INTRODUCTION Telecard Limited Company was incorporated in Pakistan on October 29, 1992 as a Public Limited Company.

The shares of the Company are listed on the Karachi and Islamabad Stock Exchanges. The Company itself and through its Subsidiary is licensed to provide fully integrated telecommunication services, including basic wireless telephony, long distance and international services and payphones. Telecard Limited is belongs to telecommunications sector. Telecard is constantly adding value added products to its portfolio. Telecard has successfully launched WLL service (GO CDMA) based on CDMA2000 1 X technology that provided the unique combination of voice and data/internet for the first time in Pakistan. Telecard is one of the WLL service providers in Pakistan also.

CAPITAL STRUCTURE
DEBT POSITION:

Both long term and short term debts were taken: -Short term running finances were taken in all 5 years apart from 2008, figures for the other years are given below:2007- Rs 200,000 from various commercial banks. 2009- Rs.400, 000 from various commercial banks. 2010- Rs 400,000 from various commercial banks. 2011- Rs 292,735 from various commercial banks. Moreover short term borrowings were also done, in years listed below: 2007- Rs 168,331 from banks and Rs 37,500 from investment bank 2010- Rs 35,500 from a related party 2011- Rs 17,000 from a related party, it was repaid fully during the current year. Only one long term debt was taken, and that in 2004 of $ 2.4 billion. MAIN SOURCES OF DEBT

The main source is long term financing. The company has taken one major loan of $2.4 billion in 2004. Due to the companys inability to pay they have asked their lenders to extend the due date, which they have agreed to. LIABILITY AS A PERCENTAGE OF TOTAL ASSETS

NON-CURRENT LIABILIT IES Long term loans redeemable capital Liabilities against assets Advance s long term deposits deferred liabilities due to employees deferred taxation other dues

2007 0.060701345 0.171588022 0.007496564 0 0.005205947 0.007184207 0 0 0.165028529 0.425950606 0.160863771 0.006143018 0.073403857 0.019574362 0.028216234 0.236350006

2008 0.080872518 0.116061323 0.002366499 0.063586789 0.008025517 0.002263607 0.005041671 0.017697294 0.13231814 0.428542031 0.123160819 0.013993209 0.00658504 0.10752135 0.091676098 0.263710258

2009 0.048008466 0.057725611 0.000173177 0.026630749 0.006349817 0.002212815 0.003367327 0.021454685 0.137386954 0.303444295 0.126034251 0.010198191 0 0.037714066 0.100538772 0.274677699

2010 0.521540062 0.08074922 0 0.054630593 0.006347555 0.183662851 0.002185224 0 0 0.379916753 0.193860562 0.007700312 0.027991675 0.001768991 0.034651405 0.266077003

2011 0.022835719 0.054078618 0 0.06703022 0.006703022 0.202567598 0 0 0 0.356169052 0.147012043 0.012837991 0.033174279 0 0.058963872 0.252329016

C URRENT LIABILITIES T rade and other payables Accrued interest/Markup short term borrowings short te rm finance s curre nt maturitie s of long te rm finance s

As presented in the chart above, long term loans have reduced in 2009 by a very high amount, this is mainly due to bullet repayments which were done in this year. Moreover in year 2010, long term loans has increased a lot, however short term finances has reduced this is because of loan restructuring which was done by the company. Thereby outstanding markup merged with outstanding principal resulting in the new principal. SHAREHOLDER AND OWNER SHIP POSITION:

Common stock shares have been issued. OWNERSHIP STRUCTURE OF THE COMPANY

On an average the ownership structure of the company has been given below:

As it is a public listed company all outstanding shares are available for trade in the general public. TRENDS AND CHANGES OF STRUCTURE OVER THE FIVE YEARS

5000 4000 3000 2000 1000 0 2007 2008 2009 2010 2011 SHARE CAPITAL & RESERVES ISSUED SUBSCRIBED PAID UP

Equity capital remained the same throughout the 5 years i.e. share capital and reserves 4000,000 and issued, subscribed paid up 3000,000. The reason given was that Issue of capital rules (ICR) of 1996 governs the right issues. The conditions applied by ICR were difficult to meet. Another reason given was that there was lack of need and they issue shares keeping the economy in sight.
12000 10000 8000 Non-current liabities 6000 4000 2000 0 2007 2008 2009 2010 2011 Current Liabilities Total liabilities

The non- current liabilities such as long term loans rise in 2007-08 as the management invested in Supernet as it considered this investment as strategic and believed that the subsidiary Company would be able to achieve its full potential and would make adequate profit and generate positive cash flows. Also in 2008, long term loans were taken to finance the acquisition of various licenses from Pakistan Telecommunication Authority (PTA) and the construction and installation of network assets.

