Submitted by: HASSAN TAHIR

Submitted to:

Department of Business Studies

PAKISTAN INSTITUTE OF DEVELOPMENT ECONOMICS

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PAKISTAN TELECOMMUNICATI

ONCOMPANY LIMITED

INTERNSHIP REPORT

INTERNSHIP REPORT

Masters in Business Administration

Submitted By: HASSAN TAHIR

Pakistan Telecommunication Company Limited (PTCL)

PTCL Headquarter, Sector G-8/4, IslamabadTel #: +92 51 2263732Fax #: +92 51 2263733

Website: www.ptcl.com.pk

Pakistan Institute of Development Economics, Islamabad

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Acknowledgement

First of all I would like to thank ALLAH ALMIGHTY, the most Beneficent and the most Merciful, for giving me the courage and capability enabling us to complete this Internship report on “Pakistan telecommunication Company Limited, Pakistan”.

I would like to thank Mr. Khalid Daud, Senior Manager CWIP & FA, PTCL, for allowing me to work under his department. I would also like to thank the other staff for sparing their valuable time from extremely busy schedule to help me finish this report and help me to adjust in there working environment. I would also like to thanks Mr. Naeem Sultan, Manager, LC Branch, PTCL for providing on and off assistance for the completion of this report.

I am also very grateful to Ms. Khushnood Zara, Assistant Manager, CWIP & FA and MR. Shoaib Qureshi, Assistant Manager, LC Branch for helping me & providing up-to-date information regarding this analysis while completing this report.

Last but not the least I would like to thanks Mr. Zafar Mueen Nasir, Head of Business Studies (P.I.D.E), for providing me the opportunity to work with PTCL.

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TABLE OF CONTENTS

Company Background...............................................................................................................................................................7

Introduction Of Ptcl................................................................................................................................................................... 8

Company Profile....................................................................................................................................................................... 10

Business Operations............................................................................................................................................................... 14

SWOT Analysis.......................................................................................................................................................................... 14

Work Description.....................................................................................................................................................................18

Fixed Asset:................................................................................................................................................................................. 23

Business Capital Expenditures:.........................................................................................................................................24

Admin Capital Expenditures:..............................................................................................................................................24

LC Branch:................................................................................................................................................................................... 27

Duties Performed in FA & LC departments:.................................................................................................................33

Conclusion................................................................................................................................................................................... 35

Bibliography............................................................................................................................................................................... 36

Annexure A – Abbreviations Used....................................................................................................................................37

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TABLE OF FIGURES

Figure 1: CATEGORIES OF shareholders......................................................................................................................11

Figure 2: ORGANIZATIONAL STRUCTURE – HEADQUARTERS...........................................................................17

Figure 3: FINANCE ORGANISATIONAL STRUCTURE (HEADQUARTERS)......................................................18

Figure 4: Flow of activities...................................................................................................................................................21

Figure 5: Flow of activities...................................................................................................................................................22

Figure 6: Deperciation table................................................................................................................................................27

Figure 7: Cycle of LC branch................................................................................................................................................29

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COMPANY BACKGROUND

From the beginnings of Posts & Telegraph Department in 1947 and establishment of Pakistan Telephone & Telegraph Department in 1962, PTCL has been a major player in telecommunication in Pakistan. Despite having established a network of enormous size, PTCL workings and policies have attracted regular criticism from other smaller operators and the civil society of Pakistan. Pakistan Telecommunication Corporation (PTC) took over operations and functions from Pakistan Telephone and Telegraph Department under Pakistan Telecommunication Corporation Act 1991. This coincided with the Government's competitive policy, encouraging private sector participation and resulting in award of licenses for cellular, card-operated pay-phones, paging and, lately, data communication services. Pursuing a progressive policy, the Government in 1991, announced its plans to privatize PTCL, and in 1994 issued six million vouchers exchangeable into 600 million shares of the would-be PTCL in two separate placements. Each had a par value of Rs. 10 per share. These vouchers were converted into PTCL shares in mid-1996. In 1995, Pakistan Telecommunication (Reorganization) Ordinance formed the basis for PTCL monopoly over basic telephony in the country. The provisions of the Ordinance were lent permanence in October 1996 through Pakistan Telecommunication (Reorganization) Act. The same year, Pakistan Telecommunication Company Limited was formed and listed on all stock exchanges of Pakistan. PTCL launched its mobile and data services subsidiaries in 2001 by the name of Ufone and PakNet respectively. None of the brands made it to the top slots in the respective competitions. Lately, however, Ufone had increased its market share in the cellular sector. The PakNet brand has effectively dissolved over the period of time. The first major product initiative taken towards a changing PTCL during the year 2006-07, was the launch of PTCL’s Broadband service. PTCL achieved unprecedented success in Broadband service as it added over 10,000 customers within the first 120 days of its launch. As telecommunication monopolies head towards an imminent end, services and infrastructure providers are set to face even bigger challenges. The post-monopoly era came with Pakistan’s Liberalization in Telecommunication in January 2003. On the Government level, a comprehensive liberalization policy for telecom sector is in the offering.

