Business Times

Suntel saga: Now SLT in the running with $200 mln deal

By Bandula Sirimanna

Sri Lanka Telecom (SLT) is set to spend an estimated US$200 million on acquiring Sri Lanka's second-largest land-based telephone company Suntel which has been looking for a buyer for the past 12 to 18 months, the Business Times reliably learns.

Saddled with debt and legal issues, Suntel has attracted offers from India’s Tata Group, a Malaysian party, Etisalat and Dialog among others. The last named company was in serious negotiations which led Suntel to resort to major staff cuts across the board, sources at Suntel said, adding that influential businessman Dhammika Perera is involved “in some way in the negotiations between SLT and Suntel.”

A top SLT official said the SLT board has taken a decision to purchase Suntel as it will be a financially viable deal. The official, who declined to be named, revealed that Suntel management had approached the SLT and offered the deal and this was the second time they came forward to sell their stake to SLT. A proper procedure will be followed and a due diligence will be conducted before finalizing the deal, he said. He pointed out any decision on this matter will be taken for the benefit of SLT.

Sharemarket analysts said however the news should be treated with some reservation as previous offers to buy Suntel were as exciting but didn’t succeed. “We have to wait and see what the due diligence will come up with,” one analyst said.

SLT trade unions claimed that CEO Greg Young is pushing the deal. The CEO along with some Indian telecom officials held discussions with Suntel management to make preliminary arrangements of the deal, they said. Trade union officials said that they are opposed to this acquisition as Suntel has huge liabilities and dues to some of its major corporate customers. A senior member of a SLT trade union said that SLT has committed a sum of Rs.2 billion for the I- Sri Lanka project and with this proposed new investment of $200 million, the company will definitely face a financial crisis. The SLT CEO is taking decisions, risking the job security of 8,000 employees of the company, he said.

However the SLT top official rejected the accusation saying that the Board will not take a decision detrimental to the company and that employees should not unnecessarily panic. Last year, Indian state-run telco Mahanagar Telephone Nigam Ltd (MTNL) was among the first to submit a formal bid to acquire Suntel, offering a price in the range of $100 million to $120 million. MTNL then withdrawn its bid as it encountered legal issues and high liabilities.

Suntel Ltd. provides telecommunications services in Sri Lanka. The company provides voice, hosted PABX, broadband Internet, virtual mail server, Web creation and hosting, and managed security services for businesses. It also offers postpaid and prepaid services for residential customers. In addition, the company provides Internet data centre services.

Further, it engages in consulting, designing, implementing, and maintaining network infrastructure, application services, and storage systems. The company was founded in 1996 and is based in Colombo, Sri Lanka. Suntel Ltd. operates as a subsidiary of Overseas Telecom AB.

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