SHERIDAN PRASSO
WHEN MUHAMMAD Yunus travels to Norway to receive the Nobel Peace Prize Dec. 10, he will come prepared to fight for management control over a company he believes is sucking profits from the poor of Bangladesh.
While in Oslo, Yunus says he intends to point out the irony that the country that is awarding him the Nobel Prize for his pioneering work on microcredit is also home to a state-controlled company, Telenor, which he says refuses to honor an agreement to allow Yunus's nonprofit Grameen Bank to take majority control of their joint mobile-phone venture.
"There's tension between us and Telenor," Yunus told Fortune in an interview in Dhaka ahead of his departure. "There's a philosophical difference. They're oriented toward profit maximization. We're oriented toward social objectives."
At issue is Grameen Phone, Bangladesh's largest mobile-phone provider, with 10 million customers - among them 260,000 "phone ladies" who provide village phone service for the poor all over the country. As the first mobile-phone company to set up in Bangladesh, Grameen Phone has gained a startling 63 percent market share in the country's rapidly growing mobile market and has become Bangladesh's largest taxpayer. Its 2005 revenues of $433 million, up 50 percent over the previous year, are forecast to increase again to $580 million this year.
Grameen Phone was created in 1996 as a joint venture between Telenor, Grameen Bank and two minor partners, which have since been bought out. Telenor now holds a 62 percent share of the company, with Grameen Telecom, a unit of Grameen Bank, holding the remaining 38 percent.
That means Telenor takes 62 percent of Grameen Phone's net earnings, which amounted to $93.6 million last year. That's a lot of money in a poor country like Bangladesh, and Yunus doesn't want it going to Norway.
Yunus insists that Telenor "agreed to give us majority ownership within six years. Our intent was to convert to a social business enterprise [where profits are reinvested in the company rather than taken out], but Telenor does not accept."
Back in 1996, when the venture was established, Telenor was a state-run company. Although the Norwegian government still holds the majority of shares, Telenor partially privatized in 2000, with the largest IPO in Norwegian history, and issued shares on Nasdaq. It was after that, Yunus says, that Telenor reneged on its agreement. "It's a very simple reason," Yunus says. "It's a cash cow."
Telenor denies that the company is either a cash cow or that it ever agreed to relinquish majority control to Grameen. The revenues of Grameen Phone constitute only 3 percent to 5 percent of Telenor's revenues from mobile activities, says Jon Fredrik Baksaas, who became Telenor's president and CEO in 2002 - the year Yunus says Telenor was to have ceded management control. (Baksaas was CFO in 1996, when the joint venture was created under his predecessor Tormod Hermansen.)
Telenor shares are up 69 percent so far this year, after the company reported that third-quarter revenues increased 35 percent to $3.7 billion over the previous year. Telenor group revenues from its operations in 12 countries were close to $11 billion in 2005.
"Different opinions are part of daily business life," Baksaas said last week by telephone from Bangkok, where he was inaugurating Telenor's new Asia regional headquarters. "We have never committed to reducing our share in the company." Telenor also says it has not yet recouped its investment.
Without Telenor's ability to negotiate volume discounts with telecom suppliers, Baksaas insisted, Grameen Phone would not be anywhere near as profitable as it is today. "We're talking about joint efforts that have really produced one of the most fantastic win-win solutions in telecom history over many years," he said.
Yunus says he asked for a meeting with Telenor's board while in Norway in order to appeal to them directly to honor the previous CEO's promise. But Baksaas said that no meeting had been scheduled - only that as part of the ceremonies Yunus would visit Telenor's offices in order to celebrate his achievement of being the founder of microcredit, not to discuss management control.
"The corporate governance of a group like Telenor does not entertain the mechanics that a board meeting can be established in such a way," Baksaas said. "We believe that on the questions of the future ownership of Grameen Phone, there should be other occasions for those topics to be discussed." He added that Yunus had been invited to discuss such topics at a future, unspecified date. "We are at all times willing to discuss future ownership structures," Baksaas said.
The Telenor CEO denied that ceding majority ownership to Grameen has ever been on the negotiating table. The last time a change in ownership structure was discussed, Baksaas said, was in 2004, when the minority partners exited the consortium. That year, Telenor bought out a third partner and most of a fourth one, increasing its stake from 51 percent to 62 percent; cash-strapped Grameen Bank, which had net earnings of only $5 million from its village lending program the year before, was able to buy only 3 percent of the available shares, increasing Grameen Telecom's stake to 38 percent.
"I think we had a very reasonable process going on when shares have been available," Baksaas said.
But according to Muhammad Khalid Shams, managing director of Grameen Telecom and for many years chairman of Grameen Phone, Grameen has been insisting for years that Telenor renegotiate the management structure and honor the pledge made by the previous CEO, who Grameen officials say was asked from the very beginning to enter into a nonprofit venture with Grameen. (Hermansen, the former CEO, could not be reached for comment.)
"We have been talking with them, negotiating with them, reminding them that we intend to make our members the owners of the largest telecom company in Bangladesh, and that they would not have had the license without Professor Yunus's support," Shams says. "They have gone back on that. They say it's only an intention, not legally binding. They seem to have defied the will and intention of their own people. They think they owe it to their shareholders to hang on to Grameen Phone."
Grameen even hired an arbitration lawyer in a third country, Sweden, to seek redress. "He charged us an enormous amount of money and told us there's no guarantee," Shams says, "so we don't want to risk it."
Even though Yunus's desire to meet with Telenor's board while in Norway will not be realized, just about every notable person in Norway attends the Nobel Prize ceremony, giving Yunus a chance to campaign, perhaps with the board members themselves, one ear at a time. Baksaas said he had no plans for a scheduled meeting with Yunus but conceded that "there will be occasions that we will meet and celebrate his achievements." #
First published in the Fortune magazine, December 5 2006
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