Sri Lanka Telecom June quarter net up 105-pct

Aug 15, 2010 (LBO) - Sri Lanka Telecom's June 2010 net profit shot up 105 percent to 769 million rupees from a year ago as earnings from its mobile unit and broadband made up for falling voice revenues, a stock exchange filing said.
Basic earnings per share rose to 0.43 rupees from 0.21 rupees the year before.

Group revenue for the second quarter rose five percent to 12.36 billion rupees compared to the same quarter of previous year. The bulk of operating profit came from SLT's mobile subsidiary, Mobitel, which has turned around after a price war caused heavy losses among all the island's mobile phone operators.

SLT's June 2010 quarter earnings included 151 million rupees from a refund of the Telecommunication Development Charge (TDC), a levy paid by operators to the government at the rate of 0.038 US dollars per international incoming traffic minute.

Operators can claim two-thirds of the TDC within three years against the cost of development of its telecommunications network in un-served and underserved areas.

The SLT statement said the Telecommunications Regulatory Commissions has been informed that the Ministry of Finance and Planning has halved the International Telecommunication Operators' levy from July 15, 2010 to 0.015 dollars a minute.

The total group customer base has risen 15 percent to 5.15 million as at June 2010 over the last 12 months driven largely by the rapid growth of mobile customers.

SLT said Mobitel had 30 percent growth in revenue for the first half of 2010, while fixed and mobile broad band customers grew 47 percent and over 500 percent.

"The SLT Group is poised to seize opportunities in non-traditional revenue areas while focusing on initiatives to protect revenues from our traditional business."

A reduction in revenue from traditional voice business, mainly CDMA (a fixed wireless system), led to a decline in sales at company level by three percent to 16.39 billion rupees for the first half 2010.

"However, an increasing trend in fixed wired line customers which began in the third quarter of 2009 has continued during first half of 2010 driven by strong demand for ADSL broadband connections."

SLT's fixed wired line customer base has grown by one percent to 882,000 from a year earlier while the fixed wireless customer base stands at 558,000.

The firm said the recent floor price and inter-connection regime introduced by the regulator should stabilise revenue.

Average revenue per user (ARPU) on fixed lines has declined over the last year mainly due to an expected switch from fixed to mobile which is an industry trend locally as well as globally, it said.

"However, rapid growth of fixed broadband revenue has minimized the negative impact from the reduction in fixed line voice ARPU.

"SLT expects stabilization in revenue from fixed lines from the floor rate and the interconnection regime recently introduced by the TRC coupled with several new price plans recently introduced by SLT," the statement said.

"Future revenue growth is expected from the rapidly growing broad brand customer base and increased business volumes from our network expansions in the North and East."

The island's 30-year ethnic war, fought mainly in the north and east, ended in May 2009 resulting in an economic revival.

The company said it has also improved debt recovery and reduced bad debts

SLT group's mobile phone subsidiary Mobitel made an after tax profit of 336 million rupees in the June 2010 quarter as against a 36 million loss in the second quarter of 2009, making a turnaround.

With a profit for the previous quarter of 2010 of 204 million rupees, profit after tax for the first half was 540 million rupees despite having to provide for corporate tax of over 200 million rupees.

Mobitel's revenue in the first half of 2010 rose by 30 percent to 9.4 billion rupees from the previous year which the company attributed to a growth in the customer base by 720,000 over the last 12 months "despite the intensified competition in the mobile telephony sector."

By the end of the second quarter of 2010, Mobitel's customer based exceeded 3.7 million.

In the first half of 2010 Mobitel also incurred an incremental depreciation charge of 637 million rupees, 44 percent higher than the first half of 2009 owing to new investments in technology and network expansion.

"The heightened competition with the entry of the fifth mobile operator during the first quarter of 2009 saw an escalating price war that eroded margins of all existing mobile operators and a pattern of customer switching between operators," SLT said.

"Mobitel too was not insulated from this industry turbulence and was forced to adjust to the market realities."

The statement said that despite the pressure on margins and increased customer acquisition costs in the face of intense competition, Mobitel has returned a "commendable performance".

source - www.lbo.lk