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Friday, September 19, 2008

What is the religion of your company?

I remember during the admission test at Notre Dame College way back in mid 90s, we were given a booklet along with the application form which we were supposed to go through as part of the preparation process for the test. The book contained the background of establishing the college, along with some fine description about the Christian faith, the ideologies etc. I came to know more in detail in Bangla language who 'probhu jishu' and 'mata Mary' were and how they are related to my admission into the best college in Bangladesh. I cleared the test well and I got enrolled there too. Other than having received quality education from the best teachers during that time, I also came to know about various charity works the college was undertaking, such as work for education program, where I found many students, mostly tribal people, who work for the college in exchange of free education. Gradually, I also came to know about the mission's religious objectives which underpinned the quality social service and top class education. So much so for Notre Dame College, missionary schools are much better performers not only in Bangladesh but also across other regions in South Asia too. Holy Cross, St. Joseph, St. Gregory school are only a few to name in Bangladesh.

I was remembering all this when I found a strange similarity with this in a few of the country's leading freight forwarding companies such as DHL and Homebound. There seems to be a great number of management staff and ordinary employees belonging to a particular minority religion of Bangladesh. Initially I thought this to be a sheer coincidence, but after some careful observation, I realized that its beyond coincidence. I am ofcourse not leading to any sensitive argument here, but just a curious onlookers query...are there any employment quota in these companies based on a person's religious faith? I guess pretty much everybody knows that in Notre Dame College, there were quotas (I am not sure if there still are any) but does DHL and Homebound follow anything like that? Also, the kind of expression of religious loyalty (posters, statues, paintings) seen in their office premises makes the issue more interesting. I have decided to visit the offices of Islami Bank to find out if they have hung big pictures of Kaaba , Mecca, Medina on their walls or not, perhaps after that, we can start terming this phenomenon as 'corporate religion' in Bangladesh. Say Islami Bank is a Muslim company, HSBC and Grameen Phone are secular companies, ZTE and Huawei are Chinese Buddhist companies and DHL, Homebound are Christian companies. Sounds weird though, very weird. What is your take on this?


Anonymous said...

I think this is the stupidest article on this blog yet. What does religion and a company have anything to do with each other?

Case in point, you say Grameenphone is 'secular'. But I would agree that GP has more in common with a thief. TIB points out Bangladesh is corrupt, but we have learnt more from Norway. We have discovered how to launder money away using a Malaysian subsidiary and by over invoicing instead of paying tax outright. We have also learnt how to 'negotiate' a pitty fine in lieu of the billions we have laundered outside.

We have also learnt that when it came to GP's private placement IPO, ONLY 3 BANKS out of the 40 who were INVITED decided to participate. (as reported in Financial Express) This is because the IPO share pricing doesn't make sense given their current and declining cash flow.

GP tried to get international investors on board for private placement. But funnily enough, not a single foreign investor stepped up. *they calculated the scam* So then they decided to drum up local banks without any luck.

Yes there are some brands whose brand value is higher than their assets like Coca Cola. But even though GP is no Cola-Cola, GP's IPO is more ambitious than Coca-Cola.

I am worried that no one noticed the fall of GP. All we do is praise them, but clearly they have falling faster with their make-a-quick-buck schemes.

As for HSBC, yes they are secular. They are what foreign companies should be like. They have a reputation, brand and ethics. They haven't tried to scam anyone or buy someone's scam IPO.

bengal*foam said...

Dear Anonymous,

You have made some “brilliant” comments, asked some interesting questions and made some forceful claims. You also chose to show disrespect to the author and call his article “stupid”.

Since you’re such a genius, let me show you what’s stupid by addressing some of your points below.

Three different ways in which the concept of religion and a company might have to do with each other, from three various viewpoints:

As for thieves, here your first assertion about the validity of linking to religion would have been more correct: I don’t see what religion has to do with it. I suppose thieves can be either secular or religious. Secular thieves probably have more honor (but that’s my personal prejudice).

