SLT’s Business Strategy
has focused on meeting and beating the competition that has
been created by deregulation and liberalisation.
Sri Lanka was the first country in the South Asian region
to commence deregulating its telecommunications industry.
It now has one of the most liberal regulatory environments
in the region. In 2003 the country took another step towards
liberalisation when 32 new gateway operators were licensed.
Despite the entry of other operators SLT continues to retain
its competitive and leading edge. Its financial performance
over the past few years is testimony to this.
The Leading and Dominant Provider
SLT continues to lead the field in the telecommunications
industry in this country. Approximately 88% of the 900,000
odd fixed line subscribers in this country were using SLT
at the end of 2003. Since the Company wasprivatised in 1997
SLT has added around 500,000 new direct exchange lines (DELs).
Over the past six years we have invested Rs. 52.25 billion
in infrastructure and network development. By completely acquiring
Mobitel, we are now the only operator to offer integrated
fixed and mobile services. Mobitel’s conversion to GSM
now makes it competitive with other mobile operators. With
the progressive introduction of value added services we anticipate
that Mobitel will soon be able to set new standards for mobile
telephony in this country.
The next step for SLT, would be to consolidate the Company's
stable financial base by repaying loans,maintaining a good
gearing ratio and a revenue assured tariff structure. At the
end of the day, we need make SLT a gilt edged investment for
our shareholders.
Generating New Sources of Revenue
The cornerstone of our strategy over the short to medium term
will be to diversify and generate new sources of revenue.
Our core business has previously been fixed voice telephony.
However, the demands of competition generated by deregulation
mean that we can no longer rely exclusively on this to generate
our main revenue. We need to diversify the sources of revenue
to maintain our competitive edge. Strategic investments have
included investments in mobile telephony, nonvoice sector,
micro links with a Indian operator and the Telecom City project.
SLT is spreading its wings into the non-voice sector by providing
IP based services such as SLT Broadband, IPVPN and Internet Data Centres
through its fibre optic infrastructure. The Wireless Local
Loop (WLL) technology is another area Company is looking at
in terms of investments.
Realising the Revenue Potential of
Mobile Telephony
The future expansion and development of Mobitel will be an
important part of SLT strategy for the next phase. Over the
next few years SLT will focus on transforming Mobitel into
a state-of-the-art mobile operator and will actively seek
to increase its customer base. According to Central Bank statistics
there are close to 1.3 million mobile customers in the country.
This compares with the slightly over 900,000 fixed line customers.
SLT is aware that the mobile market exhibits huge potential,
the surface of which has barely been scratched. We see ourselves
as beginning to capture more of this market as we begin to
integrate more features and products in the area of mobile
telephony.
Becoming a Regional Player
Whilst maintaining a healthy and strong relationship with
SLT’s longstanding Indian business partner Videsh Sanchar
Nigam Limited (VSNL) SLT took a few strategic moves by forging
close business relationships with three other major Indian
operators in view of becoming a regional player.
In 2002 SLT signed an agreement with Bharti Telesonic of India,
a leading mobile operator in India in a bid to strengthen
traffic between the two countries. Interconnection will be
provided through SEA-ME-WE III and Network i2i in Singapore.
We established links with a major Indian mobile telephone
operator, Reliance Infocom. These links will be facilitated
with interconnections via SEA-ME-WE III and Flag Cable.
In a bid to enhance our global connectivity we re-commissioned
the microwave link between India and Sri Lanka in partnership
with Bharat Sanchar Nigam Limited (BSNL).
BSNL is the seventh largest telecommunications company in
the world and has a customer base of 43 million. The link
will facilitate traffic between the two countries and make
Sri Lanka a hub in South Asia for international traffic. As
a result of the link SLT will be able to offer attractive
rates for Indian telecommunications traffic generated by BSNL.
In addition to better rates the link will provide better quality
and bigger bandwidth.
Next generation terabit optical fibre submarine cable, SEA-ME-WE
4 project is on course and is expected to be commissioned
in 2005, which would immensely enhance SLT’s potential
and capabilities as a regional player.
Rightsizing and Enhancing Productivity
In 2003, a comprehensive VRS package introduced last year
was part of SLT’s restructuring plans to improve productivity
and create better efficiencies within the organisation. The
scheme will help the Company to rightsize and to re-engineer
its work force based on actual demand. Enhancing productivity
and maintaining quality can strengthen employee relationships
and provide a more prosperous future for both the Company
and the country. The employees were educated of the scheme
through a series of awareness programmes. 1,116 employees,
which accounts for 13.5% of the staff, took advantage of this
voluntary scheme. Outgoing employees obtained a package of
between Rs. 150,000/- and Rs. 1, 100,000/- under this scheme.