In April 2006, Emirates Telecommunication Corporation, which is commonly known as Etisalat, has assumed management control of Pakistan Telecommunication Corporation Ltd – part of the $2.6bn deal to buy a 26% stake in PTCL There were three participants in the bet for privatization of PTCL. Etisalat, a Dubai based company was able to get the shares with a large margin in the bet. When Government was going to privatize the company there was country wide protest and strike by PTCL workers. They even disrupted Phone lines of some big Government institutions like Punjab University Lahore and many lines of public sector were also blocked. Military had to take over the management of all the Exchanges in the country. They arrested many workers and put them behind bars. The contention between Government and employees ended with a 30% increase in the salaries of workers. There have been various changes in the company due to privatization. Such examples include the VSS (Voluntary Separation Scheme for its employees), ERP (SAP based), restructuring, B& CC (Billing and Customer Care Software)

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etc. Another seemingly minor change was change of brand identity (logo) that will present PTCL's new face after privatization, with greater focus on customer satisfaction and bringing about of new advancements in telecom for Pakistani consumers.

INTRODUCTION OF PTCL

Pakistan Telecommunication Company limited (PTCL) is the largest telecommunication service provider in Pakistan with employee strength of about 30,000 and 5.7 million customers. PTCL also continues to be the largest CDMA operator in the country with 0.8 million V-Phone customers. The company maintains a leading position in Pakistan as an Infrastructure Provider to the other telecom operators and corporate customer of the country. The company provides a variety of up-to-date home user, corporate and wholesale communication services e.g. telephony, internet, television, video conferencing etc. The company structure is spread over the entire country which facilitates the company in providing value added services to the customers in every part of Pakistan. Geographically the company is divided into: Headquarters, North, South, Central, and West Zones and functionally in Commercial, HR & Admin, Corporate Development, Finance, Operations, Technical departments. The hierarchy of the company comprises of the following cadres: President and CEO, Senior Executive Vice President, Executive Vice President, General Manager, Senior Manager, Manager, Specialist, Management Trainee and Non Management Employee. A new shift in the ownership of the company has been taken in April 2006, when Emirates Telecommunication Corporation which is commonly known as Etisalat, assumed management control of PTCL –part of the $2.6 billion deal to buy a 26% stake in PTCL .The successful privatization of PTCL and consequently Ufone, is hailed in a new era for telecommunication in Pakistan.

PTCL (Pakistan Telecommunication Company Limited) is all set to redefine the established boundaries of the telecommunication market and is shifting the productivity frontier to new heights. Today, for millions of people, we demand instant access to new products and ideas. More importantly we want them for their better living standards with increased values in this ever-shrinking globe of ours. We are setting free the spirit of innovation. PTCL is the largest telecommunication service provider in Pakistan, offering fixed line, mobile and internet services throughout the country. PTCL is going to be your first choice in the future as well, just as it has been over the past six decades. PTCL delivers fixed line services to over 90 percent of current residential and corporate customers in Pakistan. In 2006, the company achieved significant growth in its fixed line business especially through wireless local loop technology.

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PTCL SUBSIDIARY

Ufone (Pakistan Telecom Mobile Ltd) a wholly-owned subsidiary of PTCL commenced its operations on 29th January 2001 as a GSM 900 service provider. Since the outset, it has expanded its coverage and customer base at a rapid pace and established itself as one of the leading cellular service providers in Pakistan. Ufone is now considered to be one of the most active, aggressive and innovative players in the mobile sector of Pakistan.

The growth of the cellular industry is a direct result of the successful implementation of the telecom deregulation and cellular mobile policy by the Ministry of IT and Telecommunications (MOIT&T) and the support, guidance and timely enforcement of regulatory process by the Pakistan Telecommunication Authority (PTA).

PRIVATIZATION

The growth of the cellular sector in Pakistan can also be attributable to good governance policies of the government of Pakistan and the Privatization Commission. In April 2006, Emirates Telecommunication Corporation, which is commonly known as Etisalat, has assumed management control of Pakistan Telecommunication Corporation Ltd – part of the $2.6bn deal to buy a 26% stake in PTCL. The successful privatization of PTCL, and consequently Ufone, is hailed as ushering in a new era for telecommunications in Pakistan.

Now, under the management of Etisalat, Ufone will concentrate on customer needs and benefits and is more determined than ever to be the leading cellular player in the market. Ufone has been known for providing superb propositions and quality service to its customers. With the new expected investment, Ufone can now aggressively expand its network coverage.

