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JTL has planned to provide fixed phone services to its subscribers with the latest technology.

EXECUTIVE SUMMARY JTL was awarded PSTN (Fixed Phone) License on June 22, 2004 by Bangladesh Telecommunication Regulatory Commission (BTRC) for providing fixed phone services in 16 districts of North-East Zone of Bangladesh covering about one-fourth area of the country. The principal activities of the company are to set up telecommunication system, install telephone exchange in Bangladesh and to carry out telecom operations with joint, local or foreign

collaboration

for

the purpose

of

new connections

and

expansion

of

telecommunication network in the North Last Zone's district area. JTL has planned to provide fixed phone services to its subscribers with the latest technology. Code Division Multiple Access (CDMA) is one of the latest technologies being used world wide in wireless access communication system. JTL selected CDMA technology to extend telephone connections to scattered and low densely populated remote areas. The company has also planned to continue the existing cable line telephone system in the densely populated urban areas. CDMA 2000 1X has been opted for wireless telephone system that is easily convertible to 3G (third generation) system. Digital switching system has been chosen for cable line phone system. Copper cable and fiber optic cable have been selected for use in the access network. Digital microwave transmission system of 7 GHz is for long distance link and microwave transmission system of 15 GHz is for access link. These financial statements have been prepared on Generally Accepted Accounting Principles (GAAP) under the historical cost convention and in accordance with Bangladesh Accounting Standards, Companies Act, 1994 and other applicable laws and regulations. Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditure directly attributable to the acquisition and installation of the assets. The company enjoys tax holiday benefit from 1 June 2005 to 31 May 2012 for seven years, under section 46 A (1) (b) of Income Tax Ordinance 1984. After three years of operation company fall into acute competitors pressure and BTRC rules and regulation. At that stage JTL has taken initiatives to do feasibility study for next five years.


1. INTRODUCTION 1.1 Birth of JTL With a view to operate business in telecommunication services, Jalalabad Telecom Limited (JTL) was registered on November 2002 as a private limited company (C-47651 with the Registrar of Joint Stock Companies & Firms, Bangladesh under the ambit of the Companies Act, 1994), Its corporate office is located at UTC Building (10`h Level), 8 Panthapath, Dhaka1215. It can be communicated to Tel: 880-2-9110739, 9110637, Fax: 880-2-8125 E-mail: info@jalalabadtel.net, Website: bijoyphone.net

1.2 License from BTRC JTL was awarded PSTN (Fixed Phone) License on June 22, 2004 by Bangladesh Telecommunication Regulatory Commission (BTRC) for providing fixed phone services in 16 districts of North-East Zone of Bangladesh covering about one-fourth area of the country. These 16 districts are excluding district headquarter of Dhaka, Narayanganj, and Gazipur.

1. Sylhet, 2. Sunamganj, 3. Habiganj, 4. Moulavibazar, 5. Sheipur, 6. Jamalpur, 7. Netrakona, 8. Mymensingh, 9. Keshorganj, 10. Tangail, 11. Munshiganj, 12. Manikganj, 13. Narsingdi 14. Dhaka 15. Narangonj


16. Gazipur

1.3 Management & Organ gram In order to ensure result oriented operation in various departments of JTL: Technical, Marketing, Customer Service, Finance & Accounts, Revenue and Administration, appropriate management structure has been developed. The figure 1-1 below demonstrates the organogram and management structure of JTL that depicts the chain of command among the officers.

CHAIRMAN

BOARD OF DIRECTOR

MANAGING DIRECTOR

OPERATION DIRECTOR

GM (F & A)

DGM (Eng)

DGM (P & D)

Marketing Manager


2. OPERATIONAL ACTIVITIES 2.1 Principle Activities of the Company The principal activities of the company are to set up telecommunication system, install telephone exchange in Bangladesh and to carry out telecom operations with joint, local or foreign

collaboration

for

the purpose

of

new connections

and

expansion

of

telecommunication network in the North Last Zone's district area licensed by the regulatory authority - . 'Bangladesh 'telecommunication Regulatory Commission (BTRC). The Company commenced its commercial operation from 16 June 2005.

