1

QUIS

Total Marks: 100 Time: 4 Hours

Instructions:

1. Check that your question paper contains all the exhibits as mentioned in page 3. The consecutive page numbering may be found under the base line at the foot of each page.

2. Use the answer script provided by the Institute. Write your name, roll no., registration no. and name of the subject on the upper portion of the cover page of the answer script.

3. Candidates are asked not to write any particulars of identification in any other place of the answer script and additional pages if taken.

4. Questions must be answered in English.

5. The answer should be referenced to the relevant workings.

6. Answer script and additional page(s) taken to write answer, used or unused, must not be removed or taken away from the Examination Hall.

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Requirements & Marks Allocation:

You are Ziaur Rahman, a senior articled student of Ahmed Saif & Co., Chartered Accountants. The senior partner of the firm, Ashraful Huq Amin FCA, as an advisor of Robi Telecom Ltd. (RTL), has received an assignment e-mail from Mr. M.G. Imrul Hasan, Chairman, RTL (Exhibit – 1). Mr. Ashraful Huq Amin FCA has asked you, Ziaur Rahman, to prepare a report covering all the requirements stated in the e-mail of Mr. Imrul Hasan. Your report should comprise the following elements:

Requirements:

You are required to prepare a draft report to your principal Mr. Ashraful Huq Amin FCA.Your report should comprise the following elements:

An executive summary Your responses to the detailed requirements (a), (b) and (c) set out in Exhibit -1. State clearly any assumptions that you make.

Marks Allocation: All of the marks in the Case Study are awarded for the demonstration of professional skills, allocated broadly as follows:

Requirements Professional Skills Total

Assimilating and using information

Structuring Problems and solutions

Applying Judgment

Conclusions and making recommendations

Integrative & multidisciplinary skills

Executive Summary

3 5 4 3 - 15

Requirement (a) 11 17 14 11 2 55

Requirement (b) 4 6 5 4 1 20

Requirement (c) 2 2 2 2 2 10

Total 20 30 25 20 5 100

In planning your report, you should be aware that not attempting one of the requirements, including an executive summary, will have a significantly detrimental effect on your chances of success. In addition, as indicated above, all four skills areas will be assessed under each of the four elements of your report.

You should be clear that marks are awarded for demonstrating your professional skills, not for reproducing facts from the case. In order to be successful, you will need to:

Demonstrate your knowledge of the case material and make use of your analysis.

Carryout relevant analysis of the problems and structure your proposed solutions.

Apply your judgment on the basis of the analysis that you have carried out

Draw conclusions from your analysis and judgment, and develop them into practical commercial recommendations.

Ethical issues may cover the following topic-

- Lack of professional independence or objectivity - Conflict of interest among stakeholders - Doubtful accounting or commercial practice or market competition - Inappropriate pressure to achieve a reported result.

Integrative & multidisciplinary skills may cover the following areas-

- Impact on Environment - Impact of Technological change - Social and economic impacts, e.g. with regard to employment, business

competitiveness, etc.

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LIST OF EXHIBITS

Exhibit Description Page reference

1 E-mail from Mr. M.G. Imrul Hasan, Chairman of Robi Telecom Ltd. (RTL) to Mr. Ashraful Huq Amin FCA, Partner in Ahmed Saif & Co., Chartered Accountants

4-6

2 Extract of Financial Statements of RTL and ATL for the year ended on 30 June 2015

7-10

3 Key Issues of Proposed Merger Scheme 11-13

4 Business Challenges of Telecommunication Sector in Bangladesh

14-17

5 Social and Economic Aspects of Telecommunication business in Bangladesh

18-19

6 Published article: „M&As are under close scrutiny, and rightly so‟. 20-20

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EXHIBIT – 1 E-MAIL

From : M.G. Imrul Hasan, Chairman, RTL

To : Ashraful Huq Amin FCA

Subject : Acquisition of Air Telecom Ltd.

Date : 29 November 2015

Dear Mr. Ashraful, Thank you for accepting our offer of appointment as business advisor of our company, Robi Telecom Ltd. (RTL). As discussed in our earlier meeting, RTL would like to acquire Air Telecom Ltd. (ATL). Please find below information and extracts of financial statements of RTL and ATL for the year ended 30 June 2015 (Exhibits-2) and exhibits 3 to 6 for your analysis and to draw your conclusion and recommendations for the requirements stated below:

Appointment:

We have considered your experience in terms of negotiation with the government agencies like BTRC, Ministry of Mass Media and Telecommunications and auditor of multinational companies (MNC) in Bangladesh. We have decided to appoint you as our advisor for evaluation of acquisition scheme. Your fee for the advisory services for the acquisition scheme is Tk. 50,00,000. Shareholdings and related companies:

RTL is locally incorporated in Bangladesh as a public limited company under Company Act 1994. 70 percent of RTL shares @ Tk. 10 each are owned by Robi Telecom Hongkong Ltd.(parent company) and rest 30 percent @ Tk. 10 each is owned by Kabir Associates, Bangladesh. 100 percent shareholding of ATL belong to a foreign company, Bharatio Airtel Company (BAC). The Acquisition Scheme: The BOD of RTL is keen to expand RTL business in Bangladesh. Recently we have received a proposal from the Chairman, Board of Directors, ATL that they will discontinue Bangladesh operations. We have keen interest to acquire ATL and therefore would like to submit a “Purchase Offer” to the Chairman, ATL Board of Directors within 21 December 2015.

Regulatory Approvals:

The proposed acquisition requires approval from Bangladesh Telecommunication Regulatory Commission (BTRC). RTL has meanwhile held a meeting with BTRC on the proposed acquisition. BTRC views in this regard are as follows:

Due diligence will be conducted by an independent professional firm who have previous experience on such assignment.

All the employees and staffs of the existing companies shall have to be retained for at least 1 year from completion of the acquisition.

No pipeline investments, existing business projects and CSR Projects shall be discontinued.

All audit qualifications and regulatory issues (fine, penalty, non-compliance of regulation, etc.) must be resolved before acquisition.

As an advisor, you shall have to obtain the regulatory approval from BTRC with minimum adverse impact on operations and profitability of RTL and within 30 days from the submission of application to the BTRC by RTL management. RTL will bear miscellaneous expenses at actual to get the regulatory approval faster.

