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Internship Report on PTCL (Pakistan Telecommunication Limited)

MISSION STATEMENT

To achieve our Vision by having

  • An organizational environment that fosters professionalism, motivation and quality.
  • An environment that is cost effective and quality conscious.
  • Services that are based on the most optimum technology.
  • 'Quality' and 'Time' conscious Customer Service.
  • Sustained growth in earnings and profitability.

 

INTRODUCTION

From the humble beginnings of Posts & Telegraph Department in 1947 and establishment of Pakistan Telecommunication Company Limited, to this very day, ours is a story of commitment and vision.

PAKISTAN POST & TELEGRAPH (P&T)

The postal and telecommunication services were performed by a single department known as Pakistan Post & Telegraph (P&T). This department started its telephone service with only 12346 telephone lines and seven telegraph offices all over Pakistan. This department continued its business up to 1962. The Government of Pakistan adopted the Government of India Telegraph act 1885 to control and direct the activities of telecommunication.

PAKISTAN TELEGRAPH AND TELEPHONE DEPARTMENT (T&T)

Pakistan Telegraph and Telephone Department inherited a small telecommunication network consisting of only 12,000 lines in 1947. It was the sole Department responsible for providing telecommunication facilities to whole country. In fact postal services were also included in its responsibilities. The Pakistan Postal Department was separated from Pakistan Telegraph and Telephone Department in the year 1962. Like all other field of newly born nation, there was no established system of telecommunication, available in the country. However the present system, as well as new installations was managed by the T&T quiet efficiently.

PAKISTAN TELECOMMUNICATION CORPORATION (PTC)

The erstwhile Telegraph and Telephone (T&T) Department was converted into a Statuary Corporation on 15-12-1990. It has its own legal identity totally separated from Government of Pakistan.

RE-STRUCTURING OF PTC

The P.T.C. was further segregated into four separate units in 1996.

1. P.T.C.L.

2. P.T.A.

3. N.T.C.

4. F.A.B.

PAKISTAN TELECOMMUNICATION COMPANY LIMITED (PTCL)

PTCL was incorporated on December 31st 1995 and commenced business on January 1st 1996. The idea behind this was to provide better services to its customers. This was established to undertake the telecommunication business formally carried out by Ex-PTC. It was responsible for carrying out all kinds of telecommunications activities in the country. It was required to look after the existing telecom installations and their automation and development. It was also to under take development program in telecom field. All properties, assets, obligations and liabilities of PTC were accordingly transferred to the PTCL on the 01-01-1996.

The P.T.C.L. is a prestigious organization and telecom services in the country are getting better and better, since its incorporation.

PAKISTAN TELECOM AUTHORITY (PTA)

Pakistan Telecom Authority (PTA) was established in 1996. It falls under the preview of Government of Pakistan. It issues licenses to various companies for carry out certain activities. This authority is responsible to monitor the establishment of telecom related firms, companies, the import of telecom equipments etc in the country. It is a regulatory body formed to accomplish rules and regulations relating to the telecommunication matters.

NATIONAL TELECOM CORPORATION (NTC)

It has been established for installation of telecommunication facilities to the Governmental organizations. A portion of working lines was initially transferred to N.T.C. from the P.T.C.L. but now they have established their network. They are totally independent in providing telephones connections, their look after and generation of revenue there from.

FREQUENCY ALLOCATION BOARD (FAB)

This organization has been established to allocate Radio and Wireless telecom frequencies to various organizations/companies within the country. The latest development in this regard is that F.A.B. is establishing Monitoring Stations in order to check the validity and legality of the utilization of circuits.

 

NATURE OF BUSINESS

Pakistan Telecommunication Company Limited (PTCL) was incorporated in Pakistan on December 31, 1995 and is listed onKarachi, Lahore and Islamabad stock exchanges. It was established to undertake the telecommunication business firmly carried on by Pakistan Telecommunication Corporation (PTC). The business was transferred to the company on January 1, 1996 under the Pakistan Telecommunication (Reorganization) Act, 1996 at which date PTCL took over all the properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication Corporation (NTC) , Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan Telecommunication Employees Trust (PTET). The company commenced business on January 1, 1996. The registered office of the company is situated at Block-E, PTCL Headquarter, G-8/4 Islamabad.

Pakistan Telecommunication Company Limited (PTCL) is the main provider of Telecommunication services in Pakistan. It owns and operates a substantial part of the telecommunication facilities and provides domestic and international telephone services and other communication facilities throughout Pakistan.

PTCL'S SUBSIDIARIES

Pak Telecom Mobile Limited (PTML)

PTML is a wholly owned subsidiary of PTCL established to operate cellular Telephony under the brand name of UFONE.

The company's performance during the current year has been very encouraging despite the stiff competition in Pakistan's cellular market especially after the emergence of two new international players in the last quarter of the year. Throughout the year, UFONE pursued a growth strategy and managed to almost double its revenue compared to last year. The company successfully increased UFONE's market share from 16% to 22%, a significant achievement. On June 30, 2005 the total number of subscribers of UFONE was 2.6 million versus 0.8 million at the same year.

During the year PTML successfully launched its Phase-IV network expansion project costing more than US$ 160 million. UFONE now covers more than 200 cities and towns, prominent highways and caters for international roaming with 135 operators worldwide.

UFONE recorded Revenue of Rs. 8,598 million for the year endedJune 30, 2006 as compared to Rs. 4,374 million for the previous year, an increase of 97%. Profit after tax increased from Rs.776 million for the current year. Based on these results a dividend of Rs. 700 million was declared by the Board of PTML.

