FINANCIAL MANAGEMENT

ANALYSIS OF FINANCIAL STATEMENTS

PROJECT REPORT

Submitted By: Ammara Zamurad

Class: BSBA-5A
Reg. #: 04151613009
Submitted To: Mr. Abdul Razzaq

Quaid-e-Azam School of Management Sciences

Quaid-e-Azam University, Islamabad

 ACKNOWLEDGEMENT

To the creator, to the parents, to Sir A.Razzaq and to Sir Noman Shafi.

This work is dedicated to Allah Almighty who made me capable enough to do this work, to the parents
who come without substitutes, to Sir A.Razaq who taught me how to do it and to Sir Noman Shafi who
was the first to build the basics of finance.
 EXCEUTIVE SUMMARY
The report contains introduction to the two telecommunication companies one from Pakistan and one
from Bangladesh, analysis of financial statements, interpretation of the statements, PEST analysis, SWOT
analysis, shareholders’ view, competitors’ view, management’s view and creditors view of both the
companies.
Table of Contents
ACKNOWLEDGEMENT ................................................................................................................................... 2
EXCEUTIVE SUMMARY .................................................................................................................................. 3
Introduction .................................................................................................................................................. 7
Pakistan Telecommunication Company Limited........................................................................................... 7
Vision and Mission .................................................................................................................................... 7
Core Values, Objectives and Services ....................................................................................................... 7
Bangladesh Telecommunication Company Limited...................................................................................... 7
Vision and Mission .................................................................................................................................... 7
Core Values and Objectives ...................................................................................................................... 7
Services ..................................................................................................................................................... 7
Analysis of Financial Statements................................................................................................................... 7
Horizontal Analysis of the Income Statement .............................................................................................. 8
Interpretation ........................................................................................................................................... 9
Net Profit............................................................................................................................................... 9
Sales and CGS ........................................................................................................................................ 9
Gross Profit ......................................................................................................................................... 10
Operating Profit .................................................................................................................................. 10
Final Words ......................................................................................................................................... 10
Horizontal Analysis of the Balance Sheet ................................................................................................... 11
Interpretation ......................................................................................................................................... 12
Total Assets, Equity and Liabilities ...................................................................................................... 12
Liabilities ............................................................................................................................................. 13
Equity .................................................................................................................................................. 13
Assets .................................................................................................................................................. 13
Overall Result ...................................................................................................................................... 13
Vertical Analysis of Income Statement ....................................................................................................... 14
Interpretation ......................................................................................................................................... 15
Gross Profit ......................................................................................................................................... 15
Operating Expenses ............................................................................................................................ 15
Net Profit............................................................................................................................................. 15
Vertical Analysis of Balance Sheet .............................................................................................................. 16
Interpretation ......................................................................................................................................... 17
 Current Assets ..................................................................................................................................... 17
Fixed Assets ......................................................................................................................................... 18
Equity .................................................................................................................................................. 18
Liabilities ............................................................................................................................................. 18
Trend Analysis of Income Statement .......................................................................................................... 19
Interpretation ......................................................................................................................................... 20
Sales ........................................................................................................................................................ 20
CGS ...................................................................................................................................................... 20
`Gross Profit and Operating Profit ...................................................................................................... 21
Operating Expenses ............................................................................................................................ 21
Net Profit............................................................................................................................................. 21
Trend Analysis of Balance Sheet ................................................................................................................. 22
Interpretation ......................................................................................................................................... 24
Current Assets ..................................................................................................................................... 24
Fixed Assets ......................................................................................................................................... 24
Total Assets ......................................................................................................................................... 24
Equity .................................................................................................................................................. 24
Current Liabilities ................................................................................................................................ 24
Total and Fixed Liabilities .................................................................................................................... 24
Ratio Analysis .............................................................................................................................................. 26
Interpretation ......................................................................................................................................... 28
Liquidity Ratios .................................................................................................................................... 28
Activity ratios ...................................................................................................................................... 28
Solvency Ratios ................................................................................................................................... 29
Profitability Ratios ............................................................................................................................... 30
Market Value Ratios ............................................................................................................................ 30
DPS .......................................................................................................................................................... 31
PEST Analysis of Telecommunication Industry in Pakistan ......................................................................... 31
Political Factors ....................................................................................................................................... 31
Economic Factors .................................................................................................................................... 31
Social Factors .......................................................................................................................................... 32
Technological Factors.............................................................................................................................. 32
PEST Analysis of Telecom Industry in Bangladesh ...................................................................................... 33
 Political Factors ....................................................................................................................................... 33
Economic Factors .................................................................................................................................... 33
Social Factors .......................................................................................................................................... 33
Technological Factors.............................................................................................................................. 34
SWOT Analysis of Pakistani Telecom Industry ............................................................................................ 34
1. Strengths ......................................................................................................................................... 34
2. Weaknesses .................................................................................................................................... 34
3. Opportunities .............................................................................................................................. 34
4. Threats ............................................................................................................................................ 35
SWOT analysis of Bangladeshi Telecom Industry ....................................................................................... 35
1. Strengths ......................................................................................................................................... 35
2. Weaknesses .................................................................................................................................... 35
3. Opportunities .................................................................................................................................. 35
4. Threats ............................................................................................................................................ 35
Shareholders’ View ..................................................................................................................................... 36
Investors’ View ............................................................................................................................................ 36
Creditor’s View/ Supplier’s View ................................................................................................................ 36
Competitors’ View ...................................................................................................................................... 36
FBR’s View ................................................................................................................................................... 36
Management’s View ................................................................................................................................... 37
Conclusion ................................................................................................................................................... 37
References .................................................................................................................................................. 38
Introduction
I have chosen PTCL and BTCL for the analysis of financial statements. The upcoming section contains a
brief introduction of both the companies.

Pakistan Telecommunication Company Limited

PTCL is one of the oldest telecom companies of Pakistan. Therefore, it is considered a market leader in
terms of time. Founded in 1949, it launched its subsidiaries Ufone and Paktell at the beginning of the
21st century. It was previously owned by government. Later, it was privatized.

Vision and Mission

PTCL wants to become the most admired and leading service provider of the country. It wants to give
satisfaction to the customers by delivering value.

Core Values, Objectives and Services

The core values of the company include dignity, responsibility and respect. The objectives are to satisfy
the customers and to develop them. PTCL provides various wireless, broadband and internet services.

Bangladesh Telecommunication Company Limited

BTCL was started as a private company and it was made a public limited company later. It is the largest
telecom company of Bangladesh.

Vision and Mission

The vision of BTCL is to become telecom market leader and to provide cost-effective communication to
the customers. BTCL’s mission is to deliver value added services to the customers at low cost and to
improve the service quality.

Core Values and Objectives

The objectives of BTCL include to operate in accordance to its MOA, to provide effective access to the
telecom network to the customers and to implement programs regarding new technology.

Services
BTCL provides calling services in both national and international areas. It also provides internet and
broadband services.

Analysis of Financial Statements

Analysis of financial statements of companies is performed to assess the financial position and
performance of the company, to take calculated risk while making the investment decisions and to get a
clear picture of the image of the company. Companies make various types of financial statements
including The Statement of Profit and Loss or the Income Statement, the statement of financial position
or The Balance Sheet, The Statement of Retained Earnings, The Statement of Cash Flows and footnotes
to these statements. In the upcoming sections, we’ve performed the analysis of balance sheets and
income statements of two companies. We’ve taken the data for the years 2015, 2016 and 2017 from the
annual reports of both the companies. We haven’t considered the statements for 2018 because the data
for the recent year isn’t made available on the official website yet. We’ve performed horizontal, vertical,
trend, ratio, SWOT and PEST analysis of both the companies. The pictures of the calculations are
attached below. However, the working was done in Microsoft Excel. Please note we’ve interpreted the
calculation results of both the companies’ side by side under the same heading to get a better
understanding of the results. We’ve chosen PTCL from Pakistan and BTCL from Bangladesh.

Note: The names of accounts shown in blue color represent negative accounts like cost and expenses.
The values shown in blue color represent negative amounts. The negative signs and parenthesis were
omitted to minimize the automation effect in excel.

Note: All the statements of Bangladesh have been converted into PKR for better comparison.

Horizontal Analysis of the Income Statement

HORIZONTAL ANALYSIS
Income Statement
PTCL (2015,16 and 17)
2017 (in 2016 b(in 2015 (in Amount Amount %age 2015-
Acccounts 1000Rs) 1000Rs) 1000Rs) 2016-17 2015-16 %age 2016-17 16
Revenue 69,757,391 71,420,100 75,751,975 -1,662,709 -4,331,875 -2.33% -5.72%
Cost of services 51,043,742 50,358,343 53,783,589 685,399 -3,425,246 1.36% -6.37%
Gross profit 18,713,649 21,061,757 21,968,386 -2,348,108 -906,629 -11.15% -4.13%
Administrative and general expenses 8,617,477 8,770,136 9,782,258 -152,659 -1,012,122 -1.74% -10.35%
Selling and marketing expenses -2,947,347 3,129,868 3,514,400 -6,077,215 -384,532 -194.17% -10.94%
Total Operating Expenses 11,564,824 11,900,004 13,296,658 -335,180 -1,396,654 -2.82% -10.50%
Operating profit 7,148,825 9,161,753 8,671,728 -2,012,928 490,025 -21.97% 5.65%
Voluntary separation scheme cost 4,601,379 -4,601,379 4,601,379 -100.00% Not Possible
Other income 6,001,194 5,834,131 4,917,762 167,063 916,369 2.86% 18.63%
Finance costs 304,611 193,708 317,376 110,903 -123,668 57.25% -38.97%
Profit before tax 12,845,408 10,200,797 13,272,114 2,644,611 -3,071,317 25.93% -23.14%
Provision for income tax 4,495,894 3,366,263 4,512,519 1,129,631 -1,146,256 33.56% -25.40%
Profit after tax 8,349,514 6,834,534 8,759,595 1,514,980 -1,925,061 22.17% -21.98%
Earnings per share - basic and diluted (Rupees) 1.64 1.34 1.72 0.30 -0.38 22.39% -22.09%

