State-backed fixed and mobile operator Sri Lanka Telecom (SLT) reported a rise in net income for the three months ended 31 December 2018, despite what it termed as significant foreign exchange translation losses incurred on its foreign borrowing portfolio. Net profit reached LKR957 million (USD5.34 million) in Q4 2018, up from LKR707 million in the corresponding year earlier period as revenues for the group – including mobile arm Mobitel – surged 10% year-on-year to LKR21.4 billion and operating profit climbed to LKR2.3 billion from LKR508 million.
The nation’s leading fixed line operator by subscribers reported that strong growth was recorded in all business areas, however, the strongest performance came from ‘enterprise and carrier related businesses, FTTH, IPTV and data-related services together with mobile operations’. The group is shifting its business strategy to focus more on data products and, in response to the global trend for data, is investing heavily in fibre infrastructure and 4G LTE networks. As such, in 2019/20 it expects to have a negative free cash flow, while Fitch Rating notes that it expects SLT’s capital expenditure ‘will remain significantly high’ at around 30% of revenue. ‘We expect SLT to continue to invest in expanding fibre coverage as it targets to connect about one million homes by 2020-2021 from an existing 70,000 homes currently. Typically, SLT would need to lay fibre for at least two million homes to get half of the households connected. We expect SLT’s fibre investments to have low returns due to the country’s low broadband tariffs’, Fitch confirmed in an SLT update report.
SLT is 49.50%-owned by the government of Sri Lanka and Malaysia’s Usaha Tegas is its second largest shareholder with a 44.98% stake. The Employees’ Provident Fund has a 1.40% stake.