Pak net Limited

The fully owned subsidiary of PTCL owns the largest ISP network spread over 2,900 cities/locations with 43 POPs. It has extensive data transmission capabilities but has been incurring losses due to poor business orientation and excessive overheads. During the year Paknet recorded sales revenue of Rs. 213.9 million, which is 19% loser than last year. The company posted a loss of Rs. 42.2 million vs a loss of Rs. 111.5 million last year. The quantum of loss is lower as compared to last year mainly due to reversal of provisions against doubtful debts of Rs.44.1 million made in prior years and reversal of deferred tax asset of Rs. 34.9 million in the last year.

PTCL as the sole shareholder of Paknet is highly concerned with the poor performance of this subsidiary and is currently undertaking a strategic review of this ISP subsidiary of determine the future course of action

In spite of these subsidiaries there are following product lines.

  • Fixed Telephone ( Analog & Digital)
  • DSL ( Digital Subscriber Line)
  • IN Products (Pre-Paid Cards, Calling Cards, Apna Das Calling Card, Phone Bill Card etc.)
  • PTCL Wireless.

MODERN SERVICES

REGION WISE SEGMENTATION OF PTCL

To provide efficient and smooth services to the subscribers, PTCL has been divided into almost thirty-two Regions (Nine Development and twenty-three Maintenance Region ).

The Development Regions are normally responsible to accomplish the development and expansion program of the company and after completing the lying of cable, installation, testing, commissioning of equipment, they are liable to hand over the exchange, building, or other installations to the concerned Maintenance Regions.

These maintenance regions are further responsible for the look after, up keep and maintenance of these assets. They are also required to initiate expansion proposals to meet the ever-increasing demand of telephone connections.

The overall operations department has been divided into four wings; North, South, International Communications and Information Technology Training & Research. Each of these wings is headed by EVP. As PTCL is providing its services to its customers all over the country, its entire network has been divided into fifteen regions.

Each region is further divided into zones and headed by director. Each director controls a number of divisional engineers.


 

BUSINESS VOLUME

Fixed line connections in the country are more than 5.4 million and the cellular connections are 12.7 millions

Currently there are 315 Payphone and over 51,000 Wireless Payphones

There are over 140 Data and Internet service providers (ISP's) to whom PTCL has provided network infrastructure.

PTCL generated annual Revenue of over Rs. 11 billion from its private sector operating partners.

The PTCL's performance against a key set of parameters is summarized as:

Parameters

Value

Revenue

Rs. Billion

75.97

Profit after tax

Rs. Billion

26061

Earning per share

In Rupees

05.22

Capital expenditure

Rs. Billion

12.95

Return on equity

%

24.43


 

NO OF EMPLOYEES

President & Company Secretary

02

Senior Executive Vice President

07

Executive Vice President

22

Chief Engineers

26

General Managers

94

AGM, DY. GM, Director, System Analysts, Dy. Managers, RTO, CS, SE, DE, SAO, DM, SRO etc

2500

ADE, AE, SDO, AO, SL, Lect etc

20,000

ES, Assistant. PA, Tech, LM. UDC, KPO,Khakroob, Mali, HC, etc

47,000 (almost)

Total Employees

Note: This figure includes all permanents, contract bases and also appointed under new terms and conditions during the year 2005.

70,000 (almost)


 

SERVICES

Corporate Services

Fixed Line Telephone

Wireless Local Loop (WLL)


 

Consumer Services

ORGANIZATIONAL STRUCTURE

Organizational Structure describes the organization's formal framework or system of communication and authority.

In other words, the organization structure sets forth each principal, management position and helps to define authority, responsibility and accountability.

An organization chart is essential to the development of a cost system and cost reports which indicates the responsibilities of individuals for implementing management plans.

In PTCL President / CEO is the head of major functional areas. i,e State management, Finance, Technical, Operations, HR & Admn and Corporate affairs. So Senior Executive Vice President who are the head of these units generally reports directly to the President.

The main purpose of PTCL is allowing them to effectively and efficiently accomplish organizational goals and objectives. Designing an appropriate structure means that managers must decide how to coordinate work activities and efforts both vertically and horizontally.

Organization structure of PTCL can be described as having three components like any other organizations:

COMPLEXITY

The term complexity refers to the amount of differentiation in an organization. The more division of labor there is in an organization, the more vertical levels in the hierarchy and more geographically dispersed the organization's units, the more difficult (or complex) it is to coordinate people and their activities.

When we analysis the complexity of PTCL, there is big amount about 70,000 employees and hierarchy is as under:

PRESIDENT  SEVP  EVP  GM/CE  DIRECTOR SE/MANAGER etc  ENGINEER/AE/SDO/AO ES/ASSISTANT  T.TECH/CABLE JOINTER  LM/UDC NAIBQASID/FRASH etc.

This is a very large hierarchy, which creates problems for the organizational activities and coordination's. The result is a slow correspondence between management and officials at lower levels.The Etisalat (who control the charge of PTCL) is restructuring the organization and the work is under process.

FORMALIZATIONS

The degree to which an organization relies as rules and procedures to direct the behavior of employees is formalization. The PTCL organization structure operates with standardized guidelines, rules and regulations. Each officer/official knows his/her responsibilities of what he has to do. Due to these strict rules and regulations the PTCL organization's structure is more formalized.

CENTRALIZATION

The term centralization describes where the decision making authority is.

In PTCL, organization decision making is highly centralized at upper levels of management. Problems flow up to senior executives, who decides what, should be done.