Figure 1 Horizontal Analysis of PTCL Income Statement

 HORIZONTAL ANALYSIS
income Statement
BTCL (2015,16 and 17)
Amount
2016 in 2015 in 2016- amount %age %age
Accounts 2017 in PKR PKR PKR 2017 2015-16 2016-17 2015-16
Revenue 18862611 18932709 8374584 -70098 10558126 -0.37% 126.07%
Less:
Cost of services 7980325 7698569 2248848 281756 5449721 3.66% 242.33%
Gross Profit 10882287 11234140 6125736 -351854 5108404 -3.13% 83.39%
Administrative expenses 7182061 6887470 6092262 294591 795208 4.28% 13.05%
Repairs and Maintenance 553277 987170 630757 -433893 356413 -43.95% 56.51%
Depreciation 8064826 8540810 9347886 -475985 -807076 -5.57% -8.63%
Total Operating Expenses 15800164 16415450 16070905 -615286 344545 -3.75% 2.14%
Operating Profit/(Loss) 4917877 5181310 9945169 -263432 -4763860 -5.08% -47.90%
Add:
Non-operating income 1420015 1655034 1913987 -235019 -258953 -14.20% -13.53%
Less:
Bank Charges 14817 13947 14246 870 -298 6.23% -2.09%
Foreign Exchange gain/loss 605277 1939902 3343785 -1334625 -1403883 -68.80% -41.98%

Net Loss Before Tax 2907402 5480124 4701642 -2572723 778482 -46.95% 16.56%
Less: Income tax expense 124500 -134460 30710 258960 -165170 -192.59% -537.84%
Net Loss After Tax 3031902 5614584 4732352 -2582683 882232 -46.00% 18.64%
Other comprehensive income
Unrealized gain from investment in share 9745 29636 0 -19891 29636 -67.12% #DIV/0!
Total other comprehensive income 9745 29636 0 -19891 29636 -67.12% #DIV/0!
Total comprehensive income (loss) 3041647 5584948 4732352 -2543302 852596 -45.54% 18.02%

Figure 2 Horizontal Analysis of BTCL Income Statement

Interpretation
Net Profit
This year was good for PTCL in terms of financial performance. As net profit for PTCL increased by
22.17%. However, there was a decrease of nearly the same percentage (21.98%) the previous year. This
implies that although there’s a drastic rise in net profit, but we can’t rely on it because we don’t see a
stable trend in the change. Who knows the net profit may decrease drastically the next year as well.

As far as BTCL is concerned, its financial performance has been consistently bad over the years. It hasn’t
earned profits in many years. Last year, its net losses after taxes decreased by 45.5% which is a slightly
positive sign. However, there was 18% increase in the loss the previous year. So, we can’t assume the
losses would keep decreasing until they covert to profit because there’s no stability in the trends
observed.

Sales and CGS

The revenues for PTCL have been decreasing over the years which is a negative sign keeping the growth
of telecom industries of Pakistan in mind. However, the percentage of this decrease in revenues moved
from -5.7% to -2.3% last year. This is a good signal. However, we’re not entirely sure if these revenues
will exceed the revenues of 2015 in upcoming years.
BTCL earned outstanding revenue increase of 126% the previous year. However, a slight decrease in the
percentage of revenues increased was observed in 2017. The revenues decreased by 0.37% last year.
However, this decrease can be ignored as it is very minute in comparison to the increase, we observed in
2016.

A look at the cost of giving services can give us a fair idea of the reason behind the decrease in revenues
in 2015-16. We notice a decrease in the cost of services by -6.3% which gradually increased to about
1.36%. This means PTCL provided less services in 2016 in comparison to 2015 and latter in 2017 it again
tried to boost its services. For BTCL, the drastic increase in revenues was backed by drastic rise in the
cost of services, which means BTCL provided additional services (242%) the previous year. There was a
gradual decrease by 3.6% the next year. We see that when cost of services increased by double the
revenues increased by half for BTCL. Which may signal that BTCL is spending more cost on production or
provision of services than the price.

Gross Profit
For PTCL the gross profit has been decreasing over the5. years. This year it decreased by -11% and last
year the decrease in the percentage was only about -4%. This shows PTCL is going down day by day.

In 2016 the gross profit of BTCL drastically increase to more than 80%. Whereas, this year there was a
minor decrease in the GP by -3%. We can’t draw a solid conclusion based on these values as the increase
last year is too big to only take the decrease of this year into account.

Operating Profit
The trends in operating profit of PTCL are quite similar to the trends in gross profit. Operating profit
increase by 5% last year and this year it decreased by an amount more than 400 times greater than it.
Which means this year the operating profit of PTCL decreased by more than 400 times.

BTCL suffered operating losses in the previous 3 years. However, the percentage of losses was seemed
to fall this year. Last year the percentage of operating loss was more than -45% and this year it came
down to a loss of only about -5%. In other words, the operating losses of BTCL decreased by 4400% this
year. Which is a positive signal.

Final Words
Although apparently PTCL has more profits in total but the trends suggest that PTCL’s financial
performance has been going down over the years. On the contrary BTCL is suffering from losses for
many years but these losses are drastically decreasing, and we can hope the losses would convert to
profits in the years to come. However, we can’t be certain about the future of BTCL either, because
there is no stability in the trends of BTCL.
Horizontal Analysis of the Balance Sheet
Balance Sheet
PTCL (2015,16 and 17)

2017 (in 2016 b(in 2015 (in Amount Amount %age 2015-
Acccounts 1000Rs) 1000Rs) 1000Rs) 2016-17 2015-16 %age 2016-17 16
Assets
Non-current assets
Property, plant and equipment 98,250,679 94,779,483 94,912,046 3,471,196 -132,563 3.66% -0.14%
Intangible assets 1,882,868 2,332,789 2,539,060 -449,921 -206,271 -19.29% -8.12%
100,133,547 97,112,272 97,451,106 3,021,275 -338,834 3.11% -0.35%
Long term investments 7,977,300 7,977,300 7,977,300 0 0 0.00% 0.00%
Long term loans and advances 7,670,324 2,152,757 2,261,126 5,517,567 -108,369 256.30% -4.79%
Investment in finance lease 17,268 38,513 96,113 -21,245 -57,600 -55.16% -59.93%
TotL Fixed Assets 115,798,439 107,280,842 107,785,645 8,517,597 -504,803 7.94% -0.47%
Current assets
Stores, spares and loose tools 3,633,569 2,742,7942,940,425 890,775 -197,631 32.48% -6.72%
Trade debts 16,040,224 14,227,974
14,304,039 1,812,250 -76,065 12.74% -0.53%
Loans and advances 1,511,669 676,5561,593,099 835,113 -916,543 123.44% -57.53%
Investment in finance lease 35,137 53,030 52,255 -17,893 775 -33.74% 1.48%
Income tax recoverable 15,263,357 14,261,078
18,179,032 1,002,279 -3,917,954 7.03% -21.55%
Receivable from the Government of Pakistan 2,164,072 2,164,0722,164,072 0 0 0.00% 0.00%
Prepayments and other receivables 11,860,653 11,328,0734,982,082 532,580 6,345,991 4.70% 127.38%
Short term investments 5,607,778 24,000,000
26,038,803 -18,392,222 -2,038,803 -76.63% -7.83%
Cash and bank balances 14,243,299 5,902,1442,210,148 8,341,155 3,691,996 141.32% 167.05%
Accrued Interest 128,174 -128,174 Not Possible -100.00%
Total Current Assets 70,359,758 75,355,721 72,592,129 -4,995,963 2,763,592 -6.63% 3.81%
Total assets 186,158,197 182,636,563 180,377,774 3,521,634 2,258,789 1.93% 1.25%
Equity and liabilities
Equity
Share capital and reserves
Share capital 51,000,000 51,000,000 51,000,000 0 0 0.00% 0.00%
Revenue reserves
Insurance reserve 2,806,993 2,621,288 2,416,078 185,705 205,210 7.08% 8.49%
General reserve 27,497,072 27,497,072 30,500,000 0 -3,002,928 0.00% -9.85%
Unappropriated profit 3,647,809 1,894,739 2,302,282 1,753,070 -407,543 92.52% -17.70%
Total Revenue Resserves 33,951,874 32,013,099 35,218,360 1,938,775 -3,205,261 6.06% -9.10%
Total Equity 84,951,874 83,013,099 86218360 1,938,775 -3,205,261 2.34% -3.72%
Liabilities
Non-current liabilities
Long term security deposits 553,446 553,049 552,122 397 927 0.07% 0.17%
Deferred income tax 7,086,423 7,264,575 5,754,847 -178,152 1,509,728 -2.45% 26.23%
Employees retirement benefits 23,503,831 24,068,008 32,111,859 -564,177 -8,043,851 -2.34% -25.05%
Deferred government grants 8,059,878 8,594,920 8,926,403 -535,042 -331,483 -6.23% -3.71%
Total Non-Current Liabilities 39,203,578 40,480,552 47,345,231 -1,276,974 -6,864,679 -3.15% -14.50%
Current liabilities 62,002,745 59,142,912 46,814,183 2,859,833 12,328,729 4.84% 26.34%
Total equity and liabilities 186,158,197 182,636,563 180,377,774 3,521,634 2,258,789 1.93% 1.25%

