stands in a leading position at telecommunication sector. It is being

operated since 1997. At present, Grameenphone is the most famous Multinational Company
in Bangladesh. It has the largest number of subscribers above 40 Million. Its major
shareholders are Telenor group and grameen telecom.

2.2

Telenor AS:

Telenor AS (55.80%) is the state-owned Telecommunications Company in Norway, a country

with one of the highest mobile phone densities in the world. Telenor has played a pioneering
role in development of cellular communications, particularly, but not exclusively, GSM
technology. In addition to Norway and Bangladesh, Telenor owns GSM companies in
Portugal, Denmark, Greece, Austria, Hungary, Russia, Ukraine, and Montenegro, Thailand
and in Malaysia. Telenor is using the expertise it has gained in its home and international
markets and putting it to use in an emerging market such as Bangladesh. Telenor has many
alliances in other countries, bringing experience and competence, both technological and
business, to ventures such as Grameenphone. Telenor has opened a regional Asia office in
Singapore, an expansion that emphasizes its No Barriers motto
3

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Shareholders %

10%

34%

56%

Telenor

2.3

Grameen Telecom

General Retail

Grameen Telecom:

Grameen Telecom (34.20%) is a not-for-profit organization and a sister concern of Grameen

Bank, the internationally recognized bank for the poor with an expansive rural network and
extensive understanding of the economic needs of the rural population. Grameen Telecom,
with the help of Grameen Bank, administers the Village Phone services to the villagers and
trains the operators as well as handles all service-related issues. Grameen Bank covers 40,486
villages, or 60 percent of rural Bangladesh through its 1175 bank branches. Grameen
Telecoms objectives are to provide easy access to telephones in rural Bangladesh,

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introduce a new income-generating source for villagers, bring the Information Revolution to
villages and prove that telecommunications can serve as a weapon against poverty.

2.4

Vision:

GrameenPhone's vision is We're here to help. It is simple but significant. It means we

exist to help our customers get the full benefit of communications services in their daily lives.
Were here to help.

2.5

Mission:

Grameenphone is the only reliable means of communication that brings the people of
Bangladesh close to their loved ones and important things in their lives through unparalleled
network, relevant innovations & services.

2.6

Value Statement:

There are four statements for Grameenphone, they are:

MAKE IT EASY
Everything we produce should be easy to understand and use. We should always
remember that we try to make customers life easier.
KEEP PROMISES
Everything we do should work perfectly. If it doesnt, were there to put things right.
Were about delivery, not over-promising. Were about actions, not words.
BE INSPIRING
Were creative. We bring energy and imagination to our work. Everything we produce
should look fresh and modern.
BE RESPECTFUL
We acknowledge and respect local cultures. We want to be a part of local communities
wherever we operate. We want to help customers with their specific needs in a way
that suits way of their life best.08/09

2.7

Types of Business:

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The main business of Grameenphone is telecommunication. It provides the better network for
Bangladeshi people.

2.8

Corporate Culture:

Grameenphone is one of the most disciplined organizations in Bangladesh. It follows many

rules and regulation in the organization. They have Code of Conduct. But the employee of
this organization is very friendly. There is no sir or no madam inside of the organization.
Everyone calls each other bhai or apu. They think all are same in the organization and give
same respect to all.
5
2.9

Business Objective:

Provide best network over the Bangladesh.

Provide better service to the subscriber for ensuring their satisfaction.
Capture bigger market.
To earn wider profit margin.
To gain higher return on the investment capital.

2.10 History of Grameenphone:

Grameenphone (GP) is the largest Cell-Phone operator in Bangladesh. GP was given the
cellular license in 28th November 1996 by the ministry of Posts and Telecommunications.
Later in March 26th 1997, they offered their service in Dhaka city and gradually covered the
entire country. GP, in collaboration with Grameen Bank, is aiming to place one Phone in each
village to contribute significantly to the economic uplift of those villages. GPs basic strategy
is coverage of both urban and rural areas. In contrast to the island strategy followed by
some companies, which involves connecting isolated islands of urban coverage through
transmission links, GP builds continuous coverage, cell after cell. While the intensity of
coverage may vary from area to area depending on market conditions, the basic strategy of
cell-to-cell coverage is applied throughout GPs network. GP employs a large number of
employees who are young, dedicated and energetic. GP knows that the talents and energy of
its employees are critical to its operation and treats them accordingly.
The technology used by GP can only be described as state of the art. GPs Global System for
Mobile or GSM technology is the most widely accepted digital system in the world, currently
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used by over 300 million people in 150 countries. GSM brings the most advanced
developments in cellular technology at a reasonable cost by spurring severe competition
6
GP is best known for its service rather than its low tariff and value added services. GP
believes in service, a service that leads to good business and good development. Telephony
helps people work together, raising their productivity. This gain in productivity is
development, which in turn enables them to afford a Telephone service, generating a good
business. Thus development and business go together.
As a result GP is delivering the digital revolution to the doorsteps of the poor and
unconnected. By being able to connect to urban areas or even to foreign countries, a whole
new world of opportunity is opening up for the villagers in Bangladesh. Grameen Bank
borrowers who provide the services are uplifting themselves economically through a new
means of income generation while at the same time providing valuable Phone service to their
fellow villagers. The Telephone is a weapon against poverty.

2.11

Milestones of Grameenphone:

In 1996, Grameenphone Ltd. incorporated as a Private Limited Company. In 1997, GP started

its operation on the Independence day of Bangladesh. If we summarize the history of
operation of Grameenphone till now, we can start from 2012 and go back to the previous as
follows.
In the Financial Year 2012, Awarded license for 2G operation for 15 years effective from
November 2011; two new affordable packagesAmontron and Nishchinto were launched,
10-second pulse was introduced for all products including helplines; AGP App was launched
to facilitate mobile self service; Reached 40.02 million Subscribers. In 2011, Launched My
zone- location based discount on usage, Micro SIM cards for iPhone, Spondon Package with
1-sec pulse; Grameenphone Branded Handset (C200, QWERTY handset Q100 and Android
Handset Crystal), Customer Experience Lab, eCare solution; Completed swapping of 7,272
nos. of BTS; Reached 36.5 Million Subscribers. In 2010, Launched New Tariff Plan,
MobiCash Financial Service Brand, Ekota for SME, Baadhon Package, Mobile Application
Development Contest & Network Campaign; Reached 29.97 Million Subscribers. In 2009,
Listed on Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd.; Launched
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Internet Modem, Special Olympic Regional Talent Hunt, Stay Green Campaign, Internet
Package P5 & P6, Grameenphone Branded Handset & Studyline; Reached 21 Million
Subscribers. After that, in 2008, Introduced BlackBerry Service; Commissioned Brand
Positioning & launched Stay Close & Customer Care Campaign;Reached 20 Million
Subscribers. In 2007, Converted to a Public Limited Company; Re-launched Business
Solutions; Launched New VAS, Bull StockInformation, Missed Call Alert & PayForMe
Service; Re-branded djuice; Reached 16 Million Subscribers. In 2006, GP launched
HealthLine, Smile Prepaid & Xplore Postpaid, Cellbazaar, Business Solutions for Business
Class & Community; Introduced new GP Logo Following Maiden Decade of Operation;
Reached 10 Million Subscribers
In 2005, GP launched Electronic Recharge System, djuice Brand Targeting Youth Segment,
EDGE & Voice SMS for the first time in Bangladesh; Reached 4 Million Subscribers. In
2003, GP reached 2 Million Subscribers. GP launched Prepaid Product with PSTN
Connectivity; Reached 1 Million Subscribers in 2003.