2.2 Contract signing with telecom equipment supplier Contract for Switching & Fiber Optic Transmission System The first contract was signed with Huawei Tech. Investment Co. Limited on 24"' October, 2004 for Design, Supply, Installation, Testing, Commissioning of Switch & Optical Transmission System at Sylhet city. Under this contract, Huawei supplied JTL digital switching system for 10,000 lines CLL network in Sylhet city. Capacity of the switch is expandable to 30,000 lines. Supplied fiber optic transmission system provides STM-4 transmission capacity (upgrade able up to STM-16) in the backbone ring carrier system in Sylhet city. Contract for CDMA WLL Equipment On February 02, 2005 second contract has been reached with Huawei Tech. Investment Co. Limited for design, supply, installation, testing & commissioning of Switch & CDMA WLL system, Under this contract Huawei is to supply equipments for development of CDMA WLL network in greater Sylhet, greater Dhaka (excluding metropolitan area), and greater Mymensingh region. JTL plans to install CDMA access network for 58,000 subscribers in first phase of its project implementation. Under this Contract, Huawei so far supplied I BSC, 6 BTSs, 1 set CNET (MSU expansion), 1 set PDSN equipment, 1 set OMM equipment, 1 set standard IN equipment, SMS equipment, and VMS equipment. Contract for Microwave Transmission Equipment


JTL entered into agreement with Stratex Networks INC, USA on 10"' March, 2005 for Survey, Planning, Design, Supply, Installation, and Testing & Commissioning of Microwave Transmission System. Under this contract Stratex supplied 19 Microwave links for establishing transmission network.

2.3 Out Side Plant (OSP) Copper Cable Network Outside Plant work for building of copper cable network includes plan for cable network, supply of primary cable, secondary, cable, cabinet, DP (distribution point) & other accessories and installation of copper cable, cabinet, DP & accessories. Actually, OSP for copper cable system has been started from September, 2004. Underground cable including overhead secondary cable, cabinet & DP etc. has been planned for the locations of Zindabazar, Amberkhana, Shibganj & Moulavibazar. OSP work in Zindabazar area was completed by March, 2005. Works at Shibganj & Amberkhana completed by June, 2005. Cable work at Moulavibazar will be completed within one month. Fiber Optic cable Network As per plan to build fiber optic ring transmission network for communicating traffic between RSUs & BTSs (installed at Shibganj, Amberkhana at Sylhet ) with MSU & BSC (installed at Zindabazar, Sylhet), fiber optic cable has been supplied from Huawei. Local contractor completed installation of fiber optic cable running through the PDB poles by April, 2005. The total running length of the fiber cable is about 18 kin. Later, two spur fiber optic links -- one from JTL MSU, Zindabazar connecting to BTTB TAX, Taltala, Sylhet, another one from Amberkhana to Akhali for connecting the BTS & RIM installed therewith MSU, Zindabazar have been extended.

2.4 Installation, Testing Commissioning of Main Switching Unit (MSU) Switching equipment has been supplied from Huawei in November, 2004. The MSU cum local switch was installed at Zindabazar, Sylhet site. This is the first project implementation of JTL for establishing landline telephone system in Sylhet city. Under this project, MSU for initial capacity of 10,000 lines has been installed by Huawei at Zindabazar in Decemaber, 2004.


Remote switching units (RSU) each having capacity of 2500 lines have also been installed in Shibganj, Amberkhana of Sylliet city. MSU controls and manages RSUs. MSU itself has local connectivity capacity with 2500 lines. Later another RSU of same 2500 lines has been installed in Moulavibazar. 2.5 Commercial operation for Fixed Phone service JTL has launched the commercial operation of its Fixed Phone Services with the brand name BIJOY PHONE on June 16, 2005 in Sylhet city. Its services were later expanded to Tajpur, Sreemongal and Moulavibazar town. CLL network has been developed to provide fixed phone services in the densely populated cities / towns while WLL network has been established for meeting telephone demands for population living in remote areas (sub-urban & rural areas). Line connections are being given to subscribers in Sylhet city and Moulavibazar district. Few other thanas of Sylhet district are in the process of coming into the CDMA WLL network coverage under proposed BTS in those areas. The existing network and customers are in Greater Sylhet region. All the technical, customer care, marketing/sales and revenue services to them are being run in Sylhet city under the regional office at Zindabazar, Sylhet. The company's Finance, Billing and Operations activities are kept directly under the corporate office in Dhaka.

2.6 Installation, testing and commissioning of CDMA WLL System In order to expand JTL's PSTN network by providing CDMA wireless services, CDMA WLL network equipments have been supplied from Huawei in June 2005. Core CDMA network equipments - BSC, OMM, and PDSN have been installed in Zindabazar site. 3 BTSs have been installed at Shibganj (3000 lines), Amberkhana (2500 lines) & Akhali (3000 lines). These 3 BTSs provide a total capacity of 8,500 connections in Sylhet city. Installation, testing and commissioning of these CDMA equipments have been completed by August, 2005. Commercial operation on CDMA WLL services commenced from September, 2005. As a next step of network development, 3 other locations in Moulavibazar district have been brought under CDMA WLL network service by installing 3 BTSs at Moulavibazar (2500 lines), Sreemongal (2000 lines) & Tajpur (3000 lines). These 3 BTSs added CDMA service of a total of 7500 subscribers in the network. Installation, testing & commissioning of these BTSs in Moulavibazar district have been completed in December, 2005.


