Govt. controls management but NTT runs the show

The Sri Lankan government has retained management of Sri Lanka Telecom (SLT) since 2002 when the management agreement with Nippon Telegraph and Telephone Corporation (NTT). The 2003 SLT Annual Report says 'although the Management Agreement with NTT Communications Corporation of Japan ended in August 2002, NTT nominees continue to sit on the Board and provide strategic direction to the company.' Previously, NTT had been paying US$5 million annually to maintain management control which the company thought was too high and eventually settled with the government to retain CEO and CFO positions, industry sources said.

However, the shareholders agreement which is also in place permits NTT to run the company. Under the shareholders agreement, the CEO and CFO have extraordinary powers which are virtually akin to managing the entire company. "In reality, NTT is running SLT because the shareholders agreement gives the CEO and CFO wide powers even though there is no management agreement," an insider said. The shareholders agreement does not have an exit clause for NTT but the moment the company's stake in SLT drops to below 10%, NTT loses all management control.

Furthermore, the operations of the government committee which was appointed to probe the controversial transaction between NTT and Maxis has been suspended after last week's Supreme Court judgment issuing a stay order on any further action regarding the transaction. Just prior to its suspension, the Attorney General was reviewing the legal aspects of the agreement while the Defence Ministry was looking into the security issues.

An SLT official who spoke to The Sunday Times FT said the company does not have any additional information on the ongoing negotiations between NTT and Maxis Communications. "We have not been updated on any transactions because once the decision from NTT is taken whether or not to sell their shares, they will inform the SLT Board of Directors as well as the Colombo Stock Exchange. So far, there has been no official announcement," he said adding he was unaware as to how former Minister Sripathi Sooriyarachchi's Supreme Court case will affect a management agreement with Maxis should the Malaysian company eventually end up purchasing the SLT shares. (NG)