Financial Analysis of 5G Networks Limited

This report provides a detailed financial analysis of 5G Networks Limited, including industry and company description, financial instrument analysis, financial structure analysis, and recommendations. It also discusses the role of financial players in the communication service sector and the need for government intervention in the industry.

Running head: REPORT 0
PRINCIPLES OF FINANCIAL MANAGEMENT
SEPTEMBER 18, 2019
STUDENT DETAILS:

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Contents
Introduction........................................................................................................................2
Industry description............................................................................................................2
Company description.........................................................................................................3
Financial Instrument Analysis-...........................................................................................3
Financial instruments.....................................................................................................3
Off balance sheet business............................................................................................4
Financial Structure Analysis..............................................................................................4
Three main financial ratios for creditors.........................................................................4
Three main financial ratios for shareholders..................................................................5
Calculation of financial ratios..........................................................................................5
Financial market analysis..................................................................................................6
Role of financial players in communication service sector............................................6
Need of government intervention in communication service industry...........................6
Involvement of 5G Networks limited in unethical practices............................................7
Findings, conclusion and recommendations.....................................................................7
References.........................................................................................................................9

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Appendix..........................................................................................................................10

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Introduction
In the present world, the Australian telecommunications industry has practised great
changes, creating extensive chances for the organisations such as 5G Networks limited.
In recent, the company is starting to consider commercial 5G network ongoing live. The
past generation made focus on the consumers along with private communication but
now 5G would serve consumer, organisations and take the internet of thing to upcoming
stage wherever the superior connectivity is the precondition. In the following parts, the
communication service sector, overview of 5G network limited its financial instrument
analysis as well as financial structure analysis is discussed. This report also discusses
the financial market analysis and recommendations.
Industry description
There are various companies in communications services sector that render
communication service mainly throughout the fixed line, cellular, high bandwidth,
wireless-connection, or fibre optic cable networking. The communication services
industry is economical, diverse as well as interlinked sector utilising global satellite, as
well as wireless transmission system. The communication service industry is the main
element of the economy as this underlies functions of all business, public security
organization, as well as administration. In Australia, the telecommunications sector runs
in the atmosphere of completely open competition. It is open to take entry in
telecommunication marketplaces open with minimal operational requirement. There are
2 major groups of operators:

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1. Service provider—the service provider who uses carrier facility for rendering the
phones, net service along with content related services, like Pay TV to public.
2. Carriers—they are people who run main telecommunication amenities.
Moreover, in this sector, the foreign ownership is subject to common provision of
the Foreign Acquisitions and Takeovers Act 1975. It does not include Telstra. As per
the Telstra Corporation Act 1991, just thirty-five per cent of Telstra takes may be owned
by the international interest. There are 2 regulators. These are following-
1. the Australian Communications and Media Authority for technical or different
cases (like carrier or services render licensing, as well as number probabilities) in
the Telecommunications Act 1997
2. Australian Competition and Consumer Commission regulate the matter related
to competition matters as per Competition and Consumer Act 2010.
Company description
5G Networks Limited is the licensed telecommunication carrier functioning in Australia.
The mission of the company is to become the partner of choices to unify the flawless
digital experiences for the consumers across information connectivity, data centre as
well as cloud services, all underpinned by the expert supervising service. Because of
the digital leadership, as well as the exceptional customer experience, the main
foundation to the approaches is to enable the customers to thrive in the digital world.
Additionally, this company is devoted to rendering the customer with the best and
proper experience, stated by the vision of company. In addition, the culture of company
is securely centred on the individuals, faith along with teamwork, enabling the staff to

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continually unlock value for the customers throughout modernization, and the expertise
for transforming the digital issues in successful results related to the business. The
company runs the business to work in fast as well as smart way. 5GN Data network
connects businesses to secure, world class techniques for enhancing the relevance
performance along with accessibility. Further, the big shareholder group in the company
has powers over an organisation. The institution often has the share in more developed
corporations, when this is not strange to watch the insider has a fair bit of small entities.
Financial Instrument Analysis-
Financial instruments
It can be analysed by the annual report of 5G networks limited that AASB 9- ‘Financial
Instruments and associated Amending Standards’ would be applicable in retrospect as
well as involves the revised requirement for classification along with amount of the
financial instrument, revised recognitions along with requirements to recognise the
financial instruments as well as basic requirement for hedging the accounting. Further,
the cash as well as cash equivalents involves the cash in hand, deposit held at call with
financial organisations, the short term, high liquid investment with real maturity of 3
months or less than 3 months that are willingly convertible to recognized amount of the
cash, and that is matter to the significant risks of change in the value (Leite and Vieira,
2015).
Further, the financial liabilities along with financial assets are identified while the
corporation becomes the contracting person to the contractual provision to the
instruments. For financial assets, it is corresponding to a date that groups commit itself
to either sale of business assets or purchase of business assets. It can see that the

