Competition is key and deregulation can only help the consumer.   SLT is now reaping the rewards of its post privatisation infrastructure investment.   A re-engineered blue chip company.

The Economy Revives
SLT’s performance in 2003 took place against the backdrop of a reviving economy.Reduced defence expenditure and strict financial discipline helped get the economy back on track. According to Central Bank statistics, the economy grew at an average rate of 5.6% in the first three quarters of 2003. The budget deficit fell to a provisional 7.8% of GDP, a significant drop from the 8.9% recorded in 2002. This is encouraging, particularly in the context of the Fiscal Responsibility Act of 2003, which targets a reduction in the budget deficit to below 5% by 2006.

Inflation was kept in check while the Central Bank was also able to effect several reductions in interest rates during the course of the year. Foreign inflows including direct foreign investment also increased leading to a sense of buoyancy in the business sector. The increased optimism translated into a bullish stock market and the Colombo Stock Exchange had a record year.

However, for this economic momentum to be maintained, it is vital that the country does not return to war. I therefore hope that all major stakeholders will pursue every effort at negotiating a political settlement and work strenuously to avoid a return to conflict.

Reaping the Investment Rewards
The year 2003 was significant for the telecommunications industry in Sri Lanka. It was during this year that 32 new licences were granted to external gateway operators, which denoted a new era of competition in this country. It also marked fifteen years since the first mobile operator entered the market and a little over twenty since deregulation commenced in this country. Sri Lanka’s communications environment has thus changed radically from a state controlled and tightly regulated environment to a deregulated market in which competition is key.

Such deregulation can only help the consumer. Higher levels of competition mean better products, more investment in infrastructure, higher quality, lower pricing and increased levels of customer care. Deregulation and consequently competition ultimately means a better quality of service for the consumer.

SLT’s infrastructure investment since privatisation is now paying off. Over the past seven years, we have invested Rs. 63 billion in infrastructure and network development. We have by far the largest number of fixed line customers and have over these seven years consistently enhanced the level of service to them. Our acquisition of Mobitel now makes us the only operator to offer integrated fixed and mobile services. With the switchover to GSM and other value added services, we are confident that we will soon be a leading player in the mobile market too. Sri Lanka Telecom is therefore well positioned to lead the telecom sector in all aspects.

With the privatisation in 1997 followed by its successful listing on the Colombo Stock Exchange in 2002, SLT has re-engineered itself into one of the most vibrant blue chip companies. The initial impetus for the transformation came from our agreement with NTT, which provided the technical expertise to expand our networks and to restyle our management culture. While the NTT management contract expired in 2002, SLT continues to have access to certain strategic and managerial inputs from NTT.

SLT’s restructuring strategy has involved several elements. One of our first priorities was to identify people with the right attitude and expertise for each area of work.

We have given them the autonomy in those core areas and encouraged proactive and dynamic decision-making. This strategy was supported by the infusion of professionalism in those areas where such expertise was required.

SLT has also begun to aggressively diversify its sources of revenue. The liberalisation of the market demanded that SLT move from an excessive reliance on fixed line revenue, which was previously its core business, to other business areas. Investments have therefore been made in mobile telephony, wireless loop technology, micro links with an Indian telecom operator and the Telecom City project. The microwave link between Talaimannar and Rameshwaram opens access to a 43 million subscriber base and will significantly enhance traffic volumes between India and Sri Lanka.

SLT has also introduced a new billing system, which captures ratings data for invoicing directly from the newly installed high capacity digital switches, thereby eliminating system losses and improving revenues and the bottom line.

State-of-the-art technology to deliver a new range of high quality voice, data, media and entertainment products while emphasising customer care, will be an important part of our business plan.   We are ready and well placed for the new telecom era.

The plan for our next phase of growth is to build on the foundation we have laid. The key is to make SLT not only one of Sri Lanka’s most profitable companies, but also to be responsive to customer demands while using technology for their maximum benefit. Therefore, the use of state-of-the-art technology to deliver a new range of high quality voice, data, media and entertainment products will be an important part of our business plan over the next few years. We are accordingly undertaking an overhaul of our marketing and sales strategies with the aim of projecting an enhanced SLT brand. Concurrently with these developments, we are placing increasing emphasis on customer care. We are aware that our new products and services must be driven by customer needs, which means providing customers with as much options as possible on the products we offer. In the next few years, we also hope to make maximum the use of our fibre optic infrastructure to provide IP-based services such as SLT Broadband, IP-VPN and Internet Data Centres. Through these new products we will attract high usage corporate customers and increase network utilisation.

We know that the future will see the integration of telecommunications, computer applications and media applications. Telecommunications will soon share bandwidth with information and entertainment. SLT is ready and well positioned to take on these new challenges and participate in the next phase of the dynamic and fast evolving telecommunications industry. The foundation we have laid will enable us to compete and forge ahead.

Acknowledgements
SLT’s management and staff has been the cornerstone of the Company’s success. On behalf of the Board, I would like to thank every member of the SLT team. Without their commitment and dynamism, we would not have enjoyed the success we have had. My thanks also go out to the members of the Board for their unstinted advice and support. It has been a pleasure to work with everyone of them. I also wish to express my appreciation to you, the Shareholders of the Company, for continuing to place confidence in our capability to drive Sri Lanka Telecom forward. I conclude by assuring you of our unwavering commitment to increase the value of your shareholding in the Company.

Thilanga Sumathipala
Chairman