In some cases, decentralized policy is used and decision making is delegated to lower levels of management. Which is not correct and creates problems in the creation of long term value aided strategies.

MAIN OFFICES


 

ACCOUNTING SYSTEM OF THE ORGANIZATION

The accounting system of PTCL is to comply with requirements of companies' ordianance, 1984 and approved Accounting standards comprise of such IASs as notified under the provision of the companies ordinance 1984. International Accounting Standards (IAS), as applicable in Pakistan in all respects. Wherever the requirements of the company's ordinance 1984 of directives issued by the securities and exchange commission of Pakistan differ with the requirements of these standards. Generally accounts are prepared and maintained on government pattern as well as commercial pattern on accrual basis of bills receivable and bills payable and also are exhibited the profit and loss account and balance sheet showing the assets and liabilities.

The revised cash account current (ACE-40) Performa is based on double entry system which indicates the debit and credit under each head of account viz cash/bank shows the balance in hand ceiling cash and direct payment and the closing balance. All Drawing and Disbursing Officers furnish commercial accounts at Lahore, where all items are separated analyzed and noted in necessary books for preparation of financial statements.

In the Accounting system of organization, proper books of Accounts have been kept by the company as required by the companies' ordinance, 1984.

The balance sheet and the profit and loss account together with the notes thereon have been drawn up in conformity with the companies' ordinance, 1984.

The balance sheet, profit and loss account, cash flow statement and statement of changes in equity together matches with approved accounting standards as applicable in Pakistan, and give the information required by the companies ordinance 1984 in the manner so required and respectively give a true and fair view of the state of the company's affairs as at June 30 of every year and of the profit, its cash flows and changes in equity for the year then ended.

FINANCE SYSTEM OF THE ORGANIZATION

The office of the Director General (Finance) controls all financial activities and system of PTCL. All financing decisions, capital budgeting decisions and processing on real and financial assets are major responsibilities of finance department of PTCL. Necessary future plans and projects are analyzed and selected as per their positive results i.e; (Investment decision) installation of new telephone exchanges and lines.

Lending and borrowing decisions are also made as per loans, interest rates, time period and lending agencies and banks etc.

Necessary sanctions of writeoff and depreciation rate are also issued by the finance department.

Finance department also plays a vital role in coordination, with dividend policy matters, internal and external auditors and share registrars. Pensions, insurance, preparation of budget and taxation dealings are also important factors of PTCL finance department.

USE OF ELECTRONIC DATA IN DECISION MAKING

Mostly offices of PTCL are well equipped with computers and EDPfacilities.

Data is recorded on CDs and these CDs are sent to Finance department and Director Commercial Accounts Lahore as cash accounts by regional heads. This data is fed in a main "SERVER" for use of different sections in decision making. For example balances of General Provident Fund, House Building Advance and Motor Cycle/Car Advances, Pay roll, etc are needed in pension section to prepare final emoluments of a retiring employee. This requisite information's are taken from this "SERVER" (Book & Budget Record Section) for necessary decision.

PTCL has a sound MIS System which helps all other departments in decision making and also to preserve it for future needs.Recently, the organization provides a separate internet connection to all its officers, so that they may connect to higher management regularly, keep their knowledge fresh about organization strategies/affairs and also for correspondence to other officers and higher management.

MOBILIZATION OF FUNDS

PTCL purchases raw material from Erricson, Alcatel and AT&T, Italian, Sweden and American's firms. It also borrows finance from internal and external sources. These raw material, finance and human resources are put in together in different operational activities and revenue is earned. After excluding the costs of different expenses from total revenue, profit or loss is framed for one year. Then net profits are added in company's reserves. As this phenomenon mobilizes of funds is a continuous process.

Cash  Raw material

Revenue  Operations

GENERATION OF FUNDS

Funds are mainly generated through

As per cash flow from operating activities, different expenses like taxation, depreciation amortization, pension contribution funds, employees retirement benefits, writeoffs and other provisions are excluded to know the profit or loss of the company in a particular year.

SOURCES OF FUNDS

Following are the major sources of funds of PTCL.

1. Issued, subscribed and paid up capital.

2. Long term and short term loans from different syndicate's i.e; Citi Bank, ANZ Bank, Bankers Equity Ltd etc

3. Income from operations

4. Funds from securities

5. Funds from Gross provident Funds

6. Income from its subsidiaries like CTI & PakNet etc.

7. International telephone represents revenue from foreign networks.

ALLOCATION OF FUNDS

In PTCL funds are allocated by a sound system of charts of accounts. All the Drawing and Disbursing Officers are assigned their specific coderange through which necessary budgets and grants are allocated. All the heads have also their code numbers which is easy to computerize.

NO OF EMPLOYEES IN FINANCE DEPARTMENT

There are about 3600 employees working under the department of Finance. Which include Senior Executive Vice President Finance, Executive Vice President Finance, General Manager Finance, Senior Finance Officers, Director Finance and Account Officers, etc.

Senior Executive Vice President Finance

01

Executive Vice President Finance.

  • Accounts
  • Finance
  • Revenue

03

General Manager Finance /DirectorFinance/Chief Engineers

20

Senior Account Officers

75

Account Officers etc.

