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CEO's Message
 

Shuhei Anan
Director and Chief Executive Officer

Enhancing Quality of Life through New Wave Technology

In 2006, SLT will complete 10 years as a privately managed company. These past ten years have been challenging and demanding. More importantly it has been transformative, rewarding and a tremendous learning experience.

The investments we have made in both infrastructure and internal management processes have placed us to offer state-of-the-art ultra modern solutions for our growing customer base.

In terms of financials, we have continued to perform on an upward trend with growth in revenues. Group's post-tax profit at Rs. 3.1 billion recorded an increase of Rs.1.8 billion which is an improvement of 139% in comparison to the previous year.

Modern customers are becoming highly sophisticated and are increasingly demanding rich and ready to use enhanced latest technologies. We are poised to roll out aggressively a modern IP based platform on our network again in this year. That will bring together both voice and data and provide a broad range of services to our customers. We will evolve our network with an ultra modern Next Generation Network (NGN), which will give us the capability of providing multiple services on one network. NGN technically meets the today's challenge - information anywhere anytime - on any device. As the national communications provider meeting the social challenge it is our responsibility to bring each and every citizen of Sri Lanka into the network. SLT is planning to invest approximately Rs. 7 billion to provide this state-of-the-art platform, the first phase of which will go into operation in 2006.

Our Infrastructure begins to Perform
Over the past ten years we have made substantial investments in developing new infrastructure and strengthening existing infrastructure. Among the strategic investments we made were investments in the domestic optical fibre network and SEA-MEWE 3 and SEA-ME-WE 4. These two giant undersea fibre optic cables have enhanced our international connectivity in leaps and bounds.

In the SEA-ME-WE 4 Consortium SLT has been the leading player. We invested US$ 30 million of the total investment of US$ 500 million and SLT chairs of the Finance and Administration Committee which oversees the financial sector of the entire project. The SEA-ME-WE 4 represents the next generation in fibre optics and will revolutionise connectivity. It has been built with state-of-the-art DWDM technology to perform at terabits per second levels. It is the main connectivity backbone across East and West and will link South East Asia to the Sub-Continent, the Middle East and Europe.

Bharat-Lanka commences Operations in 2006
The other strategic investment we made in infrastructure was with regard to the Bharat-Lanka optical fibre submarine cable. This project was conceived in 2004 and in that year we agreed in principle with Bharat Sanchar Nigam Limited (BSNL), the seventh largest telecommunications operator in the world, to the construction of this link. In 2005, along with BSNL we signed the Supply Contract Agreement with NEC for the implementation of the Bharat-Lanka cable system and we hope to have the link up and running by July 2006.

Prior to this, in 2003, SLT had established a micro wave link between Talaimannar and Rameshwaram, India to handle regional traffic between the two countries. This was also in partnership with BSNL. However, we both realised that there was a need for a reliable link with significantly enhanced capacity so that this project was born. The link will provide a win-win situation for both countries and enable SLT and BSNL to access other countries throughexisting and future cable networks such as SEA-ME-WE 3 and SEA-ME-WE 4 and the large internal terrestrial networks of BSNL. The microwave link will provide a back up link when the submarine cable is offline.

The Bharat-Lanka optical fibre cable will run between Tuticorin in India and Mount Lavinia with substantial benefits for both Sri Lanka and India. The cable system will initially support traffic capacity of 10 gigabits per second and will be progressively upgraded to 160 gigabits per second. It has the potential to reach a terabits per second level in the future. Corporate and personal customers in India and Sri Lanka will benefit by competitive International Private Leased Circuits (IPLCs), broadband Internet, direct and transit International Direct Dialling (IDD) traffic, Internet Protocol (IP) backbone networks, and multimedia content services.

At one level the Bharat-Lanka cable will improve connectivity and strengthen links between the two countries. At another level it will provide a foundation for other entrepreneurial activities between the two countries with win-win scenarios for both countries.

Telephone Service for everyone
SLT received the CDMA (Code Division Multiple Access) licence in August 2005, much later than the other two operators and so we were forced to be creative in our marketing to break into the market. CDMA technology is a huge leap forward in communications and will broaden access to communicationsespecially for those in remote locations. It will provide a superior quality, an enhanced range of services and wider geographical reach.

CDMA technology will enable rapid deployment at reduced costs in comparison to the present wired access technology used by SLT. It will enable SLT to offer communications facilities to those areas such as the North, East and deep South where telecommunication networks are scarce.

It will also enable the rural consumer to subscribe to new value added service such as SMS, Voice Mail Service, Internet Access, Data Services and CLI. SLT will soon introduce other services such as Free Phone Service, Calling Name Identification Presentation and Colour Ring Back Tone (CRBT). CDMA will also be compatible with the development of SLT's next generation network, which will provide multiple services be merged into the existing communication services with new products.

