Türk Telekom wanted to improve the visibility, control and predictability of its cash flows. Citi developed an innovative solution that leveraged the bank’s partnership with Post Bank of Turkey (PTT), which has 4000 online branches countrywide, so that Türk Telekom treasury can see the amount in its accounts online, same day, as well as how much each office has deposited.
Head of Treasury Operations
Türk Telekom Group, the leading communication and convergence technology group in Turkey, provides integrated telecommunication services from PSTN and GSM to broadband internet. As of 31st December 2012, Türk Telekom group companies have 14.3m fixed access lines, 7m broadband connections and 13.5m mobile subscribers. Group companies have a modern network infrastructure covering the whole country and offer a wide variety of services to residential and commercial customers all over Turkey.
Türk Telekom has more than 300 offices countrywide, of which each collects cash from subscribers. The company’s main cash management challenge was to collect the funds from these offices and deposit them into the HQ current account. In the previous cash management set-up, there were three ways to collect cash: pick-up by armoured cars from 165 offices; deposit into an account held with a state-owned bank, for further transfer to the HQ account and direct debit from dealers. The first two collection methods were at the root of the problem, effectively having a negative effect on cash flow visibility, predictability and usage.
Firstly, the cost for armoured car collections was considerable and there was a growing dissatisfaction with the service level. There was also significant inefficiency built into this model in terms of working capital management because the cash was picked up from the offices daily at 5pm. Türk Telekom could not utilise the cash on the same day, which meant the company was sitting on an excess of idle cash.
Secondly, the company faced a delay when offices used the bank deposit method. “Our offices went to the state-owned bank and deposited cash into their accounts, and the bank then transferred the money to Türk Telekom’s HQ account,” says Tamer Karabulut, Head of Treasury Operations, Türk Telekom. Consequently, it would normally take one day for the amount to show up in the HQ account. In addition, Türk Telekom wasn’t able to determine the amount collected per unit each day. As a result, the treasury’s cash flow forecasts were not accurate.
Hence, the company decided to explore alternative collection channels to reduce costs and accelerate and improve the efficiency of the cash collection process.
Türk Telekom reached out to its banking partners for a solution, but most came back with the same cash management structure, including armoured car collections – some offering a slightly lower price. However, the company was really looking for an innovative solution that would be preferable in terms of cost and efficiency. Citi was the only bank to come up with an innovative solution. The solution leverages Citibank A.S. Turkey’s partnership with Post Bank of Turkey (PTT), which has 4000 online branches countrywide, effectively the largest branch network in the country.
Citi’s corporate clients can benefit from cash deposit transactions. For Türk Telekom this was a particularly ideal solution as they share the same offices with PTT in many locations, as a result of being a business unit of PTT before being hived off as a separate company in 1995 and privatised in 2005. The physical proximity of the locations effectively eliminates the burden of moving cash and reduces the cash collection costs by nearly 20%.
In the PTT branches, with the custom designed Citi collection screens, offices can deposit cash until 5pm local time. Cash deposit transactions are performed in a straight through process (STP) on PTT teller screens. Identification details of the depositors are then saved in a database and this data is automatically displayed for future transactions, which makes the transaction entry process more efficient.
When a cash deposit is made, Türk Telekom treasury can see the amount in their accounts online, same day, as well as how much each office has deposited. “Because we can monitor all the cash inflows, we are now able to forecast the future,” says Karabulut. Implementation of the solution has had a positive impact on the cash collection process of Türk Telekom in terms of efficiency.
Türk Telekom can automate incomings reconciliation and increase efficiency thanks to a tailor-made reconciliation tool in which Citi combines a standard MT940 swift message with corresponding transaction codes of Türk Telekom. The project began in June 2011 and the first transaction was realised in November that year. Treasury set up the new process and informed their offices.
The company opted for a phased regional roll out and completed on-boarding all of the eligible offices by August 2012. Today, Türk Telekom is using Citi’s solution at 145 points through post offices countrywide. Monthly volume has reached TRY17m, with a total number of 2500 transactions. Citi is now looking at developing a solution for offices in locations that are not covered by PTT.