The average age of the staff, which was 43 years before the
VRS, has plummeted enabling SLT to keep the right blend of
the age of its staff. The right blend and higher skill levels
of staff are absolute necessities in an era where the Company
is facing stiff competition from other providers.
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International telecom industry standards recommend a high
ratio of Direct Exchange Lines (DEL) per employee. As a result
of the VRS, the DEL per employee ratio increased by 15%: moving
to 115, from 38 in 1996.
The VRS package cost SLT Rs. 710 million. We hope to recover
this sum in two years. Our Outside Plant Maintenance Centres
(OPMCs) and other strategies such as outsourcing will help
SLT bridge the gaps created by the VRS in the short term.
Next Generation Infrastructure
SLT will continue to invest to enhance its optical fibre capabilities
in its transmission network which would provide the Company
with a high level competitive edge. SLT’s transmission
network is equipped with high capacity state of-the-art optical
fibre technology including the 700 km Inter Province Optical
Fibre Transmission Central Ring and the Colombo Ring. A 325
km Southern Ring will be implemented soon and subsequently
the 564 km Northern Ring. A 583 km Eastern Ring too is in
the pipeline.
Telecom City: One-Stop Shop, Better
Connectivity, Fuller Bandwidth
Telecom City, launched in early 2004, is pioneering initiative
that seeks to make the best use of communications and information
technology. The primary function of Telecom City will be to
provide a hub for state-of-the-art call centres. This it will
do by providing better connectivity and enhanced bandwidth,
to increase speed, reduce cost and boost efficiencies all
round.
Telecom City will also support the Sri Lanka’s ICT initiatives
by providing the necessary infrastructure, connectivity learning
facilities and technology. The objective is to build an entire
city dedicated to telecom and IT and the new technologies
that both these provide. It will be a one stop shop for ICT
and place Sri Lanka on the global map of connectivity and
communications.
Telecom City will house a combination of IT and communicationbased
entities such as call centres, data storage and back up services
(disaster recovery), IT outsourcing services for research
and training, and communication hubs. It will also provide
an attractive location for vendors to set up sales and service
centres.
Telecom City, to be developed on a 66 acre site, will be developed
in three phases with the first phase focused on developing
the infrastructure for state-of-the-art call centres. Sri
Lanka’s human resource base, ‘unaccented’
English and learning capabilities make it a rich base for
call centres.
The next two phases will encompass data storage, management
services, communications hubs and vendor businesses supported
by SLT’s technology infrastructure with its large capacity,
bandwidth and security.
NTT continues to Add Value
Although the Management Agreement with NTT Communications
Corporation of Japan ended in August 2002, NTT nominees continue
to sit on the Board and provide strategic direction to the
Company. Over the past seven years NTT has provided advice
and expertise in a number of areas: network design, service
platforms and information technology. It has also assisted
in strengthening operating and financial reporting systems
and controls.
Our partnership with NTT has converted the Company from lethargic
state entity to a truly modern service provider, able to compete
with the best in the world. From a top heavy and loosely focused
organisation SLT has metamorphosed into customer driven, technologically
innovative and lean entity. The partnership began in 1997
when NTT bought a 35% per stake in the Company. This was followed
by a management agreement through which NTT agreed to provide
management advice and training to SLT. The NTT’s stake
was subsequently transferredto NTT Communications Corporation.
The proposed Lanka Bell Acquisition:
Fixed Line Telephony at Lower Cost
In October 2003 SLT signed a due diligence agreement with
Lanka Bell. The agreement will result in a comprehensive valuation
of Lanka Bell as a prelude to a complete acquisition of the
Company by SLT. As we have noted elsewhere in this report
SLT is committed to providing fixed line telephones to Sri
Lankans scattered all over the country, including in the most
remote areas. However, the competition generated by deregulation
means that we should be able to provide a cost effective connection.
Wireless technology such as that used by Lanka Bell is one
option. It is to explore the use of wireless technology as
a cost effective option that SLT proposes to acquire Lanka
Bell and to ensure that it will continue to dominate the fixed
line telephony market. Not only is wireless technology cost
effective, it also permits speedy installation. We hope that
both these features will give ensure that SLT retains its
competitive edge.
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