VISION OF PTCL

To be the leading Information and Communication Technology Service Provider in the region by achieving customer satisfaction and maximizing shareholders' value'.

The future is unfolding around us. In times to come, we will be the link that allows global communication. We are striving towards mobilizing the world for the future. By becoming partners in innovation, we are ready to shape a future that offers telecom services that bring us closer.

MISSION OF PTCL

To achieve our vision by having: An organizational environment that fosters professionalism, motivation and quality An environment that is cost effective and quality conscious

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Services that are based on the most optimum technology "Quality" and "Time" conscious customer service Sustained growth in earnings and profitability

CORE VALUES OF PTCL

Professional Integrity Customer Satisfaction Teamwork Company Loyalty

CATEGORIES OF SHAREHOLDERS

As at June 30, 2009

S.NO. PARTICULAR SHAREHOLDERS SHAREHOLDING PERCENTAGE1 DIRECTOR, CEO & CHILDREN 5 5 - 2 NIT & ICP 9 16,961,787 0.3300 3 BANKS, DFI & NBFI 39 75,781,633 1.5000 4 INSURANCE COMPANIES 20 6,613,946 0.1300 5 MODARBA & MUTUAL FUNDS 59 113,828,026 2.2300 6 PUBLIC SECTOR Cos. & CORP. 1 54,762,639 1.0700 7 GENERAL PUBLIC (LOCAL) 44,271 98,139,481 1.9200 8 GENERAL PUBLIC (FOREIGN) 393 551,000 0.0100 9 OTHERS 301 82,595,735 1.6200

10 GOVERNMENT OF PAKISTAN 5 3,172,666,493 62.2100 11 FOREIGN COMPANIES 79 152,099,255 2.9800 12 HOLDING MORE THEN 10 2 1,326,000,000 26.0000

TOTAL 45,184 5,100,000,000 100

Figure 1: CATEGORIES OF shareholders

(SOURCE: ANNUAL REPORT OF PTCL JUNE, 2009)

COMPANY PROFILE

PTCL is all set to redefine the established boundaries of the telecommunication market and is shifting the productivity frontier to new heights. Today, for millions of people, we demand instant access to new products and ideas. More importantly we want them for their better living standards with increased values in this ever-shrinking globe of ours. We are setting free the spirit of innovation.

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BUSINESS & CORPORATE USERS:

For clear communication the first choice of business circles is PTCL telephone for local, nationwide and international calling. Today businesses can have 10-100 lines with modern day services to meet their needs. Now you get options like Caller-ID, call-forwarding, call-waiting, Call Barring, to name a few.

OTHER BUSINESS SPECIFIC SERVICES INCLUDE:

0800-Toll free number, 0900-Preminum rate services, VPN-Virtual Private Network, Audio Conference Service, Digital Cross Connect (DXX), ISDN (Policy), Teleplus(ISDN/BRI), Digital Phone Facilities/ Modification Charges, UAN, UIN. NATIONWIDE INFRASTRUCTURE:

PTCL has the largest Copper infrastructure spread over every city, town and village of Pakistan with over million installed lines.

The network has over 6 million PSTN lines installed across Pakistan with more than 3 million working. Furthermore installed capacity of broadband is more than 0.6 million ports spread across 414 cities and town of the country

NATIONAL LONG-HAUL CORE NETWORK:

PTCL has over 10,400 km fully redundant, fiber optics DWDM backbone network. It connects over 840 cities and towns with 270G bandwidth. CARRIERS SERVICES

As carriers-carrier, we provide the core infrastructure services to the cellular, LDIs, Local Loop operators, ISPs, Call Centers and payphone operators.

PTCL provide all carrier services, right from inter-connects and telehousing to DPLC and IPLC connectivity. Our interconnect services are provided from our 3200 exchange locations that connect your carriers networks domestically, in addition to providing IPLC bandwidths to connect you internationally through our four international gateways and SEA-ME-WE3 and SEA-ME-WE4 international submarine, also IMWE submarine cable will be added by the end of the year.

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Furthermore to provide connectivity to operators in the extreme remote areas of the country, PTCL launched its state of the art satellite service (Skylink).

PTCL satellite service (Skylink) is provided using the Intelsat Satellite System, an undisputed leader in satellite communications. WHITE LABEL SERVICES:

PTCL customers can now provide uninterrupted services to their clients without undertaking large scale investment in infrastructure or developing expertise in their own network.

PTCL White Label Services are focused on speed and simplicity at minimal capex. This will enable our customer to offer their own branded WLL, DSL etc to customers nationally, together with an array of key support services.

