Flash Report /

Grameenphone: Temporary loss in data revenue

    IDLC Securities
    9 July 2019
    Published byIDLC Securities

    Bandwidth utilisation rate exceeds 80% – we expect a temporary loss in data revenue. We estimate that Grameenphone (GP) utilised c78% of bandwidth capacity in Q1 19 on an average. Our current valuation assumes the average bandwidth utilisation rate of 92% for 2019. The 30% cut in bandwidth, therefore, suggests a loss in data revenue. We estimate per day revenue loss of BDT26.7mn and per day earnings loss of BDT14.6mn. 

    However, we expect a stay order on the restriction in one month as GP seeks legal recourse in the High Court. In that one month, GP is likely to lose BDT799mn in total revenue and BDT438mn in earnings, thus lowering our earlier total revenue and earnings estimation by 0.5% and c1.2%, respectively.

    Table 1: Scenario analysis on impact of bandwidth restriction in our 2019f financials
    Particulars1 week1 month1 quarter

    Impact on Revenue (BDTmn)




        % of our 2019 forecasts








    Impact on NPAT (BDTmn)




         % of our 2019 forecasts








    Impact on EPS (BDT)




    Source: IDLC Securities limited

    We reiterate Buy on valuation. We retain our TP of BDT440.5 pending further information on the bandwidth restriction. We note that our TP already includes a 36% pay-off 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 pay-off for the contingent liability (BDT126bn), our fair-value estimate would stand at BDT381/share, compared with the market price of BDT340.8/share. Therefore, we believe the impact of the contingent liability claim is priced in and, hence, reiterate our Buy recommendation.

    We expect 16% yoy normalised earnings growth in Q2 19. GP will release its Q2 results on 15 July. We expect a normalised EPS growth of 16% yoy to BDT7.0, and revenue growth of 7.4% yoy. Note that our normalised EPS expectation adjusts for BDT2,650mn one-off tax gain in Q2 18. Without the adjustment, expected earnings growth would stand -13% on a reported basis.