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Matters disclosed in ATL Audited Accounts: Ahmed Saif & Co., Chartered Accountants has audited the statutory accounts of ATL‟s books of accounts for the year ended June 30, 2015. The audited accounts have following disclosures:

The financial statements of ATL revealed that the company has paid a donation of Tk. 15 million to a charitable organization where one of the directors of ATL is a trustee.

The company used to contribute Tk. 10 million each year to the National Eye Hospital for the free treatment of the poor people of the country.

The company has advanced Tk. 2.5 million to a related party, for construction of an office tower. In the notes to the financial statements, it has been stated that transactions with relat-ed parties were carried out on arm‟s length basis.

The audit committee meetings were not held during the year, because all audit committee members remained out of country. Consequently, the financial statements were issued by the company without being reviewed by the audit committee.

Stock of SIM Card and prepaid card valuing Tk. 6 million is placed in a warehouse owned by Hameed Limited (HL) – a third party vendor providing warehouse services. According to news reports, NBR has recently initiated an enquiry against HL for evading import duties and taxes. HL has confirmed the quantities of stock at the year end.

Employee Benefits – gratuity: ATL introduced gratuity in 2011 and company has a gratuity policy for permanent employees who have continuously served the company at least 5 years. The entitled employees will get gratuity at a rate of latest gross salary times number of years served. No gratuity provision was made in ATL accounts till June 2015. The number of employees in the company for relevant years are as follows:

2011 2012 2013 2014

Average gross salary/month (Taka) 40,000 50,000 55,500 55,500

Average basic salary /month (Taka) 22,000 25,500 25,500 25,500

No. of total employees 50 80 90 100

No. of employees eligible for gratuity:

Years served (average) = 5 years (employees) 10 2 3 5

Years served (average) = 6 years (employees) - 5 1 2

Years served (average) = 7 years (employees) - - 3 1

Years served (average) = 8 years (employees) - - - 1

Total 10 7 7 9

Gratuity payments during the year - 5 3 3

Other Matters to consider:

RTL has plan to improve its network to reduce call drop. Customer complain and satisfaction deportment recorded current call drop rate is 30%. RTL may use ATLs towers to gain the efficiency to reduce the call drop.

RTL may apply for accelerated depreciation allowance @ 50% for 1ST

year , 25% for 2nd

year and 25% for 3

rd year for the new investment in machineries and equipments.

RTL is used to provide tablet PC, satellite receiver and handset to its premium and corporate customers in Bangladesh to promote its business.

Hong Kong Telecommunication Regulatory Authority (HTRA) imposed penalty of USD 100 million for using illegal VOIP connection in international dial. We have managed and removed the allegation in the parent company. Hong Kong Government recently initiated telecommunication reform program under which telecom regulatory acts will be strengthened and may impose restrictions for unethical companies. RTL apprehended that 10 percent of the said VOIP business was linked to its business and the parent company would like to allocate the penalty to that proportion on it.

RTL shareholders expect 20 percent return on investment (ROI) per annum. 25% of net profit after tax beyond shareholders expectation will be distributed as performance bonus to the CEO, other key managers and departmental heads. As an advisor of the company you will be eligible to participate in the performance bonus distribution.

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You are advised to –

(a) Prepare a draft report including an executive summary advising (i) the number of shares of RTL to be issued to the shareholder of ATL as “purchase consideration” against 100 percent acquisition of ATL; (ii) the expected “premium” over the face value of RTL shares, if RTL wants to go to public for raising fund for new investment after acquisition of ATL; and (iii) RTL share value after acquisition using Net Present Value (NPV) of expected dividend for year 1 to 5 and Net Asset Value (NAV) of RTL at year end 5. Your report should be supported with forecast income statement for 5 years, EPS, ROCE and other relevant calculations & issues.

(b) Critically comment on the expected synergy benefits of the proposed acquisition and evaluate the strengths, weaknesses, opportunities and threats (SWOT) of RTL in the context of telecommunication sector in Bangladesh.

(c) Assess the economic and social impact and evaluate the ethical issues with regard to the proposed acquisition.

I look forward to receiving your draft report on or before 21 December 2015. Yours sincerely

M.G. Imrul Hassan Chairman

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EXHIBIT - 2

Robi Telecom Ltd.

Statement of Financial Statements

As on 30 June 2015

30-Jun-15 30-Jun-14

Assets Taka Taka

Non current assets

Property, plant and equipment, net 34,792,450,235 34,730,966,122

Intangible assets, net 17,037,571,309 3,510,970,374

Total non current assets 51,830,021,544 38,241,936,496

Current assets

Inventories 208,448,175 177,011,625

Deferred cost of connection revenue 191,051,586 211,428,772

Accounts receivable, net 3,107,584,016 2,680,972,216

Other receivables 544,793,086 458,162,512

Advances, deposits and prepayments 1,096,306,804 8,564,591,248

Short-term investment 71,855,956 90,928,485

Cash and cash equivalents 1,782,615,187 4,027,298,496

Total current assets 7,002,654,809 16,210,393,353

Total Assets 58,832,676,353 54,452,329,848

Equity and Liabilities:

Equity attributable to owners of the company

Share capital, Tk. 10 per share 10,678,800,000 10,678,800,000

General reserve 1,069,864,874 1,069,864,723

Retained earnings 5,980,339,681 7,692,780,216

Total Equity 17,729,004,555 19,441,444,939

Non current liabilities

Deposit from agents and subscribers 229,691,623 227,887,989

Finance lease obligation 2,509,902,919 2,509,902,919

Deferred tax liabilities 4,637,728,380 5,121,494,065

Other liabilities 2,196,460,514 1,416,954,104

Total Noncurrent liabilities 9,573,783,436 9,276,239,077

Current liabilities

Trade and other payables 8,584,666,915 5,420,167,022

Short-term bank loan 4,097,500,000 -

Payable to government and autonomous bodies 1,437,698,519 2,407,052,973

Unearned revenue 1,338,442,008 1,243,383,648

VAT payable 13,927,767 1,349,979,675

Income tax provision 8,948,742,981 8,903,174,580

Accrued interest 389,825,886 113,434,824

Other liabilities 66,784,680 49,274,933

Deferred connection revenue 243,377,464 271,486,768

Provisions 6,408,922,145 5,976,691,412

Total current liabilities 31,529,888,363 25,734,645,833

Total equity and liabilities 58,832,676,353 54,452,329,848

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Robi Telecom Ltd.