EVO WIRELESS BROADBAND

PTCL EVO 3G Wireless Broadband is Pakistan’s fastest wireless internet which offers its customers – “superior 3G internet experience”. Evo Wireless Broadband is enabling the wireless broadband revolution in Pakistan with flexibility to roam freely like never before. PTCL Evo has revolutionized the way people connect to the internet by offering true mobility. PTCL Evo is currently offering its services in more than 18 cities on EV-DO technology offering speeds up to 3.1 Mbps. PTCL Evo gives its customers the advantage of nationwide roaming with seamless internet connectivity across Pakistan. The coverage of Evo is not limited to 18 cities as Evo customers can enjoy CDMA-1X data rates of up to 153.6 Kbps at more than 1000 destinations across Pakistan.

The portable, small & stylish Evo USB device is a multipurpose device which not only delivers fastest wireless internet but can also be used for Voice Calls by inserting a Vfone SIM and for data storage by inserting a standard Micro SD Card BROADBAND PAKISTAN

PTCL Broadband is the largest and the fastest growing Broadband service in Pakistan. Since its launch on 19th May 2007, PTCL has acquired approximately 432,821 Broadband customers in over 414 cities and towns across Pakistan, leading the proliferation and awareness of Broadband services across Pakistan.

With its entry in this market segment, PTCL opened up a broadband culture in Pakistan, where till a couple of years back there was very little awareness in the country about broadband & high speed internet services. PTCL made the broadband technology affordable by lowering the barriers to entry, by geographically bringing the service within the reach of a common user across Pakistan and by continuous improvements in customer care for the service.

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A unique offer that makes PTCL’s Broadband unmatchable is special packages for the student segment, one time Installation charges of Rs. 500. The installation charges are applicable from July 1,2010, Availability of Wifi Modems, FREE dial up service for its Broadband customers and FREE access to movies, music, classical Pakistani dramas, cricket matches, online gaming, educational and religious content on PTCL’s entertainment portal ‘BUZZ’, (the access to PTCL Buzz & Gaming lounge is exclusive to PTCL Broadband subscribers). PTCL also offers multiple FREE personalized e-mail accounts exclusively to its broadband users. In addition, PTCL recently doubled its broadband speed for all its existing and new customers at the same price, making 1 MB as its minimum offered speed. IPTV SERVICE (SMART TV):

PTCL SMART TV Using its state of the art Broadband network, PTCL entered the media sector on 14th August 2008, by launching a digital interactive television service for the first time in Pakistan. Employing the IPTV (Internet Protocol TV) technology, PTCL brought Pakistan in the list of a few countries across the globe that offers this state of the art interactive TV service to its subscribers.

Branded under ‘PTCL Smart Line’, the service includes Interactive Television, Broadband and voice telephony all at the same time on PTCL’s telephone line. Besides offering the highest digital quality TV picture, the most revolutionary section of this offering is the ability to ‘rewind’ and ‘pause’ live TV channels through TSTV (Time Shift Television) feature, the ability to block / unblock any TV channel for parental lock and the ability to search through video on demand content. Currently PTCL Smart TV offers its viewers 125 live channels and over 500 Movie titles through its Videoon Demand service’. The service is available in 16 cities including Karachi - Lahore - Islamabad - Rawalpindi - Gujranwala - Faisalabad - Peshawar - Sialkot - Multan - Sargodha - Jehlum - Wah Cantt - Taxila - Hyderabad - Abbotaba and Sukkur however it is planned to be expanded to all the major cities and towns across Pakistan during the year 2010.

PAK INTERNET EXCHANGE:

It is the only IP enabled network with 40 (number increase) point-of-presences (POP) in 26 cities. The existing 16G active bandwidth is used for internet, data, and video and video-conferencing services and for voice of LDI. All PTCL Broadband users, narrow band users, corporate, mobile operators, and ISP are connected to this network.

V-FONE:

PTCL also continues to be the largest CDMA operator in the country with approximately 1.25 million V-fone customers.

It offers fixed wireless telephone for your homes & business. With CDMA2000 1X technology, ours is the largest WLL network with a capacity of 2.6M, covering over 10,000

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urban & rural areas. The network is already enabled for Voice, Dialup-Internet access (153.6kbps) and EVDO Broadband.

BUSINESS OPERATIONS

SWOT ANALYSIS

The SWOT Analysis is one of several strategic planning tools that are utilized by businesses and other organizations to ensure that there is a clear objective defined for the project or venture, and that all factors related to the effort, both positive and negative, are identified and addressed. In order to accomplish this task, the process of SWOT involves four areas of consideration: Strengths, Weaknesses, Opportunities, and Threats. It should be noted that when identifying and classifying relevant factors, the focus is not just on internal matters but also external components that could impact the success of the project.

