INTRODUCTION TO BUSINESS FINANCE

COMPANY:
MOBILINK PAKISTAN

Submitted by: Fatima Nadim (21292)

 LETTER OF TRANSMITTAL

Sir Bilal Chishti,

Senior Lecturer in Finance and Accounting
Institute of Business Management
Korangi Creek,
Karachi-75190
We are pleased to submit a comprehensive term report on our chosen
service organization; a requirement of the course Introduction to Business
Finance at Institute of Business Management (IoBM).
During all the phases and stages of report research, writing and analyzing
the report, we gained useful and practical knowledge about the course.
I have tried out level best to cover the targeted aspects of our course and
hope that this report will serve its purpose. All rules and regulations for
the preparation of the formal report have been taken into consideration.
I would sincerely like to thank you for the faith you showed in our
capabilities and the encouragement you gave us when assigning us the
report. If there is anything else you wish to know, we will be glad to
assist. Please accept my report contentedly and without any regrets.

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 LETTER OF ACKNOWLEDGEMENT

April 13, 2019

Dear Sir,
All praise and thanks be to Allah (SWT) by whose mercy and blessings
we had the strength, knowledge, insight and opportunity to complete this
report successfully.
I also seek the pleasure of thanking you for encouraging us by showing
your faith in our capabilities while handing us this learning opportunity.
While making this report I learnt a lot about the practicality of finance
market in the real world which made our concepts clearer and stronger. I
have tried our level best to cover all the targeted aspects concerning our
organization.
If you have any queries regarding the report or subject, you may contact
us for further assistance.

Sincerely,
Fatima Nadim 21292

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 INDUSTRY OVERVIEW:
Pakistan’s cellular sector is best known for low-
cost mobile connection charges, reduced tariffs, almost complete
coverage area and better mobile services for the general public
throughout the country.
As of Today, cellular tele density has reached 62.5% from just 3.3% in
2004 while almost 92% of the land area and more than 10,000
cities/towns/villages are under the umbrella of by cellular services.
Cellular penetration in the country has reached 62.5% which means that
every 6 out of 10 people in Pakistan own a mobile connection.
According to statistics made available by telecom operators, there are 104
million cellular subscribers in Pakistan. Mobilink reached 32.1 million
subscribers followed by Telenor with 25.1 million cellular
subscribers. Ufone performed well during the last four quarters and
managed to increase its subscriber base to 20.4 million whereas Warid
has 17.6 million subscribers and Zong holds 8.9 million figures

Mobilink still leads the market share with 31% market share while
Telenor stands at 24%. Ufone increased its market share to 20% and
Warid has 17% stake in the overall subscriber base. Zong has improved
its market share and reached at 8%

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 Above given table shows an interesting

comparison of the cellular operator market share and their respective

share in cell sites. Among the cellular operators, Mobilink has the highest
number of cell sites i.e. 7,952 and 26% share in overall cell sites.

However, if compared with its market share of 31% and no net additions
throughout the year, it is probable that focus of the company is more
towards increasing its subscriber base rather than expand its existing
infrastructure.

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 Brief History:

In Pakistan, the Pakistan mobile telecommunication ltd (“Mobilink”) started

its operations in 1 9 9 4 . M o b i l i n k , a subsidiary of the Orascom Telecom Group is
Pakistan’s leading cellular service and market leader with an unmatched customer
base of over 32.1 million subscribers
Mobilink has coverage in over 7,000 cities, towns, and villages, throughout Pakistan.
International roaming is available in over 127 countries with more than 300 partner
operators, and the company’s investment to date, is over US$2.5 billion. It directly
employs over 4,500 people, and facilitated through an integrated technology
infrastructure, has the largest distribution network of over 200000 retail outlets across
Pakistan. The company is a carrier-class nationwide connecting service with its 6,500
kilometers fiber optic backbone, and is leading the Mobile Commerce revolution with
its first lifestyle application.
Head Office Location:
The head office of Mobilink is located at KULSUM Plaza, blue area, Islamabad.

-Branch Offices:
Its branch offices are located in
Lahore, Karachi, Faisalabad, Rahim Yar Khan, Sukkur, Peshawar, Quetta, Swat, and Kohath.

Total Strength of Employees:

There are 4500 total employees working in Mobilink

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 Mission Statement of Mobilink:-
“To make our happy customers through giving them good and reliable service plan.
Mobilink believes that there is some promising economic form to serve rising markets
while achieving the rationally priced excellence. Mobilink is in race to serve the
biggest promising number of subscribers, cover the most greatly populated countries
in the world. Mobilink believes that by setting up themselves as a main cellular
service provider, and Mobilink will rebuild the new markets for the cellular
companies”

Mobilink’s Vision:
To be the leading Telecommunication Services Provider in Pakistan by offering
innovative Communication solutions that make each day better for our customers
while exceeding Shareholder value & Employee Expectations.

