After the attractive profits seen during last year, the country’s premier distiller, Distilleries Company of Sri Lanka (DCSL) is in two minds to sell its telco arm, Lanka Bell (LB), according to DCSL sources.
They said that DCSL, with a near 75% market share (45% market share in the liquor market in the country) is more skewed towards not selling it. “This is despite their intention to streamline their core business.
When they saw that LB has potential; especially with the turnaround it saw during last year, the management is rethinking its decision to sell,” a source told the Business Times.
Last year, DCSL announced its intention to divest Lanka Bell which diluted its profits throughout the past couple of years, but for the nine months ended December last year, the telco posted Rs 200 million profit. “This changed DCSL’s stance (to sell),” the source said.
In February 2009 Lanka Bell was seen as dragging its parent, DCSL’s profits down. DCSL owns nearly 100% of the company.
The source said the Telecommunications Regulatory Commission’s (TRC) directive on minimum floor price on call charges, the drop in Telecommunication Development Charges, TRC’s introduction of an Interconnection regime and cost controls by the company have all helped in this fixed line operator’s earnings growth.
He said that nearly 11 parties applied to buy this fixed phone line company, including a foreign telco as well.
Analysts said this transaction would have brought some Rs 60 million in terms of capital gains to DCSL.
They said that since the country is experiencing a boom in domestic tourism activities with the end of the war and improved income levels, it will see a larger drive for a demand for DCSL's local liquor range.
They said that given the buoyancy in tourism in Sri Lanka, DCSL's focus on investing in Browns Beach Hotel (which is planned to be demolished in April to build a 5- star 200 room hotel similar to Heritance Kandalama standards) will see the distiller reaping more earnings in the long term.
They said that DCSL’s insurance venture with an initial investment of Rs 500 million will also bring in long term profits.
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