STRENGTH

It is the largest and oldest telecommunication company of Pakistan. PTCL enjoy monopoly because PTCL has no competitor in the market Good market reputation in stock exchange Efficient chain of command. There is clarity of “who answer to whom. Another strength of PTCL is to offer a round the clock service PTCL has Strong research and development department. Providing landline services in the country but a Subsidiary cellular company is also

providing services in Pakistan. Nationwide reach Largest operational network and infrastructure 24/7 service call centre to its customers to ensure their satisfaction. State of the Art International Gateway Exchanges

WEAKNESS

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Lack of customer focus Over employment & low productivity. Implementation of rules and policies are not assured Political influence regarding hiring of employees. Employee skill inconsistency. Very low employee morale. Low Quality of Service. Customer retention. Political Instability, Security issues. lack of effective control on its employees Service of PTCL v-wireless is very poor. No proper maintenance of the installing connections. More Cable Breaks.

OPPORTUNITIES

Huge market size. Local handset manufacturing. Making technology accessible to all (e.g. broadband). Adopt latest technologies. Wateen & Wi-tribe due to their advance technologies can impose a potential opportunity

on PTCL Broadband. Removal of international trade barriers. Scope for efficient/cost effective operations. Capture broad band internet service market. Employees training programs. Cost effective operations

THREATS

Exposure to market competition Migration to Cellular Networks Reduction in International Settlement Rates Inconsistent policies of governments regarding the nationalization Ability to retain qualified professionals

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ORGANIZATIONAL STRUCTURE – HEADQUARTERS

Figure 2: ORGANIZATIONAL STRUCTURE – HEADQUARTERS

SOURCE: PTCL's FINANCE & ACCOUNTING MANUAL

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Board of Directors

President & CEO

SEVP HR & A

SEVP FINANCE

SEVP COMMER

CIAL

SEVP COORPOR

ATE

SEVP TECHNICAL

SEVP OPERATIO

NS

CHIEF INFORMA

TION OFFICER

SEVP BUSINESS

ZONE NORTH

SEVPBUSINESS

ZONE SOUTH

FINANCE ORGANISATIONAL STRUCTURE (HEADQUARTERS)

Figure 3: FINANCE ORGANISATIONAL STRUCTURE (HEADQUARTERS)

SOURCE: PTCL's FINANCE & ACCOUNTING MANUAL

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SEVP FINANCE

EVP RevenueEVP Financial systems and development

EVP Financial planning and

treasuary

EVP Account services

GM Asset Management

SM CWIP & FA SM corporate Tax

SM control payments

SM Accounts store SM Payroll

WORK DESCRIPTION

Finance is one of the very basic and most important activities of any business. The

finance department plays the most critical role in determining the long-term objectives and

evaluating the feasibility of the business. As one of the four basic functional heads of the

Company the Member Finance generally reports directly to the Chairman. The financial

activities of PTCL have been split up into three major branches Finance, Accounts and Project

Finance with a separate head of each.

I worked as an internee in PTCL for about 6 weeks which start from July 15, 2010 to 30

August 30, 2010. During my internship I worked in Asset Management department which

comes under finance wing. My internship work is divided into two parts. First one is the

orientation which consists of two weeks in CWIP & Fixed Asset and the second part consists of

the task which I performed in the LC (Letter of Credit) Branch. During my internship I also

learn bit of SAP that is the database used by the PTCL.

SAP:

To record transactions software is used by PTCL named “SAP”. It was implemented after

privatization in PTCL. It is internationally recognized software used in most of the organizations.

There were some authorized transactions related to each individual related to each individual

employee and was only authorized to specific user in the department. I used to work with some

specific T-codes for learning of the transactions done in the software. SAP has been used as data

entry system and also for the day to day transactions related to cost and profit centers.

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SOME OF THE T- CODES USED IN SAP BY PTCL

CJI3 - Actual Costs/Revenues

CJ88 - Individual Processing

S_ALR_87012004 - Total Depreciation

AR02 - Asset History Sheet

FAGLB03 - Display Balances (New)

FAGLL03 - Display/Change Items (New)

LSMW-Legacy System Migration Workbench

CN41N-Project Info System

CN43N-Project Info System-WBSE initial screen

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CWIP

Flow of activities

Figure 4: Flow of activities

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Technical wing(Feasibility

Report)

Cap. Budgeting & FA

(Financial Analysis)

BOD Review Reports

PP & capitalization (Creation of

project Structure in SAP)

Region Development (Physical and

financial completion of

Assets)

WBSE (WORK BREAKDOWN STRUCTURAL ELEMENT)

WBSE is the project builder in SAP. There are five levels of project creation.

Figure 5: Flow of activities

At first level Project number created by project planning and capitalization. Then a Network is

defined which is a seven digit numeric code. It is created by the Project Director. In level 3 a

region code is defined. In level 4 an asset class is created in SAP. It is also created by project

planning and capitalization. At last level activity is generated by region itself.

