SLT– Mobitel says best ever regulation in 2006

Sri Lanka Telecom (SLT)– Mobitel has attributed the telecommunication sector growth last year due to ‘the best ever regulatory execution’ the industry has seen. “The Telecom Regulatory Commission (TRC) has been very forward looking in terms of the regulatory framework and this effective regulation saw growth in the sector,” Suren J. Amarasekera, CEO Mobitel told The Sunday Times FT.

He said that last year TRC did not have any pending issues. “The price reduction was about 40 percent and this was done by keeping the consumer’s heart in mind,” he said. The company performed well during 2006 in terms of revenue with an increase of 49 percent to Rs.5.3 billion in 2006 as compared to Rs. 3.6 billion in 2005. “This increase was mainly attributable to the income from the introduction of the innovative prepaid package ‘Smart 5’ in March 2006,” Amarasekera said. He said the high gearing position of 95 % in 2005 was significantly reduced to 60 % during last quarter of 2006 through an equity infusion of Rs. 3.5 billion in the form of redeemable cumulative preference shares.

“Although the company ended the year with a net loss of Rs. 64 million it represents a significant improvement considering the net loss margin is only one percent compared to 33 % in 2005. Mobitel is rapidly returning to full profitability despite high depreciation and interest charges resulting from considerable investment in technology and network expansion,” Amarasekera explained.

Operating profit before depreciation (EBITDA) grew by 153 % to Rs. 1.98 billion in 2006 compared to Rs. 780 million in 2005 and Earnings before Interest and Tax (EBIT) increased by 238 % to an operating profit of Rs. 0.7 4 billion as against an operating loss of Rs. 0.54 billion in 2005. “This significant growth was mainly on account of increased revenue and controlling of operating costs to 62 % of revenue versus seven percent in 2005 and a reduction in depreciation charges due to full depreciation of old technologies,” Amarasekera added further.

When asked whether he has any doubts of whether 3G (third generation technology) is successful in the country, drawing from the European experience, he said the context of the two are entirely different. “In Europe US$30 billion was charged for the 3G licence. Vodafone paid it and the company was in difficulties because of this and this is the main reason that it was not successful in Europe,” he said, adding that TRC has costed the 3G licence at Rs.500 million.

He insisted that at Mobitel value innovation bridges the means and the end. “It is not about being first to market but about being right for market - if not being the best for market. It is about anticipating customer needs and coming up with new value even before customers articulate those needs in their own mind,” he said.

Mobitel will roll out 35 additional branches by June this year. “We will deliver more value to customers through this alliance in the future to the point of even accepting payments for post-paid services at Sri Lanka Postal Department’s vast island-wide network, which has in excess of 500 post offices and over 3,000 sub/agent post offices,” Amarasekera said, adding that the company will also tie up with the vast network of Singer Mega Stores. “ We plan to strengthen this relationship as well and extend our customer care points to cover all 250 Singer outlets ,”he explained, adding that Mobitel will make handsets more affordable through Singer's popular hire purchase schemes.