175

Assistant Director, Assistant, Clerks, etc

3600


 

CRITICAL ANALYSIS OF THEORETICAL CONCEPTS RELATING TO PRACTICAL EXPERIENCES (FINANCE DEPARTMENT)

In my opinion, The Finance Department of the Company has complied with all the material requirements of the Code of Corporate Governance. Proper accounting system is followed to record, classify, and summarize accounting data and information in conformity to Companies Ordinance 1984 and International Accounting Standards as applicable in Pakistan. My findings are as follow:

The company is not fully computerized yet and for this reason there are few problems like slow reporting, less efficiency, etc. further more all employees of finance department do not have sufficient computer skills to carry out the routing work of the finance department on computer based system which in turn reduces the overall efficiency of the finance department of the company. The company is not providing any proper training to the staff of finance department on new technologies to update their knowledge which also affects the performance of the finance department. All accounts and finance offices are not interconnected due to this reason communication between these departments gets slow that affects performance of the department. Receivable management of the company is not very good as there are huge amounts of outstanding bills are over due and yet to be collected. 

RATIO ANALYSIS

Horizontal and vertical analyses compare one figure to another within the same category. It is also essential to compare figures from different categories. This is accomplished through Ratio Analysis.

Ratios may be classified in number of ways. Different kinds of ratios are selected for different type of situations.

BALANCE SHEET RATIOS

These ratios are also called financial ratios. The components of these ratios are drawn from the balance sheet.

PROFIT & LOSS ACCOUNT RATIOS

These ratios are also called operating ratios. The items used for the calculation are taken from profit & loss account statement i.e. Gross Profit Ratio, Stock Turnover Ratio etc.

INTER-STATEMENT OR COMBINED RATIOS

The information required for the computation of these ratios is normally drawn from both Balance Sheet and Profit & Loss Account. For Example: Net profit to fixed assets, Debtors turnover ratios etc.

The company uses the following ratios in order to arrive at definite conclusion concerning liquidity and solvency.

GROSS PROFIT MARGIN

The gross profit margin reveals the percentage of each rupee left over after the business has paid for its goods. The highest the gross profit earned the better. Gross profit equals net sales less cost of goods sold.

2006

2005

2004

2003

2002

47.86

56.58

52.24

48.07

49.29

COMMENTS

The PTCL is constantly showing a good gross profit margin ratio. During the year 2004 its gross profit margin has maximum value.

NET MARGIN

The ratio of net Profit after tax to net sales is called the Net profit margin. It indicates the profitability generated from revenue and hence is an important measure of operating performance.

2006

2005

2004

2003

2002

35.02

39.35

34.35

29.83

29.26

COMMENTS

PTCL has shown a good improvement in its Net profit margin ratio. During the year 2005 company has shown a phenomenal growth of 39.35%.

RETURN ON INVESTMENT

Return on investment (ROI) is a key, but rough, measure of percentage. ROI shows the extent through which earnings are achieved on the investment made in the business.

There are basically three ratios that evaluate the return on investment. These are:

 Return on total operating assets

 Return on equity

 Return on capital employed

RETURN ON OPERATING ASSETS

2006

2005

2004

2003

2002

36.47

38.51

28.69

24.04

23.22

The return on total assets (ROA) indicates the efficiency with which management has used its available resources to generate income.

COMMENTS

PTCL has shown a remarkable improvement in its Return on total assets ratio. This means that PTCL is effectively using its all available assets to generate revenue. During the year 2005, this ratio is 38.51% which is maximum among the analysis years.

RETURN ON EQUITY

ROE measures the overall firm performance. ROE compares net profit after taxes (minus preferred stock dividends, if any) to the equity that shareholders have invested in the firm:

2006

2005

2004

2003

2002

25.43

28.20

24.75

23.33

23.51

COMMENTS

This ratio tells us the earning power on shareholders book value investment and is frequently used in comparing two or more firms in an industry. A high return on equity often reflects the firm's acceptance of strong investment opportunities and effective expense management.

RETURN ON Capital

The relationship of net profit after taxes to total capital is known as the Return on Capital.

2006

2005

2004

2003

2002

22.79

25.03

20.31

16.51

15.23

The value of this ratio is increasing every year from 2001 to 2004. But in 2005 value of this ratio decreases with respect to previous year.

LIQUIDITY RATIOS

Liquidity is a company's ability to meet its maturing short – term obligations. Liquidity is essential to conducting business activity, particularly in times of adversity, such as when business is shut down by strike or when operating losses ensue due to an economic recession etc. Liquidity ratios are static in nature as of year-end. Therefore, it is important for management to look at expected future cash flows. If future cash outflows are expected to be high relative to inflows, the liquidity position of the company is deteriorate.

CURRENT RATIO

Current ratio is equal to current assets divided by current liabilities. This ratio is used to measure the ability of an enterprise to meet its current liabilities out of current assets. The formula can be written as:

2006

2005

2004

2003

2002

1.91

2.78

2.02

1.72

1.21

COMMENTS

By comparing the results of analysis years it is known that for Each 1 rupee in liability the company have 1.21 up to 2.78 times in current assets.

QUICK RATIO

The quick ratio, also known as the acid-test ratio is strongest test of liquidity. In it more liquid current assets are divided by current liabilities. It can be written as:

2005

2004

2003

2002

2001

1.74

2.67

1.91

1.61

1.15

COMMENTS

By comparing the figures of analysis years, the ratio is declining in 2005 as compared to 2004.

PRICE EARNING RATIO

The market price per share of a firm's common stock divided by the most recent 12 months of earning per share.

2006

2005

2004

2003

2002

9.01

4.88

3.86

2.82

2.85

COMMENTS

Table shows the P/E ratio of years from 2002 up to 2006. This ratio is maximum during the year 2006 and minimum during the year 2003.

