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The row between Bangladesh's telecom major Grameen Phone and its 62% stake-holder, Norwegian telecom company Telenor, has gripped Bangladesh's telecom market. Such is the situation that Nobel laureate Muhammad Yunus also the founder of Grameen Phone has now asked the Norway government to intervene in the matter and sort out things between the two. The issue over the entire brawl is that Telenor has violated the agreement of the deal with Grameen Phone. The country currently has six operators and has ended the first half of this year with fewer than 43.7 mn mobile subscribers and a mobile penetration level of 28.5%.

Grameen Phone is Bangladesh's biggest telecom service provider with a customer base of 20.3 mn people. One major concern of the lesser penetration is that even with as many as six mobile operators there are only four of them that command any significant figures in terms of customer base, after Grameen Phone's 20.3 mn. Closely following it is Banglalink with 9.5 mn, Aktel with 7.8 mn and Warid Telecom with just 3.3 mn. The two remaining long-term incumbents, Citycell and Teletalk add up to only 2.7 mn customers put together.

In 1996, when Grameen Phone had entered into a partnership with the Norwegian telecom major, they had put in front the fact that after six years they would become a locally operating company keeping in mind the majority of the management and ownership belonging to Bangladesh. The matter of feud rose when Telenor did not accept to let go its area of control, as it presently governs 62% of the shares, which practically makes it a major governor. Telenor says that the words written in the document is not to be bound legally and is moreover non-committing statements.

Source: photobucket.com

Muhammad Yunus turned up the heat in the battle for control over Bangladesh's Grameen phone recently, and also warned Telenor that it may face a lawsuit if they do not abide by the terms penned down in the agreement. Grameen Telecom, a non-profit unit of Yunus's Grameen Bank, owns the remaining 38% of the shares in Grameen Phone. With such low penetration of the country's biggest telecom player, it really becomes a matter of concern whether the telecom industry in Bangladesh is under some bad influence?.

The problem not being solved is not only tarnishing the image of Grameen Phone but is also stabbing right at the heart of the telecom industry affecting its overall growth. According to Yunus, the legal action would in fact be of lesser help and prove to be unnecessary as the owners of Telenor should honor the intention expressed during signing of the agreement, and should transfer the ownership and control to Grameen Phone.

Pointing out Telenor's alleged involvement in illegal Internet telephony services and allegations of violating environmental law and employment of underage workers by its subcontractors, the 'banker of the poor' demanded that Telenor authorises complete transparency in the matters, making public the investigation reports and shareholders' agreement.

Telenor in the meantime hopes for an amicable solution to the row with Muhammad Yunus over Grameen Phone, which it aims to list on the Dhaka Bourse, according to wire services. At the same time, Yunus is also very optimistic about the eventual outcome of the controversy because he thinks that it is really in the hands of the people of Norway, whom he has eventually come to know over a period of time and trust. Yunus also said that Norwegians set a very high standard for business ethics, and they are the majority owners of Telenor, so a lot depends on them. Fifty-four percent of Telenor's shares is in the hands of the people of Norway.

The Bangladesh regulatory has slapped a fine of $60 mn on Grameen Phone. The company has been fined for alleged illegalities, and Yunus slams the blame on Telenor. According to Muhammad Yunus, it is Telenor which is sullying Grameen's name and should pay off the fine of $60 mn. Otherwise there is a high risk of the company loosing its telephone operator license, as it is violating Bangladeshi laws.

Even after all this brouhaha over the legal violations, Grameen Phone is coming out with its IPO later this year. The main problem that Grameen faces is that the country is not big enough to handle the extra stock pressure, so it needs to sell off the Telenor stocks to the people of Bangladesh.

Sunny Sen
sunnys@cybermedia.co.in