2.12 Products and Services offering:

Voice Services:
Grameenphone prepaid and postpaid voice subscribers have access to national and
international long-distance dialing. In addition, it offers a variety of GSM facilities services
in different combinations according to the airtime package selected. These services include
call waiting, call holding, call conferencing, missed call alert and caller identification.
Grameenphone also offer its voice subscribers international roaming services, which enable
them to make and receive calls when outside Bangladesh, as well as bundled products and
services.
Grameenphone offers subscription in two categories, Pre-Paid Subscriptions and Post Paid
Subscriptions. Additionally it provides various value added services.

Pre-Paid Subscription:
In Prepaid service Grameenphone has divided it into Aapon, Bondhu, New Djuice and
Shohoj package. And those who are still using the Smile and Djuice packages they are
allowed to use the package but if someone purchase a new SIM he or she will never be able
to take the Smile and Djuice package. In this prepaid SIM subscriber has to pay first for
making a call or to avail any service. Different packages are made with different facilities and
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while purchase of any new will a number of freebies are provided to the customer. More than
95% of GPs subscribers are prepaid users. The former is only mobile-to-mobile, while
PSTN (Public Switched Telephone Network)connects to BTTB local, BTTB-NWD
(Nationwide Dialing), ISD (International Standard Dialing), all Grameenphone mobiles, and
other mobiles and receives calls from the same. It frees the subscriber from the hassles of
paying bills, security deposits and line rents. A wide range of value added services are offered
with this connection, namely news updates, downloadable ring tones, wallpapers, data
transfer, internet browsing etc. Below is a chart where the call rate and freebies of different
SIM are provided.
9
Post-Paid Subscription:
With the new Xplore postpaid, one can discover the pleasure of doing much more. Packed
with a treasure of new features and facilities it keeps the user in touch with their loved ones
and gives them access to unlimited information and entertainment. Xplore postpaid is
intended to set the subscribers free. In Xplore postpaid SIM subscriber gets a credit limit of
500 Tk where they make calls out of it or purchase any services. They have the privilege to
make different acts first then pay. They receive a big facility that the prepaid subscriber
doesnt get and that is they pay per second of their call made. A chart is provided below to
know more about the charge and facilities in Xplore postpaid SIM.

2.13 Business Users:

Business Solutions is a complete, quality business communications service from
Grameenphone designed especially for the business community in Bangladesh. The Business
Solutions team provides the business users customized telecommunications solutions through
consultation with them.

Rural Users - Village Phone Program (VPP):

The internationally acclaimed Village Phone Program with the help of Village Phone
operators is providing telecommunication services in over 82,000 villages in 64 districts of
the country. Started since the inception of Grameenphone in March 1997, the Village Phone
Program is a unique initiative to provide telecommunications facilities in remote, rural areas
all over Bangladesh. The Village Phone is a shared access model which links the
telecommunications sector with the microfinance sector to enable microfinance clients
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10
Specially women to borrow the money needed to establish a Village Phone business in rural
areas. The Village Phones have proven their immense potential in boosting income of poor
households in rural areas, promoting health care, development of agri-business and in the
social empowerment of rural women. Recently all Village Phones were converted into
prepaid for more convenience of the subscribers. The Village Phone Program has also been
replicated in a number of countries including Uganda and Rwanda in Africa.
Village Phone Program is a unique initiative to provide telecommunications facilities in
remote, rural areas. It has brought about a quiet revolution in mobile telephony in
Bangladesh, by putting cell phones in the hands of the rural poor, many of them women, who
had never seen a telephone before.
The Village Phone (VP) works as an owner-operated pay phone. It has created a good
income-earning opportunity for the VP operators, mostly poor women who are borrower
members of Grameen Bank. Typically, a member of Grameen Bank takes a loan to buy a
handset and a GP subscription and she is trained by Grameen Telecom on how to operate it.
As of today, there are more than 478210 VP operators in over 50,000 villages in 439 Upazilas
(sub-districts) of the country. Amongst GP subscribers, VP operators yielded the highest
average revenue per month.
VPP has received many international awards while it has also been extensively featured in the
international media over the years and documented by researchers both at home and abroad.
It was given the GSM in the Community Award by the GSM Association at the GSM
Congress in Cannes, France in February 2000. It also received the Commonwealth
Innovation Award in 2003 and the Petersburg Prize awarded by the Gateway Foundation
in 2005.

2.14 Grameenphone Public Phone:

Grameenphone Public Phone is a product for the public call office market whereby a
telephone facility, run by one of its subscribers, is provided in a public place for use by the
general public. GPPP offers a low call rate, rechargeable through Flexi Load or scratch cards,

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for its subscribers. Grameenphone Public Phone is targeted towards potential subscribers in
the urban and semi-urban public call office market.
Grameenphone Community Information Centers
Launched in February 2006, Grameenphone Community Information Centers (CIC)
provide access for rural people in Bangladesh to Internet, voice communications, video
11
Conferencing and other information services. They are designed to be run independently by
local entrepreneurs as small businesses. Grameenphone provides the entrepreneur with
training and support. The services also include office services, including scanning, printing
and e-fax, CD writing, telemedicine services, multimedia education for children, electronic
governance services and certain value-added services. Grameenphone had more than 502
CICs as of December 31, 2010.

2.15 Mobile Handset and Other Sales:

Grameenphone offers a number of mobile handsets from a number of manufacturers,
including Blackberry TM handsets, particularly in connection with bundled promotions.
Handsets are typically sold for approximately Taka 2,000 to Taka 5,000 per handset. Till now
Grameenphone has launched 3 mobile handset one is the badhon package costing about 1199
Taka. One was the Grameenphone V100 which costs around 3200 Taka and lastly they have
introduced the Djuice shake for the young generation. Grameenphone is not only focusing on
the voice call and services but they are also diverting them towards the Handset business. A
number of other products are being sold at Grameenphone Centers and Grameenphone
service desks like different model of handset of Samsung and Nokia. Historically, high ARPU
customers are more likely to buy bundled handsets. Revenue from sales of mobile handsets
accounted for less than 1.0% of our revenue in each of the year ended December 31, 2008
and the year ended December 31, 2009.
12

