A Successful Joint Venture in Bangladesh : GrameenPhone

A Successful Joint Venture in Bangladesh Contact: [email protected]

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Assignment On

“A Successful Joint Venture in Bangladesh”

Prepared For:

Mr. Aftab Anwar

Asst. professor

Department of Business Administrator

Leading University Bangladesh

Prepared By:

Syed Maksum Zabid (ID:0701010084)

Emad Siddique (ID:0701010114)

Dipayan Chakrabarty (ID:0701010110)

Sudip Chowdhury (ID:0701010107)

A.S.M. Shahnewaz (ID:0701010112)

BBA 15th BatchDepartment of Business administration

Leading University, Sylhet

Date of Submission: December 15, 2009


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mailto:[email protected]



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Date: 15/12/09

Mr. Aftab Anwar

Asst. professor

Department of Business Administrator

Leading University Bangladesh

Subject: Submission of Assignment.

Sir,

It is our pleasure to submit the assignment on “A Successful Joint Venture

in Bangladesh” as a part of completing our course ‘International

Business’ under the BBA program.

We Sincerely Yours

Syed Maksum Zabid (ID:0701010084) ………………………………….

Emad Siddique (ID:0701010114) ………………………………….

Dipayan Chakrabarty (ID:0701010110) ….……………………………….

Sudip Chowdhury (ID:0701010107) ………………………………….

A.S.M. Shahnewaz (ID:0701010084) ..………………………………….

BBA 15th Batch

Department of Business administration

Leading University, Sylhet


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Executive Summary

A joint venture involves two or more businesses pooling their resources and expertise to

achieve a particular goal. The risks and rewards of the enterprise are also shared. The

reasons behind forming a joint venture include business expansion, development of new

products or moving into new markets, particularly overseas.

The business may have strong potential for growth and you may have innovative ideas

and products. However, a joint venture has many facilities such as: more resources,

greater capacity, increased technical expertise, access to established markets and

distribution channels.

This assignment provides information about a successful joint venture business

organization in Bangladesh – GrameenPhone.


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1. Introduction

GrameenPhone (GP) is a successful and the most popular joint venture in Bangladesh.

However, this assignment is prepared to present the information about GP regarding how

it has started its business in Bangladesh and many other aspects. GP is not the first but the

top ranked telecom service provider in Bangladesh. In this assignment there is also an

attempt to give an overview on the total telecom industry where joint venture business is

available.

2. Objectives of the Study

The study has been undertaken with the following objectives:

1. To understand the meaning and nature joint venture.

2. To identify the success of GrameenPhone as a joint venture.

3. Data collection

The study was mainly done through considering secondary sources. Secondary data were

collected for the study. The data were gathered from journals, annual reports, websites

and etc.

4. Limitations

There are some limitations of the study which are given below:

All the data were collected from the secondary sources. If a field work was made

for this assignment it would have been much better.

Lake of previous knowledge on joint ventures.


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5. Joint Venture Business

The dictionary defines ‘Joint Venture’ as: “A joint venture (often abbreviated JV) is a

legal entity formed between two or more parties to undertake economic activity together.

The parties agree to create a new entity by both contributing equity, and they then share

in the revenues, expenses, and control of the enterprise.

The joint venture is an idea as old as time. The cavemen most likely figured out that buy

pooling their efforts they could more easily feed and clothe themselves. By pooling

talents and resources so much more can be accomplished than any one individual or

company could accomplish alone. That’s why so many individuals and companies enter

into joint venture agreements. Joint ventures are the stuff that fortunes are made of.

Moreover, a joint venture is the long-term commitment of funds, facilities and services

by two or more legally separate interests, to a combined enterprise for their mutual

benefits.

6. Investment Climate for Joint Venture Business in Bangladesh

Bangladesh as a market is attractive to the firm interested in joint venture for the

following reasons:

Bangladesh has homogeneous society.

Bangladesh has stable economic and political order.

Government policies on foreign investment are liberal, supportive and focused.

Cost of doing business in Bangladesh is competitive.

Investment is protected by law.

