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Tuesday, April 03, 2007

Telenor: Lateral Thinking

I have to congratulate one of my favourite historical shorts on the proposal for floating part of their stake in the Bangladeshi operator, GrameenPhone on a local exchange. This is an extremely ingenious solution to the problem of how to deal with a Nobel Peace Prize Winning minority shareholder (38%) who wants to take control of company in order to give it away to the subscribers.

Although the details of the deal are vague at this moment, I suppose Telenor will float around 11% of their equity leaving them in control with a 51% shareholding. Then if GrameenBank want to give away their shareholding to subscribers they are freely permitted to do with shares that actually have a value and currency. Once the forces of capitalism weave its magic, I imagine over the medium term most of the small shareholders would sell out to more sympathetic and compliant institutions. A couple of economic earthquakes later the institutions will be literally begging for Telenor to buy out them of their shares at a reasonable price. And in true Houdini fashion, Telenor will have escaped the clutches of a troublesome minority shareholder without causing any harm to themselves.

Absolutely brilliant, top marks.

I was beginning to wonder if capitalism would ever triumph in this difficult situation, especially with the news that Telenor’s biggest shareholder was going to finance GrameenBank in their expansion plans onto the African continent.

It also looks as if the pressure is lifting on Telenor in Thailand with the news that a local float is planned of its holding in DTAC and the military junta is unlikely to sequestrate the assets of Shin Corp.

I’m expecting to hear soon a similar plan for the Telenor venture in Malaysia. All of these actions will actually significantly reduce risk in any Telenor valuation, given that analysts now have a benchmark price to use.