2.16 Non-Voice Services:

Grameenphone also offer non-voice services, which refer to as value-added services, or
VAS, to its subscribers. Its subscribers are increasingly using these non-voice services, in
particular Internet access, downloadable content and ring-back tone services, each described
in further detail below.
13
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 SMS: Allows subscribers to send short text messages to other mobile users handset
display screens.
Voice SMS: Allows subscribers to send audio messages (instead of text) to other GP
subscribers.
Web to SMS: A web-based SMS service that allows our subscribers to send SMSs to
single or multiple recipients.
Voicemail: Enables subscribers to retrieve audio message recordings left by callers.
MMS: Allows subscribers to send pictures, text and sound/voice in a single packet
message.
EDGE/GPRS: Allows subscribers to use their mobile phones to access the Internet,
send and receive MMS, browse WAP and download files.
GP World: Allows subscribers to visit wap.gpworld.com from WAP enabled phone
sets to download Poly Tones and True Tones of hit songs;
Blackberry TM services: Allows subscribers to use Blackberry TM wireless services
with support e-mail, phone, Internet, instant messaging, organizer and more;
Bull-Stock Information: Allows subscribers to receive, almost in real-time, updates on
stock prices on their mobiles.
Instant Messenger: Allows subscribers to use PC-style instant messaging through our
own chat software.
Multimedia Content Services: Allows content such as music, sports, news and finance
and other content to be accessible or pushed to subscribers mobile handsets,
including instant news updates and headlines (including News Update, Traffic Update
and Cricket Alert);
Grameenphone Health Line: An interactive teleconference with a licensed physician
that provides medical advice and assistance to our subscribers and non-subscribers
(who register for a fee) for both emergency and non-emergency situations, 24 hours a
day, seven days a week. Health Line was awarded the GSMA Award for Best Use of
Mobile for Social and Economic Development at the 3GSM World Congress in
February 2007;
Mobile Chat: A WAP-based instant messaging service that allows subscribers to
engage in online and mobile chat;
Mobile Web: Allows subscribers with compatible mobile handsets to access the
Internet;14
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 Pay for Me: Allows prepaid subscribers to call another subscriber even if the caller
does not have sufficient balance in his account to make the call. The intended
recipient can decide whether or not to take the call.
Welcome Tunes: Allows subscribers to set the tunes that callers will hear when they
call
Bill Pay service: Power Development Board customers in Chittagong and Coxs
Bazaar and Titas Gas Transmission and Distribution Company customers in greater
Dhaka, Maymensingh, and Comilla can pay their bills either from their handsets or at
any authorized Bill Pay center whether or not they have a mobile phone.
Mobi-ticket: Customer can buy train ticket from their mobile phone. Bangladesh Rain
way transport authority provides every day schedule to Grameenphone which is enclipped in the port of mobi-ticket. To avail the service customers must open a separate
account for the service and must keep money in that account recharging from any
Customer care point or from any place where the Bill pay service is available.
Music Radio: Its a service where after registration a subscriber can listen to song and
can even dedicate or gift that song to their loved ones. The registration monthly fee is
23Tk. The port number is 4040.
Education Information: A service which helps students to know about the admission
stuffs and educational stuffs of different collage and universities. And sort of
educational factors are discussed with the subscriber. The port number is 2255 and it
charges 5Tk per minute.
Call Block service: Its a service by which a subscriber can block those numbers
which are disturbing the subscriber by calling again and again. Its a very helpful
service mostly for the female subscriber. It charges a monthly registration fee of
34.50Tk. A subscriber can block 20 disturbing numbers at once.
Missed call alert service: Its a service which enables the subscriber to get connected
to everyone at every time doesnt matter whether the mobile is switched on or off or
even there is any network problem. With the service subscriber will be notified by
sms that while the mobile was switched off or there was any network problem who
called the subscriber. A monthly fee of 11.50TK is charged.

2.17 Online Store by Grameenphone:

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Cell Bazaar: Its an online store where people can unload information, pictures about the
product they want to sell. The product can be of any category and to do so people need to
register a logging ID for uploading any information. To do so a SMS has to be send through
mobile for registration and a reply SMS with a password confirms the registration. Thousands
and thousands of people are registered in cell bazaar.
1

2.18 Organization structure of Grameenphone:

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2.19 Future Vision of Grameenphone:

Grameenphone now the market leader of Bangladesh. So in the future they want to keep their
position by providing better products at affordable price. They provide better voice services
to their customers but about data services they are not up to the mark. Because they are
providing internet facility by a share bandwidth line. They are hoping that Govt. will provide
3G license in a coming days so Grameenphone able to provide faster internet services to its
customers. That will increase their customer satisfaction and band loyalty.

2.20 Introducing Product Department of Commercial Division:

Commercial Division: Commercial Division is responsible to all commercial
operation of Grameenphone. This is the core department of the Company. All the
operations of Product Offering, Promoting, and Placing on the Market are
centrally controlled by this division.
The Commercial Division consists of two department- Product department, and
Marketing Department.
Product Department: Product Department is the department that works to plan
new product, efficiently operate existing product, offer new price on existing
product, offering new services with or without Vendors co-operation. The
Department is divided into various Units. Each unit is operated by a team of
employee. The designation of the employees varies to Specialist, Senior
Specialist, and Head of the Unit. The head of the Product Department is Mr.
Michel.

2.21 Introducing VAS Team:

Value Added Service (VAS) team is a unit of Product Department of Commercial
Division. There are currently 10 employees working in this team. I have joined the
team on 27th January 2013 as an internee and continued for 28 th July 2013. This
unit deal with all the Value Added Services of Grameenphone. There are various
types of value added service like SMS Alart Service, Push pull service, IVR
Services such as News, Sports, Music etc. WAP based services are also included
as Value Added Services of Grameenphone.
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Each specialist has the responsibility to manage particular service(s), meeting with
vendors to launch new service or adjust pricing of the services. The Senior
Specialists observe the services of the specialists and report to the Finance
department and Head of Product Department. The Head of VAS (currently Mr.
Sanah) is responsible to do meeting with Vendors, Foreign Partners to make deals.

2.22 My Work Responsibilities during Internship

I have joined to Grameenphone as an internee after completing all the courses of
my BBA Program. I have joined to Product Commercial Department. I was
involved to many important work responsibilities in the department and also got
opportunity to work inter-department. My Supervisor Mushfequr Rahman Bhuiya,
Specialist, has guided me to many important works that was implemented in
Grameenphone Call Center, GPC, Internal Panel etc. I can describe my work
responsibilities during internship as follows.
1) Work related to Product Commercial:
UAT: User Activity Test is a very responsible and one of the important work
in this department. While launching a new service for the GP subscribers, it is
first tested to each product to ensure its correct operation. Once the finance
department and IT department grants a service to launch, there are two types
of UAT test. One is UAT at Test Class, another is UAT at Live Class. After
successful UAT, the service it sent to Activation team to launch.
Communicating Vendors: Vendors or Business Partners are called frequently
to discuss about new or existing service. It is a responsibility to notify vendors
about new meeting, communicate with them for necessary documents or
information. Most of the time I had to communicate many vendors for service
activation purpose, or to inform service patterns.
Developing Customer Service Panel: I have designed a new proposed
service panel which will be used to GP Call Center within few months. It is

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expected that this new Customer Service Panel will reduce cost and make
service providing faster and easier.
2) Work related to Finance
Being an intern of Product department, I had to work some finance related
works. Some of the works are:
o Receiving bills of new Value Added Service from Content Provider
Companies.
o Checking the bills hard copy and check the accuracy of writing bills.
o Writing bills from the money receipts after checking the amount of
bills with the statement.
o Make received the bills to Finance OTS.
o Contact CP company employee immediately if any correction needed
to the bills.
o Make the papers signed by the CMO and Head of the Product
Department.

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3.

Literature Review

1. Product Pricing:
Before setting a price for your product, we have to know the costs of running the
business. If the price for the product or service doesn't cover costs, the cash flow will
be cumulatively negative, we'll exhaust your financial resources, and our business will
ultimately fail.
To determine how much it costs to run a business, include property and/or equipment
leases,

loan

repayments,

inventory,

utilities,

financing

costs,

and

salaries/wages/commissions. We should not forget to add the costs of markdowns,

shortages, damaged merchandise, employee discounts, cost of goods sold, and desired
profits to the list of operating expenses.
Though pricing strategies can be complex, the basic rules of pricing are
straightforward:

All prices must cover costs and profits.

