Financial

Analysis of
PTCL
PRESENTED BY:
MEHER BANO (SP13-BBA-009)
IRUM MUMTAZ (SP13-BBA-015)

INTRODUCTION
The

project has been assigned to us by our course

coordinator of financial management, to develop a
project on the financial analysis of PTCL (PAKISTAN
TELECOMMUNICATION COMPANY LIMITED) which
will help us to develop a better understanding of
the concepts of financial management and how
these concepts are practically being implemented
in the organizations.

PURPOSE OF THE REPORT

The

purpose of this report was to gather entire

information regarding the financial processes
and the financial management of PTCL firm,
their financial processes, profitability position,
dividend policy and leverage position of the
firm.to get a detailed view that how these
concepts are being implemented effectively and
what is their importance for a financial manager.

BACKGROUNG OF THE FIRM

After

the partition of Indo-Pak subcontinent in1947, the

areas that became part of Pakistan were mostly neglected in
respect of telecommunication services.
In 1947, the Pakistan Posts and Telegraphs Department was
attached with the Ministry of Communication. During the
first fifteen years, a sound foundation was laid by creating
supporting organizations like telephone stores, workshops,
training centers, production and repair of equipments etc,
necessary for running of PT&T Department.

With

the expansion of the postal and telecommunication

services, government decided to split the PP&T Department
into two departments i.e. Pakistan Telegraph and Telephone
Department and Pakistan Post Office Department .
In 1990, PT & T department was transformed into a
corporation and titled as Pakistan Telecommunication
Corporation. The objective of this initiative was to provide
greater autonomy and flexibility to the organization in
achieving its long-term objectives.

In December 1995, PTC was converted into a joint

stock company under Pakistan Telecommunication
(Reorganization) Ordinance, leading to the
establishment of Ptcl having 94.8% of assets.
Strategic vision of Pakistan: Telecommunication
Company is to be the leading telecommunication
service provider in the region by achieving
customers satisfaction and maximizing
shareholders value.
Core values of Ptcl are professional integrity,
customer satisfaction, teamwork, company loyalty .

Products of PTCL
Prepaid

calling cards
Aasaan prepaid telephony
Toll free service 0800
Universal access number UAN
Universal internet number
Premium rate service (0900)
Virtual private number (VPN)

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 Financial

instruments
All financial assets
and liabilitiesare initially
recognized at fairvalue plus transaction costs other
than financial assets and liabilities carried at fair
value through profit or loss. Financial assets and
liabilitiescarried at fair value through profit or loss
are initially recognized at fair value, and
transaction costs are charged to income for the year /
period.

 These

are subsequently measured at fair value,

amortized cost or cost, as the case may be. Any gain
or loss on DE recognition of financial assets and
financial liabilitiesis included in income for the year
/ period.

Financial risk
factors
The Groups activities expose it to a variety of financial
risks:

Market risk (including currency risk, other price risk

and interest rate risk)

credit risk

liquidity risk.

Market risk
(i)

Currency risk
Currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. Currency
risk arises mainly from future commercial transactions,
or receivables and payables that exist due to
transactions in foreign currencies.

Market risk
The

Group is exposed to currency risk arising from

various currency exposures, primarily with respect to
the United States Dollar (USD), Arab Emirates Dirham
(AED) and EURO (EUR). Currently, the Groups foreign
exchange risk exposure is restricted to the amounts
receivable from / payable to foreign entities

Interest rate risk

Interest

rate risk represents the risk that the fair value or future

cash flows of a financial instrument will fluctuate because of

changes in market interest rates
If

interest rates on variable rate instruments of the Group, at the

year / period end date, fluctuate by 1% higher / lower with all

other variables held constant, profit after taxation for the year /
period would have been Rs 313,450 thousand (December 31,
2012: Rs 441,733 thousand) higher / lower, mainly as a result of
higher / lower mark-up income on floating rate loans / investments

Credit risk
represents

the risk that one party to a financial instrument will

cause a financial loss for the other party, by failing to discharge
an obligation.
The credit risk on liquid funds is limited, because the counter
parties are banks with reasonably high credit ratings. In case of
trade debts the Group believes that it is not exposed to a major
concentration of credit risk, as its exposure is spread over a
large number of counter parties and subscribers.

