News From Telecom World

NBR rejects GP’s tax benefit proposal for IPOs

Posted on: October 22, 2008

The National Board of Revenue has turned down a proposal of leading mobile phone operator GrameenPhone for 10 percent tax benefit under its planned pre-IPO placement of Tk 74 crore for institutional investors and similar amount for initial public offering, sources said.

The board forwarded the mobile company’s proposal along with its opinion to finance adviser AB Mirza Azizul Islam for a decision.

The mobile phone company can get a 10 per cent tax rebate only if offloads shares through stock exchange, the NBR explained in its note.

The proposed offloading of five per cent share of GrameenPhone through pre-IPO placement does not comply with the criteria for tax benefit, it said.

A decision from the finance adviser in this regard is expected this week.

According to the Finance Bill 2007, any mobile phone company offloading 10 per cent share of its total paid-up capital in the capital market will be entitled to corporate tax rate of 35 per cent, instead of 45 per cent as applied to non-listed companies other than banks.

‘Mobile phone operators’ corporate tax rate would be 45 per cent but the tax rate would be 35 per cent if the companies are converted into publicly traded companies and listed with stock exchanges,’ reads the budget speech for 2007-2008 fiscal year.

The GP, a joint venture of Norway’s Telenor and Bangladesh’s Grameen Telecom, has planned to make pre-public offer to global and local institutional investors and public offer to retail investors.

The companies and institutions are covered under the pre-IPO offer include merchant banks, borrowers of Grameen Bank, commercial banks and employees of GP, sources said.

Capital market officials and analysts say the GP offer does not contradict the budgetary guidelines for providing mobile phone operators with 10 per cent tax benefit as the pre-IPO placement is also very much related to stock exchanges.

‘We have strongly recommended the proposal of the GP, which has complied with the provision of the government,’ Salehuddin Ahmed Khan, chief executive officer of the Dhaka Stock Exchange, told New Age.

The GP in the previous fiscal year gave the government about Tk 400 crore in corporate tax, sources in the NBR said.

Meanwhile, the weighted average share price for pre-IPO placement has already been fixed at Tk 11.58 per share after bidding from local financial institutions.

Trust Bank, Prime Bank, IDLC Finance Limited, Lankabangla Finance, AIMS of Bangladesh and AB Bank are the possible buyers in the on-going pre-IPO placement offer, the source said.

The mobile phone operator filed its IPO application with the SEC in June this year, valuing the company at $3 billion.

It planned to raise $150 million in a pre-IPO placement with international and local investors and a further $150 million from country’s stock markets.

Telenor owns 62 per cent and Grameen Telecom the rest 38 per cent stake in the GP, the market leader of the country’s 45 million-strong mobile phone subscriber base.

The company’s market share, however, came down to 47 per cent as of June 2008 from 63 per cent in 2006.

Among the six-operator market, however, GP still remains in the leading position with about 20.84 million customers followed by Egyptian Orascom Telecom’s Banglalink with about 10.17 million customers and Aktel, recently taken over by Japan’s NTT DOCOMO, with about 8.14 million customers as of August.

Source: New Age

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