Q 1: DESCRIBE THE FINANCIAL HEALTH OF PTCL.

INDUSTRY OUTLOOK:
Pakistan offers attractive investment opportunities because of its demographic and
geographic outlook. At the same time, political and economic environment present major
challenges for its business sector. Declining GDP growth rates, hyper inflationary trend,
unemployment and energy crisis are the factors hampering the business growth.

Telecom industry remains challenging and competitive while maintaining a healthy

growth trend in terms of revenue and subscribers. Price wars continue putting pressure on
average revenue per subscriber (ARPU) which is eventually impacting the bottom line.
On the other hand, stiff competition is making it difficult and expensive to acquire new
customers to maintain organic growth.

FINANCIAL PERFORMANCE:
1. PROFITABILITY:
During the financial year 2009-10, PTCL earned profit after tax of Rs. 9.294
billion which was 1.6% higher as compared with previous financial year. Earning
per share (EPS) have grown to Rs. 1.82 compared which is Rs. 1.79 in last year.

2. SALES TURNOVER:
PTCL’s revenue was Rs. 57 billion in FY-10 as compared to Rs. 59 billion in
preceding year. Reason for declining is due to fierce price competition and mobile
substitution resulting 5.6% reduction in domestic revenue. The enhanced
international traffic volumes on the other hand, increased the international
revenue by 14 % as compare to previous year.

3. COST MANAGEMENT:
Although the inflation during the year was high, the fuel and power prices
increased, Pakistan rupee continued to depreciate, the total operating expenses of
PTCL decrease by 1.8% as compared to last year. This was achieved due to
effective cost-control measure exercised by the management. Cost of services
increased by 1.4%. Admin & general expenses decreased by 19.2%. This was
achieved due to reduce level of doubtful debts as the company continued to
ensure timely collection of receivable. The trade debts reduce by 5.5%. The
selling and marketing expense increased by 18% mainly on account of
introduction to various new packages.

4. FUND MANAGEMENT:
Operating income increased by 20%. The main contributory factors were;
increase in available funds through recently introduce PTCL’s One Stop Shops
(OSS) providing easier venue for bill payment, efficient investment of surplus
funds and better working capital management. Financial risk management
strategies adopted by the company resulted in reduced foreign exchange loss
decrease in finance cost by 56% compare to last year.