Figure 3 Horizontal Analysis PTCL Balance Sheet

 Balance Sheet
BTCL (2015,16 and 17)
Amount
2016 in 2015 in 2016- amount %age %age
Accounts 2017 in PKR PKR PKR 2017 2015-16 2016-17 2015-16
Assets
Property, Plant and Equipment 540029175 5.37E+08 5.45E+08 3429281 -8138552 0.64% -1.49%
Capital work in process 15401960.9 22304869 14417375 -6902908 7887494 -30.95% 54.71%
Government Providend Fund 4350127.96 3945370 3668326 404758 277043 10.26% 7.55%
Renewal and Resserve Fund 2878833.42 2878833 2878833 0 0 0.00% 0.00%
Government investment in shares 194198.822 203943.7 174307.6 -9745 29636 -4.78% 17.00%
Total Non Current Assets 562854297 5.66E+08 5.66E+08 -3078613 55620 -0.54% 0.01%
Current Assets
Stores and Spares 1264125.75 1264126 1264126 0 0 0.00% 0.00%
Accounts Recievables 38607159.3 37714996 32862592 892164 4852404 2.37% 14.77%
Advances 25755290.2 22993464 22773074 2761827 220390 12.01% 0.97%
Cash and Cash Equivalents 31455353.5 29357026 24018302 2098328 5338724 7.15% 22.23%
Total Current Assets 97081928.7 91329611 80918093 5752318 10411518 6.30% 12.87%
Total Assets 659936225 6.57E+08 6.47E+08 2673704 10467138 0.41% 1.62%
Equity and Liabilities
Share Capital 2.988 2.988 2.988 0 0 0.00% 0.00%
Equity Resserve 465655009 4.66E+08 4.66E+08 0 0 0.00% 0.00%
Retained Earnings 24582014.6 23576112 17991163 1005903 5584948 4.27% 31.04%
Owner's Equity 441072998 4.42E+08 4.48E+08 -1005903 -5584948 -0.23% -1.25%
Non Current Liabilities
Loans-Long term portion 40521890.9 36122815 29232933 4399075 6889883 12.18% 23.57%
Long term liabilities to employees 38946072.4 41880827 43291827 -2934754 -1411000 -7.01% -3.26%
GPF 4350127.96 3945370 3668326 404758 277043 10.26% 7.55%
Other long term liabilities 70424166.6 70424167 70424167 0 0 0.00% 0.00%
Total Non Current Liabilities 154242258 1.52E+08 1.47E+08 1869079 5755926 1.23% 3.93%
Current Liabilities
Current portion of long term loans 15380335.2 14604762 12093679 775573 2511083 5.31% 20.76%
Security deposits 1977030.08 1654321 938031.4 322709 716289 19.51% 76.36%
payables to suppliers 14397817.5 14397817 14397817 0 0 0.00% 0.00%
Duties Payable 930835.628 908923.9 919457 21912 -10533 2.41% -1.15%
Employees Amulment Deductions 23851.7266 23832.33 23264.33 19 568 0.08% 2.44%
Provisions from income tax 577724.342 2488968 2354508 -1911244 134460 -76.79% 5.71%
Provision for bad debts 4464541.72 4387327 0 77214 4387327 1.76%
accrued expenses 26868833.6 24344489 21787523 2524344 2556966 10.37% 11.74%
Total current liabilities 64620969.7 62810442 52514281 1810528 10296161 2.88% 19.61%
Total Liabilities 218863228 2.15E+08 1.99E+08 3679607 16052087 1.71% 8.06%
Total Equity and Liabilities 659936225 6.57E+08 6.47E+08 2673704 10467138 0.41% 1.62%

Figure 4 Horizontal Analysis BTCL Balance Sheet

Interpretation
Total Assets, Equity and Liabilities
These three years have been good for PTCL in terms of financial position as the total assets increased by
1.25% the previous year and by 1.93% this year. Same goes for the financing portion of the balance
sheet. However, for BTCL this year was comparatively worse than the previous one. As in previous year
the net assets increased by 1.62% and this year an increase of only about 0.41% was observed.
Liabilities
Total liabilities for BTCL increase by 8% last year and this year the increase was only about 1.7%. The
fixed liabilities increased by 3.93% last year. Whereas, the increase in fixed liabilities was 1.2%. The
current liabilities increased by 19% last year which was further reduced to 2.88% this year. Which means
there was a decrease in the need to depend upon debts to meet current business needs. This is a
positive signal for BTCL. The decrease in liabilities of BTCL is a positive sign as It shows the old liabilities
are being paid off.

Current liabilities for PTCL went from 26.8% last year to 2.3% this year. Which implies PTCL depended
less on debts to satisfy current needs. However, the value for PTCL is higher than that of BTCL. For PTCL
there was a decrease in long term liabilities. Last year -14.5% decrease in fixed liabilities was observed
and this year the decrease reduced to -3.1%. The decrease in liabilities means PTCL paid off a lot of its
long-term debts.

Equity
For PTCL no changes in share capital were observed over the years. This is not a good sign as no new
investment is coming to the business. However total equity increased by 2.34% this year. Whereas, it
decreased by -3.7% last year. The increase in equity value of PTCL is a good signal. However, the
instability in the trend sends a bad signal.

The share capital for BTCL has also stayed the same over the years. An important account here is the
account of retained earnings. BTCL’s retained earnings are negative. There was a 31% increase in the
negative retained earnings last year and this year the increase reduced to about 4%. The decrease in the
rise of amount is a good sign but the fact that BTCL has negative retained earnings in itself is an alarming
signal. It shows that the company has suffered more losses in existence than profits.

Assets
For PTCL total assets increased by 1.25% last year and by 1.93% this year. This increase was attributed to
changes in both fixed and current assets. Last year the fixed assets decreased by -.0.47% where as this
year they increased by 7.94%. Last year the current assets increased by 3.8% and this year current
assets decreased by -6.3%. There’s a cross trend (one-year fixed assets decrease, and current assets
increased. Whereas, next year current assets decreased, and fixed assets increased.) in the values of
assets.

Last year the non-current assets for BTCL increased by 0.01% and they decreased this year by -0.5%.
Whereas, current assets increased by 12.8% last year and by 6.3% this year. Cash balances increased by
22% last year and by around 7% this year. The increase in cash and cash equivalents is a good sign.
However, the decrease in the percentage increase is a bad sign.

Overall Result
Overall the financial position of PTCL is better than that of BTCL.
Vertical Analysis of Income Statement

VERTICAL ANALYSIS
Income Statement
PTCL (2015,16 and 17)
2016 as 2015 as
2016 b(in 2015 (in 2017 as %age %age of %age of
Acccounts 2017 (in 1000Rs) 1000Rs) 1000Rs) of sales sales sales
Revenue 69757391 71420100 75751975 100.00% 100.0% 100.0%
Cost of services -51043742 -50358343 -53783589 -73.17% -70.5% -71.0%
Gross profit 18713649 21061757 21968386 26.83% 29.5% 29.0%
Administrative and general expenses -8617477 -8770136 -9782258 -12.35% -12.3% -12.9%
Selling and marketing expenses -2947347 -3129868 -3514400 -4.23% -4.4% -4.6%
Total Operating Expenses -11564824 -11900004 -13296658 -16.58% -16.7% -17.6%
Operating profit 7148825 9161753 8671728 10.25% 12.8% 11.4%
Voluntary separation scheme cost -4601379 0.00% -6.4% 0.0%
Other income 6001194 5834131 4917762 8.60% 8.2% 6.5%
Finance costs -304611 -193708 -317376 -0.44% -0.3% -0.4%
Profit before tax 12845408 10200797 13272114 18.41% 14.3% 17.5%
Provision for income tax -4495894 -3366263 -4512519 -6.45% -4.7% -6.0%
Profit after tax 8349514 6834534 8759595 11.97% 9.6% 11.6%

Figure 5 Vertical Analysis PTCL income Statement

VERTICAL ANALYSIS
income Statement
BTCL (2015,16 and 17)
2017 as 2016 as 2015 as
%age of %age of %age of
Accounts 2017 in PKR 2016 in PKR 2015 in PKR sales sales sales
Revenue 18862611 18932709 8374584 100.00% 100.00% 100.00%
Less:
Cost of services 7980325 7698569 2248848 42.31% 40.66% 26.85%
Gross Profit 10882287 11234140 6125736 57.69% 59.34% 73.15%
Administrative expenses 7182061 6887470 6092262 38.08% 36.38% 72.75%
Repairs and Maintenance 553277 987170 630757 2.93% 5.21% 7.53%
Depreciation 8064826 8540810 9347886 42.76% 45.11% 111.62%
Total Operating Expenses 15800164 16415450 16070905 83.76% 86.70% 191.90%
Operating Profit/(Loss) 4917877 5181310 9945169 26.07% 27.37% 118.75%
Add:
Non-operating income 1420015 1655034 1913987 7.53% 8.74% 22.85%
Less: 0.00% 0.00% 0.00%
Bank Charges 14817 13947 14246 0.08% 0.07% 0.17%
Foreign Exchange gain/loss 605277 1939902 3343785 3.21% 10.25% 39.93%

Net Loss Before Tax 2907402 5480124 4701642 15.41% 28.95% 56.14%
Less: Income tax expense 124500 -134460 30710 0.66% -0.71% 0.37%
Net Loss After Tax 3031902 5614584 4732352 16.07% 29.66% 56.51%
Other comprehensive income
Unrealized gain from investment in share 9745 29636 0 0.05% 0.16% 0.00%
Total other comprehensive income 9745 29636 0 0.05% 0.16% 0.00%
Total comprehensive income (loss) 3041647 5584948 4732352 16.13% 29.50% 56.51%

Figure 6 Vertical Analysis BTCL Income Statement

Interpretation
Gross Profit
For PTCL gross profit by sales increased by 29% in 2015, 29.5% in 2016 and 26.8% in 2017. This implies
in comparison to the last three years, this year there were more costs of doing services involved. Gross
profit’s contribution to sales is less this year then the previous ones. It is not a good sign for PTCL. For
BTCL the gross profit as a percentage of sales was 73%, 57% and 59% in 2015, 2016 and 2017
respectively. The trend for BTCL is quite similar to that of PTCL. However, the percentage of gross profit
is higher for BTCL.

Operating Expenses
For PTCL total operating expenses as percentage of sales have been decreasing over the years. In the
last three years the decrease was recorded to be -17.6%, -16.7%, 16.5% respectively. This decrease in
expenses means PTCL has started compromising on its operations. For BTCL the operating expenses of
2015, 2016 and 2027 were 191.9%, 86.7% and 83.7% respectively. This means BTCL has high operating
expenses.

Net Profit
The net profit of PTCL in 2015 was 11.6%. in 2016 it reduced to 9.6% and in 2017 it increased again to
11.97%. The rise in net profit as a percentage of sales is a positive sign for PTCL. However, we observe
an instability in trends as in 2016 there was only an increase of 9.6%. However, on the whole the trends
are sending positive signals.