DEBTORS TURNOVER RATIO

The relationship of net sales to total debt is known as the Debtors Turnover Ratio.

2005

2004

2003

2002

2001

4.9

4.32

4.60

3.73

3.34

COMMENTS

Table shows the values of debtor's turnover ratios of the organization. The value of this ratio is gradually increasing from 2001 up to 2003 and then in 2005 but in 2004 the value of this ratio decrease with respect to the previous year.

FIXED ASSETS TURNOVER

The relationship of net sales to total assets is known as the Fixed Asset Turnover.

2006

2005

2004

2003

2002

1.04

0.98

0.84

0.81

0.79

COMMENTS

Table shows the values of fixed asset turnover ratios of the organization. The value of this ratio is gradually increasing every year from 2002 up to 2006.

DIVIDEND YIELD

Labeled "YLD %" is the dividend yield. This is found by dividing the stated dividend by the closing share price.

2006

2005

2004

2003

2002

2.85

11.86

12.3

16.03

13.37

COMMENTS

Dividend Yield has a large value through 2002 up to 2005 but in 2006 its value decreases with a big change.

BREAKUP VALUE

The value of a firm measured as the sum of the values of its operating units if each is sold separately.

2006

2005

2004

2003

2002

19.63

21.39

19.17

17.39

15.91

COMMENTS

Breakup value is maximum in 2005 and least value of Rs. 15.91 in 2002.

LEVERAGE RATIO

Leverage equivalent to solvency or long-term debt. Solvency is a company's ability to meet its long-term obligations as they become due. An analysis of solvency concentrates on the long-term financial and operating structure of the business. The degree of long-term debt in the capital structure is also considered. Further, solvency is dependent upon profitability since in the long run firm will not be able to meet its debts unless it is profitable.

These ratios help in measuring the financial contribution of the owners compared with that of the creditors, also the risk of debt financing.

DEBT / EQUITY RATIO

The debt/equity ratio is a significant measure of solvency since the high degree of debt in capital structure makes difficult for organizations. Excessive debt will result in less financial flexibility .Debt/equity ratio equals to total liabilities divided by equity.

2006

2005

2004

2003

2002

13.06

13.33

16.39

24.60

28.22

TOTAL ASSET TURNOVER

The total asset turnover ratio is useful in evaluating a company's ability to use its asset base efficiently to generate revenue. A low ratio may be due to many factors, and it is important to identify the underlying reasons.

2006

2005

2004

2003

2002

0.55

0.54

0.52

0.49

0.44

EARNINGS PER SHARE (PRE TAX)

Earnings per share indicate the amount of earnings for each common share held. Earnings per share are useful indicator of the operating performance of the bank.

2006

2005

2004

2003

2002

7.79

8.63

7.37

6.54

6.30

EARNINGS PER SHARE (AFTER TAX)

Earnings per share indicate the amount of earnings for each common share held. Earnings per share are useful indicator of the operating performance of the bank.

2006

2005

2004

2003

2002

5.22

5.72

4.53

3.88

3.56

COMMENTS

The firms earning per share are generally of interest to present or prospective stockholders and management. The Earning per Share (EPS) represent the number of rupees earned on behalf of each outstanding share of common stock. They are closely watched by the investing public are considered an important indicator of corporate success. The value of EPS is maximum in 2005 and minimum in 2002 in pre tax and after tax cases. And this value decrease in 2006.

DIVIDEND PAYOUT RATIO (BEFORE TAX)

Indicates the percentage of each Rupee earned that is distributed to owners in the form of cash, calculated by dividing the firm cash dividend per share by its earning per share

2006

2005

2004

2003

2002

25.66

57.91

47.49

42.08

38.09

DIVIDEND PAYOUT RATIO (AFTER TAX)

Indicates the percentage of each Rupee earned that is distributed to owners in the form of cash, calculated by dividing the firm cash dividend per share by its earning per share

2006

2005

2004

2003

2002

38.34

87.42

77.34

70.79

67.42

COMMENTS

Creditors and investors use the following ratios to see if the company has adequate cash flow for invest or dividend. There exists a rise in percentage in every year from 2002 to 2005. Dividend payout ratio is maximum in 2005. But in 2006 sudden decreases of value exist. This decrease of percentage is very low as compared to previous years from 2002 to 2005.

NET WORKING CAPITAL

Net working capital is equal to current assets less current liabilities. Current assets are those assets that are expected to convert into cash or used up within 1 year. Current liabilities are those liabilities that must be paid within 1 year; they are paid out of current assets. Net working capital is a safety cushion to creditors.

2006

2005

2004

2003

2002

18657

30925

16816

13891

7192

COMMENTS

PTCL is expanding its operations throughout the Pakistan, quite rapidly; one of the key indicators of growing business is the Working Capital of PTCL. From the above analysis, we can depict that PTCL is progressing.

TIME INTEREST EARNED RATIO

The times interest earned ratio measures the firm's ability to make contractual interest payments. The higher the value of this ratio, the better able the firm is to fulfill its interest obligations.

2006

2005

2004

2003

2002

87.35

65.33

36.67

13.69

10.16

COMMENTS

The values show that the company is in good condition to fulfill its interest obligations. The value of Time interest earned is in increasing mod in every next coming year from 2002 to onward.

PRE TAX MARGIN / OPERATING PROFIT MARGIN

The operating profit margin / Pre tax margin measures the percentage of each sales remained after all cost and expenses other than interest and taxes are deducted.

It represents the pure profits. Operating profit is pure because they ignore any financial and governments charges (Interest & Taxes) and measure only the profit earned on operations. A high operating profit margin is preferred.