Bilateral agreements with several countries for avoidance of double taxation.

Duty free import of capital machinery for export oriented industry

Incentive package for the foreign investors is lucrative and transparent.

There is easily trainable, enthusiastic, hardworking, disciplined, and highly

motivated, low-cost workforce.


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There exists a global market access for both primary and manufactured products

originated from Bangladesh.

Entry and Exit policies for foreign investors are simple, transparent and liberal.

Bangladesh has significant market, especially with potential access to South Asia

7. An Overview on the Telecom Industry of Bangladesh

GrameenPhone is the market leader of this industry. The major competitors of GP are

Banglalink, Aktel, CityCell, Warid and Teletalk. However, it is important to know about

the telecom industry of Bangladesh for knowing better about the GP, a successful joint

venture in this industry.

Let’s take a snapshot on the telecom industry of Bangladesh from its birth till now.

Bangladesh’s gross domestic product (GDP) contributed almost $650 million by the cell

phone industries and created nearly 250,000 jobs in the country. A recent study by the

international firm Ovum showed that most of the jobs in telecom industries paid

significantly higher than that of average job in the country.

The Bangladesh Telegraph and Telephone (T&T) Department was created under the

Ministry of Posts & Telecommunications after the independence of Bangladesh in 1971

to run the telecommunication services on a commercial basis. In 1976, Bangladesh T&T

Department was converted into a corporate body. On 24th February 1976 the department

was restructured into Bangladesh Telephone and Telegraph Board (BTTB). Very

recently, on 1st July 2008, BTTB changed to Bangladesh Telecommunications Company

Limited (BTCL).

The Bangladesh government will initially own all shares of BTCL but shares will be

available for public within one year. In 1989, Bangladesh Telecom Limited (BTL)

obtained the license as the first company of the country to operate cellular, paging, and

other wireless communication networks. In August 1993, Bangladesh’s first cellular

operation was launched by Hutchison Bangladesh Telecom Limited (HBTL).


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And in February 1996, HBTL was renamed to Pacific Bangladesh Limited (PBTL) and

launched 'CityCell Digital' to market its cellular products. To end CityCell's monopoly

business, TM International (Bangladesh) Limited, a joint venture company of Telekom

Malaysia Berhad and A.K. Khan & Co. Limited was established in the year 1996 and the

company launched its operation in 1997 under the brand name 'Aktel'. GrameenPhone

obtained its cellular license in November 28, 1996 and launched its operation in March

26, 1997.

Another Malaysia-Bangladesh joint venture Sheba Telecom (Pvt) Limited launched its

operation in 1998. But failing to come of the competitive edge, Sheba Telecom formally

sold its cent percent shares to Egyptian telecom giant Orascom. Orascom formally

launched its operation under new brand name Banglalink in February 10, 2005 and shook

the market with its opening package.

State owned company Teletalk Bangladesh Limited (TBL), the mobile unit of BTTB was

formed on December 26, 2004 and it formally launched its mobile telecom service on

commercial basis on March 31, 2005

Warid officially launched their commercial services in Bangladesh on May 10, 2007 with

a GSM Mobile Cellular network. Warid is the sixth mobile phone carrier to enter the

Bangladesh market. It is wholly owned subsidiary of Warid Telecom International LLC

which is the part of an Abu Dhabi based consortium.

8. History of Establishment

GrameenPhone Ltd., the largest telecommunications service provider in Bangladesh,

received its operating license in November 1996 and started its service from March 26,

1997. Now, after 11 years of successful operations, GrameenPhone is the largest mobile

phone service provider in Bangladesh, with more than 28 million subscribers as of

November 2008.


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The idea of providing mobile phone facility to rural areas in Bangladesh was originally

conceived by Iqbal Quadir, who is currently the founder and director of the Legatum

Center for Development and Entrepreneurship at MIT . He was inspired by the Grameen

Bank micro credit model and envisioned a business model where a cell phone can serve

as a source of income. After leaving his job as an investment banker in the United States,

Quadir traveled back to Bangladesh, after meeting and successfully raising money from a

New York based investor and philanthropist Joshua Mailman, and worked for three years

gaining support from various organizations including Nobel Peace Prize laureate

Muhammad Yunus of Grameen Bank and the Norwegian telephone company, Telenor.

