SLT group profits up 10 percent

Sri Lanka Telecom, in the first half of 2007, made a post tax profit of Rs. 2.5 billion after reversing an estimated amount of Rs. 875 million from its revenue. This came after considering the tariff reduction, in relation to the settlement of the Supreme Court appeal regarding the tariff revision implemented in 2003, the telecom provider said.

However group profits increased by 10% to Rs.2.54 billion, compared to Rs.2.3 billion in the same 2006 period as Mobitel has turned around and International and Data oriented revenues improved. Commenting on the proposed tariff reduction, SLT CEO Shoji Takahashi said, “There will be a short term impact on our revenue and profits from the tariff reduction. However we believe that in the competitive environment the reduced tariff will stimulate demand and this will help to mitigate the impact on revenue. The new time based tariff structure will give consumers a benefit, and thus encourage greater usage. SLT has confidence on its revenue growth despite the tariff reduction.”

It said during the first six months the group recorded total revenue of Rs. 20.7 billion, up 6% from the previous comparable period. Due to the provision made against the possible tariff reduction domestic revenue has dropped by 3%. The CDMA new connections given during the 1st half 2007 has reduced when compared with the same period in the previous year and also the reduction in CDMA new connection charge has contributed for the revenue from CDMA new connections to decrease by 29%, SLT said.

In the first half of the year, 95,000 CDMA new connections were installed and the customer base reached around 380,000. During the second half, more connections will be given taking the advantage of reduced connection charge and the proposed tariff reduction.

Case

The Consumers Association of Sri Lanka initiated legal action in the Court of Appeal seeking a writ of Certiorari to quash the approval granted by the Minister of Telecommunications and the Telecommunication Regulatory Commission (TRC) of Sri Lanka for the tariff revision implemented by SLT in September 2003, in which the TRC, the Minister, the Secretary to the Treasury and SLT were cited as the respondents to the case.

The Appeal Court in a judgment in July 2005 granted the writ of Certiorari quashing the approval granted for the tariff revision by the Minister and the TRC. SLT filed its application seeking special leave to appeal to the Supreme Court, which was granted on November 7, 2005 and presently the case is pending in the Supreme Court.

The last hearing of the case was held on July 9, 2007 and as part of a negotiated settlement, the time based tariff reduction effective from January 1, 2007 is being discussed. With the intervention of the court the parties have agreed to a reduction in domestic tariffs. Pending the final court decision provision has been made in the second quarter statements for Rs. 875 million, against the possible credit to be given to the customers up to June 2007.

Mobitel

SLT’s Mobile arm, Mobitel showed positive results during this period against the first half of 2006. Compared to the net loss of Rs.3 million then, Mobitel made a profit of Rs.34 million in the current period. Revenue grew by 24% to Rs. 3,074 million compared to the same period of last year. By the end of June 2007, the Mobitel customer base reached 935,000.