2006

2005

2004

2003

2002

52.32

59.41

55.93

50.17

51.79

COMMENTS

Table shows the pure profits of company, which shows a good percentage in every next coming year. Operating profit is pure because they ignore any financial and governments charges (Interest & Taxes) and measure only the profit earned on operations. A high operating profit margin is preferred. Pre tax margin is maximum in 2005 and its value is minimum in 2003.

EARNIGN POWER (GROWTH)

Neither the net profit margin nor the total asset turnover ratio by itself provides an adequate measure of overall effectiveness. The earning power of investment capital or return of investment (ROI) provides the answer.

2006

2005

2004

2003

2002

-8.79

26.38

16.50

9.13

36.18

COMMENTS

The net profit margin ignores the utilization of assets, while the total asset turnover ratio ignores profitability on sales. The return on investment ratio or earning power resolves these shortcomings.

The value of Earning Growth is maximum %age values during the years 2002 and 2004 which are respectively 36.18 and 26.38.

During the years 2003 & 2004 company has %age values 9.13& 16.5. In year 2005 this %age value is least one and has negative %age value of 8.79.

An improvement in the earning power of the firm will result if there is an increase in turnover on assets, an increase in net profit margin or both.

DIVIDEND PER SHARE

Cash payments declared and paid by the corporation to stockholders.

Dividends are the only cash payments regularly made by corporations to their stockholders. They are decided upon and declared by the board of directors and can be range from zero to virtually any amount the corporation can afford to pay.

2006

2005

2004

2003

2002

2.00

5.00

3.5

2.75

2.4

COMMENTS

Table shows the Dividend per share paid by the corporation during the years 2002 up to 2006. This value is maximum Rupees 5.00 in 2005 and minimum in 2006.

HORIZONTAL ANALYSIS / COMMENTS

Horizontal analysis is used to evaluate the trend in accounts over the years. This helps in disclosing changes on the items in financial statements over the years. In horizontal analysis, any one year is taken as base year and all items are compared with corresponds items in base year.

Horizontal analysis of PTCL under my discussion provides the information about the organization where it stands in its financial status from 2002 to 2006. Whether it improving it position or not, all this is know through this analysis.

During my analysis 2002 is taken as base year and all other year figures are compared with this base year.

ANALYSIS

S H A R E H O L D E R S E Q U I T Y & L I A B I L I T I E S

By comparing the data from 2002 to 2006, it is clear that reserves are increasing with respect to base year 2002, but in 2006 the value is reduced as compared to 2005. The reason is that during this year, the capital of the company remains same, reserves increase but the value of profit decrease during this year, which affects the overall value of 2006.

Non current liabilities are reducing during the analysis years with respect to base year. During the years, Suppliers credit, deferred taxation and long term security deposits are reduced but the retirement benefits increased in 2006, which affects the over all value of this year.

By comparing the figures of Current Liabilities of these years w.r.t base year, it is clear that during the years 2003-2006 Payables / Borrowing increase gradually with respect to 2002 but the Interest and Markup accrued, Taxation decreased with respect to base year. The over all value of Current liabilities decrease w.r.t base year.

The overall value of Equity and Liabilities remains less during the years 2003, 2004 and 2006 but in 2005 increase to some extent. This shows the stability in Equity and Liabilities during these years.

T O T A L A S S E T S

The overall value of Fixed Capital decreases with respect to base year. The value of Property, Plant, and Equipment during these years' decreases but the value of Capital work in progress increased during 2005-06. On the other hand the value of Intangible assets increases much more during 2006.

The overall value of the long term investment and loans increased with respect to base year 2002. During the year 2006 this value reduces 127.97 from 147.19 in 2005. The reason behind this that during 2006, there was not as such investment occurred and value of loans also reduced as compared to previous years.

The overall Current Assets decrease during the year 2003, 2004 & 2006. but increase during the year 2005. This shows that in 2007 the Receivables are almost double but Cash is much less as compared to 2006.

Hence overall situation is not as good as compared to base year.

P R O F I T & L O S S A C C O U N T

From horizontal balance sheet, it is clear that Revenue of the company is increasing in the coming years with respect to base year 2002. This increase in value of Revenue shows that company is moving in the right direction and showing best results for investors and stockholders. Operating cost is increasing with respect to base year with the passage of time.

Comparison shows that operating profit is increased every year with respect to base year. In 2005 Operating Profit was maximum but in 2006 this decrease from Rs. 137.11 million to Rs. 118.88 million. The overall value of Profit is increasing during the analysis years. Maximum profit occurs during 2005 but it reduces its value in 2006 as compared to 2005.

RESULT

The overall Horizontal analysis shows that the company is in good condition for its stock holders and the persons interested in this organization. The company is in running in profit situation. There is increase in profit in the next coming years. In 2005, the company gets maximum profit while in 2006; there is decrease in the value of profit as compared to 2005. The reason behind this is the uncertainty in the process of privatization scenario, increase in the operating cost, decrease in inappropriate profit, increase in payables, increase in capital work in progress, less new investment and loans etc.

VERTICAL ANALYSIS / COMMENTS

In vertical analysis, a significant item on a financial statement is used as a base value, and all other items on the financial statement are compared to it. Vertical analysis is used to disclose the internal structure of an enterprise.

In performing vertical analysis for the balance sheet, total assets and Total Equity & Liabilities are assigned 100 percent. Each account is then expressed as a percentage of these values. In profit and loss account, Revenue is given the value of 100 percent and all other items are evaluated in comparison to this Revenue. All this is done for the purpose of evaluating financial position of PTCL.

