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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2710

Sri Lanka Telecom profits for nine months to staggering Rs 3.7 billion

By Quintus Perera – Asian Tribune

Colombo, 03 December, (Asiantribune.com): Sri Lanka Telecom Ltd (SLT) released its first nine months results recording a profit of Rs.3.87 billion, up by 55 percent more than what was gained last year. For the three quarters SLT has managed a profit of Rs.1.5 billion representing a 42 percent growth compared to the corresponding period in the last financial year. Strong contributions from CDMA coupled with the improved performance of Mobitel compared to the previous year, were the key drivers to achieve the growth in profits.

Revenue rose up to Rs 29.9 billion – 27 percent due to steady sales of Mobitel – the mobile telephone arm of SLT and contribution from CDMA connections, which was launched during the latter part of last year.

Revenue from domestic calls stood at Rs.14.6 billion representing a growth of 7.3 percent compared to the same period last year. International revenue also grew by 5 percent to stand at Rs.6.1 billion. Growth in international revenue was boosted by revenue from incoming foreign calls, whilst revenue from outgoing calls showed a decline compared to the previous year.

CDMA phones, which were introduced to the market during the last quarter of 2005, has contributed Rs.3.6 billion towards revenue during first 9 months of this year. CDMA subscriber base at the end of September stood at 200,000, representing 165,000 new connections during the first three quarters of this year.

Mobitel, the mobile phone arm of SLT witnessed a substantial growth of 56 growth in its top line to Rs.3.9 billion, driven by the expanding subscriber base. Mobitel managed to grow its subscriber base to 688,000, representing a 64 percent growth to date.

SLT’s operating profit grew by 64 percent to Rs.9.56 billion during the first nine months of 2006 financial year compared to the same period last year, thereby recording an operating profit margin of 32 percent compared to 25 percent the previous year. Lower percentage growth in operating expenses of 20 percent compared to revenue growth of 27 percent has resulted in an improvement in operating margins during this year.

This is a result of efficiencies achieved through previous Voluntary Retirement Schemes (VRS) and economies of scale. Personnel cost remained the major component of operating cost amounting to Rs.3.2 billion, representing a 14 percent growth compared to the corresponding period last year.

Company has taken further steps to reduce personnel cost by offering another VRS to 500 of its employees in December this year. The proposed VRS is estimated to cost Rs.450 million, which is already been provided for in the nine months accounts.

SLT has incurred Rs.1.6 billion in providing CDMA connections during the year, which is an added expense during this year and not witnessed during the corresponding period last year.

International outgoing settlements have shown a decline of 27 percent during this year due to a reduction in rates as well as volumes in outgoing international calls. The repair and maintenance cost has also remained lower than the pervious year, at Rupees one billion. Mobitel has incurred Rs.2.3 billion as operating expenses showing an increase of 35 percent compared to the same period last year.

Mobitel has managed operating profit margin of 15% compared to an operating loss for the same period last year. SLT has provided Rs.1.6 billion as International Telecommunication levy (ITL) for the nine months of this year representing an increase of 53%. According to a gazette notification the company is entitled for a refund of up to 2/3 of the ITL charge for developing the network in rural areas. Accordingly, SLT has submitted documents for a refund of Rs.2.9 billion, which is yet to be approved by the Telecommunication Regulatory Commission and therefore has not been recognized as an income during the period.

Interest expense for the period increased by 10 percent to Rs.1.7 billion whereas interest income grew by 78 percent to Rs.753 million compared to the corresponding period of last year. Consequently, the net interest income showed a 15 percent decline during the first nine months of this year to Rs.960 million.

Corporate taxes rose sharply to Rs.2.8 billion, a rise of 131 percent compared to the same period last year, as a result of increased corporate tax rate as well as higher profits of SLT. The effective tax rate has also increased from 33 percent last year to 44 percent for the first nine months of this year.

- Asian Tribune -

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