TIB says Bangladesh is corrupt. They don’t really care whether it’s imported or homegrown. And you really can’t believe that we learned that much more corruption from Norway, do you? Are you saying there was significantly less corruption in this fair land of ours before the arrival of Telenor? I only wish it were so, at least we would have a chance at redemption by simply ousting them. I would also wager quite comfortably that a larger percentage of your household income is lost each year to “local” corruption (utility companies, petty bureaucrats, etc.) than from any action by Telenor (not that we can forgive any illegal action on Telenor’s part on that basis).

Also, while Telenor owns over 60% of GP, an overwhelming majority of GP employees are sons and daughters of our very soil (here you can think of the engineers who enabled and implemented all that illegal VOIP).

As for only three banks out of forty participating in the private placement, this is quite common for private placement deals. Private deals are expressly publicized to a large number of banks on purpose and only a few participate, either by design or default. In fact, anything above 5-6 banks is usually only considered for very big placements in much more sophisticated markets (each bank usually handles one tranche in the placement). What you should wait to see is how many banks and institutions end up purchasing shares when all is said and done. According to the source you quoted, The Financial Express, at least six banks are interested in buying private placement shares (Trust Bank, Prime Bank, IDLC Finance Limited, Lankabangla Finance, AIMS of Bangladesh and AB Bank). I expect the final tally to be higher.

The above article also explains why GP might have reduced the size of its IPO, including retrenching the international placement. In short, it has in large part to do with not getting expected corporate tax benefits from the Bangladeshi government. Although, I must admit that I cannot say if you are accurate in saying that “not a single foreign investor stepped up”. I just don’t have any evidence either way on that statement (and I would guess neither do you).

IPO pricing always fluctuates from filing to flotation. For example, Google reduced its IPO price target by 25% before their IPO.

And by the way, cash flow is only one component of IPO share pricing (which is more voodoo than science anyway). For example, you considered brand equity with your Coca-Cola example. GP is arguably our most powerful and most established brand. Or you can look beyond simple asset values and evaluate what the only truly national voice and data network in our country is worth in terms of future growth. Or that GP is the largest ISP in the nation. Or the largest taxpayer to the treasury. Or that Bangladesh is one of the most promising mobile markets in the world and GP has dominant market share. Or maybe our investment climate is not very stable at all and it’s only worth a hundred bucks. I don’t know. Much more important than current of past cash flow, future cash flow is hard to estimate in Bangladesh.

I also find it hard to quantify and understand your statement that GP’s IPO is “more ambitious” than The Coca-Cola Company (KO). GP is a domestic telco and valued itself at $3 billion for the IPO. Coca-Cola might just sell sugar water, but it's global and is currently valued at over $121 billion in terms of market capitalization and is number 16 in the Top 100 of all time in terms of market cap.

C’mon, be a big boy/girl and admit you’re just full of steam and got carried away with your unfounded, unsubstantiated, erroneous, and false comments. I’d respect you more for doing so.

I’m all for people critiquing and criticizing corporations (hell, they usually deserve it). But let’s have facts and make cogent arguments instead of knee-jerk reactionary diatribes.

You can fairly accuse GP of a lot of things quite credibly, but the amount they have invested in Bangladesh over more than one decade in terms of infrastructure, jobs, and developing human resources can hardly be called, in your words, “make-a-quick-buck schemes”. And before you go harping on about the profits they made in return, I’ll say that if you want money for nothing, go to an NGO.

Lastly, your knee-slappingly hilarious comments about HSBC being “secular” (whatever that means--I remind you that the author of the original article was referring to religion analogously and not literally) and an exemplary foreign corporate citizen for the rest of the world with a “reputation, brand, and ethics”. I shudder to think you are really that naïve or obtuse. For your reading pleasure:

HSBC 'to be fined under money laundering rules'

How the World Bank and HSBC are investing in deforestation

HSBC hit by new lost data scandal

HSBC pays £400m to end Safra scandal

HSBC stands accused of passing funds to organizations bankrolling Palestinian suicide bombers

Thanks for your comments.