He was finally successful in forming a consortium with Telenor and Grameen Bank to

establish GrameenPhone. Quadir remained a shareholder of GrameenPhone until 2004.

Basically GrameenPhone is a joint venture enterprise between Telenor (62%), the largest

telecommunications service provider in Norway with mobile phone operations in 12

other countries, and Grameen Telecom Corporation (38%), a non-profit sister concern of

the internationally acclaimed micro-credit pioneer Grameen Bank. Over the years,

GrameenPhone has always been a pioneer in introducing new products and services in

the local market. GP was the first company to introduce GSM technology in Bangladesh

when it launched its services in March 1997.

9. Situation Analysis

In this part we analyze the internal and the external situation of GP.

9.1 Internal situation

The internal situation of a firm consists of factors that shape the firms internal

environment and strength and weaknesses. These factors are in the control of the firm.

Firms can change co-ordinate, redesign, reestablish these factors according to the

organizational needs and objectives. These factors include firm’s products and services,

financial management capability, human resource and Capital goods, information

technology etc.


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http://en.wikipedia.org/wiki/Telenor

http://en.wikipedia.org/wiki/Muhammad_Yunus

http://en.wikipedia.org/wiki/Nobel_Peace_Prize

http://en.wikipedia.org/wiki/Grameen_Bank

http://en.wikipedia.org/wiki/Grameen_Bank

http://en.wikipedia.org/wiki/MIT

http://legatum.mit.edu/

http://legatum.mit.edu/

http://en.wikipedia.org/wiki/Iqbal_Quadir


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9.1.1 Firms products and services

GrameenPhone claims itself pioneer in providing world class telecommunication service

in Bangladesh with innovative product and services while providing superior customer

experience.

GrameenPhone serves different types of products and services depending on the

categorization of its customer. There are special packages for B2C and B2B customer

separately. For B2C customers its services can be categorized into two type of

subscription. Those are pre-paid subscription and postpaid subscription. Again prepaid

subscription can be subdivided into three plans.

Smile (mobile to mobile connectivity within Bangladesh): This is the primary package

of GrameenPhone targeting the economy class segment of the market. The package was

designed to suit middle and low income consumer in the market. For instance: Farmer,

student, housewives etc. This package features great start up offer to a new subscriber,

low call rates, special discount offer entitled as Thank you bonus, special call rate for

three friend & family numbers and other facilities. This is very easy to use by the lower

education level customers because it has an easy recharge and balance transfer quality.

Smile (nationwide and international mobile and land line connectivity): This package

also contains the same attributes of Smile but it also has some elaborated leverage of

international calls and land line connectivity.

Djuice (a youth based mobile to mobile connectivity within Bangladesh):

GrameenPhone launched the brand Djuice in 2005; first ever “Youth” brand in

Bangladesh. The main objective of this brand is to serve the youth segment of the market.

The product has been specially designed to cater the needs of youths of Bangladesh, both

urban and rural. Djuice has various features designed for youths, namely; special rate for

Djuice community, Xtra Khatir, (discounts at different outlets).Djuice also arranges

different special programs for youth, like, Drockstar (music competition), Know

Bangladesh (awareness program).The djuice brand is positioned as the “Youth Brand”.

The 3 main features of this brand is Music, Messaging and friends. Recently the brand

was refreshed with a new brand message “Break Free”.


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And there is only one package under postpaid plan.

Xplore (nationwide and international mobile and landline connectivity): Xplore is

the only postpaid package in the Grameenphone’s product line. It is generally designed to

satisfy the needs of a busy person’s life. The person can be an executive, a doctor or in

any profession. The message of the package is by gaining the access of unlimited

information and entertainment. It sets a person free from his/her busy life. The features of

the package are attractive startup offer, low flat tariff, flexible credit policy, thank you

bonus, and other value added services.