The entire CDMA network will be leveraged by SLT's national backbone network and its extensive resources and SLT will provide strong service guarantees to guard against service interruptions.

Our target is to increase the subscriber capacity to another 150,000 by the end of 2006 and with this focus we have commenced installing Base Transmitting Stations throughout the country. We hope to invest Rs. 1.5 billion in the first phase of the CDMA expansion plan.

SLT has to compete in the market without the advantage of tax concessions enjoyed by other competitors. We are thus forced to provide CDMA phones at higher prices since the duty concession is not available to us. We are now engaging with the Telecommunications Regulatory Commission (TRC) asking them to level the playing field in this regard. A level playing field will enable us to offer our rural customers an even more cost effective solution.

Broadband Demand Grows
In 2005, to meet a rising demand of Broadband services, SLT expanded its SLT Broadband (Asymmetric Digital Subscriber Line) coverage into the Mount Lavinia, Ratmalana, Moratuwa, Maharagama, Kelaniya, Negombo and Kandy. SLT Broadband has become

synonymous with the new Internet revolution because it facilitates higher speeds at an affordable price. The SLT Broadband package offered by SLT has two options: one aimed at domestic users and the other at corporate users and allows consumers to browse and communicate via telephone at the same time. SLT Broadband will further facilitate the growth of the Internet by becoming an access technology for e-learning, online gaming, video and audio streaming. SLT expands SLT Broadband to empower business models such as community Internet centres which will help minimise digital divide in the country.

Mobitel becomes a Challenger
Mobitel is progressively providing a greater range of services to its growing customer base. It focuses on expansion of its network to all relevant parts of Sri Lanka, both urban and rural, enabling wider accessibility and ensuring high quality connections.

Mobitel recently pioneered a range of customised menu-driven Over The Air (OTA) value added services which enables the customer to enjoy hassle-free downloading of information without the inconvenience of having to remember a list of short codes. These services range from usage balance and billing details to sports and financial updates as well as a range of entertainment options. This unique service is available even whilst roaming.

Mobitel, a wholly owned subsidiary of SLT provides an extensive roaming network and has the distinction of being the only network to offer pre-paid roaming to its subscriber base.

Bringing in Next Generation Networks
The future will be a future of convergence where one intelligent IP based network will provide a platform for existing services and new services both in the local and global markets. Voice, data, internet connectivity and application service will converge into a single high performance platform. SLT is poised to lead the industry with the introduction of next generation networks and to provide the sophisticated functionality that IP based networks offer.

Whilst strengthening its access network with modern wireless technologies such as CDMA, SLT is taking steps to evolve its core network into a Next Generation Network (NGN) replacing its existing circuit switched technology with soft switches. NGN will enhance SLT's capability to deliver IP based services: voice, data and video services making maximum use of existing networks. Consumers will soon be able to access voice, data or video on any device. New services such as E-Learning, Tele-Medicine and a broader range of entertainment services will provide consumers with increased choice and ultimately richer lifestyles. NGNs will eliminate a fair number of network components and thereby reduce complexity. It will provide greater reliability and enhanced performance. SLT will also extend its fibre backbone to cover all major cities throughout the country in order to support this NGN.

The key challenge in all of this is to provide consumers with more choices, increased flexibility and greater control. Telecommunications providers need to evolve new products that deliver at faster speeds and with superior quality and greater reliability. We will also explore how this new technology can reduce costs and create new sources of revenue. The investments that we are making are designed to do this not just for the local market but for the regional and global markets as well.

Trail-blazing
Sri Lanka's telecommunications industry is one of the most advanced in the region. Three operators now have CDMA technology which means the penetration capacity is greater. Four mobile operators have GSM which has taken the industry to the next level and SLT has a solid and widespread infrastructure.

One of our goals is to ensure that all areas of the country have the same opportunities. In pursuit of this goal we will use state-of-the-art technology to ensure that modern communications solutions are available to everyone in every part of the country.Rural consumer should not be at a disadvantage as against the urban consumer and our goal is to eliminate existing disadvantages in access to communications.

SLT has been a trail-blazer in many respects. We have earned the respect of those in the industry and those outside as a modern powerhouse of state-of-the-art communications solutions. We will continue to play this trail-blazer role and continue to provide vision and leadership to the communications industry in this country. After 10 years of privatisation we are now ready to take this vision and leadership to the region and beyond.

My thanks to all our employees who are helping to take the SLT vision forward. Their dynamism has propelled the Company to new heights. My thanks also to my colleagues on the Board for their inspiration and foresight.