Mobilink’s Values:
Be Passionate
We at Mobilink, are passionate about fulfilling & exceeding customer needs and
enriching their lives every day.
Be Professional
We take pride in practicing the highest ethical standards and take responsibility for our
actions.
Lead with Purpose
We are committed to lead the market through innovations in new services, products, as
well as cutting edge technologies and solutions.

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 Goals and Objectives

 Expand the business.

 Provide better service to people in the field of telecommunication.
 Retaining the role of a leading telecommunication company.
 Attract maximum customers and satisfy them.
 Excel in meeting customer needs.
 Seek employee involvement, continuous improvement and enhanced
performance goals.

Stakeholder of Mobilink: -
Stakeholder means that the individual those are participating in the company progress
through capital, giving the services and time.
Mobilink stakeholders are as under;
Customers
Shareholders
Mobilink Employees Union

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 Board of Directors

Designation
Name Occupation
(MF)

Chairman &
Jeffrey Hedberg President & CEO, PMCL
CEO

Agha Mohammad Qasim VP, Corporate Affairs, PMCL Director

Niaz Brohi Chief Legal officer, PMCL Director

Bilal Munir Sheikh Vice President Director

Sadia Ahmad VP, HR & Admin, PMCL Director

Director, Corporate Communications,

Omar Manzur Director
PMCL

Furrokh K Captain Business Executive Director

Seema Aziz Business Executive Director

Management

Rashid Khan CEO of Mobilink was serving Banglalink, Orascom’s arm in

Bangladesh, as its CEO. He has served Mobilink from 2004 to 2006 as chief
commercial officer. According to sources, Khaliq has been elevated to a senior
position at the level of strategic planning of the group’s global planning and
investments.

“In this moment of recession, he has shown his skills to manage the sinking ship
Mobilink and put it to road of success,” said one of Khan’s supporters.

“Excellent vision and knowledge of the industry with a vast experience in telecom
industry,” added another.

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President and CEO of Mobilink Mr. Rashid Khan have been nominated for the CEO
of the Year award by World Communication Awards (WCA). Mobilink Pakistan is the
only Pakistani operator to feature in the nominees.

“I am honored to take over the leadership of Mobilink and to continue to grow this
company” said Rashid. “Mobilink has always been a pioneer and continues to be the
leading telecommunication services provider in Pakistan.

President and CEO

Rashid Khan
Chief Strategy Officer
Tariq Rashid
Vice President Sales & Distribution
Bilal Munir Sheikh
Vice President Customer Care
Irfan Akram
Vice President Corporate Affairs
Agha Qasim
Chief Technical Officer
Ramy Reyad Kamel
Vice President Marketing
Jahanzeb Taj
Chief Information Officer
Irfan Farooq
Head of Human Resources & Administration
Sadia Ahmad
Chief Financial Officer
Andis Locmelis
Head of Business Analysis and Planning
Farid Ahmed

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 Countries in which Mobilink operates

Orascom Telecom Holding S.A.E. (“Orascom Telecom”) or (“OTH”) was established

in 1998 and has grown to become a major player in the telecommunication market.

OTH is considered among the largest and most diversified network operators in the
Middle East, Africa, and South Asia, and has acquired in early 2008 a license to
operate mobile services in North Korea. Orascom Telecom is a leading mobile
telecommunications company operating in six emerging markets having a population
under license of 430 million with an average penetration of mobile telephony across
all markets of approximately 40%. OTH operates GSM networks in Algeria (Djezzy),
Pakistan (Mobilink), Egypt (Mobinil), Tunisia (Tunisiana), Bangladesh (Banglalink)
and Zimbabwe (Telecel Zimbabwe). OTH had exceeded 74 million subscribers as of
March 2008.

