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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Sri Lanka Telecom to invest Rs5bn in mobile phone unit

Sri Lanka Telecom to invest Rs5bn in mobile phone unit

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Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
Sri Lanka Telecom to invest Rs5bn in mobile phone unit
July 13, 2011 (LBO) - Sri Lanka Telecom is to invest five billion rupees in its mobile phone subsidiary for modernisation and expansion, a stock exchange filing said.

"This investment will be on a staggered basis and is expected to be made within a period of six months," SLT said.
The investment will be for expansion of coverage and capacity of Mobitel and its network modernisation, it said.

http://www.cse.lk/cmt/upload_cse_announcements/1831310557027_.pdf - how is going to effect the SLT?

jake

jake
Equity Analytic
Equity Analytic
poor SLT carring the burden of its spoilt child.It would have been a good news for SLT if the news was that they sold it off.

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
My concern is, this can be a bad news for SLT. As a result of modernization and upgrades, old network and equipments has to be written off. This is similar to DIAL went on massive loss in 2009. This would be a burden to SLT in short run.

Tubal was pointing out this some time back.

Chabbi

Chabbi
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Will they go for Right Issue ??

Investor99


Manager - Equity Analytics
Manager - Equity Analytics
The telecom industry is a technology driven industry and big investments needs to be made to moderation the technology used, without the state of the art technology the competitive edge cannot be maintained. The high competition and strategic pricing structure of the products reduces the bottom line too. In my opinion there are too many players in the telecom industry today.

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
http://www.lbo.lk/fullstory.php?nid=313021620

Sri Lanka Telecom to invest Rs6bn over next two years
July 19, 2011 (LBO) - Sri Lanka Telecom, a firm in which Malaysia's UT group is a key shareholder, will invest 6.0 billion rupees over the next two years to migrate fully into a digital network, chief executive Greg Young said.

The investments would start in August and are expected to be completed in 2013.
The firm would use internally generated funds and they would be supplemented by a syndicated loan from local banks, he said on the sidelines of a business forum in Colombo.

The syndication would be led by state-run Bank of Ceylon, he said without elaborating.

The firm was expanding its fibre optic based digital network and migrating out of a copper wire analogue one, he said.

Earlier in the week, SLT's mobile unit Mobitel said it was investing 5.0 billion rupees in expansion.

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
http://sundaytimes.lk/110724/BusinessTimes/bt30.html

No shareholder agreement weakens Govt. control in SLT

Fitch Rating Sri Lanka this week noted that the absence of any ‘explicit shareholder arrangement’ between the Sri Lankan Government and Sri Lanka Telecom (SLT)'s 44.9% shareholder - Malaysia's Usaha Tegas – could ‘potentially dilute the Government’s influence over SLT's operations’.
Its comments came while upgrading Sri Lanka Telecom's (SLT) Long-Term Foreign Currency (LTFC) Issuer Default Rating (IDR) to 'BB-' from 'B+'. Usaha Tegas owns Malaysia’s Maxis mobile phone company, both of which are owned by Sri Lankan-origin Tamil businessman Ananda Krishnan.

According to a SLT board director, the shareholder agreement was not signed due to a Supreme Court ruling in a fundamental rights case filed by the late Sripathy Sooriyaratchchi, a one-time parliamentarian and minister of the ruling UPFA. However the court permitted SLT shares to sold to Usaha Tegas.
Fitch said SLT's Foreign- and Local-Currency IDRs are constrained by the respective sovereign IDRs, and any future change in the sovereign ratings will lead to a corresponding change in SLT's ratings.
“This is primarily due to the government of Sri Lanka owning, directly and indirectly, more than 51% of SLT,” it said.

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
http://sundaytimes.lk/110724/BusinessTimes/bt03.html

SLT CEO’s service contract creates controversy

Sri Lanka Telecom (SLT) was faced with a crisis this week as trade unions demanded that the company should reveal the validity of the company’s Chief Executive Officer’s (CEO’s) service contract.
The joint trade union front wrote a letter with signatures of 13 SLT trade union leaders to SLT Chairman Nimal Welgama urging him to reveal as to whether the CEO’s service contract is expired or not. They questioned the validity of decisions taken by the CEO if there is no service agreement.

A senior SLT official said that employees are frustrated as they have to obey the orders of a person whose service contract has already expired. This will affect the productivity of the company, he added.
When asked to clarify this issue, SLT CEO Greg Young, an Australian national, said that he cannot divulge details of his service agreement because it is confidential.

On the other hand he has signed a non disclosure agreement with his employer so that he is unable to comment, he said adding that his service will continue this year and next year as well. But Mr Young didn’t disclose the exact date of expiry.

To represent the interests of Malaysia’s Maxis, a major stake holder of SLT, the Sri Lankan Government was compelled to appoint a CEO nominated by Maxis and interviewed by SLT Board of Directors, trade union leaders alleged.

Mr. Young in a lengthy response to a question raised by the Business Times said that he was taking the best interest of the company in decision-making and some employees were not in favour of changes he has made and now making to meet the modern technology needs. SLT has to move forward with technical advances in the world and it cannot be lagging behind.

During this way forward some decisions including the retrenchment of staff had to be taken for the benefit of SLT, he added. According to job responsibilities of the SLT CEO, he should report to and be accountable to the Board of SLT. He has an overall responsibility for all operational and business activities of SLT.

SLT’s powerful Telecommunication Engineers Union in a communiqué said that there have been times when the CEO has made it very difficult for the Governance Boards, Commercial Evaluation Teams, and Technical Evaluation Teams, with appointed members of the union, to take independent decisions due to the intervention of the CEO under the guise of the SLT board’s requests.

An SLT board director, who declined to be named, told Business Times that the board has made it clear that all recommendations made by the members of the respective Governance boards, Commercial Evaluation Teams, and Technical Evaluation Teams should be submitted to the board.

Replying to this allegation Mr. Young said he is not interfering with the process of recommendations but reviewing it by considering commercial, technical and operational aspects of such recommendations.
A former board member told the Business Times that the CEO’s service contract was prepared by Maxis in Malaysia during former chairperson of SLT, Leisha de Silva Chandrasena’s tenure and it has many conditions unfavourable to the company.

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
http://www.sundaytimes.lk/110904/BusinessTimes/bt01.html

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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