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Management
Discussion and Analysis |
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Setting Our
Compass
Setting the strategic direction for SLT for the year 2004 required
a carefully focussed approach. In an industry developing as
rapidly as telecommunications, one is truly spoilt for options.
Thus, pursuing the myriad areas of opportunity, greatly tempting
though they were, required us to make careful choices along
a planned path.
Phase IV of our Strategic Plan commenced in 2004 and will run
through 2006. The key strategic direction of this phase of the
Plan is to position SLT’s brand image as that of a technologically
advanced, reliable and customer focussed telecommunications
service provider with a global reach, both in Sri Lanka to its
business and other customers, and abroad to multi-nationals
and other telecommunications service providers.
In terms of momentum, it indicated the necessity to “move
outwards”; to position the Company as a premier regional
telecommunications operator utilising its ever evolving global
connectivity to provide a diversification of revenue streams
through marketing such capabilities internationally.
It is against this backdrop that we present an analysis of management
initiatives for 2004.
Using Enhanced Global Connectivity
In March 2004, SLT became a co-signatory with 15 other international
telecommunications carriers to collaborate on the construction
of SEA-ME-WE 4, the new submarine cable to be commissioned by
end 2005.
Additionally, the Company chairs the Finance and Administration
Committee which has responsibility to see this US$ 500 million
project to completion.
SEA-ME-WE 4 a next generation, fibre optic cable will revolutionise
current connectivity, increasing bandwidth from 80 Gigabits
per second to 1.32 Terabits per second. SLT will benefit by
gaining higher connectivity, better reliability, improved security
and
enhanced speed, with many of the services offered being on par
with the best in the world.
Another high point of the year was the coming to fruition of
the agreement signed between SLT and Bharat Sanchar Nigam Limited
(BSNL) where an Indo-Sri Lanka Microwave Link was established
between Talaimannar and Rameshwaram.
This initiative is a further step along SLT’s path to
becoming an international long distance carrier for Indian traffic.
BSNL’s strength as India’s No.1 and the world’s
seventh largest telecommunications company, yields a consumer
base of over 40 million Fixed Line customers and 6 million cellular
subscribers to be served by SLT.
A further development saw the signing of a MoU between SLT and
BSNL who have agreed to collaborate on the construction of a
submarine cable which will cater to voice and data traffic between
and beyond India and Sri Lanka.
These developments taken in tandem with our bilateral agreements
with all Indian operators holding international licences, plus
an international linkage network with 223 countries and an international
connectivity of approximately 7,128 circuits, serve to
lay a firm base for our progress towards becoming a premier
regional operator.
For the future, we intend to expand international operations
through hubbing and transit services to overseas telecommunications
service providers.
The next step along this pathway will see SLT reaping revenue
from marketing its expertise and capabilities in network, system
integration and advanced technology to other telecom operators
both in South Asia and other parts of the world.
This is an exciting journey for which SLT is ideally positioned
and prepared.
The Growing Presence of the Mobile
Although the subject of Mobile Telephony has been covered more
fully elsewhere in this report, it is pertinent to make mention
of the vast potential for growth that lies within this sector.
It is also relevant from point of view of the fact that the
mobile is a key element in the “look beyond” approach
we have adopted today - an approach that explores worlds beyond
fixed telephony and more conventional forms of communication.
SLT’s fully owned mobile company Mobitel may not be Sri
Lanka’s No.1 operator just yet, but they’re getting
there, fast. Mobitel’s strategy is based upon using the
supremacy of its technology, brilliant customer care and state-of-the-art
value added services, to grow coverage and offer the best and
most modern mobile telecom solutions in the country.
From this platform Mobitel will aim for the top spot as Sri
Lanka’s No.1 mobile telecom operator.
For the year 2004, Mobitel grew its customer base by a staggering
99.3%, fuelled mainly by its introduction of its EDGE enabled
GSM services. It grew market share by 8% for 2004.
Market demographics show a penetration of just 10% whilst growth
has averaged 53% over a 10-year period.
There can be no clearer example of the huge potential that lies
within this sector.
Mobitel’s presence within SLT’s fold gives us a
unique positioning within the telecommunications industry of
Sri Lanka; that of the only truly integrated telecommunications
service provider in the country today, able to offer fixed line,
data and mobile services to its clientele.
This is a key factor in the Company’s bid to “move
outwards” - taking telecommunications beyond a purely
local focus, to the international arena.
Indicators of Strength
Along such a journey as SLT undertook in 2004, it was heartening
to receive acknowledgment and honour which we have justifiably
taken as endorsements of the Company’s strength in pursuing
its strategies.
International Bond Issue
SLT successfully completed an international bond issue which
realised US$ 100 million, in late 2004. The issue was oversubscribed
tenfold.
In the process the Company notched up several “firsts”.
This was the first ever international fixed rate bond from an
entity in Sri Lanka, which was also the first to receive an
international credit rating. This landmark offering from SLT
has created a new benchmark in the international debt capital
markets for borrowers from Sri Lanka, and opened up opportunities
for local companies to source similar funding.
The bond issue also attracted an international rating of B+
from both Fitch and Standard & Poor’s, making SLT
the first Sri Lankan company to receive such an accolade.
Another aspect of this milestone is that its success was due
in no small measure to the strength and standing of SLT as the
leading corporate entity in Sri Lanka.
Rated High
In 2004, Fitch Ratings Lanka assigned its highest rating of
SL AAA (sri) to SLT. This level of rating is only assigned to
companies of exceptionally strong capacity to meet their financial
commitments in full, and on time.
The rating takes into account SLT’s position as a fully
integrated telecommunications service provider, its dominant
market share in Direct Exchange Lines (DELs), its capacity to
offer Data and other network services and the prospects of growth
in the wireless telecommunications sector.
In a comprehensive survey and rating process, the LMD Business
Magazine ranked SLT the No.1 Company in Sri Lanka. We were chosen
as Sri Lanka’s most valuable brand and the country’s
top corporate entity for 2004.
A Regulatory Issue
The maximum impact for International Telecommunications Operators’
Levy has already been taken into 2004 accounts. However, regulations
are now being prepared to enable domestic operators to receive
reimbursement of up to 2/3 of this levy in respect of rural
roll out. As SLT has consistently continued to roll out network
at a steady pace the Company is confident of being able to review
the full amount of this reimbursement once the regulations are
published.
All in all, 2004 has been a year of great opportunities successfully
seized and developed upon.
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