Mobilink Islamabad Report

1.1 Background of Study During the early weeks of internship, working environment procedures & relevant written material of the organization were observed, but later on office work was also done with the help & guidance provided by supervisor. It was found that Mobilink is following fabulous systems, softwares, technology & procedures. An important fact is that Mobilink has the cream of best people among all but still there are some grey areas which need to be whitened in order to be the “Best of the Bests” among all others. SWOT analysis of the company is done discovering the Strengths, Weaknesses, Opportunities & Threats 1.2 Purpose of Study Internship in Mobilink was done with the perspective of studying the financial processes, procedures, and financial position of Mobilink.

1.3 Scope of Work Basic work in admin-finance section was to process all the bills or invoices of North region (Islamabad, Rawalpindi & Jhelum).The accounting & finance department sends invoices to the administration department for processing. Admin Finance is the initiator in processing those invoices. Using Mobilink’s software, payment authorization form and service completion certificate are made. So the scope of work was limited to issuing payment authorization forms and certificate of service completion.

1.4 Methodology of Research The research techniques that are adopted for the purpose of this study are as follows:

1.4.1 Primary Data Collection 1. Interviews 2. Personal Observations

Interviews include people from the top management & people from middle and lower management.

1.4.2 Secondary Data Collection 1Internet search 2Newspapers 3References books and other literature

1.4.3 Limitations One of the major limitations while carrying out this research was the lack of cooperation on the part of the management of the Mobilink in providing me the data regarding the company and its policies.

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2.1 OVERALL TELECOM SECTOR IN PAKISTAN

Highly Regulated -Only one operator, - Offering fixed line services

1947 – 1990

Fixed Line - Formation of PTCL - Issuance of 2 cellular - AMPS licences - Mobilink became

third operator & 1st GSM operator in Pakistan - (1994) - Calling party pays regime introduced - Entry of 4th cellular operator in 2001

High Growth of - Telecom sector deregulated which ends PTCL’s monopoly - Paktel acquires GSM license becoming the 3rd GSM operator - New LDI & cellular licenses awarded - Warid & Telenor enter the sector in 2005 - Activation taxes reduced in 2005

1991-2002 2003-Present (Source: PTA, 2008)

(Pakistan Telecom Sector, n.d.). Telecom sector is playing a pivotal role in the economy of Pakistan in terms of providing employment, contribution to national exchequer through taxes and attracting foreign investment in the country. In the liberalized environment, telecom share in GDP of Pakistan has increased to 1.9% from mere 1.5% three years back. During Fiscal Year 2004-05, Telecom sector attracted about US $ 207 million FDI which formed 32% of total FDI in the country. In the first quarter of the fiscal year (July-Sep 05), a total of US $ 91.4 million FDI came to the telecom sector. During the same period, telecom sector contributed about Rs. 6.5 billion in 3

the form of taxes to national exchequer (GST and activation tax). In the year 2004-05, telecom sector deposited over Rs. 28 billion in these taxes to the government of Pakistan. Telecom sector of Pakistan is growing at an astounding pace and surpassing all forecasts over the last few years. It is expected that cellular subscribers would cross 26 million mark in next year and teledensity would be doubled during the same time

2.1.1 Cellular Service Providers of Pakistan Cellular Service Provider Mobilink Ufone Telenor Warid Zong

Market Share 37% 21% 20% 17% 3% Source: (Pakistan Telecom Authority,2008)

The above table shows that Mobilink is the market leader in terms of market share. (Personal communication, July 09, 2008) revealed that the market share has been dropped significantly during the past 5 years due to changing market structure & increasing competition in the industry however Mobilink is still the leader in growth & profitability as evident through largest market captured.

2.1.2 The Market Share & Net Change in Subscribers, 2008 4

Figure 2.1

Figure 2.2

Source: PTA (2008)

Source: PTA (2008)

The above diagrams show that Mobilink has overall the highest market share of 38% but its customers’ growth has become relatively slow (Figure 2.2) as least number of subscribers opt it during May 2008.

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2.1.3 Pakistan’s telecom transformation, 2002-07 Pakistan’s recent telecom developments constitute a South Asian success story. From two million in 2002, the number of active mobile SIMs increased to 79 million by end 2007. This is a compound annual growth rate of 115 per cent a year, one of the highest in the world, and the highest in South Asia for that period. This article documents the achievements of the Pakistan telecom sector in 2002-07. The period covers the tenure of Major General Shahzada Alam Malik (retd.), who stepped down as the Chairman of the Pakistan Telecom Authority in July 2008 (Pakistan Telecom transformation 2002-07, 2008)

2.2 Role of Mobilink in Telecom Sector, A Subsidiary of Orascom Telecom

(Orascom Telecom, n.d.) states that Orascom Telecom or OTH was established in 1988 and has grown to become a major player in the telecommunication market. OTH is considered among the largest and most diversified network operators in the Middle East, Africa, and South Asia, and has acquired in early 2008 a license to operate mobile services in North Korea. Orascom Telecom is a leading mobile telecommunications company operating in six emerging markets having a population under license of 430 million with an average penetration of mobile telephony across all markets of approximately 40%.

2.2.1 Overall organization of Mobilink in Pakistan

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2.2.2 Pakistan Mobile Communications Ltd, Mobilink GSM (PMCL), A Synopsis Type

Private Limited Company

Genre

Subsidiary

Founder

Motorola USA

Area served 9000 cities, towns, and villages across Pakistan

Key people Khaliq, President and CEO

Zouhair A

Industry

Products Postpaid Indigo , Prepaid JAZZ, Mobilink PCO

Founded

1994

Headquarters IBC-I Building, F-8 Markaz Islamabad

Telecommunication

Owner Website

Naguib Sawiris

Parent

Orascom Telecom

Egypt

http://www.mobilinkgsm.com

Table 2.1

Source: Wikipedia (n.d.)

