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)

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Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.