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financial instruments are evaluated primarily at the fair values plus transactional cost
except wherever the instruments are classified as “at fair value” throughout the profits or
losses wherever the transactional cost is expensed to the profits or losses instantly
(Tran, et. al, 2017). While analysing the ‘Financial Risk Management Objectives’, it is
found that the financial instruments of group consist majorly of the deposit with bank,
local money marketplace instrument, accounts payable, account receivable, loan to and
from subsidiary, along with the lease. The key objectives of non-derivative financial
instruments are to raise the fund for operations related to the group (Danaher and
Gallan, 2016).
Off balance sheet business
Form the annual report of company, it is found that besides the balance sheet items,
and the 5 G Network Limited is also engaged in off balance sheet business. It is
analysed from the report that the determination of whether the arrangements are or
contain the lease is depended on the substance of arrangements as well as requires the
evaluation of whether the completion of arrangements is based on the utilisation of the
particular assets, as well as the arrangements convey the rights to utilise the assets
(Agiwal, Roy and Saxena, 2016). It is stated in the annual report of company that the
groups do not designate the interest in associates, subsidiaries and joint venture
corporations as being a matter of the requirement of accounting standard especially
applicable to the financial instruments (Lee and Chang, 2017).
Financial Structure Analysis-
Three main financial ratios for creditors

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The financial statements provide the creditor the comprehensive appearance at
financial position of the businesses. They render data like current debt obligation,
income, salary, expenditure, profits along with cash flow all factors in the overall
business financial background (Ellies, et. al, 2018). The creditor uses financial
statement of the company to decide whether the company’s business states the sound
credit risks, along with the capability for repaying the debts as agreed. The current ratio,
debt to equity ratio and return on equity ratio can be significant for the creditors.
Generally, the current ratio is considered as the current asset divided by current
liabilities. Here, the current means upcoming twelve months. The current assets of
company involve the cash, account receivables, inventories along with prepaid
expenditures. On the other hand, the current liabilities cover the accounts payable,
credit card along with accrued expenditures. The current ratio above the 1.2, normally
accepted as the good ratio. The creditor uses this ratio to know the capability of the
business for repaying the debts over upcoming period (Patel, et. al, 2018).
Further, the creditors utilises the debt to equity ratio. The debt to equity ratio is helpful in
determining relative proportion of the equity of shareholders and debt utilised for
financing the assets of company. The debt to equity ratio renders the creditors the
knowledge of using the debt by the business and its capability for repaying the
additional debts. The formula to determine the debt to equity is total liabilities divided by
total equity. The method of assessing debt to equity ratio is depended upon the
creditors on the basis of type of industry and business. Therefore, the ratios help
creditor to determine the financial position as per the viewpoint of borrowers simply. The
quick ratio is another example. With the help of this, one may decide the first-hand if the

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prospect borrowers are capable to make the payment of obligations. For the instance,
the quick ratio is similar to ratio of the liquid assets of company to the short-term
liabilities. The common benchmark value of the quick ratio is one. In this way, in a case
when determined value of the quick ratio of company is more than one 1, assume it is 2,
which mean making payment of the short-term liability in full would only take ½ of the
liquid assets to tell the creditors that the prospect borrowers have the ability for paying
the debt obligation (Boer, et. al, 2017).
Three main financial ratios for shareholders
The net profit margin ratio, operating profit margin ratio, and return on equity ratio are
very significant ratios for the shareholders of company to take relevant decisions. The
profitability means the ability of company to produce the revenue in excess of the cost
occurred in generating the revenues. The net profit margin ratio states that how much
money is required by the entity to make every one dollar in revenues. The entity having
the higher net profit margins may provide best benefits, bonus, as well as fatter dividend
(Akpolat, 2017). The operating profit margin is other significant metric to assess the
efficiency of the financial management of the company. Finally, the operating profit is a
part of revenue, which may be helpful for paying the shareholders along with tax.
Additionally, the return on equity assesses that how well the businesses are doing
regarding the investment made by the stakeholders. This ratio is helpful for the
shareholders to know that how much an entity is earning for each of all the invested
dollars. This is determined by dividing earnings after tax of company by the total equity
of shareholders, as well as multiplying the results by one hundred per cent.