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N10004

Network defined by PD7005491

Region definedN10004.051

Mapped Asset Class N10004.051.182

Generated Activities 7005491 0010

ACCOUNTING ENTRIES:

Step 1

a) Overhead Booking:

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESCC Element

BankXXX

XXX

b) Cash

In case of local procurement

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEES7621001

BankXXX

XXX

In case of foreign procurement

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESVendor

Bank(payment to vendor)

XXXXXX

7621001 (Cash consumption)2201011(GRIR)

(GRN done by PD)

XXXXXX

2201011(GRIR)Vendor

(Posting of invoices by manager LC)

XXXXXX

c) STORE:

At the time of issuance

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEES7621005

StoreXXX

XXX

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Step 2:

Overhead Allocation:

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESM2000999(9 GL)

CC 8 GLXXX

XXXProject

M2000999(9 GL)XXX

XXX

Step 3:

a) Settlement

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESCWIP Actual GLCash(7621001)Store(7621005)

Overhead

XXXXXXXXX

XXX

b) Capitalization of CWIP

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESAsset (Class of asset)

CWIP (Class of asset)(Capitalization of CWIP)

XXXXXX

FIXED ASSET:

All Property, Plant and Equipment shall be recorded on completion of Capital Work in

Progress. Property, Plant and Equipment that qualifies for recognition as an asset shall initially

be recorded at its cost. Those all items that are capitalized as Property, Plant and Equipment shall

be included in the FAR. An asset code shall be generated from the FAR and the asset shall be

tagged accordingly.

Asset shall be stated at cost less accumulated depreciation and impairment loss, if any.

Freehold land and capital work in progress are stated at cost less any identified impairment loss.

Cost includes direct cost, related overheads, mark up and interest.

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BUSINESS CAPITAL EXPENDITURES:

INSTALLATION OF NEW EXCHANGES:

Expenses of installation of new Exchanges are the major capital expense of PTCL because PTCL purchases the new telephone exchanges from France, Italy, Germany and China. Each exchange having different capacity and due which each Engineer should has to be trained accordingly so expenses rises on purchasing of new Telephone Exchanges. This is the main expense of PTCL.

EXTENSION OF EXISTING EXCHANGES:

The extension of the existing exchanges is the dire need as the density of the population is increasing day by day and in order to fulfill the basic communication and fill the communication gap PTCL has to extend its normal Telephone Exchanges in accordance with the demand and per paid connection. So PTCL sustain heavy expenses on the extension of exchanges.

ADMIN CAPITAL EXPENDITURES:

INTERNAL AUDIT AND TECHNICAL INSPECTION

The PTCL has sustained huge amount in context of internal audit both Accounts and Technical from various agencies. For example M/s A.F. Ferguson & Co. and Ford Rhodes Sidat Hyder & Co. conduct both internal audit and external audit and payment made to auditors in the expenses of the company.

ADMINISTRATION AND CONTROL EXPENSES

Sometime in the best interest of company, some expenses could be occurred for example if there is need of induction of a financial analyst in one region or if there is need of an Engineer then transfer and posting order can be issued and traveling and training expenses could be realized to employees.

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SALARIES OF STAFF

The monthly salary of the staff is rest with the approval of PTCL H.Q Islamabad. PTCL is spending lot of amount on the salaries.

PRINTING AND STATIONARY CHARGES

On printing of stationery PTCL spends reasonable amount.

CONTRIBUTION IN PROVIDENT FUND

There is also contribution in the provident fund from the PTCL.

DEPRECIATION:

Depreciation is the systematic allocation of the depreciable amount of an asset over its

Useful life. Each of assets has different life time and different deprecation rate at which charge.

These are rates are pre-determined and fixed.

Depreciation / amortization of an asset begins when it is capitalized, i.e. when it is in the

location and condition necessary for it to be capable of operating in the manner intended by the

company. Thus, the costs incurred shall be depreciated / amortized over the life of the asset at the

rates of depreciation / amortization applicable to the class of asset to which the asset belongs.

Depreciation on Property, Plant and Equipment shall be charged to the profit and loss Account

using the straight line method so as to write off the depreciable cost of the assets over their

estimated useful lives at the rates given below.