The borrowings were given mostly by investment companies and commercial banks as mentioned above in sources of debts. In 2007, The Company has entered into finance lease agreements worth 72,825,000 with various leasing companies and commercial banks, in respect of payphones and ancillary equipment, wireless local loop equipment and vehicles, which decreased to 0 in 2011. Other dues include the due to PTA taken in 2005 in respect of license and related frequencies acquired by the company which were paid in 2009. Also in 2009, 2010 and 2011 bonuses were also given to employees. The long term loans show a decreasing trend as there were bullet repayments ( explain bullet!)in the last 3 years. The trend of short term loans also show that when long term loans were taken in 2008 there were less short term loans in 2008-09. In fact they were no short term loans taken on 2009. The current maturity of long term finances rises rapidly in 2009 as there were some loans with the maturity of 12 months taken in 2008. (where is the trend??? If you want her to see it frm balance sheet then state it!) The overall trend of liabilities has been decreasing because of bullet repayments of loans and less investment in the past 3 years as can be seen in the attached balance sheet of showing the trend of 5 years. The capital structure is kept consistent at 50% equity and 50% debt throughout the 5 years. Mr. Hashim told us that they will continue this policy because of 2 reasons: 1. Telecard Limited took a cellular license worth 291 mn dollars in early 2000 and took a loan of 2.4 billion in 2004. Therefore their priority is to repay those loans. 2. Due to increased competition from cellular services companies, Telecards growth was not in accordance to what was expected. The following factors were involved in following a consistent capital structure: Limited mobility Decline in call prices and reduction in demand for payphone services, the Company was not able to increase its revenues from the relevant markets Competition Revenues less then cost incurred. Repayment of loans. They shifted their focus from retailers to wholesale corporates.

Mr. Hashim Ali told us that telecard limited is growing in line with its competitors like Worldcall and there capital structure is better than its competitors in terms of the areas in which

they operate. Supernet and Arfeen, its subsidiaries are all making money and are listed in KSC index. Also they were the only one to give dividends in a year when none of the competitors gave.

Dividend Policy
The company has not been consistent in paying dividends to its stockholders from 2007 to 2011. It paid dividends in 2010 just to comply with the terms of a listed company. Therefore, Telecard does not have ha any particular dividend policy, they paid dividends just to be safe themselves from getting to default list. Although the company faced a loss in years 2008, 2007 and 2006, it still did not pay dividends in 2009 and 2011. Telecard limited had a net income of Rs. 44.068 million in 2009, 74.41 million in 2011 but due to the cumulative losses and in view of challenges ahead, the directors did not recommend dividends and decided to retain all its dividends. In 2010, it paid dividends of Rs. 0.10 to its shareholders which make the dividend total amount to Rs. 30,000 as there are 300,000 shares. The net loss/profit of the company from year 2007 to 2011 is shown in the table below:

2011 2010 2009 ------- (Rupees in 000) ------NET PROFIT / (LOSS) FOR THE YEAR

2008

2007

74,410

698,462 44,068

(542,536)

(444,962)

CONCLUSIONS AND RECOMMENDATIONS Telecard does not plan to have any kind of specific dividend policy for at least next five years. They are focusing on how to improve their financial conditions of the company at the moment. Telecards finance general manager authenticate that they are satisfied with current financing mix. Telecard and lenders have confidence in each others abilities therefore Telecard is not looking out for any other sources or options. Company is fighting several lawsuits currently. The major one is against PTA. If that case is decided in Telecards favor then according to finance manager, company would be able to cover all its cost. Telecard should invest in products which are in accordance with the market demand and not invest in products which have high costs than their competitors.