Commercial operation on CDMA services in Moulavibazar region started on January 01, 2006. Existing CDMA network covering Sylhet city and Moulavibazar district has capacity of 16,000 WLL connections. 2.7 Distribution of commissioned lines by location As aforesaid, fixed phone services provided in the network of JTL are of two types: CLL & WLL. Installed and commissioned to subscribers line facilities cover Sylhet city and greater Moulavibazar district. As depicted in the following graphical charts, in summary it could be stated that a total of 10,608 CLL lines have been installed and commissioned while 16,000 lines commissioned include to CDMA WLL network. About 60% lines of total commissioned 26,608 lines are of CDMA WLL and 40% lines are of CLL.

2.8 Tower Construction Rooftop self-supported towers have been selected for BTS & microwave transmission system. First two rooftop towers (20 meter) have been erected at the roofs of the building sites of Shibganj & Amberkhana for BTS. This work has been completed in early 2005. In the next stage, towers have been erected at the sites, Al-Hamrah, Sylhet (20 meter), Akhali, Sylhet (12 meter), Tajpur (25 meter), Moulavibazar (20 meter) & Sreemongal (20 meter). It should be noted that Al-Hamrah site has been acquired for setting up main microwave station. At present, as a part of expansion of CDMA WLL network, tower & site work are on going at Syedpur in Jagannatpur. It is planned that one BTS will be installed there.

2.9 Installation, Testing, Commissioning of Microwave Transmission link Microwave transmission equipments have been supplied from Stratex Networks for establishing transmission network. After making necessary site survey, Line of Sight Survey (LOS), LOS link budgeting, the following; transmission links have so far been installed, tested and commissioned in Sylhet region.

Name of Link

Hop Distance

Purpose

Amberkhana --- Gas Bhabau, Sylhet

2 km

Interconnection between the networks of JTL and AKTEL.

Al-llamrah-Tajpur

27 km

Access link for BTS & RIM


Tajpur -- Moulavibazar

22 km

Access link for BTS & RSU

Moulavibazar - Sreemongal

20 km

Access link for BTS '

Al-Hamrah At-Falah Marketing Complex, Sylhet

2 km

Interconnection between the networks of JTI_ and CityCell.

One link from Tajpur to Syedpur, Jagarnnathpur will be installed soon. Survey & planning works are going on to install 6 other links in Dhaka periphery locations for establishment of access transmission links for CDMA WLL network there. Space at T.K. Bhaban, Kawranbazar, Dhaka has been acquired as central site for installation of transmission equipments and other core network equipments required for CDMA WLL project in Dhaka periphery.

3. TECHNICAL SYSTEM 3.1 Overview of Technical System JTL has planned to provide fixed phone services to its subscribers with the latest technology. Code Division Multiple Access (CDMA) is one of the latest technologies being used world wide in wireless access communication system. JTL selected CDMA technology to extend telephone connections to scattered and low densely populated remote areas. The company has also planned to continue the existing cable line telephone system in the densely populated urban areas. CDMA 2000 1X has been opted for wireless telephone system that is easily convertible to 3G (third generation) system. Digital switching system has been chosen for cable line phone system. Copper cable and fiber optic cable have been selected for use in the access network. Digital microwave transmission system of 7 GHz is for long distance link and microwave transmission system of 15 GHz is for access link. Standard 1N (Intelligent network) system has been planned and procured for providing services: Pre-Paid service (PPS), Free-Phone service (FPH), Virtual Private Network (VPN), and other value added services 3.2 Core Network Digital switching based Main Switching Unit (MSU) / Host Switch has been selected. MSU has been planned to provide Cable Line Loop (CLL) and CDMA Wireless Local Loop (WLL) telephone services. MSU is also for building interconnecting links with networks of other


operators. Huawei's digital switching system C&C08 has been procured along with RSU, RIM, BSC & BTS. Remote Switching Unit (RSU) & Remote Integrated Module (RIM) are access switches for connecting remote subscribers. RSU & RIM are connected with MSU for switching, control and administration. Call details records available in the MSU could be taken to billing center for bill processing. Core switching network along with all interconnecting links are demonstrated in the Diagram 2-1.