Achievements

 ISO 9002 Quality Management System Certification for Billing, Engineering

Departments and CS Contact Center
 Implementation of a full Intelligent Network (IN) platform from Siemens for
the Prepaid platform
 Largest Call Center in Pakistan, which is there to assist the customers 24 hours
 Only cellular service in Pakistan to provide coverage on the M2 motorway
 Bilateral roaming in over 100 countries around the world with true international
roaming with over 300 operators across the globe
  First mobile operator in Pakistan to offer extensive GPRS Roaming and Black
Berry roaming services

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 Practical Analysis of Mobilink’s Financial Practices

All financial assets are recognized at the time when the Mobilink becomes a party to
the contractual provisions of the instrument. Regular way purchases and sales of
investments are recognized on trade date- the date on which the company commits to
purchase or sell the asset. Financial assets are initially recognized at fair value plus
transaction cost except for financial assets at fair value and transaction costs are
expensed in the profit and loss account. Financial assets are derecognized when the
rights to receive cash flows from the assets have expired or have been transferred and
the company has transferred substantially all the risks and reward for ownership.
Available-for-sale financial assets and financial assets at fair value through profit or
loss are subsequently carried at fair value. Loans and receivables and held-to-maturity
investments are carried at amortized cost using the effective interest trade method.
Changes in the fair value of securities classified as available-for-sale are recognized in
other comprehensive income. Investments in associates are accounted for using the
equity method.

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Time value of money:

Most financial decisions involve the time value of money. We use the rate of interest
to express the time value of money.

It is very helpful to begin solving time value of money problems by first drawing a
time line on which you position the relevant cash flows.

Types of ratios calculated mostly at Mobilink:

The usefulness of ratios depends on the ingenuity and experience of the financial
analyst who employs them.

 Liquidity ratios
 Activity ratios
 Profitability ratios

Position of Mobilink in view of:

1. A creditor:

LIQUIDITY RATIOS 2017 2018

Current ratio 3.38 4.37

Quick/Acid test ratio 1.66 2.65

DEBT RATIOS 2017 2018

Debt Ratio 14.43% 13.15%

Debt to Equity ratio 0.00 : 1 0.00 : 1

Time interest Earned 188.55 485.64

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 2. A lender:

PROFITABILITY RATIOS 2017 2018

Gross profit Margin 44.32% 43.38%

 
Net profit Margin 25.78% 26.33%

 
EBITDA to sales ( EBIT margin) 37.81% 38.58%

 
Operating Leverage ( EBT margin) 435.68% 116.54%

 
Return on Equity after tax 23.67% 22.78%

 
Return on Asset 25.97% 24.94%

DEBT RATIOS 2017 2018

Debt Ratio 14.43% 13.15%

Debt to Equity ratio 0.00 : 1 0.00 : 1

Time interest Earned 188.55 485.64

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 3. An Investor:

DEBT RATIOS 2017 2018

Debt Ratio 14.43% 13.15%

Debt to Equity ratio 0.00 : 1 0.00 : 1

Time interest Earned 188.55 485.64

Return on Equity after 23.67% 22.78%

tax
 

Mobilink's revenue grew strongly mainly on the back of impressive volumetric sales
growth. The 8 % year-on-year growth in sales revenue resulted in Mobilink recording
its highest ever yearly revenues. Gross profit margins largely remained flattish,
dropping by 80 bps over the previous year. Soft gross margins could be partially
explained by insignificant movements in oil prices during the period, restricting the
likely inventory gains that had boosted .

Government's injection of nearly Rs 170 billion during FY13 eased the liquidity woes
of Mobilink considerably. Mobilink had floated various options for partial resolution
of circular debt earlier and the response from government came well in time.
Improved liquidity resulted in reduced short-term financing requirements to maintain
the working capital, as evident from a significant drop in short-term borrowing which
more than halved during the period over the previous year.

The positive impact of government liquidity injection trickled down to the bottom line
which grew by an impressive 39 % year on year. The drop in other income on account
of reduced penal income on receivables was more than offset by a sharp reduction in
financial charges, owing to the above-mentioned reasons.

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The company took huge strides towards operating cost curtailment, resulting in a
massive decline in other operating expenses. The single largest contributor to this
account was a drastic reduction in exchange loss for the period, which less than halved
supporting the bottom line massively.

Assessment of the cash flow statement:

Following things are assessed and identified a Mobilink with detail. Company’s ability
to generate future net cash inflows from operations to pay debts, interest and dividends
are assessed. Moreover, company’s need for external financing is identified.

Matching Principle at Mobilink:

It requires that revenues and any related expenses be recognized together in the same
period. Thus, if there is cause-and-effect relationship between revenues and the
expenses, record them at the same time. If there is no such relationship then charge the
cost to expense at once.

