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Doubt over GP listing

Sarwar A Chowdhury ami Md Hasan
An air of uncertainty looms over the fate of Grameenphone's initial public offering (IPO), as the stock market regulator seems unwilling to approve the IPO prospectus of the country's largest mobile operator.
Although 61 days have passed since submission of the final IPO prospectus on January 28, the Securities and Exchange Commission (SEC) is yet to give a go-ahead to the $65 million (Tk449 crore) IPO.
In line with securities rules, the SEC will have to approve any IPO within 60 days after the final submission of a prospectus. However, the rules allow the SEC to extend the deadline.
The uncertainty becomes more evident from a recent decision of not listing any share with face value of Tk 1 by the Dhaka Stock Exchange, as Grameenphone's $60 million pre- IPO was settled with a value of Tk 7.50 per share, while the face value was fixed atTkl.
Grameenphone (GP) officials said they are yet to get any formal feedback from the SEC.
They are also surprised and frustrated with the delay in the IPO approval. "In which court is the ball? We don't know," said a senior GP official, seeking anonymity.
“We are now under pressure from institutional investors, to whom we sold our shares through pre-lPO placement," he said.
Experts fear that failure of the mobile
phone operator's listing will leave a "devastating impact” on the stock market.
Such an incident will discourage other large companies, waiting to see the outcome of GP listing, to come to the market, said one of the experts.
Most of the SEC officials are opposing the GP IPO as saying the company's valuation is high and premium is not justified, people close to the issue said.
In a presentation to the SEC on March 25,2008, GP disclosed that it had a valuation of $3.75 billion (Tk 25,875 crore), which the regulator termed high. Later in June 2008, the company revised its valuation down to $3.2 billion that was accepted by the SEC.
But a market analyst asked "why some 50 institutions had received shares in private placement after bidding" if the valuation and premium are high.
An SEC high official, seeking not to be named, told The Daily Star: "There is hardly any influential SEC official to support the Grameenphone IPO."
"Some SEC officials don't want to go against DSE officials," he said.
"They (DSE officials) fear volatility in the market following the listing and do not want to take responsibility for such volatility," the SEC official added.
Market insiders point to widespread allegations that some DSE officials are out there to block the GP listing.
The SEC said it is facing a quorum crisis to call a commission meeting, which is necessary to approve an IPO.
SEC Executive Director Farhad Ahmed said there are not enough mem-
bers to "make a quorum to hold a meeting".
At least three members including chairman are needed to convene a commission meeting. At present, there are two members in the commission, of whom one is serving as acting chairman.
Ahmed however declined to comment on the latest development of the GP IPO issue.
There is an allegation that many of the DSE board members are acting out of grudge, as they did not get GP shares in
pre-IPO placement.
"We are not acting against Grameenphone,” Rakibur Rahman, president of DSE, told a recent press briefing.
Salahuddin Ahmed Khan, former chief executive officer of DSE, yesterday said: "If Grameenphone IPO is not approved, I will really be shocked.”
“There is a chance of price bargaining, but there is no scope to refuse the IPO prospectus,” said Khan, who teaches finance at Dhaka University.
He said if the listing does not happen
at all, big companies including multinationals will think twice before entering the market, "when we are encouraging them to be listed."
"The worst thing will be, there will be no growth in the market," he said, adding that those who are against the Grameenphone IPO are against the market development.
They want to make the stock market a place of'gambling', said Khan.
Immediate past chairman of SEC Faruq Ahmad Siddiqi in an interview with T he Daily Star recently said: "Failure of the Grameenphone listing will leave devastating effects and dampen market interests in the long run."
"Furthermore, new companies including multinationals will hesitate to come in the market."
Grameenphone's IPO floatation will not only attract others to be listed, but also help the market draw foreign or portfolio investment, Siddiqi said.
Successful floatation of GP shares will be a catalyst for the development of the market, he added.
Grameenphone is the market leader among six mobile operators having 20.99 million customers, followed by Banglalink's 10.33 million and AKTEL's 8.20 million.
Norway's telecom giant Telenor owns 62 percent of the company, which was launched in 1997, with the rest 38 percent stake being held by local Grameen Telecom.
sarwar@thedailystar.net, hasan@thedailystar.net