Yours fraternally,

Anonymous said...

First off, please get your facts straight. GP went peddling their IPO nationally and internationally. But no takers. Their valuation is critically flawed as it places too much value on the 'grameenphone' name rather than assets, cashflow and investments. This is what is meant by calling it more ambitious than Coca-Cola, where the name 'Coca-Cola' is worth more than the Coca Cola's accounts. I think you misunderstood me there. According to the IPO, GP considerers the 'grameenphone' name to be atleast 15 times more valuable than the assets.

What they didn't like is how everyone got hold of this news. Its not the 'corporate' tax benefits. Its just that no one considers GP a $ 3 billion company anymore but GP themselves. This situation is more dire considering since the time of their valuation, GP had to cut their calling rates by more than half. Also remember there is no VoIP to launder money or make a quick buck off. The bottom lines have significantly drained and yet GP wants to present a overvalued IPO. And yes, I am aware that in normal conditions few banks are approached for an IPO, but this time GP went on an all out crusade trying to drum up everyone abroad and nationally. Better luck next time.

The cases you mention against HSBC are minor ones. They are all related to formality and the deeds of its clients. You cannot blame a bank for activities of their clients or the changing formality of a country. But there is a distinction which separates HSBC and GP.

HSBC has never been accused of trying to dislodge tax duties by laundering money outside via a Malaysian subsidiary nationally and internationally.

GP has laundered money to avoid not paying taxes. Yes GP has invested a lot, but they withdrew even more by not paying their taxes. See the difference? GP invests 1 taka and siphons off 20 that would otherwise ended up in its taxes.

In conclusion please don't post stories of minute scandals that only merely relate to HSBC. If you find a crime that is on the same scale of GP against HSBC, I suggest you go directly to all regulatory bodies in the world to suspend HSBC's license. They will comply without even hearing HSBC's argument on how much they invested in the 'sons of soil' and the country in order to avoid years of not paying taxes.

Finally no disrespect is intended for the author of the post. But GP is a bad example of anything done correctly.

bengal*foam said...

Well, if you read what I wrote, I don't really claim to have any facts about their valuation or flotation. That was my point. I don't know who peddled what to whom for how much.

You argue they are "critically flawed" in putting too much value on their brand rather than "assets, cash flow, and investment". Maybe they are. But I also don't have any facts on what their valuation is based on. I also don't believe they stated a specific multiple solely on their brand name. They might have valued the company at a multiple of 15 on their asset value, but that's something quite different.

But for your information, a brand is an asset (albeit an intangible one) and can be placed on a balance sheet. In fact, Coca-Cola (KO) values their brands alone at just north of $3 billion, out of over $11 billion in intangible assets. You can see that in their last 10K Annual report at the link below (c.f., page 85).

So I think I understood you just fine, thank you. $11 billion over a market cap of over $121 billion only seems mildly ambitious to me.

However, to be truthful, KO is a bad example for comparison (which was also one of my original points). Their business is largely centered on selling concentrated syrup and licensing their 450 brands.

The telco business is about the value of a network. Value is always in they eye of the beholder at a fixed point in time, and the real valuation game, as you rightly say, is about what you can convince investors and the market. And yes, Telenor is failing to convince the market.

But one could argue with equal validity that they are perhaps undervaluing the company. I think it's hard to (under)estimate the value of their technology infrastructure and technical human resources. They own, operate, and maintain over 10,000 base stations all across the country--the only national network *of any kind* in this country (not even our road network is as extensive) and we're talking about a voice and data network, technology that just about defines the modern global economy.