3.3 Services Created and Provided by the PSTN Network of JTL JTL's CLL & CDMA WLL network can support the following supplementary & value added services for its customers. • • • • • • • • • • • • • • • • • • • •

Call forwarding of all types Call waiting Call barring of all types Conference call Centrex Virtual call center Caller 1D Presentation (CLIP) Caller ID Restriction (CLLR) Alarm Call Malicious call tracing Abbreviated dialing Hotline Do not disturb Absent subscriber service Emergency calling SMS (only WLL) VMS Dial up & Packet data internet Telephone address catalogue up to 100 nos. (WLL case) VOIP

4. SIGNIFICANT ACCOUNTING POLICIES a) Basic Accounting These financial statements have been prepared on Generally Accepted Accounting Principles (GAAP) under the historical cost convention and in accordance with Bangladesh Accounting Standards, Companies Act, 1994 and other applicable laws and regulations.


b) Tangible fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation. Cost includes expenditure directly attributable to the acquisition and installation of the assets. Any repairs and maintenance expenses are charged to the income statement during the period when these are incurred. Depreciation on fixed assets has been charged on straight-line method considering the economic and technical lives. Full year's depreciation have been charged at the year of acquisition of the assets and no depreciation is charged during the year of disposal. As the Company has gone into operation as on 16 June 2005, depreciation on assets for these financial statements has been charged from that date. c) Intangible asset and amortization Intangible asset are stated at cost less amortization. This will be amortized over a period of five years starting from 16 June 2005. d) Inventories Inventories include Wireless Local Loop (WLL) telephone sets and Drop Wire cables and are measured at the lower of cost and net realizable value- Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business less variable selling expenses. e) Preliminary expenses Preliminary expenses represent expenses incurred for formation of the company and are being amortized over a period of five years starting from the year 2005. During the year, proportionate amount has been charged in these financial statements. f) Pre-operating expenses All revenue expenditures before the commencement of commercial operation as on 16 June 2005 were recorded as "Pre-operating expenses" and are being amortized over a period of ten years starting from the year 2005. During the year, proportionate amount has been charged in these financial statements, g) Amortization of license and application fee


The first tenure of the License from BTRC is 20 years for which Tk. 20,600,000 has been paid on account of License and Application fees: This amount will be amortized over a period of 15 years. Accordingly, proportionate amount has been charged in these financial statements. h) Tax holiday The company enjoys tax holiday benefit from 1 June 2005 to 31 May 2012 for seven years, under section 46 A (1) (b) of Income Tax Ordinance 1984. i) General i) Figures appearing in these financial statements have been rounded off to the nearest Taka. ii) Figures relating to previous year have been rearranged wherever necessary to conform to the current year's presentation. iii) The Company commenced it's commercial operation as on 16 June 2005, as such no comparative information for profit and loss account have been shown in these financial statements.

5. FINANCIAL DIAGNOSIS 5.1. Subcriber Base by Geagraphical Area

Zone Sylhet Mouluvibazar Sremongol Tajpur Total

Subscribers 2200 700 900 500 4300


2500

2000

1500

1000

500

r Ta jp u

go l Sr em on

ib az ar uv M ou l

Sy lh et

0

5.2. Sales Trend base by subcriber

Year 2005 2006 2007

Subscribers 2500 5300 4200


6000 5300

5000

4200

4000 3000 2500 2000 1000 0 2005

2006

2007

5.3. Sales In Amount

Year

Amount

2005

800,000

2006

2,000,000

2007

1,500,000


Sales in Amount

2,000,000

1,500,000

800,000

2005

2006

2007

6. FEASIBILITY STUDY After three years of operation company fall into acute competitors pressure and BTRC rules and regulation. At that stage JTL has taken initiatives to do feasibility study for next five years based on some assumption which discuss elaborately below

6.1 ASSUMPTIONS Revenue 2008

2009

2010

2011

2012

No. of Subscribers Prepaid Postpaid Total

3,106 777 3,883

15,430 3,858 19,288

23,230 5,808 29,038

31,030 7,758 38,788

38,830 9,708 48,538

Churn (Deactivated customers, %) Outgoing Incoming Minutes per day per subscriber