Grameenphone Business Solution: This is a GP service directed to B2B customers of

the Grameenphone. Business Solutions is a complete, quality business communications

service from Grameenphone – designed especially for the business community in

Bangladesh. Grameenphone Business Solutions team is dedicated to provide help B2B

customers with customized telecommunications solutions through consultation with

them.

Value added services: Grameenphone also offers different value-added services

including SMS, MMS, Welcome Tunes (Ring back Tones), Voice SMS, SMS Push-Pull

Service, Voice Mail Service (VMS), and Fax and Data among others. Grameenphone was

the first mobile operator in Bangladesh to offer EDGE services to its subscribers.

9.1.2 Capabilities of the firm

Financial: GrameenPhone celebrated the year 2007 as year of consolidation and growth

and reinforcing its position as a market leader. It gained robust revenue with a growth of

18.6 percent with a staggering amount of BDT54.3 billion at the end of the year. In that

year GrameenPhone made BDT35.8 billion fresh investment in further increasing its

network coverage capacity. The cumulative investment reached BTD111.5 billion at the

end of the year. GrameenPhone has been the largest corporate tax payer of the country for

three consecutive years. All this information proves that GrameenPhone is a self-


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sufficient, financially strong corporation that is successfully running all its businesses and

generating fuel for further expansion.

Human Resource: GrameenPhone attributes its continuous success over past years

largely on its dedicated, professionally competent team people working for the

company. GrameenPhone’s philosophy is investing in human capital and empowerment

in order to obtain greater productivity. That is why it has always paid attention on

continuous training and developing its employees’ competence and leadership quality. A

performance driven corporate culture along with ample opportunity for career growth has

made GrameenPhone a popular employer in Bangladeshi job market.

Technological ability: GrameenPhone has the largest network with the widest coverage

in the country. The GP network now covers over 98 percent of the population and over

87 percent of the land area with the remaining areas mostly falling under the Sundarbans

and the Chittagong Hill Tract areas where mobile phone coverage is not allowed. The

company invested more than BDT 35.8 billion in 2007 primarily to further expand the

coverage and increase the capacity of its network. A record 4181 new base stations were

put into operation around the country during the year, crossing the 10,000 base station

milestone in the process. In addition, the entire Grameenphone network is EDGE/GPRS

enabled, allowing its customers to access high-speed Internet from anywhere within the

coverage area.

9.2 External Situation

External Situation of a firm relates to external factors like government, culture,

demography, present administration of the firm, customers, market segmentation,

positioning strategies, competitor’s information etc.

Government: Government plays a significant role in the telecommunication industry by

putting restriction on the network system the companies should use. In addition, every

offer a company makes to its customers is watched by the government. Previously


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government has banned the companies from offering free calls especially after midnight.

These facts play important role in Djuice’s operation as well.

Culture: Recently, due to globalization and influence of western culture, our young

generation is becoming more funky and westernized in every aspect of their behavior.

That’s why they are using mobile phones more and more. They prefer products that

resemble uniqueness, so they are getting interested about SIM card services that are fully

designed and created according to their need. Not only the youth but other age people are

also getting used to mobile phones. This cultural change is playing a significant role in

telecommunication business.

Demography: Demographic factors like age, sex, income etc. are very key issues in

influencing consumer behavior regarding mobile phone service. Usually, the younger

generation people are more prompt in using mobile phones than the elders, whereas male

are more prone to have mobile phones than females. In addition, Income has a big impact

on mobile phone use as people with higher income are more inclined to use phones rather

than the lower income people.

10. Study of the GP’s past success and failure

10.1 Success

The Village Phone initiative was given the "GSM in the Community" award at the global

GSM Congress held in Cannes, France in February 2000. GrameenPhone was also

adjudged the Best Joint Venture Enterprise of the Year at the Bangladesh Business

Awards in 2002. GrameenPhone was presented with the GSM Association's Global

Mobile Award for ‘Best use of Mobile for Social and Economic Development' at the

3GSM World Congress held in Singapore, in October 2006, for its Community

Information Center (CIC) project and for its Health Line Service project at the 3GSM

World Congress held in Barcelona, Spain, in February 2007.


