Flash Report /
Bangladesh

Grameenphone: Bandwidth restriction to collect contingent liability claim; impact priced in

    Tanay Kumar Roy
    Tanay Kumar Roy

    Research Analyst

    IDLC Securities
    5 July 2019
    Published by

    Press reports today indicate the Bangladesh Telecommunication Regulatory Commission (BTRC) has asked international internet gateway (IIG) operators to cut Grameenphone’s (GP) bandwidth by 30% to collect a BDT126bn contingent liability claim.

    The bandwidth restriction, effective immediately, will not affect voice quality. However, it will slow internet speed and affect user experience, especially during peak hours. Therefore, high volume data users are likely to spend less volume than usual, thus affecting GP’s top line. We anticipate a maximum revenue loss of BDT24mn/day and a maximum NPAT loss of BDT14mn/day while the restriction continues. 

    However, the impact on GP is likely to be lessened since the restriction affects both of the two top operators, GP and Robi (with combined customer market share of 78%). The other two operators, Banglalink and Teletalk, do not run particularly popular data networks. We think GP is likely to appeal to the High Court for a stay order against this bandwidth restriction.

    This restriction resurfaces regulatory concerns and uncertainty about the contingent liability payment. We note that our TP of BDT440.5 already includes a 36% payoff for the contingent liability claim. The worst-case scenario for GP would be paying off the contingent liability claim completely. If we incorporate the complete payoff for the contingent liability (BDT126bn), our fair-value estimate would stand at BDT381/share, compared with the market price of BDT360/share. Therefore, we believe the impact of the contingent liability claim is priced in and, hence, reiterate our Buy recommendation.