The most effective way to lower prices is to lower costs.

Review prices frequently to assure that they reflect the dynamics of cost, market
demand, response to the competition, and profit objectives.

Prices must be established to assure sales.

Cost-Plus Pricing
Many manufacturers use cost-plus pricing. The key to being successful with this
method is making sure that the "plus" figure not only covers all overhead but
generates the percentage of profit you require as well.

Demand Price
Demand pricing is determined by the optimum combination of volume and profit.
Products usually sold through different sources at different prices--retailers,
18 | P a g e

discount chains, wholesalers, or direct mail marketers--are examples of goods

whose price is determined by demand. A wholesaler might buy greater quantities
than a retailer, which results in purchasing at a lower unit price. The wholesaler
profits from a greater volume of sales of a product priced lower than that of the
retailer.

Competitive Pricing
Competitive pricing is generally used when there's an established market price for a
particular product or service. If all your competitors are charging $100 for a
replacement windshield, for example, that's what you should charge. Competitive
pricing is used most often within markets with commodity products, those that are
difficult to differentiate from another. If there's a major market player, commonly
referred to as the market leader, that company will often set the price that other,
smaller companies within that same market will be compelled to follow.

2. Financial Liquidity:
Liquidity is the term used to describe how easy it is to convert assets to cash. The
most liquid asset, and what everything else is compared to, is cash. This is because it
can always be used easily and immediately.
Liquidity and Companies
One last understanding of liquidity is especially important for investors: the liquidity
of companies that we may wish to invest in.
Cash is a company's lifeblood. In other words, a company can sell lots of widgets and
have good net earnings, but if it can't collect the actual cash from its customers on a
timely basis, it will soon fold up, unable to pay its own obligations. (To read more,
check

out The

Essentials

of

Cash

Flow and

Spotting

Cash

Cows.)

Several ratios look at how easily a company can meet its current obligations. One of
these is the current ratio, which compares the level of current assets to current
liabilities. Remember that in this context, "current" means collectible or payable
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within one year. Depending on the industry, companies with good liquidity will
usually have a current ratio of more than two. This shows that a company has the
resources on hand to meet its obligations and is less likely to borrow money or enter
bankruptcy.
A more stringent measure is the quick ratio, sometimes called the acid test ratio. This
uses current assets (excluding inventory) and compares them to current liabilities.
Inventory is removed because, of the various current assets such as cash, short-term
investments or accounts receivable, this is the most difficult to convert into cash. A
value of greater than one is usually considered good from a liquidity viewpoint, but
this is industry dependent. (To read more, see The Dynamic Current Ratio and
Analyze Investments Quickly with Ratios.)

3. Financial Profitability:
Business of all types and sizes face the challenge of capturing customers in
increasingly competitive global markets, where more and more products are offered at
lower and lower prices. Not only are companies facing downward pressures on prices,
customers have ever-increasing expectations of customer service and quality, among
other things. The business must have a product the market wants at a competitive
price, AND it must be able to structure its business operations and activities to be
sustainable under a cost structure that (when combined with the price) generates a
profit. Moreover, this must be a profit that is not just at the total business bottom line,
but on a sale-by-sale, customer-by-customer, business unit-by-business unit basis.
Every firm is most concerned with its profitability. One of the most frequently used
tools of financial ratio analysis is profitability ratios which are used to determine the
company's bottom line and its return to its investors. Profitability measures are
important to company managers and owners alike. If a small business has outside
investors who have put their own money into the company, the primary owner
certainly has to show profitability to those equity investors.
Profitability ratios show a company's overall efficiency and performance. We can
divide profitability ratios into two types: margins and returns. Ratios that show
margins represent the firm's ability to translate sales dollars into profits at various
20 | P a g e

stages of measurement. Ratios that show returns represent the firm's ability to
measure the overall efficiency of the firm in generating returns for its shareholders.

Return on Assets

The Return on Assets ratio is an important profitability ratio because it measures the
efficiency with which the company is managing its investment in assets and using
them to generate profit. It measures the amount of profit earned relative to the firm's
level of investment in total assets. The return on assets ratio is related to the asset
management category of financial ratios.
The calculation for the return on assets ratio is: Net Income/Total Assets = ___%.
Net Income is taken from the income statement and total assets is taken from the
balance sheet. The higher the percentage, the better, because that means the company
is doing a good job using its assets to generate sales.
Return on Equity
The Return on Equity ratio is perhaps the most important of all the financial ratios to
investors in the company. It measures the return on the money the investors have put
into the company. This is the ratio potential investors look at when deciding whether
or not to invest in the company. The calculation is: Net Income/Stockholder's
Equity = ___%. Net income comes from the income statement and stockholder's
equity comes from the balance sheet. In general, the higher the percentage, the better,
with some exceptions, as it shows that the company is doing a good job using the
investors' money.

4. Financial Efficiency:
The asset turnover ratio
This measures the productivity of the business (i.e. how many pounds worth of sales
revenue can be generated from the assets employed?). It is calculated using the
following formula:
21 | P a g e

For example, if a business has sales revenue of 8 million and net assets of 5
million, then the asset turnover ratio would be:

This means that for every 1 of net assets, the business generates 1.60 of sales
revenue. Clearly the higher the answer, the better. It is normal for service industries
(e.g. supermarkets) to have a much higher asset turnover ratio than manufacturing
industries, since service industries generate very high sales in relation to their net
assets.

5. How Product Pricing affects Financial Profitability,

Efficiency and Liquidity:

The relationship between price change of products and the financial solvency profitability
and efficiency are as follows:

22 | P a g e

i.

Product of Grameenphone means the Packages of Prepaid and

Post paid connection. For example, djuice is a product that has
different call rate (product pricing)

ii.

Service means any service used other than voice call. SMS,
Internet, WAP, Alert services, Health line etc.

iii.

Product or service, it might be a new product or an existing

product. If the existing products price has been changed or
new product with new service launched, it effects many other
financial variables.

iv.

Change in product pricing affects revenue, expenditure,

liabilities, assets, and inventory.

23 | P a g e

4.

Analysis

Developing New Service:

Service Name: Self-care and Self-development Counseling
Service Description:
Any GP subscribers can dial a short code to talk with a Professional psychologist to take
advice in any emergency social and psychological problem, or depression and take short time
counseling. Here, the subscriber can express his or her situation (or his/her relatives),
understand the problem, find the proper way of solution, get motivational support and a short
counseling instantly. The service will be provided by graduates from psychology, masters
from clinical psychology (in practice), and masters from counseling. This type of emergency
human health facility has never been introduced before in Bangladesh. But in other countries,
like USA, Canada, etc, distant counseling is very popular and a competitive health service.
Background of this concept:
In Bangladesh, this type of service has never placed before by any phone company, or by any
NGO. But there is a high demand for psychological counseling and advice around the
country. Very few numbers of people can get professional psychiatrist or psychological
counselor. Most of the people, even from an upper-middle class family, do not know where to
go for any mental health facility. But day by day, social and psychological problems are
increasing in our society like Suicidal attempts, Losing patience, Frustration in Jobs and
Study, Problems regarding relationships etc.
When we need more psychologists, counselor, and psychiatrist in our country, most of the
graduates from Academic Psychology having brilliant result cannot get job for clinical
psychology, or psychological counseling. After having year long practice in clinical
psychology and counseling, they switch to other profession or go abroad for job purpose
related to psychology.
The main reason for this gap is the absence of mental health institute compared to medical
health institute. Moreover, people who suffer from any depression from society or family or
from relationship, may hope to have counseling from professionals but avoid going mental
health institutes (mental hospitals) will gladly welcome this service. There are many students
who suffer from depression regarding failure in exam, or conflict from relationship, or even
confused to take decision what to do. But most of them are unknown that a number of
professional counselor and clinical psychology graduates who studied regarding these issues
and expert to give counseling them.

