GP: Annual Earnings Update 2022

Grameenphone Limited (GRAM BD) reported 11.8% negative profit growth in 2022 mainly due to provision against litigation

Grameenphone Limited (GRAM BD) reported EPS of BDT 22.29 during 2022, down 11.8% YoY. On the other hand, 4Q’22 EPS decreased by 54.5% YoY to BDT 2.75. Revenue increased by 5.1% YoY in 2022 and 3.5% in 4Q’22. EBITDA improved by ~50bps to 60.8%, but net margin fell to 20.0% in 2022 from 23.9% in 2021.

The following table shows our observations on the company’s business performance in 2022:
Particulars2022 (YoY Change)ImpactObservation
Revenue5.1%PositiveRevenue grew on the back of data and bundle growth: Total subscriber fell by 5.0% YoY to 79.1mn in 2022 as the regulator imposed a ban on SIM sales of GRAM BD in late June 2022 on the ground of poor service quality. We saw 4.2mn subscriber and 1.0mn active internet user decrease over the last year.    Growth in topline mainly came from data and bundle revenue. Data consumption continued the growth momentum amid fall in data price. Data consumption grew by 38.8% YoY to ~6.0GB in 4Q’22 but data price fell by 18.0% YoY during the same period. Overall, data revenue registered 8.9% YoY growth in 2022 GRAM BD has been actively promoting bundle offers. Bundle revenue (combinations of voice, data & SMS revenue) grew by 62.9% YoY to BDT 20.2bn in 2022.
EBITDA margin50 bpsNeutralLower salary expenses led to moderate EBIDTA margin expansion: EBITDA of GRAM BD grew by 6.0% YoY in 2022. Sales and Marketing expenses and Revenue sharing & Spectrum Fees increased by 14.5% and 15.5% YoY in 2022. On the other hand,  salary expenses was down by 19.7% YoY in 2022. Overall, we have seen moderate EBITDA margin expansion.  
PAT margin-392 bpsNegativeBDT 6.5bn provision against litigation resulted in PAT reduction: GRAM BD created a provision of ~BDT 6.5bn against negative verdict of legacy litigation. On 10 January, 2023 The Appellate Division of the Supreme Court of Bangladesh disposed the appeals of GRAM BD regarding some payments to Bangladesh Telecommunication Regulatory Commission (BTRC), including VAT on spectrum and license fees. According to media reports, GRAM BD would need to pay BDT 15bn to the regulator. According to earnings call the company has not received the written verdict yet. Provision against litigation might increase in the subsequent quarters after the company receive the written verdict. GRAM BD’s net profit has also negatively affected by forex loss. However, a decrease in effective tax rate (from 43.9% in 2021 to 42.1% in 2022) positively affected net profit.