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Class of AssetDepreciation rate %

per annumLand - Freehold -Land - Leasehold 1-3.3Buildings – Freehold and leasehold 2.5Lines and wires 7Apparatus, plant and equipment 10Office equipment 10Furniture and fixtures 10Vehicles 20

Figure 6: Depreciation table

SOURCE: PTCL's FINANCE & ACCOUNTING MANUAL

ACCOUNTING ENTRIES:

Step 5:

When Depreciation is chargedACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESDepreciation Expenses

Accumulated Depreciation (Recording depreciation of assets)

XXXXXX

Step 6:a) On disposal of assets

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESProvision for Loss on Disposal of Assets

Loss on Disposal of Assets(To reverse the provision for loss on disposal of assets at the time of actual disposal of write off cases)

XXXXXX

Accumulated DepreciationLoss on Disposal of AssetBank / Cash Accounts

Asset (Original cost)Gain on Disposal of Asset

(Disposal of tangible assets and recording of gain / loss on disposal)

XXXXXXXXX

XXXXXX

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b) On write off of assets

ACCOUNT HEAD DEBIT RUPEES CREDIT RUPEESLoss on Disposal of Assets

Provision For Loss on Disposal of Assets(To record the provision for loss ondisposal of assets at the time of marking assets as write off cases)

XXXXXX

LC BRANCH:

Letter of Credit (LC) is a written and conditional undertaking by a bank on the behalf of applicant to the beneficiary to pay a certain amount at a certain date; if the stipulated terms and conditions are complied with.

The process of International Trade starts with asking of importer to its bank for LC. Then importer’s bank will be called as issuing bank. The issuing bank sends the LC to applicant bank. A bank that receives the LC is called an advising bank because after receiving the LC, it performs the LC advising function. A cover letter is prepared and is sent to the beneficiary of the LC, advising him his LC has reached desired bank and he should collect it immediately. A copy of the LC is sent along with the letter.

The main work of LC department is to make payments to its vender. The primary financial tool used in most import/export transactions is the Letter of Credit. Letters of Credit are commonly used to reduce credit risk to sellers in both domestic and international sales arrangements. By having a bank issue a letter of credit, in essence, one may be substituting the bank's credit worthiness for that of the customer. Letters of Credit are also used domestically when dealing with a small or new business.

LC means an unconditional irrevocable Letter of Credit opened by Applicant at offshore supplier/contractor’s cost as specifies in the contract.

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Cycle of LC branch

Figure 7: Cycle of LC branch

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Procurement department (Contract)

LC Establishment

Delivery (Local,

Foreign)

Custom Clearance

Payment (Invoice, CD)

Equipment at site

PROCUREMENT DEPARTMENT

The purchasing department of PTCL is known as Procurement department. A Procurement Process is a method by which items are purchased from external

suppliers.The procurement process does not end at the commissioning or contract award stage, but

spans the entire life cycle of the product or service from inception and design through to contract management and disposal of any redundant assets.

After the successful bid the procurement department issues LOI to the supplier. LOI means letter of intent issued to offshore supplier communicating formal acceptance by PTCL of the bid.

There are three types of contracts.

Payments shall be made after the delivery of goods or services in direct purchase.In case of supply Contracts payments shall be made according to the terms of the

contract, after full documentation of the shipment. In case of Turnkey projects contracts will be completely outsourced to a

contractor. In turnkey projects / contracts, it is the contractor who is Responsible for the supply of materials, installation, testing and commissioning of Equipment. On completion of the project / contract, the equipment or site is delivered to the company by the contractor.

Mostly 60% payments are made on delivery of good/services, remaining 30% payment on installation & test and the remaining 10% after commissioning/complete run, after satisfaction.

LC ESTABLISHMENT

Manager LC shall open an LC on receipt of approved PO from the Procurement orRelevant department authorized to make procurements.

A SAP PO is generated in software named “SAP” which is used by the PTCL. From the list of approved banks a bank is selected by the Manager and shall prepare the LC

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Direct Purchases

Supply Contracts

Turnkey contracts

Opening Form on the basis of details mentioned in the PO. In PTCL Bank ALFALAH & ALLIED BANK LIMITED are mostly used for their payments. Manager LC shall forward the LC Opening Form along with the PO to the SM – Fixed Assets & CWIP who is also the second authorized signatory for approval. Authorized signatories shall ensure that LC Opening Form is in agreement with the PO. Payment of invoices and endorsement of the documents are the responsibility of LC department. In most of the cases LC opening charges are paid by the LC branch and all other expenses are paid by the vender.

DELIVERY

The delivery/installation of the Goods/equipment shall be completed by the Contractor in accordance with the terms specified by PTCL in a contract. Condition of the goods shall remain at the risk of the Contractor until the system is commissioned into the service and the Provisional Acceptance Certificate (PAC) is issued.

Normally no extension will be granted for the supply of Goods and contrary to the schedules and performance of services. However, extension in special cases may be granted by E.V.P PTCL, subject to justification by the Contractor. There are two portions of delivery

In case of Local Portion the L/C department will receive GRN that will be generated by end user then the payment is released to the contractor. But in case of Foreign Portion the L/C department will release payment first then it will GRN. Goods Receipt Note (GRN) is issued by the consignee/Project Director/authorized representative certifying receipt of equipment/goods in good order and condition.