2.2.3 Mobilink Vision “To be the leading telecommunication services provider in Pakistan by offering innovative communication solutions for the customers while exceeding shareholder value and employee expectations” (Vision, n.d.) Mobilink is achieving its vision truly by expanding its network coverage to whole Pakistan hence becoming the market leader. It also offers innovative services like “value added services” & also fulfills its employee expectations by rewarding them time to time1.

2.2.4 Mission

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This was observed during internship program

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“To be the unmatchable mobile system of communications in Pakistan. It provides the best value to its customers, employees, business partners and shareholders.” (Mission, n.d.) Mobilink is still unmatchable as its coverage has expanded to “whole Pakistan” (personal communication, July 30, 2008) even in those areas of Paksitan where no technology exists, Mobilink reached there hence is unmatchable.

2.2.5 Mobilink's Values (Mobilink Vision & Values, n.d.) •

Total Customer Satisfaction

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Business Excellence

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Trust & Integrity

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Respect for People

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Corporate Social Responsibility

Mobilink has fair & ethical business values & these could be seen in employees of Mobilink in their offices.

2.3Organizational Structure of Mobilink Figure 2.3 Source: Mobilink (2008)

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The organizational structure of Mobilink represents well-organized system of control of operations as decentralization in decision making is seen. According to (personal communication, July 29, 2008) decentralization makes the operations more productive as employees are granted more power & autonomy so they feel delegated with authority.

2.4 Major Departments at Mobilink 9

(Find where you fit, n.d.)

2.4.1 Marketing Anticipates, and satisfies the customers’ communication needs. This includes consumer behavior research and translating this research into services and pricing plans. The Marketing team helps identify new business opportunities and develops plans to exploit these profitably. It also designs and implements brand strategies and communication plans

2.4.2 Sales Employs direct and indirect channels to augment sales. They are also responsible for extending post sales support to ensure customer convenience. The major functions within the sales division include: •

Indirect Sales

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Direct Sales

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Enterprise Solutions

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Corporate Sales

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Distribution

2.4.3 Customer Services It provides services to customers pre and post purchase to ensure that customer expectations are exceeded. It is the largest division in the company. The main sub areas of this division include: •

Customer services operations (front end)

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Customer services systems (contact center)

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Quality assurance, standardization & training

2.4.4 Finance Prepares and monitors financial plans and budgets. Arranges timely funding to meet business requirements and for maintaining accounting records. Sourcing and qualification of items and

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vendors and handling custom clearance of imported goods also falls into the responsibility areas of this division. The primary areas within the division are: •

Corporate accounting

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Treasury

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Procurement & contracts

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Planning, budgeting & reporting

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Finance logistics

2.4.5 Human Resources The human resources function at Mobilink comprises four main areas. The staffing and compensation function is responsible for meeting the company’s recruitment requirements along with developing, implementing and maintaining companywide compensation and incentive plans. Organizational Development is primarily responsible for initiatives tied to employee development and organizational capability enhancement. HR Operations looks after employee services and employee relations. The employee excellence function aims to enhance HR performance through value creating activities focusing on wellness and diversity management initiatives.

2.4.6 Administration Overseeing nationwide facilities management, the Administration department ensures that employees are provided with a comfortable working environment that is conducive to high performance. It is responsible for office build outs & maintenance, travel & accommodation, transport fleet management, janitorial services, event management, cafeteria services and office supplies.

2.5 Number of Customers in Mobilink Family According to (personal communication, July 29, 2008) Pakistan operator Mobilink has announced that it has achieved the milestone of 30 million customers. The company last reported 28.57 million subscribers at the end of September 2007.. This is the reason how it has attained 11

large market share, although it’s market share was falling but due to increasing customer base stability could be seen in the share & growth.

2.6 Total Number of Recruits According to (Personal communication, August 10, 2008) total number of employees in Mobilink is about 4500. So there is enough staff to run operations of a multi-national firm in Pakistan.

2.7 Mobilink in Islamabad Mobilink has divided the whole country into three regions i.e. North, South & Central region, for the sake of ease & convenience in its operations. Islamabad, Rawalpindi, Attock, Swat, Mardan & Jhelum fall under the North region. There is a regional director who coordinates all the functions performed in the North region. The head office of Mobilink was previously located at Kulsum Plaza, Blue Area Islamabad but it is now shifted to F-8 Markaz. Other offices in Islamabad are located at Redco Plaza, Roshan Plaza, F-8/3, F-8 Markaz, I-10/3, Beverly Center & Ally Plaza.

2.8 Departments at Mobilink Islamabad Offices Department Accounting & Finance Treasury & Budgeting Customer Services Sales Administration Human Resources

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Location in Islamabad IBC Building, F-8 Markaz IBC Building, F-8 Markaz Redco Plaza Blue Area Redco Plaza Blue Area F-8/3 F-8/3

3.1 PEST Analysis of Pakistan Telecom industry (PEST Analysis, n.d.) In PEST P stands for Political, E stands for economical, S stands for social and T stands for technological analysis of industry with respect to their environment. The organization's advertising surroundings is made up from: 1. The organization inner environment e.g. staff (or internal customers), office, technology, wages and finance, etc. 2. The organization external-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc. 3. The country forces affecting the environment e.g. Political forces, Economic forces, Socio-cultural forces, and Technological forces. These are known as PEST factors. a) Political Factors •

Political environment of Pakistan is stable in the current situation and country is not progressing in terms of economic growth that was expected.

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Environment is investor non-friendly & telecommunication sector is under regulation.