70% 30% 28.0

65% 35% 28.7

62% 38% 29.4

60% 40% 30.2

58% 42% 31.0

2.5%

2.5%

2.7%

2.7%

AMPU Growth

3%


Total AMPU per month outgoing Total Air time - outgoing Prepaid Postpaid

588 2,282,910 1,369,746 913,164

560 10,794,249 6,476,550 4,317,700

547 15,888,318 9,532,991 6,355,327

544 21,093,104 12,655,863 8,437,242

540 26,204,345 15,722,607 10,481,738

309 132 441

294 126 420

287 123 410

286 122 408

283 121 405

706 470 1,176

672 448 1,119

657 438 1,094

653 435 1,088

648 432 1,080

Prepaid AMPU Peak Hour Off Peak Hour Total Post Paid AMPU Peak Hour Off Peak Hour Total Revenue from Inter connection for incoming Total AMPU per month incoming

252

301

Total Airtime - incoming per year

11,740,680

69,747,458

Interconnection Sharing Rate (Tk.) Peak Off Peak

335

363

116,856,018

168,744,834

391 227,706,718

0.40 0.40

0.40 0.40

0.40 0.40

0.40 0.40

0.40 0.40

3,287,390 1,408,882 4,696,272

19,529,288 8,369,695 27,898,983

32,719,685 14,022,722 46,742,407

47,248,554 20,249,380 67,497,934

63,757,881 27,324,806 91,082,687

Average Revenue per Minute Prepaid Post paid

0.56 0.60

0.53 0.57

0.51 0.54

0.48 0.51

0.46 0.49

Revenue from Call Charge, Monthly Prepaid Post paid (excl. line rent)

247 706

223 638

207 593

196 560

185 528

ARPU, Monthly Prepaid Post paid (incl. line rent)

247 856

223 788

207 743

196 710

185 678

No. of Users (as %) 80% 20%

Usage Total 60% 40%

Peak Hour 70% 60%

Usage Off Peak Hour 30% 40%

0.40 0.40

0.40 0.40

0.40 0.40

0.40 0.40

Revenue from Interconnection Peak revenue Off peak revenue total revene incoming

ARPU per minute Product Prepaid Post paid Inter-connection charge Inter-connection charge (Peak Hour) Inter-connection charge (Off Peak Hour) Inter-connection Expense

0.40 0.40


Inter-connection expense (Peak Hour) Inter-connection expense (Off Peak Hour) Total Inter-connection expense

3,616,129 1,862,855 5,478,984

17,098,091 8,808,107 25,906,199

25,167,096 12,964,868 38,131,964

33,411,477 17,211,973 50,623,450

41,507,682 21,382,745 62,890,427

605,207 5,478,984 6,084,191

2,227,664 25,906,199 28,133,863

3,327,404 38,131,964 41,459,368

4,624,992 50,623,450 55,248,442

5,614,774 62,890,427 68,505,201

Subsidy/Acquisition Cost Subsidy/Acquisition cost per customer DIRECT OPERATING COST Royalty to BTRC Interconnectivity Cost Subsidy/Customer acquisition cost Total Cost Rate of Royalty to BTRC

2.00%

Operation & maintenance (O&M)