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Calculation of financial ratios
Description Formula Year
Profitability 2018
Net margin Net profit/revenues -6.01%
Gross margin gross profit/ Revenues -0.23%
Return on
equity Net income/ equity -3.83%
Liquidity
Current ratio
Current assets/current
liabilities 1
Quick ratio
(current asset-
inventory)/current
liability 1
Solvency
Ratio
Debt to equity
ratio Debt/equity 59.25%

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From the above ratio analysis, it is found that net margin is-6.01% and gross margin
ratio is -0.23%. The return on equity is -3.83%. it means company is not performing well
and incurring losses. The current and quick ratio is 1. Further, the debt to equity ratio is
59.25%. It is recommended the company to use equity rather debts for financing.
Financial market analysis
Role of financial players in communication service sector
The introduction of enhanced networking has unmitigated existing relation between the
financial service providers for involving the more services as well as products, which
have become obtainable. The financial players such as regulators, borrowers as well as
investors have developed as well as maintained the correspondent relations, which
have involved like features as the participation in loan as well as the secondary market’s
operations for numerous debt instruments, without depending upon the automated
processes. These financial players have exchanged the important information to multi-
services while having the communication. They have global relationship to advance the
telecommunication services (Bouguettaya, et. al, 2017). It can be helpful in attracting
more users and consumers. This type of relation would continue in indefinite upcoming
period. The players such as regulators, borrowers and investors are in the combative
relationship. They play important role in developing the networking project in different
areas. The relationship between financial players like borrowers, regulators and

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investors, as well as their contribution has greater impact on the investing, advancing as
well as trading. The regulators regulate the services and products for satisfaction of
users. They also ensure the ethical conducts of investors as well as borrowers. They
resolve the technical issues and keep control on the activities of borrowers and
investors for better facilities (Moore and Morton, 2017).
Need of government intervention in communication service industry
Various telecommunication operators required for instant government intervention to
end the increasing financial stress in the communication services industry, and stating
matters of low tax as well as making sure ease of conducting businesses throughout
more efficient policy of the merger and acquisition. There are various debts in the
communication services industry. By taking the help of government, the problem can be
solved in 2 things. One thing is in ease of conducting the business, there is also a great
problem in right of manner for laying fibre, this is the difficult procedure for getting
access to the government building, it is found that merger and acquisition, pace at that
occur is the issues. All these requirements are required to be rationalized, for the
reason that the companies require to get on with businesses. Additionally, the latest
marketplace expansion has radically changed dynamics of the communication services
sector resulting into sector passing throughout relentless financial stress and mental
stress (Choy and Harima, 2019). The preface along with explosion of bundled limitless
plans, outcomes of lack of effectual regulatory interventions, has had the deeper
impacts on realization rate of the industry. In this way, the government intervention is
needed in the communication service sector. Therefore, the communication service

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industry is the big follower of indigenous production. However, till such the period while
quality product at the competitive prices is available in a nation, the governments need
to reconsider the stands in relation to duty on equipments to ensure the timely roll out of
networks. Aside from the budgetary interventions, the government is required to
consider decreasing the applicable tax rate as the higher cost of functions is raising the
question on sustainability of sector in the short term.
Involvement of 5G Networks limited in unethical practices
It is found that earlier, 5G networks Limited was involved in unethical practices. The
practices of company were not secure on commercial basis. It did not complied with
rules and regulations related to telecommunication services. It was the unethical
practice of company. The regulators had made control over these unethical practices of
company. The Australian Communications and Media Authority (ACMA) identified the
technical issues. They have taken proactive initiatives to ensure the security. It had
suggested solution to solve these technical issues. Further, they ensure that the
company is providing essential input as well as public services.
Findings, conclusion and recommendations
As per the above analysis, it can be concluded that the communication Service sector
has gone throughout certain important composition modifications most recently,
involving three higher growth FAANG stock being added to industry. The main issue for
global service policies reform is to provide the scheme, which leverages NBN, gradually
motivates participation of the private industry and drives great competition. This report
makes 5 interrelated recommendations for replacing the current USO policies with the

