Financial Times

SLT expands overseas presence, eyes Indian traffic
Sri Lanka Telecom (SLT) has announced plans to continue expanding its international operations by setting up points-of-presence (POPs) outside the island to be able to offer termination, hubbing and transit services to overseas telecommunications service providers.

SLT has also entered into bilateral agreements with all Indian telecom operators who hold international licences, including BSNL, VSNL, Bharti Telesonic Limited, Reliance Infocom Limited and Data Access. "This move we believe will offer opportunities to increase international and generate additional revenue," SLT Chief Executive Officer Shuhei Anan said in the company's annual report.

SLT's net profit for 2004 fell to Rs. 1,293 million from Rs. 2,249 million in 2003 while revenues rose to to Rs. 29,588 million from Rs. 25,553 million in 2003. One factor that contributed in large measure to a drop in profits was the effect of the government's levy on international telecommunication operators.

SLT made a provision against this levy of Rs. 2,067 million for 2004, which in turn impacted negatively on profits. Also, the company has made full provision for an outstanding debt amounting to a billion rupees, recoverable on the Sigiriya Card transaction. SLT is making every possible effort to ensure that all legal remedies are pursued to recover this outstanding amount.

SLT, ranked as the second largest public company listed on the Colombo Stock Exchange with a market capitalisation exceeding Rs. 30 billion, believes the potential lies in the international sphere, given Sri Lanka's geo-strategic location.

SLT has taken its joint agreement with India's Bharat Sanchar Nigam Limited (BSNL), which has already provided for a microwave link between Talaimannar and Rameshwaram, a few steps further by signing up for the establishment of an optical fibre submarine cable linking Tiruchchendur with Colombo.

Where the microwave link facilitated voice communication through a digital radio link, the proposed optical fibre submarine cable will support a public telephone network (PSTN), IP Broadband services, International Private Leased Circuits (IPLC) and multimedia traffic between India and Sri Lanka, Anan said.

BSNL is the largest telecommunications company in India having well over 40 million customers across that country. The relationship with BSNL will help increase telecommunication traffic between the two countries.

"It will pave the way for SLT to handle telecommunication traffic from BSNL towards other international destinations, which will definitely strengthen SLT's position in the South Asian region," Anan said. SLT Chairman Anil Obeyesekere said that last year, SLT began to "aggressively diversify" its sources of revenue.

"We shifted focus from the traditional fixed line revenue to other areas such as mobile telephony and wireless loop technology, among others." SLT plans to spend Rs 8 billion in 2005 to expand and modernise its network and services to meet anticipated demand.

In 2004 it spent Rs. 7.4 billion in infrastructure and network development bringing the cumulative spend to Rs. 104,764 million. "A key area of diversification of revenue streams will consist of the company marketing its considerable capacities and expertise in network, system integration and advanced technology to other telecommunications operators in South Asia and elsewhere in the world," Obeyesekere said.

SLT's mobile phone subsidiary Mobitel's subscriber base has grown from 142,700 as at 31 December 2003 to 285,000 as at 31 December 2004. The first phase of its GSM roll out is expected to be complete by the second quarter of 2005.

The consolidated profits have also been impacted by the substantial level of capital investment made by Mobitel, the return on which should be reflected in Mobitel's performance in the coming years, and also by the excessive level of receivables in the books of Mobitel, provision for part of which has been made in the accounts.

"The company's main strategy is to position SLT as a premier regional telecommunications operator," Obeyesekere said. "This outward looking approach sees the company seeking to upgrade its global connectivity through additional investments in its international bandwidth capacity such as through the SEA-ME-WE 4 submarine cable project and through interconnection agreements with other national and regional carriers."

Anan said SLT is strategically well placed to enhance its global connectivity capabilities with three gateway exchanges, two cable landing stations, three satellite earth stations and one mobile earth station. The company also has access to facilities and services under the SEA-ME-WE 2 and SEA-ME-WE 3 submarine optical fibre cable consortia.

In March 2004, SLT was a co-signatory with 15 other international telecommunications carriers to collaborate on the construction of SEA-ME-WE 4 optical fibre cable, which is a US$500 million collective investment and should be ready for use by the end of 2005.

In new local developments, SLT plans to connect the southern, eastern and northern regions of the island to the centre via optical fibre cabling.

SLT envisages that a southern network of 325 km, an eastern network of 583 km and a northern network of 564 km will be connected to the company's existing central network by the years 2006, 2007 and 2008 respectively.

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