24 | P a g e

If we come up with a exclusive service where these large number of people or their family
can contact with a professional psychologist for proper advice and counseling, it would not
only be potential business, but also a noticeable progress in Corporate Social Responsibility.
Service Design:
This is a call center based service where the clinical psychologists and counselors will sit to
talk to the GP subscribers (their clients). Subscribers who want to consult a psychologist by
phone will dial to a short code number say 678 to find a psychologist.
Here, service from the clients is as follows:
1)
2)
3)
4)
5)
6)

Registration through SMS, IVR or USSD

Dial 678 to talk to a psychologist
Listen advertisement to get free minutes
Take counseling and schedule of further counseling
Suggestions for outdoor counseling
Scheduling preferred psychologist

Service Features:
1) Registration: Subscribers need to register first to use this service. There are 3 types
of registration: Daily and Weekly. Daily subscription costs TK10 and TK3 per
minutes. Weekly Subscription costs TK25 and TK3 per minute. Without Registration,
subscribers can use this service by TK5 per minute.
2) Pay for Minutes: Subscribers with or without Registration can have free minutes paid
by third party companies. The subscribers will be given this option at the very
beginning. If the subscriber agrees listen 15 sec Advertisement, the company will pay
first three minutes of the subscribers. But one subscribers can not have this offer more
than one in a day.
3) Profile: Every clients demographical information given to the psychologists will be
stored as clients profile for the further counseling. The psychologist will keep the
information with clients permission. Every time the client takes service, his or her
problems, suggestions, and feedback will be recorded and it will benefit the client to
have more accurate understanding with the psychologist.
4) Counseling: The subscribers can take counseling from the counselor and psychologist
any time. The scheduling with the preferred counselor or the immediate counselor will
be given in text message. The client will be given a tracking number of each
counselor they talk so that they can make request for that specific counselor through
SMS.
5) Scheduling my preferred Psychologist: Having the tracking number of the preferred
counselor, the client can Send SMS <Req Number> and send to 678. The reply SMS
will give the client date and timing when the preferred psychologist or counselor will
be available on phone for the specific client.
Market Attractiveness:
25 | P a g e

o Many people living in remote areas can realize the necessity of psychological therapy
but cant reach the professional psychology counselor, they will be benefited and grab
the service.
o Large number of people (of all ages) would be interested to take this service
o Users retain rate is high; most of the people would contact regularly and suggest
other to call here.
o People in rural areas, who suffers from mental health problem, but mostly unknown
about the right treatment, would take this service.
Cost Effectiveness:
The challenge of this service is to make the cost minimum to make significant margin. The
cost mainly depends on the manpower, the hired counselors and advisers, who serve the
service. Here, we can hire the expert psychology counselor in affordable wage rate. We
mainly propose part-time job to graduates in psychology, mostly having Masters in clinical
psychology or Masters in Counseling. Their current job market is not structured; they would
be interested to these job as regular part-time call-center employee.
Strategic effectiveness:
This service will have both financial and strategic benefit for Grameenphone. Grameenphone
has already launched Health Line (789) for medical health service via phone, and have good
response from its subscribers. In the same way, with a motive to go beyond, this new value
added service, that again involve peoples social and human need, would assist us to get
strategic goal of Grameenphone. It would realize the subscribers that Grameenphone is
facilitating its users in each and every aspect; make proper solution to go ahead.
Potential Cost-Benefit Assumption:
If we calculate the variable cost of the service (the payment to the Psychologist or Counselor)
and revenue of the service, we can have significant margin to meet the fixed costs of the Call
center and also to keep significant profit for Grameenphone.
We have assumed that all the psychologist and counselor will be Part time employee and they
will be paid TK120 hourly. Here, the basic is TK80 per hour, so on the over time, the
counselor will get TK200 per hour. Regular hour of the psychologist is 5 hours a day.
The revenue on every minute from the Clients call assumed TK4 as the average of
Registered clients TK3 per minute and Non-registered clients TK5 per minute.
So, the Cost benefit analysis of this service is as follows:

26 | P a g e

The detail Business Case is attached in the Appendix of the Report. Click Here to
download the business case now.

Break Even Point: First 4 months, the service is in loss. But it reaches the
Breakeven point on 5th month of operation.

Breakeven Point of Self Care Service

70000000
60000000
50000000
40000000
30000000
20000000
10000000
0

Accumulated Revenue

Accumulated Cost

27 | P a g e

Framework of the Service:

The service given to the client is shown below. The pattern of this service
will be default as follows.

Service Point of View:

Here, we have shown the service from both clients and the counselors point of
view.

28 | P a g e

29 | P a g e

Financial Analysis of Grameenphone:

Liquidity Analysis:
1. Quick Ratio:
The Quick Ratio measures the balanc of Cash and near to Cash
Assets compared to its current liabilities. The value of this ratio is
preferable to increase when a company is in growing trend. The
ratio increases when the Cash and Near to Cash assets increases
more than the current liabilities.
Grameenphone has maintained good proportion of cash and
accounts receivable holding the current liabilities in control. Thus we
have found that the ratio has been increased from the your 2008 in
the financial year 2009 and 2010.

Fig-1: Quick Ratio of GP

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2008

2009

2010

2011

2012

If we observe the change in the Quick ratio of GP from the year

2008 to the year 2012, we can find some valid reason of these
changes. The reasons along with its change pattern are summarized
in the following table.
Analysis:
o In the financial year 2009 and 2010, GP has significant
increase in Cash and Accounts receivable because of new
product offering Blackberry service and increased number of
Post-paid users. It was the big reason of increasing the quick

30 | P a g e

ratio and made the business more liquid to response shortterm obligations.
o In the financial year 2011 and 2012, cash holding dropped
sharply. This is the main reason to decrease the Quick ratios in
these years.

Fig-2: Cash and cash equivalent

20,000,000,000
18,000,000,000
16,000,000,000
14,000,000,000
12,000,000,000
10,000,000,000
8,000,000,000
6,000,000,000
4,000,000,000
2,000,000,000
0

2008

2009

2010

2011

2012

o From the year 2010, GP has given many of its business

activities to third party companies specially in Value Added
Services. Thus GP has to carry less amount of Cash to
operate these.
o Separating IT Department as individual company GPIT, the
operation related to IT has not been counted to GP. The IT
operations took most use of Cash. This is why Cash and
Cash equivalent of Grameenphone Ltd has been dropped
compared to the year 2008 and 2009. This does not
indicate negative liquidation, but the liquidation has been
settled down.

2. Inventory Turnover Ratio:

This ratio shows that how many times the inventory of GP is sold
and replaced over the particular year. The result of this ratio
mathematically explains how much higher the sales are compared
to the inventory.
The Inventory includes
I. Handset, Data card and Other devices
II.
SIM Cards
III. Scratch Cards
IV.
IT Accessories and others
Inventory Turnover is calculated by dividing Sales volume by the
inventory of the goods. Here, the inventories carried and sold on the
31 | P a g e

market is only a certain portion of the total revenue. When, we

count the whole revenue and given inventories, the result is given
below.