For BTCL the net loss as a percentage of sales variations were 56.5%, 29.5% and 16.13% in 2015, 2016
and 2017 respectively. The decrease in net loss as a percentage of sales is showing a comparatively
stable trend. This is a positive sign for BTCL. However, it has still to achieve a point where it can earn
profits instead of losses.
Vertical Analysis of Balance Sheet
Balance Sheet
PTCL (2015,16 and 17)

2016 as 2015 as
2016 b(in 2015 (in 2017 as %age %age of %age of
Acccounts 2017 (in 1000Rs) 1000Rs) 1000Rs) of Assets Assets Assets
Assets
Non-current assets
Property, plant and equipment 98250679 94779483 94912046 52.78% 51.90% 52.62%
Intangible assets 1882868 2332789 2539060 1.01% 1.28% 1.41%
100133547 97112272 97451106 53.79% 53.17% 54.03%
Long term investments 7977300 7977300 7977300 4.29% 4.37% 4.42%
Long term loans and advances 7670324 2152757 2261126 4.12% 1.18% 1.25%
Investment in finance lease 17268 38513 96113 0.01% 0.02% 0.05%
TotL Fixed Assets 115798439 107280842 107785645 62.20% 58.74% 59.76%
Current assets
Stores, spares and loose tools 3633569 2742794 2940425 1.95% 1.50% 1.63%
Trade debts 16040224 14227974 14304039 8.62% 7.79% 7.93%
Loans and advances 1511669 676556 1593099 0.81% 0.37% 0.88%
Investment in finance lease 35137 53030 52255 0.02% 0.03% 0.03%
Income tax recoverable 15263357 14261078 18179032 8.20% 7.81% 10.08%
Receivable from the Government of Pakistan 2164072 2164072 2164072 1.16% 1.18% 1.20%
Prepayments and other receivables 11860653 11328073 4982082 6.37% 6.20% 2.76%
Short term investments 5607778 24000000 26038803 3.01% 13.14% 14.44%
Cash and bank balances 14243299 5902144 2210148 7.65% 3.23% 1.23%
Accrued Interest 128174 0.00% 0.00% 0.07%
Total Current Assets 70359758 75355721 72592129 37.80% 41.26% 40.24%
Total assets 186158197 182636563 180377774 100.00% 100.00% 100.00%
Equity and liabilities
Equity
Share capital and reserves
Share capital 51000000 51000000 51000000 27.40% 27.92% 28.27%
Revenue reserves 0.00% 0.00% 0.00%
Insurance reserve 2806993 2621288 2416078 1.51% 1.44% 1.34%
General reserve 27497072 27497072 30500000 14.77% 15.06% 16.91%
Unappropriated profit 3647809 1894739 2302282 1.96% 1.04% 1.28%
Total Revenue Resserves 33951874 32013099 35218360 18.24% 17.53% 19.52%
Total Equity 84951874 83013099 86218360 45.63% 45.45% 47.80%
Liabilities
Non-current liabilities
Long term security deposits 553446 553049 552122 0.30% 0.30% 0.31%
Deferred income tax 7086423 7264575 5754847 3.81% 3.98% 3.19%
Employees retirement benefits 23503831 24068008 32111859 12.63% 13.18% 17.80%
Deferred government grants 8059878 8594920 8926403 4.33% 4.71% 4.95%
Total Non-Current Liabilities 39203578 40480552 47345231 21.06% 22.16% 26.25%
Current liabilities 62002745 59142912 46814183 33.31% 32.38% 25.95%
Total equity and liabilities 186158197 182636563 180377774 100.00% 100.00% 100.00%

Figure 7 Vertical Analysis PTCL Balance Sheet

 Balance Sheet
BTCL (2015,16 and 17)
2017 as 2016 as 2015 as
%age of %age of %age of
Accounts 2017 in PKR 2016 in PKR 2015 in PKR assets assets assets
Assets
Property, Plant and Equipment 540029175.45 536599894.34 544738446.79 81.83% 81.64% 84.22%
Capital work in process 15401960.92 22304869.34 14417375.45 2.33% 3.39% 2.23%
Government Providend Fund 4350127.96 3945369.52 3668326.48 0.66% 0.60% 0.57%
Renewal and Resserve Fund 2878833.42 2878833.42 2878833.42 0.44% 0.44% 0.45%
Government investment in shares 194198.82 203943.66 174307.58 0.03% 0.03% 0.03%
Total Non Current Assets 562854296.58 565932909.23 565877289.71 85.29% 86.10% 87.49%
Current Assets 0.00% 0.00% 0.00%
Stores and Spares 1264125.75 1264125.75 1264125.75 0.19% 0.19% 0.20%
Accounts Recievables 38607159.31 37714995.80 32862592.13 5.85% 5.74% 5.08%
Advances 25755290.20 22993463.60 22773073.62 3.90% 3.50% 3.52%
Cash and Cash Equivalents 31455353.47 29357025.60 24018301.55 4.77% 4.47% 3.71%
Total Current Assets 97081928.73 91329610.75 80918093.05 14.71% 13.90% 12.51%
Total Assets 659936225.31 657262521.03 646795382.76 100.00% 100.00% 100.00%
Equity and Liabilities 0.00% 0.00% 0.00%
Share Capital 2.99 2.99 2.99 0.00% 0.00% 0.00%
Equity Resserve 465655009.31 465655009.31 465655009.31 70.56% 70.85% 71.99%
Retained Earnings 24582014.57 23576111.82 17991163.41 3.72% 3.59% 2.78%
Owner's Equity 441072997.73 442078900.48 447663848.89 66.84% 67.26% 69.21%
Non Current Liabilities 0.00% 0.00% 0.00%
Loans-Long term portion 40521890.86 36122815.38 29232932.51 6.14% 5.50% 4.52%
Long term liabilities to employees 38946072.39 41880826.86 43291826.86 5.90% 6.37% 6.69%
GPF 4350127.96 3945369.52 3668326.48 0.66% 0.60% 0.57%
Other long term liabilities 70424166.65 70424166.65 70424166.65 10.67% 10.71% 10.89%
Total Non Current Liabilities 154242257.86 152373178.41 146617252.50 23.37% 23.18% 22.67%
Current Liabilities 0.00% 0.00% 0.00%
Current portion of long term loans 15380335.21 14604762.48 12093679.36 2.33% 2.22% 1.87%
Security deposits 1977030.08 1654320.80 938031.40 0.30% 0.25% 0.15%
payables to suppliers 14397817.45 14397817.45 14397817.45 2.18% 2.19% 2.23%
Duties Payable 930835.63 908923.87 919457.03 0.14% 0.14% 0.14%
Employees Amulment Deductions 23851.73 23832.33 23264.33 0.00% 0.00% 0.00%
Provisions from income tax 577724.34 2488968.40 2354508.40 0.09% 0.38% 0.36%
Provision for bad debts 4464541.72 4387327.40 0.00 0.68% 0.67% 0.00%
accrued expenses 26868833.56 24344489.40 21787523.40 4.07% 3.70% 3.37%
Total current liabilities 64620969.71 62810442.14 52514281.37 9.79% 9.56% 8.12%
Total Liabilities 218863227.58 215183620.55 199131533.87 33.16% 32.74% 30.79%
Total Equity and Liabilities 659936225.31 657262521.03 646795382.76 100.00% 100.00% 100.00%

Figure 8 Vertical Analysis BTCL Balance Sheet

Interpretation
Current Assets
For PTCL the net current assets as a percentage of total financing were 40.2% in 2015, 41.2% in 2016
and 37.8% in 2017. The decrease in net current assets as a percentage of total assets shows that PTCL is
gradually decreasing its investment in current assets. Whereas, for BTCL the percentages of current
assets were 12.5%, 13.9% and 14.7% in 2015, 2016 and 2017 respectively. This means BTCL has been
increasing the investment in current assets over time. An increase in the percentages of cash and cash
equivalents and accounts receivable indicate that the company’s position is getting stronger. Moreover,
it may have changed the debtor’s policy or it may have given additional loans.

Fixed Assets
The percentage of fixed assets to total assets was 59.7% for PTCL in 2015 which decreased to 58.7% in
2016 and then increased again to 62.2%. As there’s a slight instability in trends, we can’t make solid
predictions. However, it seems like PTCL is increasing the investment in fixed assets and decreasing the
investment in current assets gradually.

For BTCL the percentages of total fixed assets to total assets decreased from 87.5% in 2015 to 86% in
2016 and further to 85% in 2017. It means contrary to PTCL, BTCL is decreasing its investment in fixed
assets gradually.

Equity
For PTCL the equity contribution to total financing changed from 47.8% to 45.4% and then to 45.6%. it
means PTCL is relying more on liabilities when it comes to financing. The values for BTCL are 69%, 67%
and 66.8% for the years 2015, 2016 and 2017 respectively. These values show that unlike PTCL, the
capital structure of BTCL consists mainly on equity financing.

Liabilities
Current liabilities as a percentage of total financing was 25%, 32% and 33% in 2015, 16 and 17
respectively for PTCL. However, total fixed liabilities decreased from 25% to 22% and further to 21%
over the years. This means that PTCL’s financing is composed more of current liabilities then of fixed
liabilities.

