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Sri Lanka Telecommunications Report Q2 2011
Business Monitor International, Feb 2011, Pages: 87
Business Monitor International's Sri Lanka Telecommunications Report provides industry professionals and strategists, corporate analysts, telecommunication associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Sri Lanka's telecommunications industry.
This quarter’s update on the Sri Lankan telecoms market reveals there to be significant challenges ahead in the mobile market. As we have noted in previous quarters, Sri Lanka’s mobile market has reached maturity, with penetration rates of around 85% as of September 2010, the equivalent of around 16.196mn subscribers. The last three consecutive quarters of 2010 reveal that the number of net additions has been slowing, and we attribute this to poor economic growth and net losses in Dialog and Airtel’s subscriber bases during Q210.
The slowing mobile subscriber growth appears to be of concern to Sri Lanka’s Telecommunications Regulatory Commission (TRC), which in December 2010 announced the removal of a floor price for mobile tariffs to help boost subscriber growth. Furthermore, the regulator is delaying the implementation of SIM registration by a further three months until April 2011. The TRC announced that customers would be able to register up to five SIM cards with a single operator. Such protectionist measures for the mobile market by the regulator are a result of the contribution it makes as a percentage of GDP.
Sri Lankan fixed-line operator Lanka Bell was put up for sale by its parent, Distilleries Company of Sri Lanka (DCSL), in end-November 2010. It was also reported in October that Indian telecoms company Tata Communications was in talks to acquire 100% of Sri Lanka's alternative fixed-line wireless in the local loop (WLL) operator Suntel. Although both Sri Lankan companies operate in a fixed-line industry dominated by Sri Lanka Telecom, BMI thinks buyers of these companies will be attracted to the operators' assets because they allow for the pursuit of profitability in alternative revenue streams and take advantage of the government's efforts to promote the telecoms and information technology (IT) industries.
The Sri Lankan government is trying to promote the country's telecoms and IT industries in order to create employment and restore economic stability, and President Mahinda Rajapaksa's ongoing bid to consolidate political power in the hands of the presidency should ensure near-term political stability after years of domestic turbulence. BMI therefore thinks that telecoms companies could be interested in acquiring Lanka Bell to leverage on the government's support and capitalise on the growth potential of the nascent broadband industry in Sri Lanka.
Meanwhile, the TRC conducted tests of ISPs' broadband speedsand found then to be slower than advertised. Although the regulator has not said it will levy fines on operators found guilty of misrepresenting their broadband speeds, it has encouraged customers to complain to their ISP if they find speeds to be slower than advertised.
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