Fig-3: Inventory Turnover

300
250
200
150
100
50
0
2008

2009

2010

2011

2012

The inventory turnover ratio is very high when we count the total
revenue and total inventory of Grameenphone from its financial
report. There are some reasons,
o Revenue includes various services that cant be counted as
inventory or have no need to carry as inventory. For example,
Traffic Revenue includes revenue from the mobile phones
Voice talk minutes consumed by subscribers. The cost is the
investment made by GP for technological establishment. Once
the cost is made, and revenues cover the cost of the
infrastructure.
o The inventory mainly includes SIM Cards, Scratch cards which
are loaded weekly or daily. Scratch Cards are loaded atleast 4
times in a week on average. On the other hand, SIM card
inventory is also reloaded at least once in a week. This is why
the ratio is so high.
o Scratch card includes only a portion of the Traffic Revenue, a
good portion of the Traffic revenue comes from Flexi-Load
recharge option.
This is why, if we wished to analyze the actual characteristics of
inventory turnover, we have to go with specific revenue and specific
inventory to analyze inventory turnover.
32 | P a g e

Observation: The higher the inventory turnover ratio, the better

Liquidity we can predict from Grameenphone. In 2008, and 2009,
the ratio is higher enough. In 2010, the turnover ratio of inventory
dropped by 41%. In 2011, the inventory turnover was at the pick
because of increased revenue and decreased inventory.

Inventory Turnover (Handset, Data Card and other devices)

Till 2011, the inventory turnover was in increasing trend. In these
periods, Grameenphone came with its own handsets and Modems
that had good demand in the market. The revenue was in increasing
trend compared to inventory because the market demand was
accurately forecasted year by year. In 2011, Grameenphone has the
highest revenue on selling handsets and data cards, specially the
newly placed handsets.
The mostly sold handset was the cheapest
price

handsets

placed

in

the

market

between the years 2008 to 2011. The

Handset C100 which was the lowest price
handset was sold by maximum number of
customers. The Handset costs only TK1100.
The Handset Q100 was another popular
handset. The price of Q100 handset was
TK5,200. But Grameenphone could not get
expected revenue bringing Android handset

Grameenphone
Handsets

which price was above TK12,000. Thats

why in 2012, the Inventory turnover sharply
dropped.

33 | P a g e

Fig-04: Inventory Turnover (Handset, Data Card)

25
20
15
10
5
0
2008

2009

2010

2011

2012

Inventory Turnover (Handset, Data Card)

This is how the pricing of a non-mobile product drives the Liquidity

of inventory turnover of Grameenphone. The price of the handset
effects the number of handset sold and the total revenue come from
selling the handsets. If the price comes higher to offer the handset
for small segmented market, it looses the large portion of potential
customers. The result reflected in the flow chart of Inventory
Turnover on Handset and Data Card.
The promotion of wide spread capacity of Grameenphone Internet
has increased the sales of Grameenphone Internet Modem (data
card). But in 2012, other internet service provider company like
Banglalion-Wimax, Qubee, Ollo etc has good market demand and
their modem price was much cheaper than Grameenphone Modem.
That is why the demand for data card in 2012 also dropped in the
market and inventory turnover ratio decreased. The Revenue of SIM
Card includes the revenue from selling new Connection Sim and SIM
replacement. The inventory turnover ratio of SIM Card selling
specially boom between the year 2010 and 2011 because of
remarkable reduction on call rate. The revenue of the SIM card
increased compared to its inventory. The reason of increasing the
Revenue is clear from the side of grameenphone. But the reduction
of inventory is the cause of separation of IT department from GP.
GPIT took the risk of inventory Data Card selling by Grameenphone
Ltd.
34 | P a g e

The reason of reduction of Data card selling in the year 2012 is

insufficient marketing effort compared to other Wireless internet
service provider companies. From the mid of the year 2011, Wimax
companies had spread their 4G network in different divisional
districts. The people were more likely to buy 4G modem rather
buying a 2G modem of Grameenphone.

Inventory Turnover (Handset, Data Card and other devices)

In 2008, Inventory turnover was 15 times in a year. In the year 2009
and 2010, the inventory turnover was 10 times in a year. Then the
inventory turnover suddenly raised because of excessive revenue
from selling New SIM connection.

Fig-05: Inventory Turnover (SIM Card)

2
1.5
1
0.5
0
2008

2009

2010

2011

2012

Asset to Sales

35 | P a g e

The reason might be the launching of new Prepaid Packages like

Shohoj, Bondhu, Apon, Nishchinto, Amontron, that attracted many
segmented customers. The another reason of increased revenue
and decreased inventory is opening SIM prior to sale. To claim large
amount of commission, the dealers tend to open SIM cards before
selling the SIM to actual customers.
But after a regulation from BTRC on new connection, the Revenue
dropped suddenly and reached the lowest revenue as well as lowest
inventory turnover. The regulation was to verify users identity
before giving new SIM connection to the customers.

3. Accounts Payable to Sales:

Accounts Payable to Sales ratio measures the extent to which
suppliers money is used to generate sales.
Accounts payable includes Liabilities to Capital Expenditure, Payable
to international roaming services, Payable to training and traveling
expenses, Payable to sales and promotional expenses,
o In the year 2008, Grameenphone has the highest Accounts
Payable to Sales ratio. 25% of the Sales were generated using
suppliers money.
o In the next year 2009, Accounts Payable decreased by 8%
whereas Sales increased by 6.5%. For this reason, payable to
sales ratio decreased.
o In the next year 2010, Accounts Payable increased by 9%
whereas Sales increased by 14.5%. For this reason, payable to
sales ratio decreased again.
o In the next year 2011, Accounts Payable increased by 4.6%
whereas Sales increased by 19.2%. For this reason, payable to
sales ratio decreased.
o But in the next year 2012, Accounts Payable increased by 28%
whereas Sales increased by 3.1%. For this reason, payable to
sales ratio increased.

36 | P a g e

Fig-6: Accounts Payable to Sales

30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2008

2009

2010

2011

2012

The reasons of decreasing accounts payable from 2008 to 2011 are:

o 65% reduction on payable to international roaming decreased
in 2009, accounts payable on sales and promotional activities
also dropped to one third from the previous year.
o Competition increased in the market, suppliers are more
sensitive

to

the

payable

issues.

International

Roaming

competition also increased

If we explain the ratio as Accounts Payable Turnover, we find the
scenario of last five years as follows.
Last year, GP took about 80 days on average to pay suppliers back.
But the deviation is so high. Some suppliers gets money back soon
such as Content Providers Companies gets money back within a
month, whereas some suppliers gets money after 6 months of its
supply.
In the year 2011, GP took only 64 days to pay suppliers back because of
its higher revenue and higher gross profit. Compared to the year 2010, GP
had 33% higher gross profit in the financial year 2011.

37 | P a g e

Fig-07: Accounts Payable Turnover

100
80
60
No. of Days

40
20
0
2008

2009

2010

2011

2012

Years

Profitability Analysis:
1. Profit Margin:
This is a ratio used to evaluate the operating efficiency of
Grameenphone. It is also known as Return to Sales ratio. Profit
Margin is very important information to see how much portion of the
revenue comes to shareholders as earnings.