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Before WTO implementation government already took steps in regulation of telecommunication sector.

b) Economic Factors •

Marketers should consider long term and short term state of a trading market

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Inflation is being controlled by state bank and under strict eyes but unemployment rate is going up & up with the increase of level of poverty

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Economic instability is worsening day by day as liquidity crunch is prevailing in the world

c) Socio-Cultural Factors •

As Pakistan is an Islamic country and people are very strict in case of Islam any thing against the philosophy of Islam on either print or electronic media are treated as against Pakistan.

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Most of the people dislike anything extra-ordinary or something which sabotage their culture or subculture.

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Companies who are targeting upper-end of market mostly published and aired their advertisement in English language.

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In metropolitan cities women are doing work along with their other responsibilities but other than metropolitan cities it is difficult for women to convince their parents and spouses for work.

d) Technological Factors •

Companies have technology with which they can compete in the Pakistan and now companies are investing in their infrastructure to not only expand but also to upgrade their existing structure.

•

Currently all companies except Zong & Instaphone are providing Multi-media Messaging Services (MMS), General Packet Radio Service (GPRS), Virtual Private Network (VPN), Pocket Stocks, Conference Calling, Wallpapers Animated pictures Polyphonic ring tones (WAP), and Voice Mail at low price and telenor is proving an addition feature that one can see TV channels on their cell.

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Mobilink shifted its whole network from 900 MHz to 1800 MHz offer Value-Added Services like General Packet Radio Service (GPRS), Multi-media Messaging Services (MMS) and Virtual Private Network (VPN) etc.

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3.2 SWOT Analysis of Mobilink

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

3.2.1 Strengths 3.2.1.1 Competitive Advantages •

Mobilink’s strength lies in the establishment of a strong, fundamental and coherent longterm business plan, designed to sustain economic challenges in the country.

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It has invested heavily in infrastructure, technology, human resources and customer services which has given impetus for a broad-based future planning strategy. It further is investing US $ 500 billion in Pakistan to develop its infrastructure. Therefore it has the competitive advantage of making huge investments in Pakistan which no-one else had made before regarding telecom.

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Pioneer cellular service in Pakistan to provide coverage on the M2 motorway.

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Pioneer in GSM service in Pakistan.

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With 30 million customers Mobilink is truly called the “King of cellular service providers”.

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Mobilink has the highest market share of 37 % not only in terms of number of subscribers but also in terms of revenue.

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Large number of corporate customers use Mobilink post paid connection Indigo and Mobilink’s Blackberry handsets.

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Mobilink and Muslim Commercial Bank have made a combined effort in order to maximize the ease and the satisfaction of their respective customers by offering them all banking services from their very own mobile handset.

3.2.1.2 Resources, Assets and People •

Being a multinational company Mobilink has huge resources in terms of capital. It has billions of capital to invest in various projects. Its offices are luxuriously equipped with every facility.

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Mobilink while choosing people for jobs follow the strategy of “choosing the best among all” therefore majority of its staff people are highly qualified from renowned universities of Pakistan. A certain percent is foreign qualified as well.

3.2.1.3 Innovative Aspects •

Mobilink brought innovation in Pakistan by offering “First GSM Network Connections”. Previously instaphone was operating with old technology.

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Mobilink is the pioneer in Mobile Commerce services as well. Previously no other company had made such an effort.

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The concept of post-paid and prepaid was also introduced by Mobilink.

3.2.1.4 Location and Geographical Coverage •

Mobilink is the first cellular service which covered the northern and other remote areas of Pakistan such as Muzzafarabad, Chitral, Kaghan, Naaran and Kaalaash.

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It is the achievement of Pakistan’s First GSM service Mobilink to widespread its network across whole Pakistan. Now the theme line of Mobilink is “Poora Signal Poora Pakistan”

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Wherever you go wherever you are, you’ll never have the message of “No service” with Mobilink connection.

3.2.1.5 Government Dealings •

Mobilink pays a huge amount in taxes to the government of Pakistan. So it’s a big source of revenue to the government as well.

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It conducts its business by abiding by the rules and regulations setup by the government and cooperates with the government in every aspect.

3.2.2 Weaknesses of Mobilink 3.2.2.1 Less Investment •

Although Mobilink is covering whole Pakistan but its call rates are high and network quality is poor. These are the two major issues which brought Mobilink’s share down to 37% in 2008 from 60% in previous years.

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Fewer advertisements now days shows that Mobilink is taking out its investment from marketing &its advertising is not active up to the mark. However if we compare it with Telenor, Zong and Warid we’ll realize that they are heavily marketing their products.

3.2.2.2 Quality of Network Mobilink must have planned very good network quality but the results are opposite as described below. •

Mobilink’s network mostly remains busy in thickly populated cities such as Karachi, Lahore and Multan so people face a lot of difficulty while trying to connect to their friends and families. However Warid’s network provides crystal clear voice quality. So many of Mobilink’s customers (including me) have shifted to Warid.

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Mobilink has been fined twice by Pakistan telecommunication Authority over its bad service. It must try and emphasize on providing better services to its customers instead on concentrating only on expansion

3.2.3 Opportunities of Mobilink 3.2.3.1 Developments •

Mobilink can develop a stronger market by focusing on segments such as teenagers, adults, office workers, girls and ladies as well as old people by offering innovative packages. These packages could be offered keeping in view the time consideration as well as pocket of each segment. These packages could be at low cost for teenagers and grand parents as their pocket is small but could be little expensive for the rest.

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Through proper advertisement also Mobilink can target as many customers as it can in order to augment and give support to its falling market share.

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Mobilink can lower its call rates, SIM charges, Mobitune charges, GPRS charges and other extra charges in order to capture a larger market to make business difficult for rival companies. In this way it can segment a larger market and may capture the customers of low income group as well.