2.00%

2.00%

2.00%

2008

2009

Rent

1,200,000

1,320,000

1,452,000

1,597,200

1,756,920

Salaries and allowance

2,400,000

2,640,000

2,904,000

3,194,400

3,513,840

Printing and stationeries

50,000

55,000

60,500

66,550

73,205

Postage and telephone

40,000

44,000

48,400

53,240

58,564

Entertainment

20,000

22,000

24,200

26,620

29,282

Training and development

-

-

-

-

-

Books and periodicals

10,000

11,000

12,100

13,310

14,641

Consultancy fees

-

-

-

-

-

Car running and maintenance

12,000

13,200

14,520

15,972

17,569

Traveling and conveyance

20,000

22,000

24,200

26,620

29,282

Insurance premium

1,000,000

1,100,000

1,210,000

1,331,000

1,464,100

Stores & spares

500,000

550,000

605,000

665,500

732,050

Fuel & lubricants

00

211,750

232,925

18

Repairs & maintenance

00

181,500

199,650

15

Electricity bills

00

4,840,000

5,324,000

00

Miscellaneous expense

00

1,210,000

1,331,000

00

Total Cost Put into Process

175,0 150,0

4,000,0 1,000,0

00 00 00

192,5 165,0

4,400,0 1,100,0

00 10,577,000. 00

11,634,700. 00

2010

2.00%

12,798,170.00

2011

14,077,987.00

2012

256,2 219,6

5,856,4 1,464,1 15,485,785. 70

General & Administrative Expense Office rent

2,400,000

2,640,000

2,904,000

3,194,400

3,513,840

Salaries and remuneration Printing & stationeries

8,400,000 250,000

9,240,000

10,164,000 302,500

11,180,400 332,750

12,298,440


275,000

366,025

Postage & telephone

200,000

220,000

242,000

266,200

292,820

Entertainment

50,000

55,000

60,500

66,550

73,205

Publicity and advertisement

2,500,000

2,750,000

3,025,000

3,327,500

3,660,250

Books and periodicals

10,000

11,000

12,100

13,310

14,641

Audit and legal fees

60,000

66,000

72,600

79,860

87,846

Car running and maintenance

120,000

132,000

145,200

159,720

175,692

Traveling and conveyance

50,000

55,000

60,500

66,550

73,205

Miscellaneous expense

1,000,000

1,100,000

1,210,000

1,331,000

1,464,100

Total

15,040,000

16,544,000

18,198,400

20,018,240

22,020,064

Collection from Sales / Collection of receivables Credit Term

60

days

Beg. A/R

-

1,016,325

3,781,074

5,933,758

8,561,743

Ending A/R

1,016,325

3,781,074

5,933,758

8,561,743

10,104,588

Collection from Sales (Cash)

29,244,043

108,618,460

164,217,512

228,621,614

Credit Term

60

days

Beg. A/R

-

771,990

4,586,134

7,683,683

11,095,551

Ending A/R

771,990

4,586,134

7,683,683

11,095,551

14,972,497

Credit Term

60

days

Operation & maintenance

10,577,000

11,634,700

12,798,170

14,077,987

15,485,786

General and administrative expense

15,040,000

16,544,000

18,198,400

20,018,240

22,020,064

Total

25,617,000

28,178,700

30,996,570

34,096,227

37,505,850

Beg. A/P

-

2,134,750

2,348,225

2,583,048

2,841,352

Ending A/P

2,134,750

2,348,225

2,583,048

2,841,352

3,125,487

60

days

4,258,553

6,268,268

279,195,869

Interconnection revenue receivables

Payment of operating expenses

Interconnection expenses payable Credit Term Beg. A/R


Ending A/R

-

900,655

900,655

4,258,553

8,321,663 6,268,268

8,321,663

10,338,152

6.2 PROJECT COST (Tk) Already Invested PROJECT COST

Land & Development : Land & Land Development Site Preparation

To be Invested

Local Currency

Foreign Currency Equivalent in BDT

1,900,000

-

-

-

Local Currency

10 0,000

-

100

,000 Site & Civil Works: Cost of Site Acquisition & Civil Works Advance against Sites & Spaces

10,300,000 -

-

20 0,000

Imported Machinery: Imported Machinery Duty, Clearing forwarding etc.

220,000,000 -

0,000

10, 500,000

-

304, 100,000

Imported Machinery

220,000,000

84,100,000 -

Local Machineries & Equipments: Local Machineries & Equipments

61,400,000

-

Local Machineries & Equipment

61,400,000

-

Transport, furniture & fixtures Transport & vehicles

4,200,000

Furniture & fixtures

4,000,000

Computer & office equipment

7,200,000

Leasing of E-1

7,500,000

10, 500,000 -

20

84,100,000 -

2, 000,000

10,300,000

2, 000,000

1,900,000

Total

42,000 ,000 42,00 0,000

1,80 0,000 1,00 0,000 2,80 0,000 6,00

304, 100,000

103, 400,000 103, 400,000

6, 000,000

5, 000,000 10, 000,000 13,


Total transport, furniture & fixtures, etc. Other Project Cost Pre-operating Expense Marketing Expense

22,900,000

-

14,100,000

-

2,500,000 20,600,000

-

Bank Guarantee Margin

5,000,000

-

Bank interest and charges

6,500,000

-

-

Other Project Cost

-

48,700,000

Initial Net Working capital

500,000 34, 500,000

14, 100,000 5, 000,000 20, 600,000 6, 000,000 40, 000,000 5, 000,000 90, 700,000

2,50 0,000

License & application fee

Contingency

0,000 11,60 0,000

-

1,00 0,000 33,500 ,000 5,00 0,000 42,00 0,000

-

Total Cost of the Project

365,200,000

84,100,000

95,900,000

545,200,000 -

6.3 MEANS OF FINANCE Source Equity

Amount 200,000,000

Percentage 37%

Term Loan

345,200,000

63%

Total

545,200,000

100%

Comparison of project cost with other operators Dhaka Phone Ltd. Total project cost (Tk.)