ANALYSIS

S H A R E H O L D E R S E Q U I T Y & L I A B I L I T I E S

By comparison it is clear that Share capital & Reserves are increasing from 49.14 to 77.05 during the year 2002 to 2005 and then decrease its %age value in 2006 as compare to 2005. During the period Reserves are increasing every year, Capital %age almost remain its value constant i.e. no significant difference. The alarming condition is about Un-appropriated profit. The profit is maximum in 2005 that is 18.43 as compared to total Equity & Liability and this value decrease in 2006.

Non current liabilities are also decreasing every year but 2005, a slight rise in value exist. When we analysis its individual values, it is clear that Suppliers credit is decreasing significantly but the other values like Deferred taxation , Retirement benefits, Security deposits have mixed affect. In different years its %age values are different. But overall liabilities are decreasing.

Current liabilities in base year 2002 are 33.39, its value decrease in 2003, then increase in 2004 and again decrease and then rise. So have a mixed affect. When we study individual item in Current liabilities, it shows that Interest & Markup accrued decreases. Trade & Payables are increasing from 5.36 to 10.89. And other items have mixed affect.

T O T A L A S S E T S

Vertical Balance Sheet shows the %age of Fixed Capital w.r. to total Assets. This value is 64.91 % in 2002; its value increase to 67.77% in 2003 then decrease to 64.37% in 2004 then reduce to 58.46% in 2005 and again rise in 2006. All other items have a mixed affect.

Vertical Balance Sheet shows the %age values of Long term assets during the year 2002-2006 with respect to total assets. This value is 5.10% in 2002, 6.78%in 2003 (a rise of 1.68%), 6.73 in 2004 (a decrease of .05% as compared to 2003) 7.43 in 2005 (a rise of .70% as compared to 2004) and again decrease .70% in 2006. In 2004 and 2006, these values have same values.

By comparing it shows that maximum current assets are 34.11 % in 2005 and minimum current assets are25.44 in 2003. In 2004 & 2006 its value is 28.90 % which is same in both years. When we study the items involved in current assets, it is clear that items have almost same %age of values in 2004 and 2006. Company bank balances are maximum 16.97% in 2004 and minimum bank balance was in 2003.

P R O F I T & L O S S A C C O U N T

During the vertical analysis of Profit and Loss Account Revenue is taken as 100% and all other items are compared with respect to this Revenue

Operating profit is maximum 52.14% in 2006 and minimum in 2005 with respect to base value of Revenue. Company earns maximum Operating profit of 56.58% in 2005. During this year the Operating cost was minimum. Company earns minimum Operating profit of 47.86% in 2006. During this year the Operating cost was maximum. This shows that Operating cost & Operating profit are inversely to each other.

Company earns maximum profit in 2005 which is 39.36% of the total revenue. A decline in profit up to 9.34% exists during the year 2006. This shows the poor condition of the company during this year. During this decline the Earning per share during this year also decrease from 5.72 to 5.22.

RESULT

The overall vertical analysis shows that during the year 2005 the company earns maximum profit during this year the E.P.S was also maximum.

In this year the Operating cost was minimum and its Operating profit was maximum as compared to other years.

PTCL & STOCK MARKET

PTCL is the largest listed stock in Pakistan in terms of market capitalization & represents more than 30% of the total capitalization of the Karachi Stock Exchange (KSE). PTCL's free float is around 11.76% or 600m shares, 83% of which were initially issued in the form of GDRs. Initially, only one-way convertibility was possible in PTCL's GDRs (i.e., from GDRs to locally listed shares), but now government and the central bank have allowed two-way conversion.

SHAREHOLDING STRUCTURE OF PTCL

PTCL's paid-up capital is 51 billion rupees; divided into 3.774 billion classes "A" ordinary shares (74%) and 1.326 billion class "B" ordinary shares (26%). The class "A" share is listed on the all three stock exchanges of Pakistan, while class "B" share are not listed and have been earmarked for future sale to a strategic investor. Class "B" share are currently sold to UAE company Etisalatt, which take over the charge in March, 2006 and these "B" shares have four voting rights against one voting right per class "A" share. The government has sold 11.76% equity of PTCL in two trenches. One million vouchers (equivalent to 100mn shares) were sold via a local IPO at Rs.30 per share. Subsequently, another 500mn shares were sold in the form of GDR's to international investors at Rs.55 per share.

LEADERSHIP OF PTCL IN THE MARKET

PTCL is leading company in the market, Till December 2002 due to its monopoly status in the country and was the sole and largest Telecommunication services provider in Pakistan. Now there are five other companies in the market. PTCL aims at using the latest technology for its services. PTCL is also inducting professionals in the field of engineering and information technology. It is also getting consultancy from international companies in order to remain leader in telecommunication sector.

THE BIGGEST FOREIGN EXCHANGE EARNER

PTCL is the biggest source of foreign exchange for Pakistan. Currently, it earns million rupees from its international traffic.

COMPETITIVE PRESSURE

Before 2002 PTCL had no competitor in the market and other companies are legally not allowed to enter into competition with PTCL. So PTCL was performing its activities freely without any pressure. But now PTCL has to change its strategies to face the competitors because there are competitors such like Mobilink, Telenor, Warid, Word Call, Insta-One etc in the market to compete the PTCL.

In such scenario the PTCL has to face many problems in the early but no doubt the PTCL has a strong powerful motivate team members to face this challenges/atmosphere and again approves a Market Leader of communication in the country.