Liquidity risk
Liquidity

risk is the risk that an entity will encounter

difficulty in meeting obligations associated with its
financial liabilities.
The Group follows an effective cash management and
planning policy to ensure availability of funds, and to
take appropriate measures for new requirements

Capital risk management

The Groups objectives when managing capital are:
(i) to safeguard the Groups ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
(ii) to provide an adequate return to shareholders The Group
manages the capital structure in the context of economic
conditions and the risk characteristics of the underlying assets.
In order to maintain or adjust the capital structure, the Group
may, for example, adjust the amount of dividends paid to
shareholders, issue new shares, or sell assets to reduce the
debt. For working capital and capital expenditure
requirements, the Group relies on internal cash generation and
does not have any significant borrowings.

FUNCTIONS OF FINANCE DEPARTMENT

Finance

system of the organization

Accounting system of the organization
Mobilization of funds
Generation of funds
Allocation of funds
1)Collection of bills
2)External borrowing from commercial banks, referred as debt
financing.
TYPES OF FINANCING:

PROFITABILITY POSITION OF PTCL

PTCL posted a net profit of Rs 15.64 billion (EPS Rs 3.07) in FY12 against
last year's figure of Rs 20.78 billion. The declining trend in profitability
continued during the financial year ended June 30, 2012 due to structural
adjustments brought about in the telecom sector by competition.

decrease

in revenues by 5.5% mainly due to mobile expansion, an

increase in operating expenses by 11.7% mainly due to prudent
provisions for doubtful debts and long term systematic improvements in
operations and customer services. PTCL managed to increase its
operating cash flows to Rs 35.54 billion compared to Rs 35.19 billion last
year.

The total revenue for FY 2011-12 stood at

Rs 65.28 billion against Rs 69.09 billion of
FY 2011-12. The decrease in revenue was
mainly in the domestic segment due to
competition and reduction in tariffs.
However, PTCL is making all efforts to
boost revenue by improving customer
service and launching new services to turn
around the situation.

LIQUIDITY POSITION
The

liquidity position of the company suffered a setback

in FY12. This trend hasbeen witnessed despite increasing
current assets, as current liabilities grew more sharply.
liquidity stance of the company is fairly satisfactory at the
moment, but a continuation of the current negative trend
may spell trouble for the company.
company holds large amounts of cash and bank balances
compared to the other companies in the business. This
may provide an edge to the company

LEVERAGE POSITION
The

debt ratios showed a decreasing trend in

the FY11.
company maintains a largely unleveraged
capital structure, with the current trend in debt
ratios bought about largely by changes in
current liabilities of the company. This was
brought about mostly due to a decline in
current liabilities of the company in FY11 and
an increase in the same in FY12.

 FY12

also saw an increase in short term borrowings of

the company, complemented by increases in other
components of current liabilities

FINANCIAL HIGHLIGHTS

DIVIDENDS
PTCL

has had a history of paying out

significant portion of its earnings to its
shareholders.
However it was unable to maintain its
payout level in FY13, due to ongoing projects
which required a huge capital but it will soon
meet its level of paying out dividend in time.

CONCLUSION
PTCL

provides telecommunication services in

Pakistan. It owns and operates telecommunication
facilities and provides domestic and international
telephone services and other telecommunication
facilities through Pakistan.
Strategic vision of PTCL is to provide advanced
technology and create high customer satisfaction, the
PTCL is pursuing geographic and product markets.

developing

the capabilities to develop its plans

and making the kind of company that
management is trying to create Strategic vision
of Pakistan Telecommunication Company is to
be the leading telecommunication service
provider in the region by achieving customers
satisfaction and maximizing shareholders value.