3.2.4 Threats of Mobilink 3.2.4.1 A New Market Player, Zong •

A new market player i.e. Zong is getting immense popularity among teenagers and youngster students because of its very low call rates and attractive packages. It is expected from the mushroom growth of its customers that it will soon capture a large market share hence if Mobilink keeps its call rates high it is expected that a large percent of young Mobilink users will switch over to Zong.

3.2.4.2 Better Packages by Other Cellulars •

Companies like Telenor offer better packages for corporate customers. Telenor Postpaid connection “Persona” is a good example of it.

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Wireless local loop (WLL) service providers are also targeting areas which are less developed.

3.2.4.4 Price Wars •

Current price war among cellular service providers may reach at a position where only brand names survive.

3.2.4.5 Unreasonably Restrictive Trade Practice •

Mobilink is involved in an unreasonably restrictive trade practice, prohibited under the provisions of MRTPO, 1970 by not allowing its blackberry subscribers to other service providers. This can lead to legislative proceedings against Mobilink.

Concluding, it is analyzed that Mobilink has a number of strengths which could be utilized to avail the opportunities & overcome its weaknesses. However, as threats to an organization are

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always external therefore they cannot be eradicated however they could be handled efficiently to minimize the unforeseen problems.

3.3 Analysis with the help of BCG Growth-Share Matrix We can analyze Mobilink’s different products and services with the help of BCG Matrix. Currently Mobilink has the following products/services: •

Mobilink Post-paid Indigo

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Mobilink pre-paid Jazz Connection

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Mobilink Blackberry Handset

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Miscellaneous Packages and Sub-packages

(BCG Growth Share Matrix, n.d.) Companies that are large enough to be organized into strategic business units face the challenge of allocating resources among those units. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). The BCG growth-share matrix displays the various business units on a graph of the market growth rate vs. market share relative to competitors:

Figure 3.1

Source: QuickMBA, (2008)

3.3.1 Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other

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business units. The postpaid connection Mobilink Indigo could be put here. Similarly Mobilink Blackberry handsets which are used by the corporate customers generate heavy revenues. 3.3.2 Star - a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures. Mobilink Jazz could rightly be put here because there is a rapid growth in Pakistan telecom industry and due to 5 rivals; Mobilink has to save its market share through further investments. 3.3.3 Question Mark (or Problem Child) - a business unit that has a small market share in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. The packages and sub packages of Mobilink such as Jazz one, Jazz ladies first, Jazz budget etc, I put here because the packages offered by the competitors are still less costly and Mobilink strongly needs to promote them for their survival. 3.3.4 Dog - a business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share. Currently no product of Mobilink could be put here.

3.4 Accounting & Financial Review 3.4.1 Accounting Review 3.4.1.1 Accounting System Review The system of accounting followed at Mobilink admin is “Payment Tracking System” which is commonly called PTS (in short form). All the bills are processed using this system. When the bills are received they are called “Invoices” but after processing them with PTS they are individually called “Cases”. The PTS requires the following information to process each and every invoice:

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1. Name of the vendor 2. Description of goods/services availed 3. Name of the team leader 4. Date of submission 5. Return date (after verification) 6. Month of expense 7. Cost centre 8. Location 9. Invoice number 10. Pay order number 11. Work order number 12. Total cost 13. Amount with payment authorization form (PAF) When all the above mentioned information is put, the details are saved. The saved form of information then turns into “Payment Authorization Form” called in short as PAF. Another document called “Service Completion Certificate” or SCC is automatically saved with this form. It is to be noted that each PAF is assigned a unique number with the help of which each case is traced in case it is required. Then a copy of PAF and SCC is attached with the relevant invoice. The invoice has now turned into a case. All the invoices are processed in this way and then sent for verification signature of team lead. Usually there are two team leads; one for transport cases and the other for the rest of goods/services. A record of cases sent is also maintained but the associate. After receiving the cases back from team leads, their dates are updated in PTS and then they are sent to the manager and the director for verification and signature. Once these cases are returned after signing, they are ready for submission to finance department where cheques will be printed and handed over to each vendor who can easily have it cashed. When the cheques are printed, before handing over them to the vendor they are properly recoded in the PTS. The following details are recorded:

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1. Vendor name 2. Cheque number 3. Cheque amount 4. Date of issue of cheque 5. Invoice number (against which cheques is issued) When the cheque is issued and handed over to the concerned vendor, the case is closed but its record is saved in PTS. It is done so in order to • match the records of vendor and self •

check the discrepancy if any

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avoid all the perplexities

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avoid embezzlements (at both ends)

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avoid double payment against the same invoice

Each case can be traced with the help of 1. PAF number 2. Invoice number 3. Supplier name 4. Date 5. Cheque number 6. Location 7. Amount of PAF 8. Cost Centre Here is a table showing the list of all the supporting documents required for payments processing.

3.4.1.2 Payments Supporting Documents

Documents PAF (Payment Authorization Form) SCC (Service Completion Certificate)

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Invoice Original PO (Purchase Order) Agreement Copy PR (Purchase Requisition) GRN (Goods Received Note)

3.4.1.3 Internal Accounting Standards Internal accounting standards followed by Mobilink are those standards which are applied to the accounting system i.e. Payment Tracking System. its the internal proceeding or accounting software which is followed by all the three regions of Mobilink i.e. North, South & Central. It is strictly followed that: All the invoice processing that takes place in any region should be done with the help of PTS. The cost centre i.e. the chart of account to which the expenses are charged should be uniform throughout the country. We can narrate a simple example i.e. its a standard rule that all the repair maintenance of leased buildings should be charged to RM Leasehold. All the associates throughout the country follow this standard and do the same action. No one can do his/her own will by charging similar expenses to different accounts. Similarly its also a standard that each time cases are verified they will be updated using PTS. So its not possible that an associate in Islamabad is updating them but another associate sitting in another city, say Multan is skipping this step and working according to his own will. Keeping and maintaining proper record and each and every detail starting from invoice entry upto issuing cheque are the internal accounting standards of Mobilink which are followed throughout the organization. Here are some important points to note down regarding the internal accounting standards:

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•

In case of PTCL, PTA and equipment clearance and freight payments there is no need of PR, PO, GRN and SCC.