ADEQUATE FINANCIAL RESOURCES

PTCL earns billions of rupees as profit each year and has enough money in its general reserve. PTCL also has debt as a major source of Capital. These adequate financial resources not only enable the company to cope with any unexpected event but to deploy its resources to increase product line and services without feeling any financial difficulty.

FLEXIBILITY IN OPERATIONS

Because of its adequate financial resources and leadership in the market, PTCL has flexibility in changing its operations. Marketing department responds to the customers whenever they contact and ask problems. So, marketing department acts freely and independently. But for coming days PTA has issued licenses to many companies for installation of WLL (Recently World Call is in the market) technology switches, surely PTCL has to face these competitors.


 

FUTURE PROSPECTS OF THE ORGANIZATION

The overall analysis shows that company is in good condition throughout the analysis years 2002- 2006. The 2005 is the golden year for the company because in this year the company earns maximum profit. During this year the Operating Cost was minimum and its Operating Profit was maximum.

In the next year 2006, there is decrease in the value of profit as compared to previous year. During this year the Operating Cost was maximum and its Operating Profit was minimum as compared to previous year. The reason behind this due to uncertainty in the process of Privatization scenario, increase in Payables, increase in Capital Work in Progress and less investment during this year.

Earning per share is also increasing during these years for the stock holders and the persons interested in PTCL investment. Future Prospects of the Organization is to get more and more profit for its share holder by increasing revenue and operating profit by reducing its operating costs.

PTCL is a leading Telecomm service provider in Pakistan with its extensive networks all out the country. There are now five other companies in competition with PTCL. No doubt the situation is some one critical but either of the companies have not their own infrastructure by now. It will take long span of time in this sector to come in competition with PTCL.

It is more over worth-mentioning that PTCL is under going the strategic structural changing in the sector of Engineering, IT, Marketing and updating the R & D section which plays a key role for taking long term value projects that are 5 to 10 years. This is the sole objective of PTCL.

New management namely Etisalat is in collaboration with PTCL with its 5 members in the Board of Directors and 4 from Govt. of Pakistan. The total restructuring of PTCL is in full swing & Insha-Allah it will be completed within a fortnight period. It also includes the Rightsizing of employees. This will no doubt boost up the services as well as revenue.

PTCL has launched U-FONE (Mobile services), V-WIRELESS, andINTERNET (Paknet) services with old FIXED LINE phones. The other competitors are no doubt in the market but they are just having one or two services as compared to PTCL. The World Call is the only competitor with V-Wireless facility. Above all other considerations, the PTCL is leading and likely to introduce more services like DSL, Cross Connect shortly to facilitate its valued customers.

As for as Revenue is concerned, PTCL still stands exclusively in the best position among all other companies. Since its networks are not only in the big cities like other companies but also in the remote areas of the country. If the situation remains productive, I can safely foresee that within a decade it will not only maintain persistency but also grow more in every dimension.

I therefore come to the conclusion that PTCL will only be the company in Pakistan who is leading one because the facts stated above and with the missionary zeal of its employees.


 

SHORT FALLS / WEAKNESS OF FINANCE DEPARTMENT

  1. SUGGESTIONS

  2. Whole finance related offices should be interconnected.
  3. Latest technology tools and modules should be used in all offices.
  4. Employee should be updated with latest techniques related to finance.
  5. Unique loaning policies should be implemented for all employees.
  6. People working in Finance Department should be trained enough that they have computer knowledge. here should be proper training regarding computer skill so that they can update themselves according to the updates
  7. Finance Department should be fully computerized.
  8. There should be planned program for the training of the employees
  9. All the finance offices should use the same format of transaction
  10. Latest financial techniques and modules should use in these departments.
  11. Trained staff should work in the finance department.
  12. All Finance office should co-ordinate with other departments.
  13. There should be proper Database management in finance department.
  14. There should be planned program for the loaning policies of employees.


 

C O N C L U S I O N S

To fulfill the requirement of the MBA degree program, I have completed my internship with PTCL for about two months. During this period I have gained a lot of knowledge and practical experience. I have practically realized the importance of individual/practical work.

The very important things which I learnt are, like any other basic sphere of modern socio-industrial activities, Telecommunication is a main and important field for the development of any country. The staff of organization is highly qualified and their behavior is friendly. Also the working environment of organization is very good. So I recommend all students who do their internship in future, should do the training program with PTCL because this is very good institution of learning.


 

RECOMMENDATIONS

 In every year PTCL starts new ventures and services in the country but on the other hand, the people of Azad Kashmir, and many other Rural Areas are still being neglected. There is a high potential market for value added services of PTCL in Azad Kashmir and Rural Areas. The company should start the internet, Pay-card Phone, and Mobile phone services in these areas in collaboration with private investors.

 There exist a huge amount of outstanding bills to be collected by the defaulters. The company should frame tight and effective policies to ensure the collection of its outstanding bills. The revenue officers should be provided incentives and bonuses on achieving the determined targets of revenue collection.

 Hundred percent computerization in PTCL would be helpful to save the time and money and provision of quick services to its valued customers.

 Human resource development is a key component in every organization; In PTCL this is not going well. So there is an immense need to improve this department.

 Over employment is main and major problem in PTCL. Reduction / Right Sizing in over employment can give better results.

 PTCL management should give more emphasis towards customer satisfaction, delight and retention.

 PTCL higher management should adopt a uniform policy for every region.

 Finally, PTCL revenue is decreasing due to arrival of market competitors in the country, so the management should adopt special careful steps to face this competition environment.

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