1,460,400,000

Ranks Tel. 2,300,000,000

Telebarta 3,103,041,03 3

JTL 545,200,000


6.4 BUDGETED BALANCE SHEET 2008

2009

(13,029,23 7)

Cash

2010

19,878,4 94

73,520,0 49

2011

2012

170,547,8 54

299,564,2 82

Bills Receivables Interconnection Revenue Receivables

1,016,325

3,781,074

5,933,758

8,561,743

10,104,588

771,990

4,586,134

7,683,683

11,095,551

14,972,497

Other Short Term Assets

-

-

-

-

-

Total Current Assets

(11,240,922)

28,245,702

87,137,490

190,205,148

324,641,366

Long Term Assets

545,200,000

545,200,000

545,200,000

545,200,000

545,200,000

Less: Depreciation & Amortization

51,935,238

103,870,476

155,805,714

207,740,952

259,676,190

Net Fixed Assets

493,264,762

441,329,524

389,394,286

337,459,048

285,523,810

Total Assets

482,023,840

469,575,226

476,531,775

527,664,195

610,165,176

A/P

2,134,750

2,348,225

2,583,048

2,841,352

3,125,487

Interconnection expense payable

900,655

4,258,553

6,268,268

8,321,663

10,338,152

Total Current Liabilities

3,035,405

6,606,778

8,851,316

11,163,015

13,463,640

Long Term Debt

345,200,000

345,200,000

345,200,000

331,200,000

317,200,000

Less: Loan repayment

-

-

(14,000,000)

(14,000,000)

(14,000,000)

Net Long Term Debt

345,200,000

345,200,000

331,200,000

317,200,000

303,200,000

Total Liabilities

348,235,405

351,806,778

340,051,316

328,363,015

316,663,640

Share Capital

200,000,000

200,000,000

200,000,000

200,000,000

200,000,000

Retained Earnings

(66,211,565)

(82,231,552)

(70,536,545)

(31,273,595)

27,601,628

Reserve for Tax holiday

-

-

7,017,005

30,574,775

65,899,908

Total Capital

133,788,435

117,768,448

136,480,460

199,301,180

293,501,536

Total Liabilities and Equity

482,023,840

469,575,226

476,531,775

527,664,195

610,165,176


6.5 BUDGETED INCOME STATEMENT Particulars

2008

2009

2010

2011

2012

Revenue

30,260, 368

111,383, 209

166,370, 196

231,249, 599

280,738, 714

-

-

-

Total Revenue

30,260,368

111,383,209

166,370,196

231,249,599

280,738,714

Less. VAT @ 15%

2,225,752

8,280,551

12,994,929

18,750,217

22,129,047

Net Revenue Less: Cost of Revenue

28,034,617

103,102,658

153,375,267

212,499,382

258,609,667

Interconnection cost

5,478,984

25,906,199

38,131,964

50,623,450

62,890,427

Royalty to BTRC

605,207

2,227,664

3,327,404

4,624,992

5,614,774

Subsidy/Customer acquisition cost

-

-

-

-

-

6,084,191

28,133,863

41,459,368

55,248,442

68,505,201

Operating Revenue Commercial Expenses:

21,950,425

74,968,795

111,915,900

157,250,940

190,104,466

Operation & maintenance

10,577,000

11,634,700

12,798,170

14,077,987

15,485,786

General & Administrative Expense

15,040,000

16,544,000

18,198,400

20,018,240

22,020,064

Bad Debt & Other Provisions

109,752

374,844

559,579

786,255

950,522

Other Administrative Expenses

-

-

-

-

-

Fixed Operating Cost

25,726,752

28,553,544

31,556,149

34,882,482

38,456,372

EBITDA

(3,776,327)

46,415,251

80,359,750

122,368,458

151,648,094

Depreciation

40,960,000

40,960,000

40,960,000

40,960,000

40,960,000

Amortization

10,975,238

10,975,238

10,975,238

10,975,238

10,975,238

EBIT

(55,711,565 )

(5,519,987)

28,424,512

70,433,220

99,712,856

Less: Interest on Term Loan

10,500,000

10,500,000

9,712,500

7,612,500

5,512,500

Less: Interest on W/C

-

-

-

-

-

(66,211,565 )

(16,019,987 )

18,712,012

62,820,720

94,200,356

(66,211,565

(16,019,987

18,712,012

62,820,720

94,200,356

Total Cost of Revenue

Profit Before Tax Profit Before Tax

-

-


)

)

Less. Income Tax

-

-

-

-

-

Profit After Tax

(66,211,565 )

(16,019,987 )

18,712,012

62,820,720

94,200,356

Retained Earning

(66,211,565)

(16,019,987)

11,695,008

39,262,950

58,875,222

Cumulative Retained Earning

(66,211,565)

(82,231,552)

(70,536,545 )

(31,273,595 )