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more transparent as well as well-organized approach through developing the universal
services. Following are the recommendations-
1. Universal Service Fund
It is required to develop the Universal Service Fund, to assist funds non-
commercial however socially significant telecommunications infrastructure. The
Universal Service Fund Will be financed from contribution by the advanced levy
schemes that will require to decrease the imposition of existing arrangements.
2. NBN as Universal Infrastructure Provider
Consistent with NBN’s present reference, it is required to select officially, NBN as
the Universal Infrastructure Provider for connecting the premises in Australia. It cans
say that all retail service providers on NBN will be capable to render voice as well as
broadband service to each area in Australia (Valos, et. al, 2016).
3. NBN as the Standard Communications Service Provider
It is highly recommended to keep the copper networking to render the standard phone
Services, as well as render funding to NBN for delivering the modern Standard
Communications Service providing voice along with broadband ability to all the
locations.
4. mobile coverage as well as preference
The Universal Service Fund is required to consider the provisions of financing for
different necessary services like advancing the mobile coverage as well as choices in
local area of Australia by means of expanded Mobile Black Spot Program. The NBN is

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also required to establish the project plans for assisting the sector expand competitive
mobile service in local area of Australia by rendering admittance to NBN backhaul.
5. Broad range of telecommunication resolution-
As substitute to the conventional payphone subsidy, it is required to broaden abate of
the Universal Service Fund for providing the range of telecommunications resolution for
the regional community as well as other customers, like public open access Wi-Fi. It is
also required to provide the funds for smaller scale communities led inventive
communication projects for enabling the broadband service to all the people of Australia
(Wunderlich, et. al, 2015).

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References
Agiwal, M., Roy, A. and Saxena, N. (2016) Next generation 5G wireless networks: A
comprehensive survey. IEEE Communications Surveys & Tutorials, 18(3), pp.1617-
1655.
Akpolat, H. (2017) Six sigma in transactional and service environments. New York:
Routledge.
Annual report (2018) 5G Networks. Available at:
https://5gnetworks.com.au/asx_announcements/2018-annual-report-to-shareholders/
[Access on 19/09/2019]
Boer, H., Berger, A., Chapman, R. and Gertsen, F. (2017) CI Changes from Suggestion
Box to Organisational Learning: Continuous Improvement in Europe and Australia:
Continuous Improvement in Europe and Australia. 24(9), pp. 23-27
Bouguettaya, A., Singh, M., Huhns, M., Sheng, Q.Z., Dong, H., Yu, Q., Neiat, A.G.,
Mistry, S., Benatallah, B., Medjahed, B. and Ouzzani, M. (2017) A service computing
manifesto: the next 10 years. Communications of the ACM, 60(4), pp.64-72.
Choy, S. and Harima, K. (2019) Satellite delivery of high-accuracy GNSS precise point
positioning service: An overview for Australia. Journal of Spatial Science, 64(2), pp.197-
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Danaher, T.S. and Gallan, A.S. (2016) Service research in health care: positively
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Ellis, K., Kent, M., Hollier, S., Burns, S. and Goggin, G. (2018) Reimagining Australia via
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Lee, W.H. and Cheng, C. ( 2018) Less is more: A new insight for measuring service
quality of green hotels. International Journal of Hospitality Management, 68, pp.32-40.
Leite, H.D.R. and Vieira, G.E. (2015) Lean philosophy and its applications in the service
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Moore, T. and Morton, J. (2017) The myth of job readiness? Written communication,
employability, and the ‘skills gap’in higher education. Studies in Higher
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Patel, P., Sinha, P., Bhanugopan, R., Boyle, B. and Bray, M. (2018) The transfer of
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MNE diamond model. Journal of Business Research, 93, pp.268-279.

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Tran, T.X., Hajisami, A., Pandey, P. and Pompili, D. (2017) Collaborative mobile edge
computing in 5G networks: New paradigms, scenarios, and challenges. IEEE
Communications Magazine, 55(4), pp.54-61.
Valos, M.J., Haji Habibi, F., Casidy, R., Driesener, C.B. and Maplestone, V.L. (2016)
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Wünderlich, N.V., Heinonen, K., Ostrom, A.L., Patricio, L., Sousa, R., Voss, C. and
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and managers. Journal of Services Marketing, 29(6/7), pp.442-447.

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Appendix
Financial statements 2018:
Balance sheets-

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Income statement

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