Is the Prince asking for too much?

Share Shah

It has been a long while and the Rupali Bank matter does not end. The drama, which reached its crescendo last October seems to have attained some kind of inertia. I do not really know what sort of arrangement the Privatization Commission had, or what were the terms and conditions of sale...it does not seem to have a closure.
   The prices of the shares on the bourse are like a school of fish, east one day and west another day. The question none can answer is when the tantrums of the advisors of the merchant prince will end. Is he really serious? We would like to know the facts because we the public do not really know what is happening or what was promised.
   A while ago we heard that he was the highest bidder for the 67.26 per cent of the shares at a price of $ 330 million. We were impressed and assumed that the tender which had involved international consultants along with several pleasure trips to key cities for a 'road show' would be water tight. It now appears that we had reasoned stupidly as the result now shows. Obviously the tender document was not close ended thereby giving the buyer opportunity not to play ball.
   For some reason the Prince was not happy with what he was getting. He wanted more in fact all the remaining equity the government held. The government indulged him and promised to give him 26 per cent at the same rate amounting $ 128 million. I have tried hard to find out what will happen to small investors now holding 6.74 per cent of the shares, which were originally floated years ago. Surely the Prince does not want these shares otherwise there would have been an offer!
   There seems to be no end to princely tantrums. The current demands are for very special privileges for his acquisition. Firstly he wants a waiver in the matter of shareholdings. Currently the law requires that no single family can hold more than 10 per cent stake or have voting rights in excess of 5 per cent in a bank. If the princely advisors were prudent then they would have done what the operators schemers behind the Oriental Bank would have done. Breaking up the holding in 5 per cent lots in names of various subsidiary or nominee companies. For the government to give such special privileges would be at a cost to the banking reforms now underway.
   There seems to be not one or two but about 20 outstanding issues, which the princely advisers are seeking to resolve. Amongst these, there is a demand for tax exempt status for 300 management advisors to be appointed by the Prince to run the bank. According to the media there is a threat on the Ministry of Finance to resolve the matter but this day has also passed quietly. There is no end to the princely irritability in matters of demands, which appear contrary to the subscribed tender terms or norms. We all know that the Prince was the highest bidder in fact much, much higher than the second or the third bidder. One wonders if he is now suffering from the winner's curse and therefore trying to wriggle out of the deal. The economist's have observed that in public tenders, contractors with lowest sealed bids who are awarded contracts leads to poor workmanship. It has been suggested that a second price auction (lowest bidder wins the contract at the second lowest price) may be more beneficial to those concerned due to the revenue equivalence theory. This implies that, upon certain conditions being met, owners can, in the long run, expect to pay approximately the same amount to contractors irrespective of whether contracts are awarded according to a first price auction or second price auction. At the same time, it is expected to be easier to bid in a second price auction.
   People loose face when they eventually discover that they have over paid for say a painting or an object of art in an auction. In the case of government tenders significant differential between the lowest and the second lowest leads to anxiety on the part of the lowest bidder who feels cheated. The Dutch auction system as practice in respect of international sale of flowers is one feasible way of running an auction, the only definitive way one can transparently arrive at the right price. It allows everyone to bid aggressively, but since everyone gets the shares at the clearing price, no one ends up looking smarter or dumber than the rest, an issue that is important to professional traders.

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Holiday Desk

The Norwagian state-owned company Telenor owns 62 per cent shares in GrameenPhone, the mobile telephone market leader in Bangladesh with 12 million subscribers while the rest 38 per cent is held by Grameen Bank subsidiary Grameen Telecom.
   It was recently reported in the media that that Grameen Bank would like to acquire the rest of the shares of the GrameenPhone for its subsidiary Grameen Telecom. However,
   Telenor president and chief executive officer (CEO) Jon Fredrik Baksaas Baksaas has recently clearly stated that his company's strategy is to maintain majority ownership of GrameenPhone for further participation in the advancement of mobile communications in Bangladesh
   The Telenor CEO, has agreed to offload some of the company's share to the people through the initial public offering (IPO) by GrameenPhone. He, however, did not say anything in concrete terms when the company would like go for IPO. It is still in a very early stage, industry sources said.
   Telenor CEO has reportedly said: 'We are proud of GrameenPhone's achievement, its contribution to economic growth in Bangladesh and the ability to serve more and more people both in rural and urban areas of the country. A public listing would bring more Bangladeshi ownership of GrameenPhone.'
   'We think it is important that the people of Bangladesh and all customers of GrameenPhone can become owners of this successful company,' he said.
   The Telenor CEO met with Nobel peace prize winner Muhammad Yunus in Norway where they discussed various matters, including the possibility of an IPO of GrameenPhone.
   GrameenPhone, which has around 12 million customers covers almost 140 million population in both rural and urban Bangladesh providing them both voice and data services.

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Laptop sales surge in 2006

Market growth to slowdown this year

Holiday Desk

Singapore-based Springboard Research outfit in a study says that sales of portable personal computer saw about 50 per cent growth last year in Bangladesh, though political turmoil throughout the later half of 2006 affected other businesses.
   In its quarterly market survey report entitled 'Asia Emerging Countries Tracker', the firm said that 'Aggressive pricing strategies of multinational corporations are credited to the tremendous growth in the portable sector'.
   Bangladesh's PC and server market generated growth of 19.2 per cent in 2006 with 193,600 units shipped compared to 162,400 units in 2005, while laptop sales surged by 49.6 per cent, followed by desktop and X86 server segments.
   'Continued healthy economic performance, increased investments from large corporations, especially from the telecom and financial industries, helped drive the upswing in the PC and server market,' said the report.
   Among MNCs, Springboard found, HP led the market with a 10.5 per cent share of personal computer shipments in 2006, followed by Dell and Lenovo. Leading local vendors, Daffodil and Flora, contributed a combined 5.8 per cent share to total PC shipments in the same period.
   Despite the strong performance of the portable segment in 2006, Springboard Research forecast that political tension would affect future PC and server market growth. 'With the transfer of political power to a caretaker government in October 2006, a substantial decrease was seen in the government's IT spending during the fourth quarter. Government spending is expected to further slow in the first half of 2007.'
   Springboard predicted the market would grow just at a rate of 16.6 per cent in 2007.
   Springboard observed that in the last one year the multinational IT vendors in the country aggressively expanded their operations and launched new products.
   Through the Asia Emerging Countries Tracker, Springboard Research tracks computer market developments in Bangladesh, Brunei, Cambodia, Sri Lanka and Pakistan every three months.

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