2015

Long term sources

Sources Of funds Uses Of Funds
Fund For Operation Long Term Investment
Profit 11,805,400
20,185,152
Depreciation 20,241,752
56600
Long term Borrowing 410000 Fixed Assets 625433
Deferred Taxation 163110 Surplus on revaluation of 10,508
Asset
Dividend Unpaid 35670 Dividends Paid 30500

Total 20,850,532 Total 12,471,841

Short term sources

Sources Of funds Uses Of Funds
Stock in Trade Store & Spare part 145707
100,802
Taxation 450670 Trade debt 132000

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 Loands and Advances 243483
Receivables 2910935
Pre payment 10,300
Short term investment 209299
Cash & Bank 2386981

Total 551472 Total 6,038,705

Working capital management:

 A managerial accounting strategy focusing on maintaining efficient levels of both

components of working capital, current assets and current liabilities, in respect to
each other.

Degree of risk Mobilink assumes:

Financial risk factors and risk management framework:

Financial risk is an umbrella term for multiple types of risk associated with financing,

including financial transactions that include company loans in risk of default. Finance
manager told us that the degree of financial risk for a franchisee is very high. He told
us about the recent two events happened in which the franchise face a loss of 0.5
million, and there was no recovery from the head office.

The company has exposure to the following:

 risks
 Market risk
 Credit risk
 Liquidity risk
 Operational risk

Issues regarding working capital management that Mobilink faces:

Biggest issue in working capital management includes trade-off between profitability

and risk.

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 Risk Low
Liquidity High
Profitability Low

What do you prefer more, long term financing or short-term financing?

We prefer long term financing Conservative Approach-More current assets

However, degree of Financial Risk is very high

Is there any risk involved in opting for long term financing?

Definitely, at times we have to pay larger sum of interest rates. He further said that in
the past few years, we were using aggressive approach due to which we suffered huge
financial risks.

Types of risks Mobilink assumes:

The company has exposure to the following risks from financial instruments:

 Market risk
 Credit risk
 Liquidity risk
 Operational risk

The company’s finance and treasury department oversee the management of the
financial risk reflecting changes in the market conditions and also the company’s risk-
taking activities providing assurance that these activities are governed by appropriate
policies and procedures and that the financial risk are identified, measured and
managed in accordance with the company policies and risk appetite.

a) Market risk:

Market risk is the risk that the value of the financial instrument may fluctuate as a
result of changes in market interest rates, foreign exchange rates or the equity prices
due to a change in credit rating of the issuer or the instrument, change in market
sentiments and demand of securities and liquidity in the market.

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 b) Credit risk:

Credit risk is the risk that one party to financial instrument will fail to discharge an
obligation and cause the other party to incur a financial loss, without taking into
account the fair value of any collateral. Concentration of credit risk arises when a
number of counter parties are engaged in similar business activities that would cause
their ability to meet contractual obligations to be similarly affected by changes in
economic, political or other conditions. Concentration of credit risk indicates the
relative sensitivity of the company’s performance to developments affecting a
particular industry.

c) Liquidity risk:

Liquidity risk represents the risk that the company will encounter difficulties in
meeting obligations associated with financial liabilities that are settled by delivering
cash or another financial asset. Prudent liquidity risk management implies maintaining
sufficient

d) Operational risks:

Operational risk is the risk of direct or indirect loss arising from a wide variety of
causes associated with processes, technology and infrastructure supporting the
company’s activities either internally within the company or externally at the
company’s service providers and from external factors other than credit, market and
liquidity risks such as these arising from legal and regulatory requirements and
generally accepted standards of operation behavior.

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 Conclusion:
Mobilink is following all management functions effectively,
corporate strategies are developed and communicated from
the top level. Region is accountable to the parent company
from where instructions are received and applied in the
organization nationwide. Moreover, Mobilink has a friendly
environment where each employee is empowered to exercise
delegated powers and has an authority to directly contact the
president, if need be.

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 RECOMMENDATIONS

1. Mobilink franchises should implement security majors in order to avoid theft,

burglary and other crimes. Such as, Security alarms and sensors
2. Company should provide credit days to the franchises in order to maintain a
trust relationship with the employees.
3. To be a market leader and to maximize profit, mobilink should focus on
advertisements and marketing.
4. Mobilink should provide value service and network to the customers as it
charges more than other telecom networks
5. Customer retention is one the biggest weaknesses of mobilink. This can be
resolved by providing good services to the customers.
6. The cost of production should be minimized.
7. The strategies Mobilink should focus on are:
 Adopting innovative technology; mobile wallet and gift cards- product
development and mobilizing the brand.
 Global expansion in emerging markets- Market development concentrate
on providing better and reliable service -market penetration.
 Concentrate on consumer retention and gaining market share - market and
product development and penetration.
 Backward integration over venders for reductions in infrastructure
maintenance cost and other expenses.

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