Mr. Thilanga Sumathipala - Chairman Dear Shareholders

The year 2002 has proved to be a very eventful and successful one for SLT.

SLT not only consolidated its position as market leader in the industry but also became the only fully integrated telecommunications service provider in the country when it acquired Mobitel in its entirety in November 2002; A successful Initial Public Offering placed SLT as the largest listed Company on the Colombo Stock Exchange; Following the completion of five years of stewardship by NTT Communications Corporation, management control was transferred back to SLT’s own management team; SLT geared itself to meet the new challenges posed by the emerging deregulation in the Telecom sector; Amidst all these very significant events, SLT Revenues and Profits soared to unprecedented levels.

SLT group’s revenue grew by 15% to reach Rs. 25.4 billion while Operating Profits recorded their highest rate of growth at 26% to reach Rs. 7.9 billion. Reduced cost of debt servicing through repayment of higher cost borrowings and a general reduction in interest rates combined with containment of other costs enabled a disproportionately higher increase of 44% in pre-tax profits to Rs. 5.2 billion. This is the highest pre-tax profit recorded by SLT since its incorporation. The post-tax profit of Rs. 2.68 billion is also the highest in SLT since incorporation.

It is well accepted that mobile phones would dominate future growth in the global telecom industry. Cognisant of this trend, SLT acquired the balance 60% of Mobitel from Telstra in October 2002. Mobitel with its DAMPS technology presently holds the third position in the domestic mobile industry with a market share of 18%. The process of converting the Mobitel network to a GSM platform has been initiated by SLT. The new technology combined with the inherent strengths of SLT and the resulting synergies is likely to make Mobitel a lead player in the mobile arena.

In line with its commitment to privatize state enterprises, GOSL offered for sale a further 12% stake of its equity in SLT through an Initial Public Offering on the Colombo Stock Exchange. This second phase of SLT privatisation reduced GOSL’s holding to less than 50%. The success of the issue despite its unprecedented size is a reflection of the confidence the investors placed in SLT and its future prospects. Consequent to the issue, SLT now has over 28,000 shareholders, which makes SLT the most broad-based company in Sri Lanka. I take this opportunity to welcome and thank the new shareholders who have come on board SLT.

The ending of SLT’s monopoly on international telephony has prompted timely proactive strategies to counter the emerging competition. The successful launch of the ‘Sigiri’ calling card in UK and Europe and the establishment of links with non-traditional operators in the international voice market are some of the initiatives taken to augment international revenues.

SLT prides itself on being at the cutting edge of technology. Wider use of its fibre optic infrastructure has begun. SLT is equipped to provide IP based services such as SLT Broadband and IPVPN.

An exciting new prospect being pursued by SLT is the setting up of a Telecom City that will have a single venue Data Centre, ICT facilitator and Call Centre to provide the latest communications technology and services under one roof. We have earmarked a 3 1/2 acre land at Welikada for the Centre.

Driving change and competing aggressively in the market place cannot happen without one key element-people. I pay tribute to staff of all grades who have responded in a most commendable manner to the new challenges brought about by a rapidly changing environment.

It is with pride that I make special mention of the tangible evidence of employee commitment to higher levels of productivity and achievement, which was recognised when SLT won the coveted National Productivity Award in the Service Sector-Large Scale Category for 2002. SLT’s Annual Report of 2000 was the winner in the categories of ‘Unquoted Companies’ and ‘Companies incorporated after 1st April 1996’ at the Annual Report Awards Competition of the Institute of Chartered Accountants of Sri Lanka 2002. At the competition in 2003, SLT’s Annual Report of 2001 was adjudged the Runner-up in the ‘Services’ category. SLT was also the second Runner-up in Human Resource Management at a competition held by the Sri Jayawardhenepura University’s Postgraduate Institute of Management. SLT also received 13 awards and two certificates of excellence at the Taiki Akimoto 5S Awards ceremony held in Colombo along with the Overall Winner Award. On behalf of the Board, I wish to place on record my sincere thanks to the senior management and all other employees for their dedicated contribution to the success of SLT.

I acknowledge with gratitude the role of NTT Communications Corporation who has partnered us in both challenging and exciting times. I also thank the Hon. Imtiaz Bakeer Markar, M.P., Minister of Mass Communication and the Government of Sri Lanka for their guiding hand of support and encouragement. My grateful thanks are extended to all shareholders for their confidence in SLT.

I also wish to thank my colleagues on the Board of Directors whose invaluable advice and support has helped steer SLT to the strong, vibrant and highly profitable entity it is today.

Thilanga Sumathipala