Income Statement

For the year ended 30 June, 2015

Taka Taka

2015 2014

Revenue 45,960,222,878 44,529,808,463

Cost of Network Operation -

Direct Cost of Revenue (9,282,341,124) (8,826,252,422)

Network operation and Maintenance expenses (3,472,831,397) (3,243,065,979)

Depreciation and amortization (7,009,799,186) (6,850,108,668)

Total cost of network operations (19,764,971,707) (18,919,427,068)

Gross Profit 26,195,251,171 25,610,381,395

Other income – net 36,697,844 40,824,849

Operating expenses

General and administrative expenses (4,947,130,802) (4,654,920,421)

Selling and distribution expenses (3,893,872,189) (4,041,178,382)

Depreciation and amortization (578,650,250) (668,858,641)

Total Operating expenses (9,419,653,241) (9,364,957,443)

Operating profit 16,812,295,775 16,286,248,801

Finance income/(expense), net (1,653,108,146) 494,798,062

Foreign exchange gain/(loss) (87,716,785) (324,276,267)

Gain on disposal of property, plant and equipment 25,237,681 46,360,482

(1,715,587,250) 216,882,277

Profit before income tax 15,096,708,525 16,503,131,077

Income tax expense (6,344,323,738) (7,057,580,130)

Profit for the year 8,752,384,787 9,445,550,947

Other comprehensive income - -

Total comprehensive income for the year 8,752,384,787 9,445,550,947

EPS 8.20 8.85

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Air Telecom Ltd.

Balance Sheet

As at 30 June 2015

30-Jun-15 30-Jun-14

Assets Taka Taka

Non current assets

Property, plant and Towers 4,820,019,993 5,171,263,080

IT Equipments, net 2,138,470,054 1,774,930,144

Intangible assets, net 3,407,514,262 702,194,075

Total non current assets 10,366,004,309 7,648,387,299

Current assets

Inventories 41,689,635 35,402,325

Deferred cost of connection revenue 38,210,317 42,285,754

Accounts receivable, net 621,516,803 536,194,443

Other receivables 108,958,617 91,632,502

Advances, deposits and prepayments 219,261,361 1,712,918,250

Short-term investment 14,371,191 18,185,697

Cash and cash equivalents 356,523,037 805,459,699

Total current assets 1,400,530,962 3,242,078,671

Total Assets 11,766,535,271 10,890,465,970

Equity and Liabilities:

Equity attributable to owners of the company

Share capital, Tk. 10 per share 1,350,300,000 1,350,300,000

General reserve 213,972,975 213,972,945

Retained earnings 1,981,527,936 2,324,016,043

Total Equity 3,545,800,911 3,888,288,988

Non current liabilities

Deposit from agents and subscribers 45,938,325 45,577,598

Finance lease obligation 501,980,584 501,980,584

Deferred tax liabilities 927,545,676 1,024,298,813

Other liabilities 439,292,103 283,390,821

Total Noncurrent liabilities 1,914,756,687 1,855,247,815

Current liabilities

Trade and other payables 1,716,933,383 1,084,033,404

Short-term bank loan 819,500,000 -

Payable to government and autonomous bodies 287,539,704 481,410,595

Unearned revenue 267,688,402 248,676,730

VAT payable 2,785,553 269,995,935

Income tax provision 1,789,748,596 1,780,634,916

Accrued interest 77,965,177 22,686,965

Other liabilities 13,356,936 9,854,987

Deferred connection revenue 48,675,493 54,297,354

Provisions 1,281,784,429 1,195,338,282

Total current liabilities 6,305,977,674 5,146,929,168

Total equity and liabilities 11,766,535,271 10,890,465,970

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Air Telecom Ltd. Statement of Comprehensive Income

For the ended 30 June 2015

2015 2014

Taka Taka

Revenue 2,800,089,151 1,960,062,406 Cost of Network Operation

Direct Cost of Revenue (1,276,840,653) (893,788,457) Network operation and Maintenance ex-

penses (276,368,799) (193,458,159) Depreciation and amortisation (268,500,549) (187,950,384) Total expenses (1,821,710,001) (1,275,197,001) Gross Profit 978,379,150 684,865,405 Other income - net 1,908,288 1,632,994 Operating expenses

General and administrative expenses (197,885,232) (186,196,817) Selling and distribution expenses (155,754,887) (161,647,135) Depreciation and amortisation (23,146,010) (26,754,346)

(376,786,129) (374,598,298) Operating profit 603,501,309 311,900,102 Finance income/(expense), net (66,124,326) (19,791,922) Profit before income tax 537,376,983 (3,257,403,803) EPS 3.98 -24.12

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EXHIBIT 3 KEY ISSUES OF THE PROPOSED ACQUISITION SCHEME

Objective of the acquisition:

The proposed acquisition of ATL by RTL aims at higher growth by increasing market share and reducing overhead expenses & operational costs and thus increasing shareholder value of RTL.

ATL Shareholding and earlier acquisition:

It is the policy stance of the Air Telecom Ltd. to go for partnership with a relatively large similar company in the country for realising the goals and objectives of its overall business strategy for sustained and sustainable growth. ATL will retain its equity holding in the RTL subject to the clearance by the regulatory authority.

ATL management bought Warid Telecom Bangladesh operations in two phases just 5 years ago. Slowly but steadily the company (ATL) has otherwise been making progress over the years. Only in last 90 days, the company added 0.8 million (8.0 lakh) new customers. ATL‟s authorities might have desired a much more extensive growth or that they are trying to redefine their strategy and operations in the face of stiff competitions from other operators.

RTL Revenue growth after acquisition of ATL:

The revenue of RTL is expected to grow by 15% every year from base sales of both companies of 2014-2015 for at least 5 years. The revenue growth is expected from higher market share, incremental return from the new investment, above all, ensuring retention of existing customers of both the companies through better technological services and reducing call drop, etc. and bringing back the left customers through extensive promotion. The management of the company is expecting higher profitability and EPS after acquisition. The market competition may be lesser among the survivors in the telecom industry which will result in higher sales and margin.