Fig-08: Profit Margin

25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2008

2009

2010

2011

2012

Observing the Profit margin of last five years of Grameenphone, we

found:
o The lowest profit margin was in the financial year 2008. But
the highest profit margin was in the next year 2009.

38 | P a g e

o Profit margin fluctuates very frequently. But it is more stay

able than before.
o Profit Margin increased in the financial year 2009 and 2011.
o The profit margin ratio is in increasing trend.
Reason:
Increased Revenue over Cost: The competitive advantage in
infrastructure

investment

of

Grameenphone

made

good

impact on profit margin. If the fixed cost remains constant, the

revenue increases keeping the cost slowly increased.

Fig-9: Revenue Cost Trend

100,000,000,000
90,000,000,000
80,000,000,000
70,000,000,000
60,000,000,000
50,000,000,000
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0
2008

2009
Revenue

2010

2011

2012

Cost of Network Operation

The revenue increased because of remarkable increase in

number of subscribers for last five years of Grameenphone. In
2008, GP has offered very few packages like Smile, Djuice,
etc. Most GP prepaid subscribers used Smile and Regular
prepaid package. Only a particular segment Young generation
users used Djuice package. There were some other prepaid
package like Village phone, BPO etc which has fewer users
than Smile and djuice.
In last two years, Grameenphone has remarkable increase in
revenue offering wide range of product than other operator.
The product pricing was introduced for segmented market.

39 | P a g e

Fig-10: Gross, Operating and Net Profit trend

60,000,000,000
50,000,000,000
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0
2008

2009

Gross Profit

2010

Operating Profit

2011

2012

Profit before tax

Having no further investment on Network operation or

enhancement, Grameenphone was able to keep its cost of
network operation and maintenance and kept Gross Profit
increased in the pace of Revenue increase. (Fig-10)
The other operating expenditures of Grameenphone increased
in 2010 for which the operating profit decreased by 2%
whereas Gross profit increased by 20%.

Fig-11: Composition of Operating Expenditure

20,000,000,000
18,000,000,000
Depreciation and Amortization
16,000,000,000

Selling and Distribution expenses

14,000,000,000
12,000,000,000
10,000,000,000
8,000,000,000
General and Administrative Expense
6,000,000,000
4,000,000,000
2,000,000,000
0

2008

2009

2010

2011

2012

From the composition of operating expenditure, we found

noticeable increase in Selling and Distribution Expenses in the
financial year 2010. So, product pricing has influenced to
increase sales and made higher revenue but could not keep
distribution expenditure constant. This is how gross profit
40 | P a g e

aligns with the increase of revenue but operating expenses

reduces operating profit.
General and administrative expense increases along with the
increase

in

business

operation.

On

the

other

hand,

amortization and Depreciation expense remains constant

every year. So, the main challenge is to keep Selling and
Distribution Expenses in control to reduce operating expenses.

2. Return on Assets:
ROA is an indicator of how profitable a company is relative to its
total asset. It gives an idea as to how efficient management is at
using its assets to generate earnings. Calculated by dividing a
company's annual earnings by its total assets, ROA is displayed as a
percentage.
The scenario of ROA of Grameenphone from the year 2008 to the
year 2012 is as follows:

Fig-12: Return on Asset

20.00%
15.00%
10.00%
5.00%
0.00%
2008

2009

2010

2011

2012

Return on Asset varied as same as Return on Sales. The observation

is as follows:
o ROA was lowest in 2008, about 2.76%. Asset was same but
Return was very lower than other years.
o ROA improved in 2009, reached to 13.71%. The net income
was 4 times higher than the previous year, Asset remained
constant.
o ROA decreased in 2010, having 30% decrease in Net income
and Asset imcreased by only 0.25%.
o ROA again increased to 17.54% in 2011, having 80% increase
in Net income and 0.5% decrease in Asset.
41 | P a g e

o ROA has recently dropped to 15% in 2012 because of 7%

decrease in Net Income and 8% increase in Asset.

Reasons:
Asset Composition: Most of the Asset is fixed asset. The fixed
asset remains constant and the current asset increases along
with the spread of business operation.

Fig-13: Asset Composition of GP

120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0

2008

2009

Non Current assets

2010

2011

2012

Current assets

42 | P a g e

3. Return on Equity:
ROE means the amount of net income returned as a percentage of
shareholders equity. Return on equity measures a Grameenphone's
profitability by revealing how much profit the company generates
with the money shareholders have invested.

Fig-14: Return on Equity

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2008

2009

2010

2011

2012

Observing ROE of Grameenphone, we found:

o Return on equity of GP in 2008 was only 11%. Against BDT 27
Billion equity of Grameenphone, the shareholders got BDT
2.98 billion Net Income.
o ROE of GP in 2009 was 30% . The reason of this remarkable
increase is the increase of Net income. Though The equity has
also increased from 27 billion BDT to 50 Billion BDT, but the
net income became 5 times higher than previous year.
o ROE of GP in 2010 decreased to 22% because of 4.5 billion
BDT decrease in Net income. The Equity also decreased by
6%.
o ROE of GP in 2011 increased to 50% because of increase in
Net income that became twice than previous year.
o ROE of GP in 2012 increased by 0.5% though Net income
decreased by 7%. This is because the Equity decreased by 3
billion BDT.
Reasons:
Composition of Total Equity:
If we observe the composition of Total equity, we found same
Share Capital from 2009 to 2012. So, Share Capital is not
responsible enough to change the ROE. But The Share Premium
43 | P a g e

has made the difference from 2009. But the share premium was
constant from 2009. The only variable Retained Earinings that
that varied in every year and made change on ROE.

Fig-15: Composition of shareholders' Equity

2012
2011
2010
2009
2008
0

20,000,000,000

40,000,000,000

60,000,000,000

Share capital

Share premium

Capital reserve

Deposit from shareholders

General reserve

Re.Earnings

The retained earnings had been increased in 2009, then retained

earnings gradually decreased though they had good earning
continuously. The other components of Equity such as Capital
Reserve, and Deposit from shareholders had no significant role
on change in total equity.

44 | P a g e

Efficiency Analysis:
Sales to Asset Ratio:
The asset to sales ratio is calculated by dividing total assets by
sales revenues. The asset to sales formula can be used to
compare how much in assets Grameenphone has relative to the
amount of revenues the company can generate using their
assets.
If we observe this ratio of Grameenphone for last five years, we
find a stay able improvement. More sales to asset ratio indicates
that the assets of Grameenphone is more efficiently used than
before.

Fig-16: Sales to Asset Ratio

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2008

2009

2010

2011

2012

If we observe the change in Sales and Asset, it will be clearer.

The Asset remained constant till 2011, But the Sales generally
increased year by year. So, the change in Revenue actually
changes the Sales to Asset Ratio.

Fig-17: Asset and Sales trend comparison

2008

2009

2010
Sales

5.

2011

2012

Asset

Findings

1) Cash and Near Cash Assets drives Liquidity:

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Our first analysis was on the Liquidity of Grameenphone. We have

found

the

relationship

between

Cash

and

Quick

Ratio.

