Sri Lanka’s telecom sector soars on mobile growth

Posted on February 21, 2007  /  6 Comments

Sri Lanka’s telecom sector soared in 2006 to 7.3 million users, led by a 59% jump in new mobile phone connections on competition and falling call rates, an AFP report said. 


Quoting the industry watchdog Sri Lanka Telecommunications Regulatory Commission, the AFP report said despite a waiting list of around 366,000 for fixed-line phone services, mobile phones, including GSM and CDMA systems, had allowed rural residents to get phone services immediately.

The AFP report further said fixed-line subscribers rose to 1.9 million in 2006 from 1.2 million a year ago after the commission gave CDMA licenses allowing three firms to use the cheaper technology and expand in rural areas.

The number of cellular phone users grew to 5.4 million in 2006 from 3.4 million a year earlier, as operators slashed tariffs by up to 40%, the report said.

The clear majority of new users buy pre-paid cards, the commission said.

With India’s largest private phone company, Bharti Airtel, lined up to be the fifth mobile phone player, analysts expect further price cuts, especially outside the capital, to tap rural users in the nation of 19 million, the report said.

Bharti, which is due to start services by year-end, has promised to invest $100 million within the first year of operation, the report further said.



  1. There is no question about the sector growing. However, the real story is that Pakistan has already overtaken Sri Lanka in mobile/100: 31.07 versus 27.10 at yearend 2006 and is on course to overtake Sri Lanka in fixed mobile/100 as well (the yearend numbers were 36.70 (LK) versus 35.40 (PK).

    In September it looked like Pakistan had actually overtaken Sri Lanka on this count as well, but yearend numbers show Sri Lanka still ahead by a whisker.

    To demonstrate the enormous leap that Pakistan has taken, two other sets of numbers are provided:

    In 2001, just before the Pakistan reforms started, Mobile/100 in PK was 0.56 (compared to 3.56 in LK); Fixed/100 was 2.33 (compared to 4.43 in LK).

    in 2005, GNI per capita (Atlas Method; USD) for PK was 690 (versus 1,160 in LK). GNI per capita (Purchasing Power Parity; USD) was 2,350 (versus 4,520 in LK).

    How can a country that is so far behind Sri Lanka in income levels overtake it in telecom? Could it be that the telecom reforms that were well planned out and implemented coherently have had something to do with it?

  2. Reporting on a study by Capital Alliance Research, this LBO article suggests that growth in Sri Lanka’s mobile market is slowing down, with Dialog – the current market leader – set to lose market share, especially in light of the entry of Bharti. The report suggests that just cutting prices to encourage demand may not bee too effective in the high-inflation setting that is Sri Lanka today.

    22 February 2007 11:41:41 | Lanka Business Online
    Sri Lanka mobile phone growth peaking: report

    February, 22 (LBO) – After growing at breakneck speed for the past several years, Sri Lanka’s mobile phone market is losing pace and competitors are pecking away at dominant player Dialog’s market share, an equities research report has said.

    In 2006 Sri Lanka’s mobile penetration hit 27.1 percent according to official Telecommunications Regulatory Commission data.

    Capital Alliance Research estimates that mobile subscriber penetration would reach 38 percent in 2008, while dominant player Dialog Telekom last year estimated it would be around 43 percent.

    Dialog Telekom, a subsidiary of Malaysia Telekom has been a key driver of Sri Lanka’s high mobile sector growth.

    “..even with a 43 percent projection of mobile penetration as at end 2008, percentage growth in total mobile subscribers in 2007 and 2008 would be around 32 percent each year compared to growth rates of close to 50 percent in the recent years,” Capital Alliance said.

    “However though the percentage growth is slower, the numbers of subscribers being added to the network could be similar to the past.”

    Capital Alliance said Dialog’s market share has slipped marginally to 60 percent from 62 percent in 2006.

    “This is a trend which, if continued, would see subscriber growth in percentage terms come in lower than even our own projections which are based on Dialog maintaining it’s current market share,” Capital Alliance said.

    While Dialog is listed in the stock market with more than three million customers, Mobitel with 900,000 customers is a wholly-owned subsidiary of Sri Lanka Telecom. Two unlisted firms, a unit of Millicom International Cellular recently re-branded as Tigo and Hutchison make up the rest of the market.

    The entry of Bharti into the market as well as existing competitors boosting capacity may also undermine Dialog’s market share.

    Capital Alliance says Dialog Telekom share appears to be fully valued, with the price more than doubling since the initial public offering.

    “With the counter having more than doubled in price post IPO we believe Dialog’s stock price now fully reflects the remaining growth that will be seen with as a result of rising mobile penetration in Sri Lanka,” the report said adding that the latest quarterly number show the challenges faced by the core mobile business of Dialog.

    Though Dialog has been making investments in third generation, data and fixed line markets, and has the management capability to repeat is success in the new areas it may take time for revenues to come.

    “As a result we feel that Dialog will significantly under-perform the broader market in the next two years and as such we believe that Dialog should be at a significantly underweight position within a Sri Lanka portfolio,” Capital Alliance said.

    The report says operators may have to re-consider price cuts in the face of high inflation in the country, while higher interests rates are also likely to affect valuations of growth companies.