Cost Efficiency:

The general overheads of RTL will reduce by 30% in the first year after the acquisition. The cost reduction may arise due to operational efficiency and elimination of common cost. However, from 2

nd

year, general overhead will go up @ 3 per cent p.a. over previous years due to inflation.

Human Resources:

It is expected that the common positions might be redundant as per HR Policy of RTL which includes gross salary of 4 months‟ notice period.

Infrastructure:

Neither RTL nor ATL currently does have full coverage of network in Bangladesh. Division wise tower and server stations, which indicates their strength of area coverage in percent are as follows:

Dhaka and Mymensing division

Chittagang division other than CHT

CHT* Sylhet division

Khulna division

Barisal division

Coastal-belt**

Rajshahi division

Rangpur division

RTL 90 85 5 50 55 40 Nil 40 35

ATL 60 70 Nil 40 45 35 10 60 60

* CHT – Hilltracks disctrics comprising Rangamati, Khagrachari and Bandarban

** Coastal belt – Part of Patuakhali, Khulna and Noakhali districs

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Technology:

RTL uses ORACLE based system to run the business. However, ATL uses SQL based systems. The customer information and customer billing software of these companies are different. However, RTL parent company decided to continue with ORACLE system after acquisition of ATL. ATL has an offer to offload IT equipment‟s at 60% WDV price to a third party vendor.

Strategic Investment:

After the acquisition of ATL, RTL management would have to replace 10 towers and 5 servers by next 3 years. Also to ensure the area coverage of all over Bangladesh, RTL will have to install new towers and stations in remote areas like CHT, coastal-belt and Northern Districts. An estimate projected investment plan in infrastructure in next 3 years is as follows:

Year Replacement (nos.) New (nos.)

Tower Server station Tower Server station

Year 1 4 2 5 2

Year 2 3 2 4 2

Year 3 3 1 5 1

Total 10 5 14 5

The tower cost is Tk. 10 million each and server cost is Tk. 100 million each.

Financing options for acquisition and investment:

ATL shareholders are not interested for cash considerations. They have already indicated to receive RTL shares at a rate 5:1 ratio. RTL parent company is not interested to inject further capital for new investment but agree to ATL proposal to exchange ATL 100 percent shares with RTL shares at 5:1 ratio. RTL will increase its share capital for issuing shares to the shareholder of ATL against the purchase consideration. Government of Bangladesh through its fiscal and other policies encourages the tele-companies to go for public and listing with DSE and CSE. The Finance Act 2015 has following fiscal incentives for listed companies:

Tax base: For non-listed mobile operators, tax base is 45% while for listed companies , it is 40%

The existing non-listed company will get 10% tax rebate in the year it issues at least 20% of its paid up capital to public.

Additional tax at a rate of 5% on the retained earnings (un-distributed profit) if listed companies fail to declare dividend at least at a rate of 15%.

The regulator of Stock Exchanges – BSEC usually does not allow to increase paid up capital unless a foreign company agrees to go for public. RTL management is not enthusiastic to go for public and listing with DSE and CSE because of increased accounting disclosure and regulatory requirements unless compelled by law or regulators. They prefer for financing by debt. A foreign bank operating in Bangladesh has expressed its interest to finance fund requirements for new investments. They have offered two options: (i) arranging a syndicated taka loan at a rate of 9% p.a. plus 1% processing fees for sanctioning the loan repayable in 10 half yearly equal instalments; or, (ii) arranging a foreign currency loan at a rate LIBOR Plus 4%. Currently 1 year LIBOR rate is 4%. Bangladesh currency taka was either appreciated or remained more or less stable against US dollars during last 2 years but before 2 years it was depreciated at an average rate of 6% p.a. Recently, International Monetary Fund (IMF) is pressing the Government to depreciate its currency to boost export. Exporters are also demanding devaluation of Taka in the context of value erosion of Euro. There is a projection by the international currency dealers that the value of Bangladesh Taka may go down at least at a rate of 1% p.a. during next 5 years. RTL Finance Director has indicated to accept the profitable option for the company even it is riskier.

Pricing for Public Offering:

Normally existing companies while going for public get premium price. Grameen Phone while it went for public got 17 times premium over the face value of Tk. 10 per share. RTL expects approval from

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BSEC for its premium at a similar rate. However, present financial strength especially net asset value (NAV) per share and trend of past earnings and expected growth in future earnings must justify that while asking that level of premium price. Also because of public and press criticism (refer to exhibit 6), BSEC is now-a-day very much conservative while approving premium. The criticisms are well grounded because of the fact that most of the IPOs could not sustain the premium price after those went public trading. Moreover, existing listed companies which were amalgamated could not deliver the synergy benefits according to the scheme they announced for their merger and acquisition (M&A).

Book building' made mandatory for companies seeking premium:

The Bangladesh Securities and Exchange Commission (BSEC) has approved a set of revised public issue rules with a view to ensuring more accountability and responsibilities on the part of issuing com-panies, issue managers, auditors and other stakeholders. The regulator has also increased the num-ber of disclosures and due diligence requirements for the issuing companies and issue managers. As per the revised rules, the companies will have to disclose more information. The additional level of disclosures will help investors take investment decisions. As per the revised rules, the minimum paid-up capital of an aspirant company must be Tk. 150 million and its post-IPO capital must be Tk. 300 million to go public under the fixed price or book building method as well. A company having a paid-up capital of Tk. 150 million must raise fund worth at least Tk. 150 million through IPO.