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10.2 Failure

GrameenPhone didn’t face any substantial failure in Bangladesh. But to some extend it

has hampered its goodwill by involving itself in illegal VOIP operations.

11. Reason behind the Success

In our study we observe that the widespread perception that it is not economical to serve

“marginal customers” - the poor, is a myth. We found that a huge amount of the revenues

of Bangladesh’s Grameen Phone come from a group who are not the most affluent; they

are village phone ladies.

Some of the key factors behind the success of Grameen included:

Access to nation-wide backbone infrastructure with the acquisition of a 1800 km

long fiber optic network from Bangladesh Railway;

Seeing marginal customers as a source of profit, based on Grameen Bank’s years

of experience with microfinance;

A business model that piggy-backed on Grameen Bank’s established

microfinance infrastructure and brand image, and was carefully structured to

overcome problems of creditworthiness and repayment and thereby ensure

sustainability; and,

The unconventional approach to microfinance adopted by Grameen – analogous

to the ancient Chinese proverb of giving a poor man a fishing rod instead of a fish

– in this case, providing entrepreneurial women with a means of generating a

steady income by reselling telecom services.

Muhammad Yunus, the founder of Grameen Bank, has said: “The quickest way to get out

of poverty right now is to have one mobile phone, and you will see how quickly she is

changing her life. Come back in two years and you will not recognize what she was

before”.


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The Village Phone program covers 45 per cent of the country’s population in around 50

per cent of the villages in Bangladesh, as at June 2005. The advantage of this approach

moreover, is that one phone provides access to multiple users; Grameen Phone earns 16

per cent of its revenue from these Village Phones, which make up only 4 per cent of the

total connections.

12. Government Benefits from GrameenPhone

GrameenPhone’s services help everyone win. Businesses, government bodies and

individuals are better connected and consequently can do their jobs better. The national

treasury’s gain is many times more than the returns to the shareholders of the company.

How does a private company enrich the treasury so much? The answer lies in the nature

of the telecommunication business and its associated fees and taxes. During the first year

and a half, when GrameenPhone lost a billion takas, the Government received Taka 1.09

billion from various sources related to GrameenPhone’s operation. This does not include

the economic growth due to additional phones, whose impact on the nation’s treasury

could be even larger. The table illustrates how the national treasury is augmented.

This rich set of revenue streams for the Government from a private telephone company

also means that the Government can be deprived from even more potential revenues. The

Government’s total intake is, in the end, many times larger than that of the shareholders.

An increased number of phones speed up economic growth in general. In due course,

quality telecommunications facilities will serve as a direct invitation for increased

international investments help build the country’s export base, increase the GNP, and

enable Bangladesh to compete in the global marketplace. The nation’s treasury grows

richer as the nation grows richer.

13. Recommendations

After discussing the success of GP as a joint venture in Bangladesh we recommend the

followings:


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1. The government should encourage joint venture business as it creates employment for

the local people.

2. There should be an emphasis on technology based joint venture business as it will play

an important role in making “Digital Bangladesh”.

3. There should be some steps to make ‘Bangladesh’ a brand for joint venture friendly

environment.

4. There should be a time clicking, suitable act for doing joint business in Bangladesh.

14. Conclusion

As a joint venture company, GrameenPhone live by the statement "Development is a

journey, not a destination." GrameenPhone’s work is not just about ensuring

connectivity; it is about connecting with people and building relationships, based on trust,

with the subscribers, business partners, employees, shareholders, as well as the wider

community. GrameenPhone’s relationship with Bangladesh is built on a partnership

which strives to achieve common economic and social goals.


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Bibliography

1. http://en.wikipedia.org/wiki/Grameenphone

2. http://en.wikipedia.org/wiki/Joint_venture

3. www.grameenphone.com/


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http://en.wikipedia.org/wiki/Joint_venture

http://en.wikipedia.org/wiki/Grameenphone

Documents

A Successful Joint Venture in Bangladesh : GrameenPhone