    “In our view if inflation stabilises at above 15 percent annually Dialog may need to reassess its strategy of providing price cuts in absolute terms to its consumers,” the report said.

    “We believe Dialog should then look at providing price reduction from real inflation adjusted price perspective rather than in absolute terms.”  

  3. Lanka Internet Closed

    I’m not sure where this article will be best suited. Admin can replace this in a proper thread. What gurantee do we have with the remaining internet companies have. Will this be another Pramuka Bank story?

    ISSN: 1391 – 0531 Sunday, March 04, 2007 Vol. 41 – No 40
    Financial Times


    Lanka Internet goes bust
    By Natasha Gunaratne

    Internet and telecommunications service provider, Lanka Internet Services Ltd has gone bankrupt and unceremoniously disappeared into thin air with senior management of the company jumping ship and unable to be located.

    An estimated 3000 to 4000 of its clients have been affected with the abrupt closing of the business and were caught off guard by the loss of their services. Furthermore, it is alleged that Lanka Internet had also billed clients for services not rendered. Sources in the telecom industry told The Sunday Times FT that in previous instances when the company had to close down their services due to financial difficulties, a third party investor came and bailed them out.

    Established in 1994, the company is a Board of Investment (BOI) approved and licensed telecommunications service provider and has filed for bankruptcy twice in the span of one year and now has shut down all its operations without giving any notice to their clients.

    It was originally created by a group of Sri Lankans living in the United States and some of the earliest investors included Central Finance Co. Ltd. and Lanka Ventures Ltd, a venture capital company started in 1992. Reportedly, these investors pulled out after nearly doubling their investment. Lanka Internet has had around two to three sets of investors since its inception.

    Upali Keppitopola, Chairman of the Thoso Group of Companies which backed Lanka Internet was the original owner of the service provider. It was subsequently sold some time ago to Mahinda Ramanayake, Chairman of MaxTV and MaxRadio. Ramanayake’s acquisition failed and the company continued to struggle. Sources say the slew of problems was compounded by some share disputes with the former owners and the company was eventually given back to Keppitipola. The Sunday Times FT contacted Ramanayake who said ‘he has nothing to do with the company’ and refused to comment further. The Sunday Times FT learnt that the licence under which Lanka Internet was operating was actually being used to sell calls to and from the US or overseas, reaping millions of rupees. Allegedly, the email and Internet service the company was providing for its clients was actually a front for the data licence to sell telephone calls. The contract agreed upon with the Telecommunications Regulatory Commission (TRC) of Sri Lanka had provided the company with some unique benefits and a clause which enabled them to provide these services. In addition, the agreement actually had a ‘terminate clause’.

    In fact, Sri Lanka Telecom (SLT) filed action against Lanka Internet because they were not a licensed telecommunications service provider and was cutting into SLT profits. Sri Lanka Telecom was the only company licensed to handle International Direct Dialing (IDD) incoming calls but Lanka Internet had started to channel IDD traffic using data parts, without permission or a proper licence.

    The Sri Lankan government subsequently issued international gateway licences to other interested parties and in total, released 32 international gateway operating licences. SLT’s case against Lanka Internet was resolved with the issuing of the gateway licences.

    An internet website called Goliath which enables users to search for company profiles has a listing for Lanka Internet and describes the company as an ‘international private company’, dealing in ‘communications, provision of information and communication technology services including telecommunications services.’ The website further says Lanka Internet is ‘backed by Central Finance Co. Ltd, Lanka Ventures Ltd, Esjay Electronics (Pvt) Ltd. and International Internet Services Inc. (USA).’

    This is the second time in the past six months that the company’s services have been shut down. Financial troubles have plagued the company with creditors coming in and claiming their dues, the sources said. As the situation currently stands, the inability to locate and contact any of the management is aggravating an already dire situation. Phone lines are not working and the business address for the company is also shut down. According to one source, ‘we have a serious problem.’ The Lanka Internet website is also not in operation.

    Since last Friday, Lanka Internet services were off. Moreover, the status of the company for the past month and a half has been ‘up in the air operationally.’ Sources have also said that around 15 employees of the company were found on the ninth floor of the Ocean View Building in Bambalapitiya where the Lanka Internet offices are located and are accusing the company of non-payment of salaries for the past four months in addition to non-payment of EPF/ETF for the past two years. The source also said the employees were ‘holed up in darkness’ in the office without any electricity.

    The Sunday Times FT went to the ninth floor, room 9C at the Ocean View Building and found the office empty. Guards at the reception of the building said the office has been closed since Friday of last week, the same day that the company’s Internet services also ceased. The guards were also instructed to inform anyone inquiring about Lanka Internet that the office is closed and no one is available.

    Director General of the Telecommunications Regulatory Commission (TRC) of Sri Lanka told The Sunday Times FT that ‘the TRC is in the process of making contact with the relevant organization in order to ensure continuity of service for the consumer and secondly, is considering what kind of action could be taken against the company.’ Ratwatte further added that the TRC’s main concern is to ensure that dues are paid to the customers and businesses that used Lanka Internet’s services. The BOI also has no recourse for intervening with the company. BOI officials say after BOI agreements are entered into, companies ‘must follow the law of the land.’ (NG)

  4. kapila sri gunawardana

    If you finding a land for build a telecommunication tower in sri lanka,mail
    to me.
    Badulla district

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