BTCL has also increased the percentage financing of current liabilities from 8% in 2015 to more than 9%
in 2016 and 17. A minor increase in the long-term liabilities is also seen. However, the rise in total
liability or debt financing is mainly due to the rise in current liabilities.
Trend Analysis of Income Statement
TREND ANALYSIS
Income Statement
PTCL (2015,16 and 17)
2017 as 2016 as 2015 as
2017 (in 2016 b(in 2015 (in %age of %age of %age of
Acccounts 1000Rs) 1000Rs) 1000Rs) 2015 2015 2015
Revenue 69757391 71420100 75751975 92.09% 94.28% 100%
Cost of services -51043742 -50358343 -53783589 94.91% 93.63% 100%
Gross profit 18713649 21061757 21968386 85.18% 95.87% 100%
Administrative and general expenses -8617477 -8770136 -9782258 88.09% 89.65% 100%
Selling and marketing expenses -2947347 -3129868 -3514400 83.86% 89.06% 100%
Total Operating Expenses -11564824 -11900004 -13296658 86.98% 89.50% 100%
Operating profit 7148825 9161753 8671728 82.44% 105.65% 100%
Voluntary separation scheme cost -4601379
Other income 6001194 5834131 4917762 122.03% 118.63% 100%
Finance costs -304611 -193708 -317376 95.98% 61.03% 100%
Profit before tax 12845408 10200797 13272114 96.78% 76.86% 100%
Provision for income tax -4495894 -3366263 -4512519 99.63% 74.60% 100%
Profit after tax 8349514 6834534 8759595 95.32% 78.02% 100%
Earnings per share - basic and diluted (Rupees) 1.64 1.34 1.72 95.35% 77.91% 100%

Figure 9 Trend Analysis of PTCL income statement

 HORIZONTAL ANALYSIS
income Statement
BTCL (2015,16 and 17)
2017 as 2016 as 2015 as
2016 in 2015 in %age of %age of %age of
Accounts 2017 in PKR PKR PKR 2015 2015 2015
Revenue 18862611 18932709 8374584 225.24% 226.07% 100.00%
Less:
Cost of services 7980325 7698569 2248848 354.86% 342.33% 100.00%
Gross Profit 10882287 11234140 6125736 177.65% 183.39% 100.00%
Administrative expenses 7182061 6887470 6092262 117.89% 113.05% 100.00%
Repairs and Maintenance 553277 987170 630757 87.72% 156.51% 100.00%
Depreciation 8064826 8540810 9347886 86.27% 91.37% 100.00%
Total Operating Expenses 15800164 16415450 16070905 98.32% 102.14% 100.00%
Operating Profit/(Loss) 4917877 5181310 9945169 49.45% 52.10% 100.00%
Add:
Non-operating income 1420015 1655034 1913987 74.19% 86.47% 100.00%
Less:
Bank Charges 14817 13947 14246 104.01% 97.91% 100.00%
Foreign Exchange gain/loss 605277 1939902 3343785 18.10% 58.02% 100.00%

Net Loss Before Tax 2907402 5480124 4701642 61.84% 116.56% 100.00%
Less: Income tax expense 124500 -134460 30710 405.41% -437.84% 100.00%
Net Loss After Tax 3031902 5614584 4732352 64.07% 118.64% 100.00%
Other comprehensive income
Unrealized gain from investment in share 9745 29636 0
Total other comprehensive income 9745 29636 0
Total comprehensive income (loss) 3041647 5584948 4732352 64.27% 118.02% 100.00%

Figure 10 Trend Analysis BTCL Income Statement

Interpretation
For the trend analysis we’ve taken 2015 as the base year because we didn’t see major stability in trends
afterwards. So, for trend analysis we’ll be comparing the respective performances of both the
companies in 2016 and 17 with the year 2015.

Sales
Revenues for PTCL have shown a decreasing trend in comparison to the trend year. Revenues of PTCL
fell from 94% to about 92%. It sends a signal that PTCL needs to boost up its sales to come back in the
market. For BTCL, the case is inverse. Its revenues increased by more than 200% in 2016 and 17.
Therefore, in terms of revenues BTCL is leading.

CGS
We can’t overlook cost of doing services or goods sold while talking of revenues. For every unit of
revenue, there’s always the cost of making those units involved. Now although BTCL has more than
200% more revenues than the base year, it also has more than 350% more cost than the base year. The
increase in cost is way higher than the increase in revenues for BTCL. From this information we infer that
BTCL needs to control the cost of services by either decreasing the quality or increasing the price. BTCL
needs to seriously reconsider its strategy.

The CGS of PTCL has decreased with reference to the base year and so have the revenues. So, it only
tells us that PTCL has started decreasing or limiting its services. If PTCL starts providing more services,
we can expect a rise in its revenues as well.

`Gross Profit and Operating Profit

The gross profit of PTCL has decreased over the years in comparison to the base year. It first declined to
95% and then to 85%. Whereas, for BTCL the GP increased by 183% and then fell to 177%. We don’t
observe a consistency in the ratios.

The operating profit for PTCL went from 100% in the base year to 105% in 2016 which is a positive sign
but it went back to about 82% in 2017. Whereas, for BTCL the operating loss went from 100% to 49%.
This is a positive sign because a decrease in loss is always welcome.

Operating Expenses
In the case of BTCL, we observed that it earned gross profit and increased sales over the years. However,
it is still going in losses. The reason being it has very high operating expenses that convert the gross
profit into operating loss. BTCL needs to control its operating expenses to gain profits. The reason why
BTCL’s losses are decreasing over time Is because its operating expenses decreased from 100% in the
base year to 98% in 2017. However, the operating expenses increased from the base year in 2016 and
went to 102%.

PTCL’s operating expenses also decreased to 89% and 86% in 2016 and 2017 respectively in comparison
to the base year. However, for PTCL this decrease is related to the decrease in the total quantity of
services provided. So, we won’t take it as a positive signal because the business seems to decrease its
operations.

Net Profit
PTCL is not doing well in terms of net profits after taxation. For the past few years, its net profits have
decreased to 78% and then rose further to 95% in 2017. However, the profits have still not exceeded the
amount of the base year. 2016 seems like a bad year for PTCL in terms of financial performance.
However, it lifted itself up again in 2017.

For BTCL the last three years have been uncertain in terms of net profits. In 2016 its net losses went to
about 116% but it managed to decrease the losses in 2017 to around 60%. However, due to the
instability in the trends, we can’t give the final verdict about the financial performance of BTCL.
Trend Analysis of Balance Sheet
Balance Sheet
PTCL (2015,16 and 17)

20t as 2016 as 2015 as

2017 (in 2016 b(in 2015 (in %age of %age of %age of
Acccounts 1000Rs) 1000Rs) 1000Rs) 2015 2015 2015
Assets
Non-current assets
Property, plant and equipment 98250679 94779483 94912046 103.52% 99.86% 100%
Intangible assets 1882868 2332789 2539060 74.16% 91.88% 100%
100133547 97112272 97451106 102.75% 99.65% 100%
Long term investments 7977300 7977300 7977300 100.00% 100.00% 100%
Long term loans and advances 7670324 2152757 2261126 339.23% 95.21% 100%
Investment in finance lease 17268 38513 96113 17.97% 40.07% 100%
Total Fixed Assets 115798439 107280842 107785645 107.43% 99.53% 100%
Current assets
Stores, spares and loose tools 3633569 2742794 2940425 123.57% 93.28% 100%
Trade debts 16040224 14227974 14304039 112.14% 99.47% 100%
Loans and advances 1511669 676556 1593099 94.89% 42.47% 100%
Investment in finance lease 35137 53030 52255 67.24% 101.48% 100%
Income tax recoverable 15263357 14261078 18179032 83.96% 78.45% 100%
Receivable from the Government of Pakistan 2164072 2164072 2164072 100.00% 100.00% 100%
Prepayments and other receivables 11860653 11328073 4982082 238.07% 227.38% 100%
Short term investments 5607778 24000000 26038803 21.54% 92.17% 100%
Cash and bank balances 14243299 5902144 2210148 644.45% 267.05% 100%
Accrued Interest 128174 0.00% 0.00% 100%
Total Current Assets 70359758 75355721 72592129 96.92% 103.81% 100%
Total assets 186158197 182636563 180377774 103.20% 101.25% 100%
Equity and liabilities
Equity
Share capital and reserves
Share capital 51000000 51000000 51000000 100.00% 100.00% 100%
Revenue reserves
Insurance reserve 2806993 2621288 2416078 116.18% 108.49% 100%
General reserve 27497072 27497072 30500000 90.15% 90.15% 100%
Unappropriated profit 3647809 1894739 2302282 158.44% 82.30% 100%
Total Revenue Resserves 33951874 32013099 35218360 96.40% 90.90% 100%
Total Equity 84951874 83013099 86218360 98.53% 96.28% 100%
Liabilities
Non-current liabilities
Long term security deposits 553446 553049 552122 100.24% 100.17% 100%
Deferred income tax 7086423 7264575 5754847 123.14% 126.23% 100%
Employees retirement benefits 23503831 24068008 32111859 73.19% 74.95% 100%
Deferred government grants 8059878 8594920 8926403 90.29% 96.29% 100%
Total Non-Current Liabilities 39203578 40480552 47345231 82.80% 85.50% 100%
Current liabilities 62002745 59142912 46814183 132.44% 126.34% 100%
Total equity and liabilities 186158197 182636563 180377774 103.20% 101.25% 100%