Under the book building method, institutional investors, including foreign ones, will be able to pur-chase 70 per cent shares of a company willing to go public. And general investors will apply for the remaining 30 per cent shares. The securities will be offered to general public for subscription at an issue price to be fixed at 10 per cent discount from the cut-off price. When the book building method was first introduced, a minimum of 5 institutional investors were required to support the price indicated by an issuing company. But after the collapse of the market in December 2010, the number was raised to 15. As per revised public issue rules, the number of categories of the eligible investors hav-ing business operation/investment in Bangladesh was raised to 12 from previous five categories. The eligible investors are: Merchant Bankers and Portfolio Managers, Asset Management Companies, Mutual Funds, Stock Dealers, Banks, Financial Institutions, Insurance Companies, Alternative Invest-ment Fund Managers, Alternative Investment Funds, Foreign Portfolios Investors, Recognised Pen-sion Funds and Provident Funds and other institutions as approved by the commission. Market risk and expected return:

The expected beta (β) for RTL is 1.50. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. The average risk free rate of return is 5%. The average expected market return from investment in similar securities (comprising of dividend and capital gain yield) is 15% per annum. The Present value factors of Tk. 1 for 5 years as follows:

Discount rate % Year 1 Year 2 Year 3 Year 4 Year 5

19 0.840 0.706 0.593 0.499 0.419

20 0.833 0.694 0.579 0.482 0.402

The market capitalization of all securities listed in DSE Ltd. as on 02 Dec. 2015 was Tk. 3,189,322 million and market P/E Ratio is 16.11 where telecommunication sector Market Capitalization was Tk. 382,993 million and sector‟s Price earnings (P/E) ratio was 19.55. The telecommunication sector‟s dividend yield was 2.95 percent per annum and Sector‟s 6 months‟ average return was (-) 17.73 percent and 1 month average return was (+) 7.29 percent . Similar stock‟s market price and EPS in DSE were as follows:

Sl. No.

Company Face Value (Tk.)

NAV(Tk.) 31 Oct. 2015

Market Price (June –Dec. 2014:

6-Month Average) (Tk.)

EPS as on 30 June 2015

a b c d e f

1 Grameen Phone 10 23.23 270.80 14.44

2 BSCCL 10 26.91 105.10 0.56

Dividend Policy:

The management of RTL wants to increase the EPS at least by 50% from the pre-acquisition level. It is expected that minimum 50 percent of net profit after tax will be paid off as dividend in next 5 years.

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EXHIBIT - 4

BUSINESS CHALLENGES OF TELECOMMUNICATION SECTOR IN BANGLADESH 1. Major Competitor in mobile Telecom Operators in Bangladesh

Grameen Phone Limited Grameenphone is a GSM (global system of mobile communication) based cellular operator in Bangladesh. It has started operations on March 26, 1997. It is partly owned by Telenor (62%) and Grameen Telecom (38%). Grameenphone is the largest and the fastest growing cellular telephone network in Bangladesh. At the end of 2012, it had about 7200 BTS (Base Tower Stations) around the country. Grameenphone‟s stated goal is to provide cost-effective and quality cellular services in Bangladesh. According to GP the logo symbolizes trust, reliability, quality and constant progress.

The name Grameenphone was kept as part of the new identity because the name Grameenphone carries with it all of the heritage, success and values of the companies past, added the then CEO of Grameenphone Erik Aas. Hawaii, and Ericsson provides technological support to GrameenPhone. The tower range of GP exists 5-7 km. The technology used by Grameenphone is 1G (First Generation) which is supportable to 2G (Second Generation).

Orascom Telecom (Pvt.) Limited / Banglalink.

With a slogan of “making it difference”- banglalink started operations in February 2005. Previously, it was known as Orascom Telecom Pvt. Ltd that had been providing GSM (global system of mobile communication) services in Bangladesh since 1998. Orascom Telecom bought 100% share of Orascom Telecom in 2004 and gave its new name as Banglalink. Banglalink, is the second largest cellular service provider in Bangladesh. It is a wholly owned subsidiary of Orascom Telecom. In August, 2006, Banglalink became the first company to provide free incoming calls from BTTB for both post paid and prepaid connections.

Banglalink serves their customers with more than 700 CCP(Customer Care Point). Till now Banglalink has invested 6,324 cores BDT for the development of network and infrastructure. Nokia-Siemens network & Hawaii provides technological support to Banglalink. The tower range of Banglalink exists 5-9 km. in case sometime it varies to about 13-15 km. The technology used by Banglalink is 1G (First Generation) which is supportable to 2G (Second Generation).

2. Mobile Subscriber in Bangladesh

The active mobile subscriber base in the country reached 98.55 million at the end of December 2012 as the six mobile operators added 1.67 million subscribers in the month. The number of active subscribers was 85.455 million at the end of December 2011 after the subscriber base crossed 70.34 million -mark for the first time in Dec. 2010. Although the number of subscribers had passed 98.55 million, the number of people using mobile phone would be less as many of the subscribers use services of multiple operators. Number of subscribers for the Mobile Phone operators is shown below:

Subscribers in millions

Operators Dec,2012 Dec,2013 Dec,2014

Grameen Phone Ltd. (GP) 30.428 36.493 43.065

Robi Axiata Limited 12.626 16.139 19.707

Orascom Telecom Ltd. (Banglalink) 20.038 23.753 23.107

PBTL (Citycell) 1.858 1.824 2.907

Teletalk Bangladesh Ltd. (Teletalk) 1.204 1.218 2.183

Airtel Telecom International L.L.C (Airtel) 6.184 8.026 9.581

Total

3. Mobile SIM Tax, 3G licence fees cut by 50pc recently

The National Board of Revenue recently reduced the tax on mobile SIM card and VAT on 3G service licence fees by 50 per cent. The NBR reduced the SIM tax to Tk 300 from Tk 600 and VAT on the 3G mobile service licence and spectrum fees to 7.5 per cent from 15 per cent. The mobile operators have demanded of the government to reduce the SIM tax for months while a number of government

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agencies and high ups, on behalf of the operators, also lobbied with the government. The government in 2011 reduced the SIM tax to Tk 600 from Tk 800. Mobile operators, however, said that „high‟ SIM tax was affecting the growth of the telecoms sector as the operators sell SIM card as low as Tk 100 but paid Tk 600 in taxes against each SIM. The operators have also demanded that the NBR totally withdraw VAT on 3G mobile service licences before the Bangladesh Telecommunications Regulatory Commission hold an auction for awarding four licences. The BTRC will hold the auction in July 01, 2013 for awarding three 3G licences to three operators out of five existing operators and one licence to a new foreign mobile operator. State-run Teletalk has already launched 3G operation. The Finance Minister, however, agreed to reduce VAT to 7.5 per cent from the existing standard VAT of 15 per cent. Mobile operators have been in loggerheads with the government over the payment of 15 per cent VAT for 2G licence and spectrum charges but the operators lost most of the legal battles in this regard. An NBR official said that reduction of VAT for 3G licence would not be applicable for 2G licences held by six existing operators.

