Macro-economic factors Essay
There are a lot of macro environmental factors that affect Telfin performance though emphasize has been given on the important factors. Economic factors like current and anticipated economic growth, interest rate, inflation, cost of labor, disposable income and distribution of income etc collectively comprise economic environment.
Current and projected economic conditions: In recent years Pakistan’s economic figures were indicating very impressive and promising consequences and infact these all were proven to be wrong. A number of reasons are behind this but the most important are the economic policies which were not integrated with political environment in an apt manner. Secondly, terrorism has stooped down our economy in a very negative manner. Therefore because of these reasons Pakistan current and anticipated economic conditions aren’t in Telfin favor. Exchange Rate: Telfin is directly affected by fluctuation of exchange rates as investment is being done in USD, all suppliers have to be paid in USD and being subsidiary of Vimplecom, Shareholder calculations are in USD while revenue is generated in local currency (PKR). Due to depreciated PKR every year when revenue is calculated in USD it is minimized due to negative exchange rate effect. Fuel Prices: Telfin is the one of the biggest customer of PSO (Pakistan State Oil), due to energy crisis in Pakistan and being the largest on coverage for the services, more than 5000 cell sites have to be energized to keep the network running.
Taxtation: Govt has applied additional 5% tax on the top up so subscribers get 5% less balance on recharge but as an impact it has been seen that subscribers have reduced the usage as recharge revenue has decreased and 5% reduction is from Telfin revenue. Inflation and interest rate: interest rate and inflation both are elevated in Pakistan. In most of countries it is very much natural that once economic conditions are bad central banks reduces interest rate in order to boost investment where as in Pakistan the case is otherwise. The interest rate is high because the government wants to cease central bank new notes issuing rate which is more than 15% currently. Therefore collectively interest rate and inflation are presenting a bad picture for Telfin.
Unemployment rate and cost of labor: Because of higher education bang there is a talented pool of candidates who are ready to be employed in big companies or organizations. But the fact is that the production of new jobs is not competent with supply pool therefore unemployment rate is high. In addition as supply of potential workers is high, the cost of labor is low in Pakistan which is a positive signal for Telfin. Level of disposable money and income distribution: It is really evident that if the economic conditions of a particular country are bad, the people living in, do not have high level income to be spent. Moreover the fact is that national income distribution is very unfair and unequal in Pakistan because elite class dominates on key government posts. Non-economic macro Exposure:
Telfin like every other organization is also affected by the political setup to a greater extent which are needed to be addressed. Political Factor: There is a democratic government now-a-days in Pakistan but due to previous government policies & present government inability to manage issue wisely, it can be concluded clearly that government is not able to stabilize the situation as it was expected which is surely not good for the companies like Telfin. Rule of Law, Corruption and bureaucracy: Due to the amendments made in the constitution of Pakistan by ex-dictators and domination of rich people on the vital government posts, there is just a minimal justice and rule of law in Pakistan. Regularity authorities: There are regularity bodies in Pakistan like PTA (Pakistan Telecommunication Authority) but it does not have enough grip on issues as it is expected from it due to the mandate given to it. Security: Due to security situations, telecom industry has suffered a lot as on events there is complete network shutdown to prevent terrorism. These shut down is a direct loss for complete industry. Moreover due to different measures taken by regularity to address security is to have Biometric scanning before issuance of SIM so cost of sale has increased recently and all operators have to install machines to have scanning capability.