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In case of payments to shareholders of management fee, dividend, insurance premiums and expat salaries, finance working and approval is required for payments processing.

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PR is not required in case of civil work i.e. in case of any task undertaken for the purpose of fulfilling the corporate social responsibility.

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For transportation of infrastructure equipment from one cell site to another, Infra Equipment Transfer Note (IET Note) must be attached.

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Utility payments will be routed directly to accounts payable department without involving Invoice receiving associate.

3.4.1.4 Books and Records Maintained At every organization nowadays mostly the records are kept in soft form i.e. using softwares. Some of them are predesigned and some are especially designed by the companies for the sake of convenience at every step. At Mobilink both hard copy and soft copy is used to keep record of various operations performed. Softwares used for payments processing are •

Payment Tracking System (PTS)

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Oracle Financials

3.4.1.4.1 Payment Tracking System This software keeps record of

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•

All the invoices processed

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PAF number issued

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date of verification

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date of submission to finance

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date of cheque issued

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cheque amount

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cheque number

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vendor name

It is a very useful software because it not only keeps a record of all the processed invoices but also it helps to trace the invoices against which the payment has been made so the vendor is unable to make any embezzlement by sending an old invoice and demanding payment because as soon as the invoice number is repeated, PTS gives a message “Same supplier and invoice number already exists” so the associate comes to know that this invoice has already been processed. Then the status of invoice is checked through PTS i.e. whether the case was returned from finance or the payment was made through it. If the case was returned then after proper checking of invoice it is processed otherwise it is returned to the vendor with a letter stating that the payment has been made through the following cheque number.

3.4.1.4.2 Oracle Financials Oracle financial is a special type of software which is used to keep record of all the invoices received, cases processed and cheques are also printed with the help of Oracle financial. According to (personal communication, July 31st, 2008) Oracle financial has the following uses: Whenever any department is in need of putting some request for either the purchase of stationery items, crockery, furniture or any other goods or services, a proper method is followed i.e. a request mail is sent to the associate administration. The associate then raise the purchase requisition (PR) which means that the purchase of specific goods/services has been approved by the administration. It is important to note here that the PR is raised through using the software Oracle financials. Oracle then keeps the proper record of each PR raised with a specific number assigned it. So this record keeping software is really very important in meeting the needs of each and every department. Without this the needs of departments couldn’t be effectively fulfilled and record of each procurement item could not be maintained.

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Similarly in the finance section, whenever the invoices are received an entry is made against each invoice in the Oracle financial describing the amount to be paid against each vendor name. In case of both the “return cases” and the “forward cases” an entry is made again in the Oracle financials. This entry includes the PAF receiving date, PAF amount and PAF number. It is done to keep a proper record of all the cases forwarded to the accounts payable section and also of all the cases that are sent back so that if in future any mishmash occurs regarding the cases, all the queries could be easily answered with solid arguments. When the accounts payable team makes the cheques, it also makes necessary entries in the oracle financial. This process is in continuation of invoice receiving associate invoice log in the system. The invoices received are matched by accounts payable team using the oracle record. The account payable associate then enters the “Submission to Signatory Date” in the oracle just before handing it over to the supervisors. When the cheques are duly approved by the authorized signatories and received back by the account payable team, the associate marks them as “Paid”, again using Oracle financial. Finally when the cheques are handed over to the concerned vendors, a last entry is made in the oracle financial for the date of cheque delivered to the vendor. This is the review of the records maintained at Mobilink. It is important to note that no book is maintained in the hard form to keep these records.

3.4.1.5 Documents, Bills and Vouchers 3.4.1.5.1 Bills The Mobilink admin-finance section is basically a bill or invoice processing section. All the bills received against goods and services at different Mobilink offices which fall under North region i.e. Islamabad, Rawalpindi, Jhelum, Kohat, Mardan, Swat and Peshawar are processed by the admin finance team. So I had the golden opportunity to view all the bills. These bills were against different goods/services including:

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•

Pots and Plants provided at Mobilink office cafés

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Drinking water refill charges

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Stationery items charges

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Repair maintenance charges

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Salaries of teaboys and janitorial staff

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Fumigation services charges

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Entertainment or refreshment charges

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Cafeteria (lunch) charges

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Female pick and drop charges

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Gas and electricity charges

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Furniture fixture charges

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Vehicles repair maintenance charges etc

Proper and complete invoices along with purchase order copy or agreement copy is sent by the vendor directly to the finance office. The invoice receiving timing is 3:00 pm to 5:00 pm at head office level while at regional level there is no specific timing for invoice receiving. The finance associate receives the invoices and fixes a receiving stamp on each invoice and makes entry in oracle financial. Then each invoice is routed i.e. assigned a unique number provided by oracle. The invoices are then sent to the administration department where the team used to process and forward each invoice through payment tracking system. Daily I used to receive all the bills and process them with the payment tracking system. So I deeply observed all the invoices. These invoices contained the following data •

Vendor name

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Invoice date

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Invoice number

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Location where the service is provided

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Description of service provided

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•

Rates to be charged against each item (according to contract or purchase order)

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Total amount claimed

•

Address where the vendor can receive the cheque

•

Banking detail of vendor

Using the payment tracking system, PAF and SCC are attached with each invoice thus converting them into “cases” and are submitted to finance after proper verification where cheques are printed and handed over to each vendor.

