SLT, Mobitel, ring impressive profit growth

Sri Lanka Telecom and its subsidiary SLT Mobitel last week reported impressive profit growth in the first nine months of 2007.
Sri – Lanka Telecom (SLT) reported a group after tax net profit of Rs. 4.3 billion during the first 3 quarters of 2007. This is a 12% increase year on year basis.

The group revenue has increased by 7% during the 9 months of 2007, when compared to the same period of the previous year.

The corresponding increase in the company was 5%.
Additional revenue generated by the CDMA new connections given, has been absorbed by the revenue reversal made in accordance with the Supreme Court judgment given on the legal actions initiated by “Consumers Association of Sri-Lanka”.

Hence the increase of domestic revenue was marginal. Company expects a growth in usage in the future due to the effect of price elasticity. By the end September 2007 SLT had a fixed line subscriber base of 1.3 million.

During the first nine months of the year, 161,550 CDMA new connections have been given. This is lower by 3,492 connections over the connections given during the same period of the previous year. In May 2007 the connection charge was reduced to Rs. 12,000 from Rs. 16,000..

Revenues through international gateway operations have continued to increase. The rise in international incoming traffic volumes mainly through VOIP operations have contributed to the increase.

The competitive nature of the local market has shown a slight drop in IDD call revenue.
Data related revenues have shown a healthy growth. This includes the broad band and narrow band products. By September 2007, SLT had about approximately 45,000 ADSL connections and 82,000 post paid internet customers. Additionally, SLT provides domestic and international leased services and IPVPN facilities to corporate customers.

SLT’’s wholly owned subsidiary and mobile operator Mobitel (Pvt) Ltd., recorded a strong growth in the first nine months of operations in 2007. The subscriber base increased over 60% to 1.11 million in September 2007 compared to corresponding period of last year.

Growth
Growth in subscriber base has been the key driver of revenue where the first nine months of 2007 witnessed a 26% increase to Rs. 4.9 billion compared to the corresponding period in 2006. This increase has resulted in growth in all key profitability indicators. While EBITDA increased by 8% to Rs.1.6 billion in the first nine months of 2007, Mobitel was able to make a profit of Rs.43 million compared to Rs. 167 million losses made during the same period of 2006.

Mobitel continues to expand coverage with Stage III expansion which is currently underway. Already the subscriber capacity has been increased up to 1.75 million. Under Stage III expansion Mobitel intends to introduce 3G in the 4th quarter of 2007 with a range of new services including mobile Broadband.

On 27th August 2007 the Supreme Court delivered its judgment on the legal action initiated by an organization styling itself, “Consumer Association of Sri – Lanka”.

Accordingly, customers will be entitled to an 8.72% overall reduction on local call chargers and rentals effective from 01.01.2007 to 31.10.2007. This credit will appear in the bill for November 2007.

Effective from 01st January 2007, a new time based (per second) traffic structure will be introduced along with a reduction in rentals. The overall revenue reduction is approximately 9.03%.

For the period 01st January 2007 to 30th September 30 2007 SLT has estimated the revenue reversal amount to be Rs.1.3 billion.

During the 3rd quarter of 2007 SLT introduced its third VRS incurring a cost of Rs. 43 million. The objective of this scheme was to ease the burden of those employees who had served the Company well, but had been affected by poor health, thus causing them stress at work. SLT was the first institution to offer a scheme of this nature, which benefitted 52 employees.

A ceremony was held at Trans Asia Hotel to hand over their compensation package. At present, there are about 7,000 employees working at SLT.