4. Network Infrastructures A network of 15,000 km optical fiber covers 59 of the 64 districts in Bangladesh. BTCL, Power Grid Company of Bangladesh (PGCB), Bangladesh Railway, and the mobile operators are the primary developers of this fiber backbone. BTCL and GP (leasing Bangladesh Railway‟s) own the largest, active fiber backbones in the country. PGCB‟s fiber is underutilized. The other mobile operators either share fiber networks of the BTCL and GP or have built their own. The country‟s international connectivity is through a single undersea cable, the SEA-ME-WE-4. Its landing station is in Cox‟s Bazar (at the South- Eastern part of Bangladesh). Till recently, access to this landing station and the cable‟s routing to the POPs were solely controlled by BTCL (IGWs and IIGs obtained access from BTCL). The regulator determines the price of bandwidth access. But the carrying cost for the bandwidth (from center to the other parts of the country) and other backhaul costs are determined by BTCL and BSCCL. Due to the control of these two operators, the prices are not competitive, and the private operators are subject to high bandwidth charges. The Government of Bangladesh (GoB) is currently considering connecting with an international terrestrial cable through private sector, in addition to its SEA-ME-WE-4 undersea cable. Fiber-optic Submarine Cable 1800 KM long optic fiber network under Bangladesh Railway is being utilized by the private Cellular Phone Operator. Fiber optic links have already been established in most cities of the country (50 out of 64 districts) areas by Bangladesh Telegraph and Telephone Board (BTTB). BTTB has taken up a project to connect Bangladesh with the Information Superhighway through submarine fiber-optic cable project SEA-WE-MEA4 with a landing site at Cox‟s Bazar. The facility is to be operational by June 2005. Based on this it is expected that the nationwide Internet backbone will be established. Satellite/Microwave Network: Relying primarily upon the IO-Inmarsat synchronous orbit satellites located above the Indian Ocean, the geo-stationary satellite/terrestrial microwave link network in Bangladesh that is solely used for international telecommunication consists of four ground stations: the first two are standard "A" stations located in Betbunia, about 40 km from Chittagong on the Chittagong- Rangamati highway and in Mohakhali, in Dhaka City; the third one is a standard "B" station at Talibabad, about 30 km north of Dhaka on the Dhaka-Mymensigh highway while the fourth one, of standard "F", is in Sylhet. The microwave links carry the intra-country portion of the traffic. For instance, the Betbunia station is connected to Chittagong by a 2 GHz 140 Mb/s PDH Microwave; the international channels are then transmitted through a STM-16 Optical Fiber transmission system to Dhaka, where the three international gateways switches (two at Moghbazar and one at Mahakhali adjacent to the satellite Earth Station) are installed. The Talibabad station is connected to the international switch at Moghbazar through a single hop 6 GHz microwave link. The Sylhet Earth Station is to cater for the international trunk service to Sylhet and adjoining areas. This satellite station is directly connected to the international gateway switch of British Telecom in UK. In addition to these, there are two more international terrestrial links: the first is the microwave link from Chuadanga near Kushtia to Krishnanagar in India while the second is an UHF link from Attari near Dinajpur to Bhadrapur in Nepal.

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Optical Fiber Network Establishment of fiber optic links in Bangladesh began in 1986, along with the installation of new digital switches. Starting with the optical fiber link between Dhaka‟s Maghbazar and Gulshan telephone exchanges, all intra-city inter-exchange connections are now established through short distance fiber optic links. The inter-city portions between the major cities started with the completion of the STM-16 fiber link between Dhaka to Chittagong in 2001 (“STM” is a standard of data transmission rate where STM-1 represents 155 Mb/s). Bogra to Joypurhat to Ragpur and Dinajpur in the north west of Bangladesh is already connected by STM-4 optical link while Dhaka to Bogra optical fiber link via the Jamuna Bridge is currently under construction. In addition, there is a plan to connect Dhaka to Sylhet and Dhaka to Khulna on the optical fiber network. Moreover, to cater for the increasing international traffic, Bangladesh, having missed out on a similar opportunity a decade ago, is finally joining the SEA-ME-WE-4 submarine cable network consortium. The 10Gbs bandwidth of this network is expected to serve Bangladesh‟s needs for the next 10 years and significantly reduce costs of international calls. This link, costing approximately US$60 million will use Chittagong as the landing station. This guarantees BTTB‟s free landing access in Singapore, Indonesia, Malaysia, India, Sri Lanka, Pakistan, UAE, Saudi Arabia, Egypt, Italy and France. VSATs Users With the intention of accelerating the growth of internet, the government licensed the use of Very Small Aperture Terminal (VSAT) satellites for data-com use about a decade ago. There are now about 120 operators consisting mostly of foreign organizations such as gas companies, embassies and financial institutions and some internet service providers. These users are linked to internet hubs located in Singapore or Hong Kong via these links. The Bangladesh Telecom Regulatory Commission (BTRC) is contemplating legalizing the use of Voice Over IP on these lines as a way to further alleviate the existing acute voice channel log-jam.

First Bangladeshi satellite project on roll

Bangladesh will launch its first satellite into space by 2015 in a landmark move towards opening a new era in communication and broadcasting and creating new businesses. Bangladesh Telecommunication Regulatory Commission signed a Tk 82.5 crore consultancy deal with a US firm, Space Partnership International (SPI). The firm will design the satellite, named Bangabandhu. The satellite will reduce reliance on foreign satellites for cable channels and improve telecom services to the remote areas of the country. Moreover, meteorological data, including disaster warnings, will be easily available via the satellite. It might also be used for mapping natural resources.

Currently, all television channels, organisations providing internet services, V-SAT and radio channels are running their operations using foreign satellites. According to BTRC, each television station pays about US $0.0002 billion annually for using the satellites, and all institutions, including the 19 television channels, taken together end up paying US $0.004 billion every year. Berry Teleco Plc. is also playing a vital role in providing technical support to SPI so that they can operate in telco sector and get government blessings with 3G licensing and utility connections with preference and at subsidized rate. So far, 19 Asian countries have their own satellites in space. There are several thousand satellites in space, launched by more than 50 countries. India and Pakistan launched their own satellites in 1980 and 1990.