3.4.1.5.2 Documents The following documents were viewed at Mobilink office. •

Payment Authorization Form (PAF)

•

Service Completion Certificate (SCC)

•

Goods Received Note (GRN)

•

Purchase Order (PO)

•

Work Order (WO)

Let’s elaborate them one by one:

3.4.1.5.2.1 Payment Authorization Form or PAF This is the very first payment supporting document which is attached with each and every invoice that comes to the admin section for processing. PAF is prepared using “Payment Tracking System” (see accounting system review for further details). When all the necessary details are entered in the PTS, PAF could be saved. Each PAF is assigned a unique number which could be used to trace PAF (later on if required). One copy of PAF is printed and attached with the invoice. The signatures of associate, specialist, manager and the director are also taken on the PAFs. This PAF is important as it authorizes the vendors for their due payments.

3.4.1.5.2.2 Service Completion Certificate or SCC

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The second necessary payment supporting document is the “Service completion Certificate or SCC”. This document certifies that the services against which the vendor has claimed payment are actually acquired and received. This document is sent for verification to the team leader. He or she after making satisfactory investigations signs it hence allows the finance team to process the case without any hindrance.

3.4.1.5.2.3 Purchase Requisition Admin Department may place a request for procurement of goods & services on the base of requirement of the department or employee. The admin finance team will prepare & forward a purchase requisition through the oracle financial systems, after the request has been approved the manger administration. The procurement of any item or service carries out with the following procedure. The request is posted by the concerned project manager with essential description. The request entails: •

Description of goods/services

•

Quantity of items

•

Cost estimated

•

Location where goods will be delivered

•

Department to whom goods will be delivered

3.4.1.5.2.4 Goods Received Note or GRN As the name indicates this document is the certificate of receiving of goods. Whenever any type of goods are procured or received, goods received note is made (either manually or with the help of computer system) and the authorized person puts his signature on this note thus he verifies that the department has received goods and the claim of vendor is actual. An important point to be noted is that the invoices, on which GRN is attached, are forwarded with PAF only and SCC is not attached with them because it verifies only services, not goods.

3.4.1.5.2.5 Purchase Order or PO

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Purchase order is attached with those invoices which are sent by those vendors who have not made any contract or agreement of goods/services supply with Mobilink. Purchase order is thus necessary to show so that it could be verified that these goods were actually ordered by the company. Each PO contains the following information: •

Purchase Order number

•

Purchase Requisition Number

•

Date of Order

•

Goods/Services ordered by (name of manager who placed the order)

•

Place of delivery of goods

•

Description of goods

•

Amount of goods

•

Mode of payment (advance, full payment or installments)

3.4.1.5.2.6 Work Order or WO Work order or WO is the written order placed by the supervisor at Mobilink to the vendor for the repair maintenance of official vehicles which are under the use of managers or staff members. With each invoice of transport a WO is attached which is verified by the supervisor indicating that the work has been done by the vendor. Each WO contains the following: •

Work order number

•

Vendor name

•

Vehicle number

•

Vehicle make

•

Chesis number

•

Description of work done

•

Signature of the supervisor

If all the above required information is provided the case is forwarded for processing.

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3.4.1.5.2.7 Vouchers There is only one type of voucher which is issued by Mobilink i.e. a Cheque

3.4.1.5.2.7.1 Cheque It takes almost fourteen days to process an invoice full and final i.e. from invoice receiving to cheque printing. •

Invoices received from the finance are logged into Payment Tracking System

•

Required supporting documents are then arranged i.e. Payment Authorization Form (PAF), Service Completion Certificate (SCC), Goods Received Note (GRN), Purchase Order (PO), and Work Order (WO).

•

Supporting documents are then fixed & invoices are forwarded to finance Department

•

Approval from the concerned officials is obtained

•

This procedure takes place in a fix time of 14 days.

•

Cheques are released by finance Department & admin collects them.

•

Cheques are handed over to vendors after keeping entries in Oracle and Payment Tracking System

3.4.1.5.6 Closing and Adjusting the Record Every record is logged, stored and maintained in 1. Payment Tracking System 2. Oracle Financial Often the cases are returned by finance section with the reason why the following case has been returned. The supporting documents are then unattached from the invoices and the invoices are returned to the vendor with the reason mentioned on a separate letter. These changes are also to be recorded in the related softwares so that the mismatching of record do not create trouble, confusion or misunderstanding in the future.

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Sometimes, only a single invoice is to be returned from the whole bunch of invoices. Then in PTS the PAF number is logged and case is opened. The record of that invoice is deleted and PAF is updated. Let’s elaborate it with an example: PAF number 11300 Invoices in the PAF (# 01 to 08) Invoice to be returned # 08 PAF amount Rs. 50000 Invoice amount 20000 The associate will detach the invoice from the case. Then put the PAF number 11300 in the system, will delete the complete record of invoice number 08 and update the PAF. The amount on PAF will now be 30000 (Rs 20000 is now subtracted as the invoice has been deleted) The amount on hard copy of PAF will either be manually changed or a new print of PAF will be attached to it. So in this way all the records are adjusted. Closing of records is done in the Oracle financial. When the admin team sends the case to finance department, we may say that the case has been closed by the admin team by using payment tracking system but it is reopened in the finance department. The department then makes entries of all the cases received in the oracle system. Similarly when the cheques are printed the full and final case is closed by making closing entries in Oracle. These closing entries include: •

Cheque number

•

Cheque amount

•

Vendor name

•

Date of issue of cheque

After making these closing entries in the system the case is closed by finance.