27,601,628

6.6 BUDGETED CASHFLOW STATEMENT Investment Yr

2008

2009

2010

2011

2012

Operating Activities : Net Profit Before Tax

-

(66,211,565)

(16,019,987)

18,712,012

62,820,720

94,200,356

Add: Depreciation

-

40,960,000

40,960,000

40,960,000

40,960,000

40,960,000

Add: Amortization

-

10,975,238

10,975,238

10,975,238

10,975,238

10,975,238

Add: Interest

-

10,500,000

10,500,000

9,712,500

7,612,500

5,512,500

EBITDA

-

(3,776,327)

46,415,251

80,359,750

122,368,458

151,648,094

Payment of Income Tax

-

-

-

-

-

-

Decrease (Increase) in net working capital

-

1,247,090

(3,007,520)

(3,005,696)

(3,728,153)

(3,119,166)

Cash flow from operating activities

-

(2,529,237)

43,407,731

77,354,054

118,640,305

148,528,928

(545,200,000)

-

-

-

-

-

Issue of Share

200,000,000

-

-

-

-

-

Term Loan

345,200,000

-

-

-

-

-

Investment Activities : Land Development

(2,000,000)

Site & Civil works

(10,500,000)

Imported Machinery

(304,100,000)

Local Machinery

(103,400,000)

Vehicles, furniture’s & fixtures

(34,500,000)

Other Cost Cash Provided from investment activities

(90,700,000)

Financial Activities :


Payment of Interest

(10,500,000)

(10,500,000)

(9,712,500)

(7,612,500)

(5,512,500)

Repayment of Term Loan Repaid

-

-

(14,000,000)

(14,000,000)

(14,000,000)

Change in Bank Loan (W/C)

-

Cash Provided from financing activities

545,200,000

(10,500,000)

(10,500,000)

(23,712,500)

(21,612,500)

(19,512,500)

Net Changes in Cash

-

(13,029,237)

32,907,731

53,641,554

97,027,805

129,016,428

Add. Opening Cash balance

-

-

(13,029,237)

19,878,494

73,520,049

170,547,854

Ending Cash Balance

-

(13,029,237)

19,878,494

73,520,049

170,547,854

299,564,282

6.7 FINANCIAL RATIO ANALYSIS Particulars

2008

2009

2010

2011

2012

Net Margin

-236.18%

-15.54%

12.20%

29.56%

36.43%

Gross Margin

100.00%

100.00%

100.00%

100.00%

100.00%

Return on Investment

-13.42%

-3.63%

4.81%

18.62%

32.99%

0.84

3.56

5.27

6.92

8.02

13 (2,529,236.8 4)

13 43,407,731. 26

14 77,354,054. 45

15 118,640,304. 93

14 148,528,928.0 2

-9.02% (5. 31)

42.10% (0. 53)

50.43% 1 .20

55.83% 3 .26

57.43% 5 .11

Current Ratio Receivable turnover days EBITDA (BDT) EBITDA/Net Sales Debt Service Coverage Ratio (times)

7. OBSERVATION AND RECOMMENDATION Planning

Observation: JTL activities were not object oriented. There have lots of gap between company planning and its activities. Management did not properly comply/ follow up company’s budget and planning to achieve the objective. Recommendation:


JTL management has to be goal congruence. They have required developing plan and budget based on study and analysis and properly follows the budget that will help company to achieve the objective. Organizational Structure

Observation: JTL has poor organizational structure. Company has no specific criteria for decision making process. Managing Director is the only decision maker which has to be follow irrespective comply any plan or not. JTL has no marketing manager although Telecom is highly marketing based company. Recommendation: JTL must be developing a good organizational structure that will help to make right decision at the right time. JTL has required recruiting marketing manager. Sales Target and Marketing Plan

Observation: Company are following visionary sales target without effective marketing plan and personnel and effective technical support. Recommendation: Management should consider proper marketing plan, personnel and technical feasibility to attract more subscribers. Project Cost

Observation: JTL project cost is excess compare to operational area of the company. Company is spending many unutilized resources in different location where subscribers are very negligible. Recommendation: JTL management should utilize the expensive resources that will generate more cash flow for the company. 8. CONCLUSION JTL (a PSTN operator) start its operation by local ownership with very latest technological equipment with the vision to operate in 16 districts.

But after three years of operation JTL

started to face acute business competition and BTRC rules and regulation. As a result it’s


become very difficult for JTL to make up its operating cost. To start new journey with lot of courage and energy JTL has taken initiatives do to feasibility study for another five years period and new investment project.


Jtl has planned to provide fixed phone services to its subscribers with the latest technology