3G Technology in Bangladesh

Technology behind mobile phone has been changed several times and it‟s an ongoing process. So far mobile phones have experienced 1G, 2G, 2.5, 3G and in some developed countries 4G technology. As 4G is yet to get a vast coverage, 3G is one of the most talked technologies in the present scientific world. Although developed and our neighboring countries have been experiencing 3G for a handsome number of years, Bangladesh was not fortunate enough to have this technology so far. After a long cherished waiting, things have been changed as Bangladeshi telecom operator Teletalk launched 3G in 2012.

There are currently almost 100 million 3G wireless subscribers worldwide. The US, with over 200 million mobile phone subscribers, crossed the 10% mark for 3G penetration for the first time in 2006, while Japan stayed in the lead with over 50% of its subscribers using 3G phones. As 3G adoption

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accelerates, 3G carriers, handset manufacturing, infrastructure equipment makers and 3G application providers stand to gain. Wireless Internet Service Providers (WISP), carriers without the wherewithal or financial resources to upgrade their networks, and companies that provide services which are standard under 3G (i.e. email access), will be in a position to lose. While the 3G market may be definitely gaining traction, the industry is rapidly approaching a crossroads, where the needs of different market segments can vary substantially, and the potential rewards and losses for the different technology vendors and mobile communications operators could be substantial. 3G or the third-generation wireless refers to near future developments in personal & business wireless technology, especially relating to mobile communications. 3G or The Third Generation will usher in many benefits as roaming capability, broad bandwidth and high speed communication.

This new technology will not only enrich the experience of using mobile phone, but also create deep influence in the market & economy in Bangladesh. As it has been mentioned earlier, 3G mobile accessories will have to be imported from other countries as no infrastructure has been introduced yet in our country to produce those. But we have infrastructure and potential to design new applications for 3G mobile phones. GPIT (Grameen Phone IT), a shining example in this regard, has been providing the service of designing & maintaining applications to various mobile phone operators in Bangladesh. For the making & maintaining 3G environment in Bangladesh there will be an employment facility for many IT professionals. So, definitely this technology does have a good business prospect in Bangladesh.

As a government runs company, Teletalk has got the very first chance to develop its 3G structure. It will first provide 3G coverage in Dhaka and gradually cover the whole country. Teletalk, which started its service in 2005, did not gain much success in telecommunication sector. But may be this time, with the launching 0f 3G, Teletalk will get a chance to change its fate. After Teletalk, other mobile service operator will get 3G license according to their demand. As 90 percent of Bangladeshi consumer take the service from non govt operators, 3G in real sense will be experienced after they get license and make infrastructure. This will not be rhetoric to say that, 3G is going to start a new era in Telecommunication sector of Bangladesh.

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EXHIBIT - 5

SOCIAL AND ECONOMIC ASPECTS OF TELECOMMUNICATION SECTORS IN BANGLADESH World has become a global village and this is due to prompt, easy and accessible communication. Telecom segment has changed the shape of communication everywhere and this is a hot issue in Bangladesh now a days. Telecom sector has emerged as a fast growing industry during past few years and now Bangladesh is promising as one of the most progressive country where the number of mobile phone subscribers has reached 98.55 million. For the reason different companies are being attracted to invest heavily in this sector. Role of Telecommunication Sector in Economic Development Role of telecommunication sector is indispensable for economic development. Telecommunication infrastructural investment can lead to economic growth in several ways: transaction costs of data collection, placing and receiving orders have greatly reduced due to the availability of advanced telecommunication infrastructure. It has put a positive effect on the output of individual firms and in aggregate overall economy. Communication tools such as internet and telephone are progressively more important for the economic development. No one can ignore the importance of internet for the society. The internet provides all types of information related to the business, health, education, culture, weather etc as needed by the different users. Distance learning is only possible through advanced telecommunication tools. It has also allowed educational institutions to deliver online lectures. It is widely accepted that mobile phones have made a tremendous impact on Bangladesh‟s economy. Telecom services sector is Bangladesh‟s fastest growing sector among others like electronic media, banking sector, etc. However, the telecommunication sector has taken a lead, the matter of fact can be recognized by the combined teledensity figure which has already reached 53.41% compared to only 4% in 2005. The number of subscribers has tremendously increased 4.04 million in 2003 to 4.86 m (LandLine subscribers) and Cellular Mobile from 85.455 million in 2011 to 98.55 million in 2012. Current coverage of telecommunication services is around 62% of the population which is intended to be increased to at least 85% within next three years. Mobile sector exhibited growth of over 21% in 2011 & 15% in 2012 with fierce competition. Contribution to GDP Direct contribution of Telecom Sector to GDP increased from almost negligible to more than 2% (2007). In 2006 the sector contributed a total of BDT312 billion to the economy, over 5% of GDP. Mobile sector employed 210,000 Bangladeshis in 2006. The gain in productivity can be realized by the fact that BDT94 billion of value had added to domestic economy in 2006. Consumer surplus increased by PRKR42 billion between 2003 and 2006. Bangladesh has one of the highest tax burdens on mobile services in Asia Pacific. Influx of FDI FDI in Bangladesh is increasing year by year and have reached to US$ 5,124.9 million in 2010-11 as compare to US$ 484.7 million in 2005-06. However, it declined in 2011-12 i.e. US$ 3,038.8 million. From negligible Foreign Direct Investment (FDI) a few years back, the telecom sector has attracted foreign investment on license and infrastructure of over US$ 8 billion and another US$ 4 billion is expected on Roll-out by 2014. Similarly rising trend in FDI in telecom sector was also observed from 2005-06 (US$ 284.7 million) to 2010-11 (US$1,905.1 million) and US$ 1276.30 in 2011-12. As a percentage of total FDI, Telecom Sector contributed more than 37% in 2010-11 and more than 42% in 2011-12. However, decline in investment in telecom sector from foreign side was observed recently due to overall disturb Political situation of the country, which has discouraged the foreign investors.