3.4.2 Financial Review

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3.4.2.1 Assessment of Financial Position through Mobilink’s Liquidity and Profitability Review 3.4.2.1.1 Liquidity In order to analyse the financial position of Mobilink we firstly need to understand what is liquidity and profitability. According to (Gibson, n.d.) liquidity is the ability of an organization to pay its short term obligations by liquidating its short term assets. The more liquid the company is the better it is because it has sufficient short term assets i.e. cash, short term securities and inventories that it could easily meet its maturing short term debt e.g. notes payable or short term loans maturing in near future. An entity’s ability to maintain its short term debt paying ability is important to all users of financial statements because if the entity cannot maintain a short term debt paying ability, it will not be able to maintain a long term debt paying ability which will discourage the creditors in future. Following are some of the ratios that are calculated to measure the liquidity of an organization: •

Cash Ratio

•

Acid test Ratio

•

Current Ratio

•

Inventory Turnover

•

Accounts Receivable Turnover

Mobilink is very conscious regarding its debt paying ability as any negligence can damage its repute intensely so Mobilink invests sufficiently in short-term securities, holds cash in hand for its day to day expenses and has good amount of inventory. Whenever any short term debt matures it pays it through selling securities or inventory (SIMs, connections and Blackberry sets) or uses its cash to pay it off. So it is analyzed that Mobilink has first-rate liquidity position which shows its financial health.

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3.4.2.2 Profitability Analysis (Gibson, n.d.) says that profitability is the ability of a firm to generate revenue. Analysis of profitability is of vital concern to the stockholders and creditors since they are interested to know that how much profitable the firm is. Stockholders derive revenue from the firm in the form of dividend and capital gains. It is also important for creditors since they come to know whether the firm will be able to refund the debt or there are chances that it will be bankrupt. While the management takes profit as the measure of their performance. Hence profitability analysis is important for the stockholders, creditors as well as management. While measuring profitability the following ratios may be calculated. These ratios are the best indicator of a firm’s profitability • • • • • •

Net Profit Margin Gross Profit Margin Operating Income Margin Return on Assets Return on Investment Return on Common Equity

According to (personal communication, July 28, 2008) Mobilink is a multi-national organization which generates its revenue by doing its operations in almost 10 countries of the world. So a large portion of revenue is collected from different income groups of different countries. It is the cellular leader in Pakistan and it has captured large market share in other countries also. Therefore Mobilink’s profitability is really good. The net income margin and other income margins are well up to the mark therefore its staff gets handsome amount of salaries and all the Mobilink offices are luxurious and well furnished. Mobilink has heavily invested in Pakistan and it is going to invest further 5oo million US Dollar and it gets good return on its investment as the number of Mobilink customers has gone up to 30 million which is the largest as compared to any other network. Therefore Mobilink’s overall financial condition is good and short term debt paying ability or liquidity position is also upto the mark.

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3.4.2.2 Advice to the Company According to (personal communication, July 28, 2008) Mobilink makes a budget of expenses in the start of every month. a graphical presentation of the budget is logged into Payment tracking system. At the end of the month the data of actual expenses is collected and converted into graphical form. The budgeted and actual expenses graphs are then matched with each other and the difference is noted down. If the difference is negligible then next month’s project is started otherwise an advice is sent to the top management with the attachment of the graphs. It is then advised that there is substantial difference among the estimated and actual expenses therefore cost should be reduced. After receiving the advice the top management works in every possible way to reduce its costs. In this way the advice to company works.

3.4.2.3 Problem with Receivables and Inventory According to (personal communication, July 28, 2008) Mobilink usually don’t face many problems with its inventory and receivables because of its: •

Active management

•

Strictly followed policies

•

Use of modern technology softwares such as Oracle*, Cygent** and E Point Server***

* Used to raise purchase requisition for various inventory items ** A billing and customer information database *** Backhand software for instant SIM related activities Whenever any inventory item is required, its request is instantly put up by the admin department using the Oracle financial. After approval of request the procurement department procures the items so every time enough inventory is available at every Mobilink office. A separate inventory store is located in Islamabad where the entire inventory is placed and is sent to all north region offices whenever required. Therefore there is no problem of inventory faced by Mobilink.

3.4.2.3.1 Receivables 35

Receivables

Pre-paid Users

Post-paid Users

According to (personal communication, July 28, 2008) at the sales and customer services department proper record of every customer is maintained with respect to the number used. This record is maintained with the help of Mobilink’s local software Cygent. The post-paid customers are actually the receivables from whom Mobilink receives cash revenue against the services provided. Here no customer can create embezzlement or default because when the credit limit of a customer is end up, the outgoing calls are blocked by the staff. The cash is received in advance of services provided therefore so there is no chance of bad debts Cell phone is the need of every common man as well as corporate customers so the bills are paid well in time and Mobilink usually do not face any problem regarding accounts receivable default. Similarly the per-paid connection users pay the bill to the company in advance otherwise their service cannot be activated. Therefore receiving from customers is not a big issue at Mobilink.