Grameenphones Accounts Receivable and its change has no

significant effect on the performance of Liquidity. Rather Cash and
Cash Equivalent mostly drives the Liquidity of Grameenphone.
Beside this, we have found cash reserve mainly depends on market
offering such as:
a) New call rate offering or Introducing new product on the
market increase Cash and other Current Asset in the
market.
b) New offering comes with advertisement through different
channels. Some corporate level channels such as TV
advertisement, Print Advertisement etc might be done on
account, but the distribution and campaign costs higher
and Cash in hand increases.
c) Increasing Sales of new connection increases Cash flow in
distribution level and in regional GPC.
d) Product Pricing effects the sales of Recharge service and
Scratch Card Selling. These scratch card selling and
Commission distribution also increases Cash holding in
different regions of Grameenphones operation.
e) Offering non-mobile products such as Handsets, Data Card
when comes with new price range, it directly effects
Distribution costs and Commission costs.
This is how Grameenphone maintains increased amount of Cash
Holding as much as its product offering increases business operation.

2) Inventory Turnover depends on Price of Product offering:

Inventory turnover is mostly driven by the change in Inventory of
various products. For example, SIM Card Inventory, Scratch Card
Inventory, Inventory of Handsets and Data Cards, Inventory of IT
Machineries and Accessories.

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From the above figure, we understand the effect or product pricing

on Inventory change. And the inventory change mainly changes
inventory turnover.
Sales is another reason

for

changes

in

Liquidity.

Sales

of

Grameenphone indicates that most changes in sales are made for

changes in Traffic Revenue and changes in Other Operating Revenue
such as Value Added Service, SMS and MMS service etc. All these
services are highly sensitive with the price change in products or
introducing new service.

3) Effective Pricing on Call Charge results immediately:

Changes in Call charge, or Offering new product having different
pricing model effects the market immediately and most of the time
the change in profitability and efficiency reflected immediately. The
reason is that Traffic Revenue is realized immediately after a
customer made a phone call. All these revenue except Non-mobile
revenues are realized electronically and recorded electronically.

4) ROE is driven by Retained Earnings:

We have found that Return on Equity which results on dividing
Return by Equity varies by both Return and Equity. Return changes
along with the changes in Revenue and in operating expenses.
When revenue increased, some expenditure might be decreased,
but new cost might occur. This is how Return usually response. But
Retained Earnings made a trick here. Retained earnings were found
in decreasing trend while the company was earning ever higher than
previous years. So, before concluding the potential ROE of GP,
decision regarding retained earnings is a big factor.

5) Revenue is better indicator of growth than Profit:

Telecommunication companies have wide area of operation. Most of
their strategies are for long term and involves various types of
costs. For long term revenue target, GP considers some initial costs.
Every year whole GP has huge revenue from the market but
sometimes the new services comes with high initial costs. For
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example, GP have come 3 exclusive products Shohoj Bondhu Apon

having different Call Charge but some other Value Added services
also come that made some initial costs. This is how Revenue
increased by 2 billion BDT whilie Profit decreased by 2 billion BDT in
2012.
So, when we consider the growth of Grameenphone, Return or any
ratio highly depends on return should not be considered as growth
indicator only if the analysis considers long term progression.

6) Revenue depends on Price Change:

Finally when we have found that Revenue is the best indicator to
understand Liquidity, Profitability and Efficiency of Grameenphone,
we have also proved that Revenue depends on Price Change.
Actually Product pricing and Call Charge setting has the motive to
earn more revenue. When there is any possibilities to earn more
revenue for long term, Price has been changed to gain the chance
and make revenue higher.

7) Profitability depends on Efficiency:

When we think about profitability, we first think of Net Income
against some other variable such as Asset, Equity or Sales. When we
think of Net Income, we expect sales to increase so that after
deducting costs, Income becomes larger.
Grameenphone has almost same Asset over last five years. The
Total Equity varied mostly for Earning reserve and Retained
earnings. The Revenue/Sales is the variable that increases in a
certain trend and helps to increase higher income in long term. This
is the efficiency to reduce cost so that Revenue remains to increase
Net Income. On the other hand Sales to Asset is the ratio we found
where

efficiency

increased

because

of

higher

revenue.

So,

Profitability depends on Efficiency of Operation.

6.

Recommendation

Bring Services through Third Party:

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Now there are many vendors or partner companies who have established manpower and
technology to make supply new value added service for the GP customers. So, GP should
give importance on services which can be supplied from vendors and share revenue with the
vendor. This would ultimately increase revenue but keeps the costs in control. Utilizing the
existing investment and the infrastructure would make the finance more efficient.
Pricing to attract more customers:
Ultimately the revenue of GP increases with the increase of new subscribers. So, the pricing
of new product call rate or changes in existing products prices should be attractive so that
new number of subscribers increase and revenue gradually increase.
Increase Service criteria in each port:
New port for new service makes cost of licensing, new management distribution, separate
formalities etc. If GP increases the criteria of service in each port, then investment for each
port will be more utilized. This would increase the efficiency of the company.
Operating Expenses should be controlled:
Increase in operating expenses reduces probable net income. While ratios related to Revenue
is positive, the operating expenses changes the scenario of net income at the end of the
calculation.
Bringing premium price value added services:
While subscribers are mostly sensitive with the call rate of the phone, a portion of the
subscribers are willing to get premium services at premium price. For example, there is a
service operating in the USA called Tele-therapist, where customers would talk to the
therapist about her problem and gets suggestion or counseling. To buy the minutes, customer
give very high premium service.

Offer Bundle package to increase revenue:

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When there is a tough competition with other mobile operators, GP can go for bundle offer,
ranging from lower price to higher price. The bundle offer attracts subscribers and habitually
makes more minute consumption.
Increase channels of service:
Services might be attractive but the channel used to get the service or product is not suitable
to all. For example, an aged person may wish to have a nice wallpaper on the mobile screen
but cant understand the WAP service. If the subscriber is given USSD based activation
service or download link, it would be easier for the person to achieve the service. So, way of
service may also increase the revenue.
Reduce Customer Service Cost to increase Net Income:
Customr service cost is very high and it is increasing year by year. By reducing customers
complains, GP can reduce customer service cost and increase net income. For example, many
customer s make call to the Hotline number to de-activate active VAS services. The customer
do not know how to de-activate the services. If the customers are given these de-activation
information along with the activation confirmation message, it would reduce the phone calls
to hot-line and keep cost minimum.
Moreover, the customer service panel at Call center should be improved. Once a customer
make call to de-activate many services, the customer manager should track the services at
once, so that he can give service faster. It would also help to retain customers and motivate
him to try service in future.

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7.

Conclusion

Grameenphone has the potentiality to become an ideal example of a corporation which is best
performer in business field, as well as best share on stock market. The investors mainly
observes companys profit, ROI, ROE and other tools that express financial health of the
company. So, Grameenphone should consider both business potentiality as well as way of
business that keeps the company financially stronger and competitive to the Stock Market as
well. We should remember one thing, if the downsizing or rightsizing of employee at GP can
have bad impact on the business, then the stock holders might want to see the smoothness of
business operation and financial health to keep investment at GP.

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8.

References:
i.

Pricing a Product Definition, Small Business Encyclopedia,

www.ntrepreneur.com

ii.

Jim Mueller, June 17, 2011,

Understanding Financial Liquidity
www.investopedia.com

iii.

Lea A. Strickland, October 10, 2010

Financial Profitability, Sustainability, and Growth
www.technovationentrepreneur.com

iv.

Rosemary Peavler,
Profitability ratios analysis
www.bizfinance.about.com

v.

Annual Report- 2012

Grameenphone Ltd.

vi.

Annual Report- 2011

Grameenphone Ltd

vii.

Annual Report- 2009

Grameenphone Ltd.

viii.

Investors Site, Grameenphone.

www.grameenphone.com

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