PAYMENT:

Manager Payments shall receive the vendor invoice and related documents from the bank for acceptance. After verification the Manager Payments shall forward a remittance request to Senior Manager Fixed Assets & CWIP Control for approval. After approval, the Manager Payments shall forward the remittance request to the Senior Manager Treasury.Mostly 60% payment on delivery of good/services, remaining 30% payment on installation & test and the remaining 10% after commissioning/complete run, after satisfaction i.e., normally after 1 year.

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Local Portion

Foreign Portion

In payments different parties are involved they are called THIRD PARTY. The Third party is the BANK. Three banks involves in this process, these are:

Negotiator Bank: The bank of contractor/supplier/vendor is called the negotiator Bank.

Intermediately Bank: The Bank between the Vendor’s bank and Applicant bank is Intermediate bank; there role is coordination between them.

Local Bank: The PTCL bank is the local bank, through which PTCL make contracts with vendors and from whom payments is made to vendors.

CUSTOM CLEARANCE

First, the invoices are received from the vendor. LC Department responsible to pay for the outstanding invoices and payments are made through Bank. For the purpose of fulfillment of payment, Bank endorsed the invoices and other legal documents. After receiving the invoices, the clearing agent clears the consignment and also provides the details of charges as well as goods delivered. G.M (M & L) provides the information to Asset Management after vetting out rates and duties and this needs to be done within 7 days of the clearance of consignment. Asset Management assess the Custom duty after verifying the conditions that was mentioned in SAP P.O. Asset Management transfer the funds from National Bank to Bank Alfalah against the assessed value of the duties on the assets. Custom duties are paid in the form of Demand Draft (D. D) to the authorities.

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Negotiator Bank

Intermediately Bank

Local Bank

EQUIPMENT AT SITE

There are two types of foreign shipments through which the consignment is delivered at site which are,

If the shipment is by Sea then a copy of documents vendor must send before One week and if the shipment is by Air then vendor must send before one day.These documents send by Vendor’s Bank to Local PTCL’s Bank which then gives to PTCL but the payment made by PTCL through L/C banks after the Original Documents received.

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Invoice Received from the vendor

Payment of invoices & endorsement through

Bank by LC department

Bank endorsed Invoice & other documents

M & L request the Assets Management for

payment of custom

G.M M & L provides the details of duties other

charges to Assets Management along with the GD after vetting of rates &

duties within 7 days of clearance of consignments

Assessment of custom duty after verification of conditions in SAP P.O by

Assets Management

Assessment of custom duty after verification of conditions in SAP P.O by

Assets Management

Transfer of funds from National Bank to Bank Alfalah at the assessed

values of duties by Assets Management

Payment of custom duties to authorities

through DD

By Sea

By Air

CONCLUSION

Overall PTCL still behaves as a monopoly

PTCL needs innovative service offerings to its customers

PTCL should also encourage the Billing On line system that each and every

customer should have to pay his/her bill on line.

The system of E-PAYMENT which although exist in PTCL finance system but

there is still a need of improving this facility.

PTCL started introducing new and innovative services and products after its

Privatization of 26% shares to Etisalat.

Complaint Department is not working properly so that department should be made

efficient.

They are providing the services to their customer by lowering the prices and they

are the only ones who are providing the services at such a large scale.

FEEL THE DIFFERENCE is the slogan of PTCL. They are now providing the

most innovative and advanced technologies to their customers.

The image of PTCL being leading Telecom provider is not good in the eyes of

common customer especially there are lot of complaints about including the bogus

local calls in the monthly bills of various customers. PTCL should also provide the

detail of local calls made from any Land Line Number which would be provided

in Micro level to the customer.

Faulty Telephone connection should be Fault Free within 24 hours in order to

maximize the Revenue, as Revenue of PTCL should sacrifice at the cost of Faulty

Telephone.

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BIBLIOGRAPHY

Mr. Naeem, Sultan Manager LC DepartmentMr. Amir, Assistant ManagerMr. Akhlaq, Assistant ManagerMs Zara, Assistant ManagerMr. Shoaib, Assistant ManagerMr. Mobeen, Assistant ManagerCompany’s website - www.ptcl.com.pkPTCL's FINANCE & ACCOUNTING MANUALPakistan Telecommunication Company Limited, (2009). Annual Report, Islamabad.www.Google.comKse.comPTA Reports

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ANNEXURE A – ABBREVIATIONS USED

CIO Chief Information OfficerCWIP Capital Work In ProgressDepr. DepreciationEVP Executive Vice PresidentFA Fixed AssetGM General ManagerGRN Goods Received NoteHQ HeadquartersHR & A Human Resource and AdministrationLC Letter of CreditPAT Provisional Acceptance Testing FormPCR Project Completion ReportPD Project DirectorSE Senior EngineerSEVP Senior Executive Vice PresidentSM Senior ManagerSM CWIP & FA Senior Manager Capital Work In Process &

Fixed Asset

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