Flash Report /
Bangladesh

Grameenphone: Q2 2022 - c8% yoy earnings growth driven by c6% revenue growth

  • BDT 37.8bn revenue in Q2 2022 – highest in any quarter so far. EBITDA margin was 60.8% in Q2 2022, improving by 20bps

  • Data price war seemed to have slowed down in Q2 2022. We may see a truce

  • GP declared BDT 12.5 interim cash dividend with 97.6% pay-out

IDLC Securities
24 July 2022
Published byIDLC Securities

GP recorded BDT 6.8 Q2 2022 EPS vs BDT 6.3 in Q2 2021. The reported numbers translate to c8% yoy increase in bottom line. If we adjust one-off tax adjustment, EPS in Q2 2022 would stand at BDT 6.4, implying 2.3% yoy earnings growth. The earnings growth was mainly driven by c6% revenue growth. During 6M 2022, EPS of the company stood at BDT 12.8 against BDT 12.9 in 6M 2021.

BDT 37.8bn revenue in Q2 2022 – highest in any quarter so far. This is noteworthy for two reasons. First, it occurred in a quarter which experienced severe flood in the north-eastern side of Bangladesh. Second, the revenue crossed it previous high of BDT 36.6bn in Q3 2019, thus breaking the plateau. The roll-out of 10.4 MHz spectrum in 2021, increased economic activity, resumption of educational institutions, increase in voice and data subscribers by c3% and c6% respectively - all seem to have contributed to the growth. During Q2 2022, the 6% yoy revenue growth was driven by –

  • Bundle revenue, a combination of both data and voice, grew by 100.4% yoy.

  • Standalone data revenue grew by 9.5% yoy driven by c6% yoy user growth

  • Standalone voice revenue declined -5.8%

EBITDA margin was 60.8% in Q2 2022, improving by 20 bps.  The major reason was decline in salary expenses, which declined by c31% yoy. the main reason is that such cost-head includes restructuring and voluntary retirement expenses. During Q2 2021, Grameenphone incur such expenses which discontinued in Q2 2022. That’s why EBITDA margin slightly improved. Please note that the extent of such expenses may reduce for a while since GP have already done a substantial portion of restructuring.

10 percentage point VAT hike for data packages in FY23 budget is detrimental for the industry. The government has increased VAT on data from 5% to 15% to maximize revenue collection from the industry. It has resulted in upward revision of some data packages by the telecom operators for now. The rising costs of data may adversely affect the volume consumption in the short run. We may see the operators redesigning the packages to subsidize a part of the costs, which might pressurize their revenue in later quarters.

Data price war seemed to have slowed down in Q2 2022. We may see a truce. Because of competitive pressure, average cost of per GB data has been declining at an average rate of c30% since 2018. Our understanding suggests that Banglalink has been the pioneer in price cut, followed by Robi, and then GP. Our industry insights and recent quarterly number suggest that the data price remained Q2 2022 was similar to that of Q1 2022. The continuous cut of prices has already made data business less profitable for the operators. On top that, the impact of 10 percentage point VAT hike, if partially absorbed by the operators, will pressurize profitability further. We think the operators will rethink their pricing strategy considering the upcoming deployment of newly auctioned 5G spectrum. Since all of the major players will experience rising costs because of new spectrum purchase, they may be less prone to cut prices further as it would lower down the ROI of the acquired spectrum. 

GP declared BDT 12.5 interim cash dividend with 97.6% pay-out. The amount of dividend declared is similar to that of H1 2021.