3.4.2.4 Doing Business with Creditors According to (personal communication, July 28, 2008) Mobilink being the largest cellular service provider and a giant multinational consumes services from a large number of vendors. Goods and services are acquired for different purposes. Some of the major goods items acquired by Mobilink are • •

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Inventory items Food, water and Tea items supplies

•

Office equipments

•

Furniture Fixtures

•

Stationery items

•

Pots and plants

And the services acquired are the following •

Transport services

•

Janitorial services

•

Repair maintenance services

•

Lunch and Tea services

•

Window cleaning services

•

Construction services

•

Printing of visiting and office cards services All of the above mentioned goods and services are acquired through major

vendors of the country. Some of the major vendors and the description of goods/services include the following:

Name of the vendor/Creditor NASCO Traders Pro Tech Enterprises Jass Catering United Transport Services Honda Classic Avis Rent A Car TCS Leopards Suzuki Azim Motors Margalla Water (Nestle) Mahaan Engineering IKAN Engineering

goods/services provided to mobilink Sound systems during conferences Janitorial and Tea boys services Lunch and Refreshment Female pick and Drop Services Vehicle repair and maintenance services Cars for casual use of employees Courier services Courier Services Vehicles repair maintenance Water supplies Repair maintenance of Mobilink buildings Repair maintenance of Mobilink buildings

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Whenever goods or services are acquired through any vendor, he becomes the “Creditor” of Mobilink i.e. Mobilink has some credit against that vendor and Mobilink is liable to that party. After providing the goods or services the vendors send their bills in the name of finance associate. These bills are then sent to the admin department for processing. Few weaknesses are seen on the part of Mobilink while doing business with the creditors. First of all is the weaker processing of invoices at Mobilink. It is believed that the bill will be cleared in the time period of eight days but it usually takes double time for a bill to be cleared through every department. Sometimes the bills remain pended for so long time period that it seems now nobody (neither the vendor nor the company) is concerned about the bills. The bills are placed in files sometimes even for six months and when the creditor/vendor comes to Mobilink in search of his old pending bills it creates a lot of taxing and apprehension. Therefore the system needs to be updated otherwise it may damage the repute of Mobilink in the eyes of vendors. A plus point for Mobilink is that it pays huge amount of tax to the government of Pakistan. It never delays its taxes and do not make any frauds. Therefore government being the creditor of Mobilink is satisfied with it.

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4.0 Findings and Recommendations 4.1 Findings Following are the findings of analysis of Mobilink

4.1.1 Heavy Outlays At Mobilink heavy outlay is made by the way of luxurious offices, ostentatious lunch, refreshments, breakfasts etc and also heavy electricity expenditure is made by using luxury lamps and lights. The daily lunch for employees contain a chicken curry, a snack food, a vegetable food, fruits, three types of salads and heavy desserts. Other than Pakistani foods, a heavy amount is spent on Italian, Mexican, Thai, Chinese and Afghani foods. Food bills are huge i.e. almost rupees six hundred thousand for only one week of month (whole Islamabad offices) i.e. rupees twenty four hundred thousand for one month. Similarly the electricity bill for one month only was almost one hundred thousand for the admin office only. This shows heavy costs and expenditures.

4.2 Recommendations 39

Following are the recommendations to Mobilink. They were highly appreciated by the manager administration and it was ensured that they will try their level best to adopt them after performing specific procedures and analysis. Some of the recommendations are short-term while others are medium and long term.

4.2.2 Cost Cutting 4.2.2.1 Food or lunch This is short term recommendation. As mentioned earlier, Mobilink spends a heavy amount on food, refreshments, electricity, luxurious lamps, double lights i.e. white lights and golden lights etc. All of these measures are extra lavish and they intake s huge amount of funds

4.2.2.2 Electricity Saving It was recommended Mobilink to save energy through properly turning off their computer systems during breaks and at closing of office hours. Lavish lamps should be kept off as there is enough light in the office that it is useless to turn them on. Tubelights should be replaced by energy savers as they consume very little electricity. These cost cutting measures will lower Mobilink’s variable costs considerably.

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5.1 Action Plan for Cost Cutting through Food and Electricity 5.1.1 Action Plan for Cost Cutting through Food Following are the cost cutting techniques through monthly food consumption: •

Instead of four dishes at lunch, only two should be served i.e. one meat/chicken dish and other vegetable dish. This will save 20% of food budget.

•

Snacks are tea time luxury. There is no need to serve them at lunch therefore snacks such as chicken burgers, hot dogs, vegetable and chicken rolls should be completely eliminated. This will save 10 % of food budget.

•

Fruits and desserts are served daily in the lunch. They comprise 10% of total budget. If they are served on alternate days, it will reduce 5% of food expense.

•

Daily three types of salads are served. The Russian salads contain high mayonnaise and fats that are harmful for health. Eliminating this salad will cut 5% of food expense.

Hence a total of 40% food expense could be cut down. This will increase the profit to the firm which could be utilized in investment projects or could be retained as retained earnings. As seen by me in the invoices (which were processed by me) the monthly food bill of Mobilink is Rs. 24,00,000 for six Islamabad offices. By adopting this measure Mobilink will save almost Rs. 10,00,000 which is a considerable amount. 41

Current Monthly Food Bill = Rs. 2400,000 Cost cutting in bill is recommended as 40% or Rs. 960,000 Monthly bill after cost cutting = Rs. 14, 40,000

5.1.2 Action Plan for Energy Saving through Saving Electricity In order to save energy I presented the following recommendations. These were also highly admired by the staff •

In order to bring down monthly electricity bills, Mobilink offices should be equipped with “Energy Savers” instead of tubelights and luxurious golden lamps. During lunch time when the employees are in cafeteria the lights should be switched off. This will bring down the bill by approximately 20%.

•

The employees usually donot turn off or shut down their computers during breaks and even when they are off on routine days and weekends. This consumes a lot of energy and bill increases by 20%. By proper turning off the computer systems this bill could be brought down by 20%. Only admin office’s monthly electricity bill is almost Rs.100,000. Adopting this measure will bring it down to almost Rs. 70,000 Current monthly electricity bill of admin office only = Rs. 100,000 Cost cutting through energy saving: 40% = Rs. 40,000 Monthly electricity Bill after energy saving= Rs. 60,000

Hence almost Rs. 10, 40,000 worth of cost could be cut down by adopting these useful measures.

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