Financial Times

SLT net profit for 1Q 2005 up at Rs 1.06 bln
Sri Lanka Telecom (SLT), the country’s largest telecommunications service provider, has posted a substantial first quarter after-tax profit of Rs. 1.06 billion, the company said last week.

This figure was achieved in spite of negative market conditions and the liberalization of the telecommunication industry witnessed recently. "This number is still impressive although it has been reduced to Rs. 909 million due to moderate losses at its fully owned subsidiary Mobitel. The net earnings per share of the group for 2005 was a substantial Rs. 2.01 as against Rs. 1.43 in 2004," the statement added.

It said there was also welcome news that the company experienced a marginal increase in revenue of 2% as against the same period in 2004, mainly from an increase in local call revenue and Internet Provider (IP) oriented revenue. However, expenditure for the same time also increased by 5% mainly due to the efforts to improve the network through repair and maintenance. The international telecom levy of Rs. 157 million which was posted for the first three months also added to this expenditure, but refund of 66.67% would be available which could be claimed against the rollout of rural telephone connections, it said.

The company also further improved its financial position by settling a substantial number of high interest bearing loans during the last quarter in the early part of the current financial year with proceeds from its International Bond issue. This bond issue has effectively reduced the interest cost by 50% for company and 30% for the group. The group’s long-term debt is currently at Rs. 20.1 billion while SLT’s debt is at Rs. 15.3 billion-another marked improvement from Rs. 16.1 billion for the same period in 2004, showing a very healthy cash flow and denotes a good trend for the future.

SLT's fully owned subsidiary Mobitel has also performed well during the first quarter with an active subscriber base of 340,000 connections. The first phase of expansion is completed and the second phase has just commenced thus enhancing coverage and reach. This expansion will enable Mobitel to further contribute to the group’s cash and revenues in the short-to-medium-terms which will also, add to the bottom line of the group in the long-term, Phenomenal growth is expected from Mobitel which is expected to be the driving force of the group in the coming months, the statement said.

"Although international revenue was lost at the initial stages of the revision, a subsequent substantial increase in international call traffic volumes has resulted in allowing earnings to match revenues of the pre-liberalization period. This will now enable the company to maintain the international call traffic revenues. The value added growth of new products and the company’s aggressive marketing outlook will also ensure that SLT remains strong in the future," the company said adding that, "this quarter’s earning results have further reiterated SLT’s true potential which allows this stock to remain highly liquid in the share market resulting in an ongoing advantage to shareholders."

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