In fact, I believe their total PPE investment alone in Bangladesh is now well over $1 billion at this point. Add to that a brand which is known even in the remotest village. Add to that the fact that teledensity is only around 30% in Bangladesh. Say what you want about Telenor, but the mobile phone has revolutionized this country. I would wager it will continue to do so. And really, so would you if you could just get over your bias. But that's presumptuous of me. Maybe one day Bangladeshis will choose to abandon their mobile phones because the telcos are corrupting the nation. Right after they abandon sweet foods and Coca-Cola.

Cash flow from a handful of quarters should not be sufficient to underpin a company's valuation. But maybe it will end up doing so in our market.

I bet you if another company were to acquire GP today, they would be willing to pay close to, if not more, than $3 billion.

Again, correct me if I'm wrong, but you also seem to be making the point that there is an acceptable level of corruption or corporate malfeasance, and that somehow HSBC is within these acceptable limits with minor infractions and Telenor is not. This is just spurious and squabbling over matters of degree!

But I'm going to humor your point. I would think that looking the other way on money laundering which facilitates terrorism (the kind which HSBC has been accused by regulators of not monitoring closely enough in breach of the law) is more dangerous than alleged money laundering to avoid taxes. But again, that's just a matter of degree. "Formality and the deeds of its clients", my foot. Let's look at the consequences of actions.

I would also speculate (admittedly without a shred of evidence) that in the last decade alone HSBC has probably racked up and/or paid more in just fines over money laundering and illegal activity than any sum of money that Telenor could have possibly laundered via its Malaysian subsidiary. I could be wrong. (I won't even begin to speculate on the actual sums of money that are probably laundered through HSBC globally, especially via offshore shell banks.)

Which brings me to my next point, there doesn't seem to be any hard information or evidence anywhere regarding the allegations of "money laundering" by DiGi Telecom in Malaysia. In fact, your statements about "an account in Singapore" are about as detailed as any article that comes up on the web. All I can find are articles from several weeks back when Md. Yunus seemed to briefly and ill-advisedly contemplate legal action against Telenor and which cite a "police report". If you can point to any source, I would be much obliged. Lest you think I'm an apologist for Telenor, I am more than willing to accept that perhaps the case is still developing. My original point was and remains that the jury is still out. In fact, forget calling a jury, a case hasn't even been filed as far as I can see.

Again, I could be wrong.

Also, I draw your attention to the latest report release today from another one of your sources, Transparency International. Bangladesh has actually *dropped* 3 places from last year, to number 10 in terms of corruption. Norway is in the bottom 15. So much for your theory that Telenor is "teaching" corruption in Bangladesh. Although, in my personal opinion TI's reports have always been of limited value since they only measure perception and only public corruption while omitting the private sector, but you cited them.

You're right, HSBC hasn't been accused of laundering money outside via a Malaysian subsidiary nationally or internationally. They also haven't been accused of laundering money while hopping on one foot and wearing a green shirt on Tuesday either (that we know of). They've just been accused of not doing enough to halt the laundering of proceeds from illegal activities which support further criminal activities that sometimes end up taking innocent life.

I don't need to go to any regulatory body, they already know and take action regularly against them.

If Telenor siphons off Tk. 20 for every taka of investment, and they do so against the law, then by all means they should be held to justice. I just don't know where you're getting your numbers from.

Let me also make a wild statement of my own: no bank will ever be a better example of how do things correctly than any telco anywhere in the world. Boy, it feels good not to be weighed down by evidence or experience or facts!

You also missed my point about 'sons of the soil'. I meant that most of the illegal activity, including VOIP, was taken with the complicit knowledge, if not direct participation, of Bangladeshis who were in the majority.

Who knows, maybe Norway learned a few things about corruption from us. We were number one in corruption for five years straight according to TI. Norway is in the top 15 of least corrupt.

Thanks for clarifying that you intended no disrespect to the author, although it was short of an apology.

As for me, let me apologize for the length of this note, but this bloody traffic is killing me and I needed a diversion. Let Telenor or HSBC solve that problem and they can launder all the money they want. I'll even buy them the soap.

Good day,