Figure 11Trend Analysis PTCL balance sheet

 Balance Sheet
BTCL (2015,16 and 17)
2017 as 2016 as 2015 as
2016 in 2015 in %age of %age of %age of
Accounts 2017 in PKR PKR PKR 2015 2015 2015
Assets
Property, Plant and Equipment 540029175 5.37E+08 5.45E+08
Capital work in process 15401960.9 22304869 14417375 106.83% 154.71% 100.00%
Government Providend Fund 4350127.96 3945370 3668326 118.59% 107.55% 100.00%
Renewal and Resserve Fund 2878833.42 2878833 2878833 100.00% 100.00% 100.00%
Government investment in shares 194198.822 203943.7 174307.6 111.41% 117.00% 100.00%
Total Non Current Assets 562854297 5.66E+08 5.66E+08 99.47% 100.01% 100.00%
Current Assets
Stores and Spares 1264125.75 1264126 1264126 100.00% 100.00% 100.00%
Accounts Recievables 38607159.3 37714996 32862592 117.48% 114.77% 100.00%
Advances 25755290.2 22993464 22773074 113.10% 100.97% 100.00%
Cash and Cash Equivalents 31455353.5 29357026 24018302 130.96% 122.23% 100.00%
Total Current Assets 97081928.7 91329611 80918093 119.98% 112.87% 100.00%
Total Assets 659936225 6.57E+08 6.47E+08 102.03% 101.62% 100.00%
Equity and Liabilities
Share Capital 2.988 2.988 2.988 100.00% 100.00% 100.00%
Equity Resserve 465655009 4.66E+08 4.66E+08 100.00% 100.00% 100.00%
Retained Earnings 24582014.6 23576112 17991163 136.63% 131.04% 100.00%
Owner's Equity 441072998 4.42E+08 4.48E+08 98.53% 98.75% 100.00%
Non Current Liabilities
Loans-Long term portion 40521890.9 36122815 29232933 138.62% 123.57% 100.00%
Long term liabilities to employees 38946072.4 41880827 43291827 89.96% 96.74% 100.00%
GPF 4350127.96 3945370 3668326 118.59% 107.55% 100.00%
Other long term liabilities 70424166.6 70424167 70424167 100.00% 100.00% 100.00%
Total Non Current Liabilities 154242258 1.52E+08 1.47E+08 105.20% 103.93% 100.00%
Current Liabilities
Current portion of long term loans 15380335.2 14604762 12093679 127.18% 120.76% 100.00%
Security deposits 1977030.08 1654321 938031.4 210.76% 176.36% 100.00%
payables to suppliers 14397817.5 14397817 14397817 100.00% 100.00% 100.00%
Duties Payable 930835.628 908923.9 919457 101.24% 98.85% 100.00%
Employees Amulment Deductions 23851.7266 23832.33 23264.33 102.52% 102.44% 100.00%
Provisions from income tax 577724.342 2488968 2354508 24.54% 105.71% 100.00%
Provision for bad debts 4464541.72 4387327 0
accrued expenses 26868833.6 24344489 21787523 123.32% 111.74% 100.00%
Total current liabilities 64620969.7 62810442 52514281 123.05% 119.61% 100.00%
Total Liabilities 218863228 2.15E+08 1.99E+08 109.91% 108.06% 100.00%
Total Equity and Liabilities 659936225 6.57E+08 6.47E+08 102.03% 101.62% 100.00%

Figure 12 Trend Analysis BTCL Balance Sheet

Interpretation
Current Assets
Total current assets for PTCL increased to 103% in 2016 and decreased to 97% in 2017. The sudden rise
in 2016 was due to the increase in cash balances and payments and other receivables. Seems like PTCL
gave a lot of loans in 2016. For BTCL, the current assets increased to 112% in 2016 and 119% in 2017 in
comparison to the base year. Almost all the current assets of BTCL have seemed to increase in the
recent years.

Fixed Assets
Total fixed assets of PTCL decreased slightly to 99% in 2016 and rose back up to 107% in 2017. The
sudden rise in 2017 was due to the sudden increase in investment in long term loans. Seems like PTCL
has made several changes in its debtors’ policy and it has adopted the strategy of investing in loans. On
the other hand, PTCL has been decreasing the investment in financial lease over time.

No major trend is observed in the fixed assets of BTCL over the years. The assets remained the same in
2016 and gradually decreased in 2017. Seems like BTCL has no plan to invest in the long-term assets as it
is already suffering from major losses.

Total Assets
Total assets of PTCL increased to 101% in 2016 and to 103% in 2017.which means that PTCL is gradually
adding to its assets over time. This rise in total assets of PTCL is mainly due to the rise in the current
assets.

BTCL’s fixed assets have also increased over time from 101% in 2016 to 102% in 20017 and just like PTCL
the rise is mainly due to the rise in the current assets.

Equity
Total equity of PTCL decreased to 96% in 2016 and increased again to 98% in 2017. There is no major
rise or fall in the total equity value. Same goes for BTCL. BTCL’s equity went from 98.7% in 2016 to 98.5%
In 2017. These values show a slight inclination of both the companies towards liability or debt financing,
but the values are not too high to reach on a concrete conclusion regarding the strategy of the
companies.

Current Liabilities
Current liabilities of PTCL went from 126% in 2016 to 132% in 2017. There is major increase in the
current liabilities with reference to the base year.

Current Liabilities of BTCL have also shown an increasing trend over the years. They increased to 119% in
2016 and to 123% in 2017. This rise in current liabilities is mainly because of high rise in the security
deposits.

Total and Fixed Liabilities

The long-term liabilities of PTCL have decreased over time. They decreased to 85% in 2016 and again to
82% in 2017. This decline means that PTCL is not taking long term debts. The overall rise in liabilities is
attributed to the rise in current liabilities.
Total fixed or non-current liabilities of BTCL have also gradually increased over the years. They increased
to 103% in 2016 and to 105% in 2017. Therefore, the rise in total liabilities of BTCL is due to changes in
both the types of liabilities.
Ratio Analysis
Liquidity Ratios Formula 2017 2016 2015
Current Ratio Current Assets/Current Liabilities 1.13 1.27 1.55

Quick Ratio C.A - inverntories - prepaid expenses / C.L 1.08 1.23 1.49

Net Working Capital Current Assets - Current Liabilities 8357013 16212809 25777946

Cash Ratio Cash + M.S / Current Liabilities 0.320164486 0.5055913 0.6034272

Activity Ratios Formula 2017 2016 2015

A/R turnover (Times) Net credit sales/average A/R 4.61 5.01 5.04

A/R collection period (Days) 360/A/R turnover 78.09110629 71.856287 71.428571

Inventory turnover (times) Cost of goods sold/Average inventory 14.04782515 18.360235 18.291094

Average age of inventory (days)360/Inventory turnover 25.62674265 19.607592 19.68171

Total Assets Turnover (times) Net Sales/Avg. total assets 0.374721028 0.3910504 0.4199629

Fixed Assets Turnover net sales/avg total fixed assets 0.602403552 0.6657302 0.7028021

Operating Cycle ACP+ Avg. age of inventory 103.7178489 91.463879 91.110281

Solvency Ratios Formula 2017 2016 2015

Debt Ratio Total Liabilities/Total Assets 0.543657624 0.5454738 0.5220123

Debt to Equity Ratio Total Debt/Total Equity 1.191337145 1.2000933 1.092104

Times interest earned EBIT/Interest expense 23.46870271 47.29672 27.3232

Profitability Ratios Formula 2017 2016 2015

Gross Profit Margin G.P/Net sales 26.83% 29.49% 29.00%

Net Profit Margin Net Profit/Net Sales 11.97% 9.57% 11.56%

Return on Assets Net Income/Avg. Total Assets 4.49% 3.74% 4.86%

Return on Equity Net income/total Equity 9.83% 8.23% 10.16%

Market Value Ratios Formula 2017 2016 2015

Earning Per share Net income(Less P.S.D)/C.S o/s 1.64 1.34 1.72

DPO Dividends/Net Earnings 6.108139947 7.4621035 5.822187

No of Shares Outstanding E/EPS 5091167 5100399 5092788

DPS Dividends/No of Shares outstanding 10.01734951 9.9992187 10.014162

Figure 13 Ratios of PTCL

Liquidity Ratios Formula 2017 2016 2015
Current Ratio Current Assets/Current Liabilities 1.502328565 1.45405139 1.54087785

Quick Ratio C.A - inverntories - prepaid expenses / C.L 1.084207078 1.06784826 1.08315095

Net Working Capital Current Assets - Current Liabilities 32460959.02 28519168.6 28403811.7

Cash Ratio Cash + M.S / Current Liabilities 0.486766968 0.46739084 0.45736704

Activity Ratios Formula 2017 2016 2015

A/R turnover (Times) Net credit sales/average A/R 0.488578071 0.5019942 0.25483637

A/R collection period (Days) 360/A/R turnover 736.8320875 717.13976 1412.67122

Inventory turnover (times) Cost of goods sold/Average inventory 6.312920132 6.09003387 1.77897454

Average age of inventory (days) 360/Inventory turnover 57.02590758 59.1129717 202.363773

Total Assets Turnover (times) Net Sales/Avg. total assets 0.028582476 0.0288054 0.01294781

Fixed Assets Turnover net sales/avg total fixed assets 0.033512423 0.03345398 0.01479929

Operating Cycle ACP+ Avg. age of inventory 793.8579951 776.252731 1615.03499

Solvency Ratios Formula 2017 2016 2015

Debt Ratio Total Liabilities/Total Assets 0.33 0.33 0.31

Debt to Equity Ratio Total Debt/Total Equity 0.50 0.49 0.44

Times interest earned EBIT/Interest expense 95.84 118.66 134.36

Profitability Ratios Formula 2017 2016 2015

Gross Profit Margin G.P/Net sales 57.69% 59.34% 73.15%

Net Profit Margin Net Profit/Net Sales 16.13% 29.50% 56.51%

Return on Assets Net Income/Avg. Total Assets 0.46% 0.85% 0.73%

Return on Equity Net income/total Equity 0.69% 1.26% 1.06%

Market Value Ratios Formula 2017 2016 2015

Earning Per share Net income(Less P.S.D)/C.S o/s 168980 310275 262908

DPO Dividends/Net Earnings N/A N/A N/A

DPS Dividends/No of Shares outstanding N/A N/A N/A

Figure 14 Ratios of BTCL

Interpretation
Liquidity Ratios
1. Current Ratio
The current ratio of PTCL has been declining over time. In three years, it changed from 1.5 to 1.27 to
1.13. The decline in current ratio indicates the decline in liquidity of PTCL. In 2015 it had 1.55 rupees in
current assets to pay off a current liability of 1 rupee. This amount has not decreased to 1.27. Although,
there’s no major threat as assets are still higher than liabilities but it sends a negative signal regarding
the liquidity of the business.

BTCL’s current ratio has also shown a considerably decreasing trend in the last three years. It went from
1.54 in 2015 to 1.45 in 2016 and to 1.5 in 2017. This means for very current liability of 1 rupee, BTCL has
1.5 rupees in current assets to pay off that liability. Overall, BTCL has a better current ratio then PTCL.

2. Quick Ratio
PTCL’S quick ration has also shown a decreasing trend. It moved from 1.49 in 2015 to 1.23 in 2016 and
to 1.08 in 2017. This means for 1 rupee of current liability PTCL has 1.08 rupees in quick assets to meet
those liabilities. In quick assets we count only the most liquid assets. Therefore, it is slightly less than the
current ratio.

BTCL’s quick ratio showed a slight decrease in 2016 as it fell to 1.6 but rose back again to 1.08 in 2017.
We can say it has shown a stable trend. This ratio is same as that of PTCL.

