Rising demand for SL telecommunications in 2013 : Fitch
View(s):Increasing demand in Sri Lanka’s telecommunication industry, as well as the resulting growth in average revenue per user (ARPU) will continue over 2013, according to ratings agency Fitch.
Elaborating in its “2013 Outlook: Sri Lanka Telecommunications Services” report, Fitch further indicated that the rise in demand and ARPU was a result of “strong growth in minutes of use, supported by Sri Lanka’s post-war (since May 2009) growth and limited tariff competition”.
However, Fitch also added that the “pace of mobile subscriber growth will decelerate further as headline penetration approaches 90 per cent (Q212: 87 per cent), while the ongoing decline in fixed-wireless subscribers and demand is likely to continue”.
Additionally, Fitch also noted that local telcos Sri Lanka Telecom and Dialog Axiata would continue to lead the pack, while other competitors in the sector could potentially weaken as a result of high capital expenditure requirements. And, according to opinions expressed in the report; “Fitch expects operators to invest between 20 per cent – 40 per cent of 2013 revenues into modernising the network, and building capacity and coverage to support greater demand. Network infrastructure-sharing is also likely to increase, particularly among challengers, as the benefits of rapid capacity and coverage deployment may compensate for sub-optimal positioning of transmission equipment and lower profitability”.
The report also stated; “Subscriber acquisition and retention costs (SARCs) are likely to remain high so long as six telecoms operators compete for Sri Lanka’s 21 million population. High SARCs should affect challengers more than incumbents (which benefit from greater economies of scale). Profitability pressure will also stem from higher energy costs and inflationary pressures since early 2012, as well as higher regulatory levies. However, the agency expects the EBITDAR margins of its rated companies to remain above 30 per cent in 2013″. (JH)
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