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Sector Revenues The Telecommunication sector is deriving great source of income through its service. The Revenues of Telecom Sector has increased from Tk.115 billion to Tk.235 billion in last three years. This is expected to increase @ 20%- 25% per annum. Contribution to the Exchequer The contribution of Telecom sector to the VAT and Customs and Excise Duty (CED) is Tk. 36,282 million per annum (2010-11). Total Government receipts from telecom sector through tax, deposits & other sources were more than Tk. 100 billion (2010-11). Social Aspects of Telecommunication in Bangladesh The economic as well as social benefits from access can, in theory enable people to graduate from poverty and also contribute more widely to development. Thus it can be argued that inequality in access to telecom services can lead to limitations in fighting poverty. The monopoly in Bangladesh's telecom industry ended in the year 2002 and the economic indicators showed positive signs within three years. Analysts believe that high Foreign Direct Investment (FDI) and economic pace are outcomes of good policies by Government of Bangladesh and also deregulation of telecom sector. Future of Bangladesh's telecom sector seems very exciting but the good old past should also be kept in mind for learning and formulating fruitful future strategies. The foundation of this boom was led by the government and the private sector acted swiftly in the right direction towards the voyage of a wired Bangladesh. The country is moving with a very high pace towards a teledense country. It is praiseworthy to notice special interest of Ministry of IT and strong support from Government of Bangladesh to make the industry more competitive and beneficial for both consumers and telecom companies. Internet usage is also being promoted widely in the country and more real world services are now shifting to Internet day by day. Government has established about 50 IT centers for awareness in villages and 800 centers are to be established before the end of 2013. Establishment of Virtual University for distance learning is also a futuristic move as centers of this university have also been set up all over the country, which are interconnected via broadband. Besides this, 200 acres land for Internet City in Dhaka has also been allocated. Bangladesh is heading towards automation as government departments and ministries have started adopting computerized systems for processing of different everyday jobs. An E-government department with the name of 'Electronic Government Directorate (EGD)' is also there to facilitate automation. This department aims to make all government departments online; all ministries now have their websites online. The government has also set a target to train 16,000 employees for computer use in coming months. IT Parks in metropolitan cities like Khulna, Dhaka and Chittagang serve as platforms for buying and selling of IT services. All this is not only helping in the promotion of IT in an effective manner but is also contributing towards the economic growth of Bangladesh. The Telecom sector remained the hottest of all in last 2 years and is still playing a key role in the country's economic growth. From Europe to Middle East, investment inflow is coming up while the days pass by. This is not just because of the telecom operators that came to Bangladesh but also because of vendors which provide the basic infrastructure, technical support and equipment etc. for telecom companies. We can see this sector is acting as a catalyst for future economic development as the share of telecom sector in provision of employment and development in rural sector is on the rise. The country which had only 1500 Internet subscribers in 1995 now has the figure in millions. Currently, over 1900 cities, towns, upazilla, union parishad have Internet access in Bangladesh. Similarly, last year the teledensity graph rose to such a high level that it had touched 13.7% which was at that time 3% higher than India despite of the fact that India ended the telecom monopoly before Bangladesh. Currently, the teledensity has touched the 17% mark and is increasing rapidly.

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EXHIBIT -6

PUBLISHED ARTICLE: ‘M&As ARE UNDER CLOSE SCRUTINY, AND RIGHTLY SO’ For most chief executives and chairmen, announcing big deal can mean entering a world of pain. Even for those running listed companies and used to being in the public eye, the scrutiny that mergers and acquisitions (M&As) invite from investors, analysis and the press can prove to be overwhelmingly intense. Pfizer boss Ian Read is pretty used to the limelight, given that he has moved seam-lessly from the company‟s failed $100bn approach for Astra Zencca last year to its current $160bn bid for Allergan. Even so, attempting to push through the third-largest M&A deal in history can make even as seasoned a performer as Mr. Read hit the wrong note. His complaints about the lack of support from US politicians for a deal structured to avoid US tax have attracted widespread derision. It is right that M&A attracts scrutiny from all sides since, as many studies have shown it often fails to deliver value for shareholders. Sadly, all the attention does not guarantee a deal being either well-designed or ultimately successful. This is compounded by the fact that, once concluded, deals too often move out of the spotlight. Their aftermath- often a slow slog to integrate operations and processes, and bring together terms – is a lot less glamorous than the high drama that precedes it. And analysing the success of any deal is fraught with difficulties. Given the vagaries of the market, a straight comparison of equity value before and after is often misleading (although given the companies Pfizer has swallowed up since 2000, its market capitalisation should now be $432bn rather than &199bn). Similarly, the simplicity of a promise to deliver X billion in savings over X years rarely translates into measurable metrics after a deal. Managers can say they have hit their targets but investors have little way of testing whether that is genuinely the case. And what can be tracked in year one after a deal is often impenetrably obscure by year five. That is on excuse, through, for failing to hold the dealmakers to account. Take, for example, one of the largest deals concluded this year; the £41bn merger of Switzerland‟s Holcim and France‟sLafarge. So far, it is failing to deliver. At the operating level, the picture is pretty dire. In the first nine months of the year, earnings before interest, tax, depreciation and amortisation fell more than 14 per cent year on year, the margin is down 13 per cent, and cash flow has more than halved. Net debt of SFr18.3bn ($17.8bn), although down over the past year due to disposals, is still expected to be uncomfortably high by year end, at about three times EBITDA. More unimpressive still is how the company is putting its capital to use, In 2012, both Lafarge and Holcim said they would target an 8.0 percent return on capital employed. Based on the pro-forma data released, analysts estimate that, together, the companies made a combined ROCE of just 4.7 percent in 2014, which they expect to decline further to about 4.3 percent this year- even after adding back merger and restructuring cost. Rather than the SFr 1.2bn of savings promised at the operating level at the time of the deal, Jefferies thinks SFr 2.8bn is needed to get within sight of the ROCE targets. But evidence for that happening is not there. Before the deal, the companies promised to deliver SFr 410m of savings by sharpening up their procurement processes. Yet, in the latest quarterly result, there was just a 2.0 percent reduction in external spending. Lafarge‟s cost of goods sold as a percentage of sales remained unchanged on the precious quarter, while Holcim‟s actually increased. Meanwhile, rivals such as Cemex and Titan both reduced theirs. Cost savings should be the first thing any investor in cement asks for from a company, given the chronic overcapacity in the global market. Lafarge Holcim is clearly aware it has a case to answer. Its shares have lost more than a quarter of their value since the deal closed, knocking SFr 7bn off the SFr 41bn at which the merged company started trading in July. At an investor day this week managers did their best to reassure investors that performance since the deal closed was a blip, and promised more cuts to spending. Maybe they will be proved right. But if ever there was a deal that merited scrutiny after it closed, this is it.