3. Cash Ratio
PTCL’s cash ratio was 0.6 in 2015. It fell to 0.5 in 2016 and to 0.32 in 2017. It means PTCL has less cash
now to meet the current liabilities then it had in 2015 and 16. On the contrary, BTCL’s cash ratio has
been increasing over time. Its cash ratio increased from 0.45 in 2015 to 0.48 in 2017. This shows that
BTCL has more amount in cash then PTCL to pay off the current liabilities.

4. Net working Capital

PTCL’s net working capital has decreased over the years. Whereas, BTCL’s net working capital shows an
increasing trend.

Final Word
From an overview of the liquidity ratios, we conclude that BTCL is doing better in terms of liquidity then
PTCL, as it has higher liquidity ratios than PTCL.

Activity ratios
1. AR turnover
PTCL’s AR turnover ratio has shown a decreasing trend in the past three years. It went from 5.04 to 4.61
in the last three years. This ratio is measured in times. This means PTCL now collects its AR four times in
a year. Previously it was 5 times. It means PTCL has extended the collection period which is good news
for the creditors. BTCL’s AR turnover ratio increased from 0.2 to 0.48 in the last three years. The trend is
opposite to PTCL. It is some bad news for the creditors.

2. ACP in days
PTCL’s average collection period has shown an increasing trend. It has moved from 71 days to 78 days.
As the AR turnover is decreased, it means that now the money loaned will be collected in more time
than it was previously done. BTCL has shown the same trend in terms of ACP in days. The value
decreased by half in the recent years.

3. Inventory Turnover
PTCL’s inventory turnover ratio fell from 18 to 14 in the last three years. The ratio shows how many
times inventory is sold out during an accounting year. The decrease in the ratio shows, less inventory is
sold during the year. Whereas, the ratio for BTCL has increased from 1.7 to 6.3 in 2017. This means that
BTCL is selling more inventory in a year than it was previously doing.

4. Average age of inventory

The average age of inventory for PTCL has increased for the last few years. It has moved from 19 to 25.
This means it takes more time for PTCL to sale its stock than it previously did. Whereas, for BTCL it
decreased from 202 to 57. It means if BTCL took 202 days to sale an item in 2015, it can now sale the
same item in 57 days. Trend wise, BTCL is doing better in terms of inventory turnover. Whereas, in terms
of values PTCL is doing better.

5. Asset turnover ratio and Fixed Assets Turnover

The asset turnover ratio of a company indicates how efficiently the company has utilized its assets to
generate sales or revenues. For PTCL this ratio decreased from 0.4 to 0.37 from 2015 to 2017. For BTCL
the ratio increased from 0.01 to 0.02 in these years. It means BTCL is getting better at utilizing its assets
than PTCL.

The fixed asset turnover ratios of both the companies also indicate similar results. PTCL’s fixed assets
turnover ratio has decreased and that of BTCL has increased. Which means BTCL Is getting better at
utilizing both the fixed and the total assets.

6. Operating Cycle
Operating cycle indicates how much time does a company take to initiate and complete its operations.
Including the investment, selling and collection of money. For PTCL it has increased from 91 days to 103
days. Whereas, for BTCL it has decreased from 1615 to 793 days. The values indicate PTCL is doing
better. The trends show the otherwise results.

Final word
The results of activity ratios show PTCL is better at converting its balance sheet accounts to profits.
However, the trends show us that BTCL is getting better day by day.

Solvency Ratios
1. Debt Ratio
The debt ratio of PTCL has increased from 0.52 to 0.54. it indicates that company is now using more
debts to finance its assets than It was previously doing. The debt ratio of BTCL has also increased from
0.31 to 0.33. However, it has remained at 0.33 in the last two years. The high debt ratio of PTCL is an
alarm for the creditors.

2. Debt to equity ratio

The debt by equity ratio for PTCL has increased from 1.09 to 1.19 in the past three years. It means the
company is relying more on debt financing. For BTCL it has increased from 0.44 to 0.5. Which means
company is relying equally on both the modes of financing.
 3. Interest Earned
The times interest ratio of PTCL has been unstable over time. It went from 27 to 47 and then back to 23
in the last three year. However, the ratio is greater than 1 which means company is capable of meet its
debtor requirements. The ratio for BTCL has decreased from 135 to 95. This means both the companies
can pay interest to the creditors easily.

Final Word
The solvency ratios of both companies show considerably similar results except for the debt by equity of
BTCL which shows better trend than PTCL.

Profitability Ratios
1. GP and NP margin
The GP margin of PTCL changed from 29% to 26%. Which means 26% of the total sales contribute to
gross profit. Whereas, the net profit changed from 11.5% to 11.9% which is a positive trend.

The GP margin of BTCL has decreased from 73% to 57.8%. The decrease in unfavorable for BTCL.
However, the percentage is higher than that of PTCL. The NP margin of BTCL is in negative percentages
because it has suffered net losses over time. However, the percentages have decreased from 57% to
16%. This indicates a decrease in the net losses.

2. Return on Assets
For PTCL the return on assets has been decreasing over time. It decreased from 4.8 to 4.49 in the last
few years. The percentage ha also decreased for BTCL as it went from 0.7 to 0.46. It means the efficiency
of both the companies to utilize their assets has been decreasing over time.

3. Return on Equity
Return on equity of PTCL has gone down from 10.16% to 9.8% from 2015 to 2017. Whereas, the ratio for
BTCL has decreased from 1.06% to 0.69%. the ratio is threatening for BTCL This means BTCL is not using
the equity well enough to generate income. This is an important insight for the investors.

Final Word
The profitability ratios of PTCL are a lot better than that to BTCL. The insights are very important for the
investors.

Market Value Ratios

1. EPS
The EPS for PTCL has decreased from 1.72 to 1.64 and that of BTCL is in negative numbers. This means
both the companies are going down. However, BTCL is in major threatening situation in terms of earning
per share. Any investor thinking of investing in BTCL should think twice. However, the amount of the
negative numbers is decreasing, and we can expect some positive EPS in the future.

2. DPO
The DPO of PTCL has increased from 5 to 6 in the last three years. It means PTCL is now paying more to
the investors in terms of dividends than it was previously doing. We haven’t calculated the DPO for BTCL
because it isn’t in the position to pay any number of dividends to the investors.
DPS
The DPS of PTCL has been consistent over time. Whereas, we haven’t calculated the DPS of BTCL
because currently no dividend is being paid out to the investors on any number of shares.

Final Word
There can’t be a market value comparison between a company going in loss and a company generating
profits. PTCL is doing way better than BTCL in terms of the market value ratios.

PEST Analysis of Telecommunication Industry in Pakistan

This section contains the political, economic, social and technological factors influencing the telecom
industry of Pakistan.

Political Factors
 Recently a new government is elected in Pakistan. It appears like unlike the previous
governments, this government cares for the interest of its people. If the situations go as hoped,
we can predict a growth in all industries including then telecom industry in Pakistan.
 New research university is being opened under the supervision of the newly elected prime
minister. The misusage of telecom information and cyber crime is being minimized now as a lot
of new committees are set up to tackle it. It appears like good news for the telecom industry in
Pakistan.
 A threat for the telecom industry is the change in pricing and tax strategies by the government.
The government has recently decreased the taxes on adding balance to the mobile phone.
Which is healthy for the customers and unhealthy for the telecom companies. The telecom
companies will now have to increase the prices of the services to cover the change in taxes.
 It is also possible that the government may increase the tax rate on the telecom companies. The
telecom companies will have to change their pricing strategies accordingly. If they increase the
price too much, the customers may switch.
 The safety and protection of the telecom industry is increased with the new regulations
introduced by the government.
 We can conclude that political situation of the country is expected to improve which may result
in a better situation for the telecom industry in Pakistan.
 The government has now limited the maximum number of SIMs an individual can hold.
Previouly one individual could have tens of sims now the maximum allowed number is 5. This is
both positive and negative for telecom sector because on one side the crime rates would
decrease and on the other side the revenues would aloo decrease.

Economic Factors
 In Pakistan PTA controls the working of telecom sector which influences the economic condition
of the sector.
 In the previous years, the government has been controlling the financial institutions of the
country for its own good. However, a change has taken place and we hope the financial
institutions would be made independent in terms of deciding the interest rates. If the interest
rates decline, we can hope a positive change in the telecom industry.
  The change in tax rates (increase) by the government is an alarming factor for the telecom
companies of Pakistan. The government is increasing taxes to generate its own revenues.
 Contrary to the expectations, the government has managed to meet the budget deficit with the
help of the fellow countries. This means an ease in the conditions imposed by IMF. If the
situations go as planned, the financial situation of the country may increase which may result in
financial benefits for the telecom sector as well.
 An unstable trend Is observed in the foreign exchange rate (dollar value). However, the finance
minister has assured a long-term stability in the rate. This is another positive news for the
telecom sector.
 The government has recently announced a minimum fixed pay rate for the teaching staff of the
country which is 12000 rupees. Chances are that the government may introduce a minimum
salary limit for employees working in the telecom industry as well. If this happens, the salary
expenses of the companies may increase. However, this rise will be backed by the increased
productivity as employee satisfaction would increase and they’d start putting more effort in the
work.
 The government has promised a decrease in unemployment in the years to come. If this
happens as stated, the telecom sector may find skilled employees and hence increase the
profitability and productivity of their businesses.
 The government has also promised provision of easy loans. This means telecom industries will
have fair opportunities to grow in the future.

Social Factors
 The population of Pakistan is becoming well equipped with technology with every passing day.
Now almost everyone is using mobile phones or telecom services overall. This means an
increase in demand for the telecom sectors.
 The previous government made several coursera courses available to the laptop holders under
PM laptop distribution scheme. This step has increased the scope of e-learning in Pakistan. The
increase in the scope of e-learning means an increase in the usage of the telecom services as
you need internet connection for e-learning. This is another positive factor influencing telecom
sector in Pakistan.
 The attitude of the parents is changing towards the technological changes. Parents have now
started accepting these changes. Now they’re also trying to equip themselves with mobile
phones and internet services.
 There has been an increase in harassment and assault cases especially for females and children
in Pakistan in the last decade. Now, even females and children are taught to use mobile phone
and internet services i.e. google maps and GPS tracers. This also means an increase in the usage
of internet, mobile phone and the telecom industry in general.
 With the introduction of biometric requirements to own SIMs. The crime rates are also expected
to decrease. Which may increase the trust levels of people on the telecom industry.

