Telenor's Grameenphone: Navigating Accounting Irregularities Amid Growth – Can Trust Outweigh Hurdles?

The telecom sector has long been a battleground of growth versus governance. Nowhere is this tension more evident than in Telenor Group's Bangladesh subsidiary, Grameenphone, which has delivered stellar subscriber and revenue growth while grappling with recurring accounting irregularities. Investors face a paradox: Should they prioritize Grameenphone's robust operational metrics—or scrutinize its financial integrity risks? This analysis dissects the implications of Grameenphone's recent EBITDA volatility and historical errors, urging investors to weigh transparency against short-term performance.

The Growth Engine vs. the Governance Quandary

Grameenphone remains Telenor's crown jewel, boasting over 80 million subscribers in Bangladesh and double-digit revenue growth even amid macroeconomic headwinds. In Q2 2025, service revenue dipped by 3.1% organically, but subscriber additions surged by 1.4 million, underscoring its market dominance. Yet, this growth narrative is shadowed by financial irregularities.

The most glaring example is the NOK299 million (USD35 million) commission provision error in 2019, which shaved 2.6% off Telenor's group EBITDA. While Grameenphone's adjusted EBITDA still grew by 14% that year, the oversight raised red flags about internal controls. Fast-forward to 2025: Grameenphone's Q1 EBITDA dropped 8% year-on-year, with Telenor citing “high inflation” and an 8% OpEx surge as drivers. However, the unresolved “commission provision” issue looms like a ghost, complicating the narrative of a purely macro-driven decline.

Recurring Errors: One-Off Mishap or Systemic Weakness?

Critics argue that the 2019 error was not an isolated incident. The 2025 EBITDA drop, while attributed to external factors, occurs in a context of repeated financial missteps:
- In Q2 2025, organic EBITDA fell 3.4%, despite strong top-line growth.
- Telenor's Q1 2025 earnings call highlighted “ongoing macroeconomic challenges” in Bangladesh, including tariff uncertainties and inflation, but offered little clarity on whether the commission provision issue had been resolved.

The question for investors is: Are these errors mere operational hiccups—or symptoms of deeper governance flaws? Historical parallels to accounting scandals at firms like Enron or Wirecard suggest that repeated financial irregularities often signal a lack of oversight. Telenor's insistence that Grameenphone's growth trajectory remains “strong” rings hollow if its books cannot be trusted.

Valuation Implications: Growth ≠ Value Without Transparency

Telenor's stock (TELN) has tread water in recent years, despite Grameenphone's dominance. The market may already be pricing in governance risks.

A closer look at the numbers reveals a disconnect:
- Grameenphone's adjusted EBITDA margin fell to 62% in 2019 after the provision error, but recovered to 65% in 2024.
- However, the 2025 Q1 EBITDA drop and ongoing OpEx pressures suggest margin sustainability is fragile.

Investors must ask: Can Telenor's governance reforms—such as enhanced audit protocols—mitigate these risks? Or will recurring errors erode stakeholder confidence, even if operational metrics hold up?

Investment Thesis: Prioritize Integrity Over EBITDA Bumps

The verdict hinges on transparency. Here's the roadmap for investors:
1. Demand clarity on governance: Insist on detailed disclosures about the root causes of past provision errors and steps taken to prevent recurrence.
2. Scrutinize EBITDA drivers: Is the decline truly due to macro factors, or are unaccounted costs (like commissions) still distorting results?
3. Value discipline over growth: A 14% subscriber growth rate is meaningless if financial statements are unreliable.

If Telenor can demonstrate rigorous controls, Grameenphone's growth could justify its valuation. But without transparency, the stock risks becoming a “value trap”—appealing on paper but vulnerable to governance-driven write-offs.

Conclusion: Trust Is the New Currency in Telecom

Telenor's Grameenphone is a textbook case of growth clashing with governance. While its subscriber base and revenue trends are undeniable strengths, recurring financial irregularities—whether isolated or systemic—threaten long-term value. Investors should heed the lessons of history: In an era of heightened ESG scrutiny, transparency is the ultimate growth driver. Until Telenor proves it can balance growth with accountability, Grameenphone's EBITDA numbers alone won't be enough to justify its valuation.

Final advice: Proceed with caution. Prioritize firms where operational resilience is paired with financial integrity—and avoid those where growth is bought at the cost of trust.