Technological Factors
 With the changing global technological trends, the telecom companies of Pakistan will also have
to introduce digital technologies like E-customer care to meet the needs of the customers.
 It means that the telecom companies may have to merge themselves with the IT companies.
  There is an increased need to ensure the security of the customers. The telecom companies may
therefore, need to introduce footprint readers or other data analytics systems. The telecom
companies have already introduced the biometric systems.
 3G has already become famous in the Pakistani market. It is now time to introduce 4G and 5G
services to cope with the changing world trends and an increased need to save time. The
companies will now start working on introducing the 5G services to the customers.
 Telecom companies will also need to move towards innovation as the competition in the market
is increasing drastically.

PEST Analysis of Telecom Industry in Bangladesh

Political Factors
 In Bangladesh the government organizations are taxed at a slightly lower rate as per the policy
of the government. This can be an important insight for people investing in BTCL.
 The democracy and institutions of Bangladesh are weak and fragile. Power governs the country.
So, the private telecom sector is likely to be influenced by the policies of the government.
 There is no law and order in the country. Every other day incidences of violence and murders
are reported. This lack of law and political stability in the country can have an adverse impact on
the telecom sector as well because, it is controlled by a few people in power.
 The common trends of human rights violation in Bangladesh can affect the satisfaction levels of
the customers of the telecom sector. The telecom companies must violate the security and
privacy rights of the customers due to the lack of law and order.

Economic Factors
 The growth rate of the Bangladeshi economy has been increasing over the years. It shows
financial stability of the country and has a good impact on the telecom industry as well.
 The World Bank is helping Bangladesh to lift its financial position up. It may be beneficial for the
telecom industry too in the long run.
 The employed population of Bangladesh is mainly working in the agriculture sector. Therefore,
there is a lack of skilled labor in technologically advanced sectors like the telecom sector.
 Although the GDP of Bangladesh shows an increasing trend, this trend is due to the contribution
primarily in the agriculture sector. We can’t attribute a positive association of the GDP with the
telecom sectors.

Social Factors
Most of the population of Bangladesh is agriculture dependent and away from technology. The
backwardness of the population is a bad sign for the telecom industry in Bangladesh.

The trends of education are moving towards e-learning and modern education system in Bangladesh
too. It could be a positive insight for the telecom industry.

Bangladesh has a strong support of US. US may plan to promote advancements in the telecom sector of
Bangladesh too.
Technological Factors
 With the adoption of National science and technology rule in Bangladesh, e-learning and other
technological advancements are expected to happen. Which may help the telecom sector in the
long run.
 Bangladesh is moving towards technological advancements with every passing day, this may
prove to be an opportunity for telecom sector. However, they’ll have to cope up with the
changing technological needs to beat the competition.

SWOT Analysis of Pakistani Telecom Industry

This section contain SOWT of Pakistani telecom industry.

1. Strengths
Exponential Growth: The telecom industry in Pakistan has been growing exponentially. It is a major
strength of the industry. Telecom is one of the major industries of Pakistan contributing to the national
income.

Low Cost Labor: There’s excess of labor supply in the market. Skilled employees are available at
considerably low salaries because employment rates are low in Pakistan. Telecom companies can utilize
the skill of the employees to do innovative and new stuff.

Big Market: A huge number of Pakistani people are connected to the telecom sector one way or the
other. Pakistan is a country with huge population and the population regularly uses mobile and internet
services. This big market allows the telecom companies to generate a lot of profits.

International Image: The telecom companies of Pakistan are known globally for the provision of quality
services at low prices. In fact, the telecom companies of Pakistan have some of the lowest prices In the
world.

2. Weaknesses
Less Revenue: As the telecom companies in Pakistan offer services at very low rates, they generate less
revenues per user. If they increase the prices, the users will switch. Therefore, they’re left with no other
option.

Customer Switching: Customer switching is very common in the customers of Pakistani telecom
companies. That is because the availability of new sims at low cost is prominent in Pakistan. Therefore, it
is hard to retain customers.

Employee Disengagement: As stated earlier, employees work at low salaries in telecom companies of
Pakistan. There morale becomes low and they stop working passionately.

Lack of Innovation: Pakistan is still stuck in the era of 4G. whereas, 5G has become common in the rest
of the world. Lack of innovation and fear of risk is a major weakness in the telecom companies of
Pakistan.

3. Opportunities
Big Market: Pakistani telecom companies have a huge market size. They can ensure a very high growth
by targeting it and utilizing the market for its good.
Innovation: Innovation is another opportunity to be availed. Introduction of new services like 5G and E-
customer care can really boost the profitability and give competitive advantage to the companies.

Availability of Skilled Employees: Skilled labor is in excess supply in Pakistan. Companies can utilize the
talent of employees for their own good.

4. Threats
Political Instability: Political conditions are never stable in Pakistan. The governments change in days
and with them change their policies. These policies are a major threat to the telecom industry.

Inflation: Trends of inflation are also a major threat to the telecom industry.

Increased Tax Rate: The new government’s plans to increase the taxes can also badly influence the
revenues of the telecom sector.

SWOT analysis of Bangladeshi Telecom Industry

1. Strengths
Growing Market: The telecom market is growing day by day in Bangladesh.

3G: More consumers are moving towards 3G services. The companies are strong at providing 3G to the
customers.

Skilled Labor: Bangladesh is also equipped with strong and skilled employees just like Pakistan. These
employees work towards better performance of the telecoms sector.

2. Weaknesses
Value Added Services: The telecom sector of Bangladesh still has room for a lot of improvement.

Promotional Activities: The promotional activities i.e. advertising campaigns, TVC’s etc. of the
Bangladeshi telecom companies are complicated and quite confusing. Customers don’t clearly get what
they want to deliver.

3. Opportunities
Economic Growth: The constant economic growth of Bangladesh can be a great opportunity for telecom
sector in terms of revenues.

3G: The increased demand of 3G services is a big opportunity for the telecom sector in Bangladesh.

4. Threats
Competitve Market: The telecom sector of Bangladesh is not competent enough to compete with the
global market.

Devaluation of Currency: Taka is being devalued with the passage of time. This can result in a decreased
performance of the telecom sector as well.

Government: The policies of the government of Bangladesh are vey rigid in terms of the private sector.
There is rule of power there. It is a major threat to the telecom industry.
Shareholders’ View
Shareholders care about the growth of the business and the dividends. They want to gain maximum
dividends. Therefore, from the perspective of the shareholders, the profitability ratios are of most
importance. A look at the profitability ratios of PTCL and BTCL show us that PTCL’s gross profit margin is
decreasing whereas. The NP margin is increasing. However, BTCL is still in losses. The losses of BTCL are
decreasing. We can conclude that the shareholders of PTCL are in a better position because, at least
PTCL is profitable. It is not going in losses like BTCL. The shareholders of PTCL are also getting dividends
unlike the shareholders of BTCL.

Investors’ View
Investors care most about the solvency ratios of the company as they make the long-term decision to
invest in the company. Investors want to earn a fair share of dividend and profits in the future. They
should look at all the ratios, but the profitability and solvency ratios are of considerable importance.
PTCL the analysis of the ratios shows that PTCL is relying more on debt financing. Whereas, BTCL is
relying on both the sources equally.

PTCL has more return on equity than BTCL. Moreover, PTCL is profitable. It would be unwise to invest a
company that is suffering from losses. As an investor, I would not invest in BTCL. Although, its losses are
decreasing but it has still to start earning profits. I would choose a company with profits as an investor.

Creditor’s View/ Supplier’s View

As a creditor, I would be interested to see the liquidity and the interest coverage ratio of the company.
From the analysis of the liquidity ratios, we concluded that BTCL is better in terms of liquidity than PTCL.
Therefore, as a short-term creditor, I would prefer to give loans to BTCL.

As a long-term creditor, I would look at the solvency ratios of the company to see if the company can
pay off my long-term debts. As a long-term creditor, I would not give loans to PTCL. It has high debt to
equity ratio. It would be unwise to give loans to a company which is already relying on loans.

Competitors’ View
Competitors are interested in all the ratios of the company because they want to ensure they know
everything about the company. The most important ratios in this regard are the profitability and activity
ratios. Competitors want to know how profitable their competitors are and what activities they’re
performing. In terms of competitors, BTCL Is no major threat as it is already going in losses. It has high
operating expenses that are the major reason why the company is going in losses. A slight increase in
the net profit margin of PTCL can be a concern to the competitors.

FBR’s View
FBR is concerned only about the taxes and taxes are depended upon the EBT or the operating profit.
Therefore, FBR will look at the operating profit margin of both the companies. As BTCL is suffering
operating losses, there wouldn’t be major news for FBR in terms of taxes. PTCL’s operating profit is
gradually decreasing. The tax would also decrease. Hence, there’s no major good news for FBR in both
the case. Also, BTCL’s profit or losses have nothing to do with FBR as FBR is operational in Pakistan.
Management’s View
As a manager, I would be interested in all the ratios. I would check all the functions of management i.e.
planning, organizing, staffing, directly and controlling. In the present case, from a manager’s View I
know that BTCL needs to control its operational expenses to decrease its losses. Moreover, PTCL needs
to provide more services, increase the customer base to earn more profits and grow. PTCL also needs to
reposition itself in the minds of the customer. This is because customers perceive it as a slow service
provider. BTCL is a new in the market. It will take some time to make its mark.

Conclusion
Objectively speaking, both the companies have to bring some changes. PTCL needs a serious lift as it has
been in the market for a very long time now. It is time for PTCL to innovate and take risks. It needs to get
out of the comfort zone or the shell as to say it.

BTCL needs to start earning some profits now as it has already received a fair share of losses. It needs a
serious shift in the operations to do so.
References
Annual Report PTCL (2015, 16 and 17)

Annual Report BTCL (2015, 16.and 17)