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AN IMPORTANT YEAR ON THE MARKET |
Sri Lanka Telecom had a significant year on the market. On 2 April, the Company was the subject of the largest single transaction ever to take place on the Colombo Stock Exchange when NTT Corp, then SLT’s second-largest shareholder, sold the entirety of its 35.2% holding to Global Telecommunications Holdings (GTH) N.V. A total
of 635 million shares were transferred at a price of Rs. 50.50 per share. GTH is a wholly-owned subsidiary of Usaha Tegas Sdn. Bhd., which also owns Maxis Communications Bhd., a leading telecommunications provider based in Malaysia and operating in that country as well as in India and Indonesia.
Following news that the proposed transaction had been approved by the Supreme Court of Sri Lanka, energetic trading in SLT shares commenced in early March 2008 (see share price chart). This was largely fuelled by anticipation of the mandatory offer to other shareholders that is dictated by CSE rules in the event of a single buyer purchasing a stake of more than 30% in a listed company. This phase of activity continued after the GTH’s purchase of NTT’s stake on 2 April, subsiding only after the offer lapsed on 2 June.
Following the mandatory offer, GTH acquired a further 5.22% of SLT in transactions with individual shareholders. This had the effect of reducing the ‘free float’, or regularly-traded volume of SLT shares on the Colombo Stock Exchange, from over 15% of total equity to around 5%.
The Government of Sri Lanka, SLT’s largest shareholder and its associated institutions, declined GTH’s mandatory offer as expected and collectively retained over 50% holding in the Company.
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2008 |
| Issued Share Capital |
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1,804,860,000 |
Less:Holding over 10%
Secretary to the Treasury |
893,405,709 |
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Global Telecommunications
Holdings N.V |
811,757,869
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(1,705,163,578) |
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99,696,422 |
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Trading Activity, Year-on-Year
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2008 |
2007 |
| No. of transactions |
16,473 |
28,350 |
| No. of Share traded |
901,856,789 |
157,119,304 |
| Value of Shares traded (Rs.) |
43,850,830,079 |
5,604,532,534 |
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MAINTAINING VALUE IN TURBULENT TIMES
Share Price Trend since IPO
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2008 |
2007 |
2006 |
2005 |
2004 |
2003 |
| Highest Value (Rs.) |
49.75 |
43.25 |
29.75 |
27 |
23 |
30 |
| Lowest Value (Rs.) |
29.75 |
28.00 |
14.75 |
15.5 |
15 |
10.5 |
| Last Traded Price (Rs.) |
31.00 |
31.5 |
27.75 |
16.5 |
15.5 |
18 |
| Market Capitalisation (Rs. Billion) (year end) |
55.95 |
56.85 |
50.08 |
29.78 |
27.97 |
32.49 |
The GTH offer and the activity surrounding it had a strong positive effect on SLT’s share price, which rose from around Rs. 30.00 at the beginning of the year to peak at Rs. 49.75 on 21 April. The price remained above Rs. 40.00 for the remainder of the second and third quarters before falling in the final quarter in concert with the rest of the market.
Already suffering from the effects of domestic economic and political troubles, the Colombo securities market was, like its counterparts in other countries, severely impacted by the effects of the world financial crisis. The most severe effects were felt in the final quarter of 2008. As a result of this universal slump in share value, SLT’s share price ended the year only marginally higher than it had begun. However, as a comparison with market trend data shows, SLT shares have done relatively well on the market - as is only to be expected from one of Sri Lanka’s leading blue-chip securities.
CONSISTENTLY HIGH DIVIDENDS
Despite the inevitable flurry of trading activity following the NTT/GTH transaction, SLT remains a steady, productive stock for the long- and medium-term investor. In times of financial crisis and economic uncertainty, the attractiveness of such a stock is enhanced, though this is not necessarily reflected in trading volumes as investors often choose to ‘buy and hold’.
Total Shareholder Return since IPO
| Period |
Dividend |
Rs. |
| 31 Dec. 02 |
Interim Dividend |
541,458,000 |
| 31 Dec. 02 |
Final Dividend |
541,458,000 |
| 31 Dec. 03 |
First & Final Dividend |
902,430,000 |
| 31 Dec. 04 |
First & Final Dividend |
902,430,000 |
| 31 Dec. 05 |
First & Final Dividend |
1,353,645,000 |
| 31 Dec. 06 |
First & Final Dividend |
1,804,860,000 |
| 31 Dec. 07 |
First & Final Dividend |
1,804,860,000 |
| 31 Dec 08 |
Proposed First &
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Final Dividend |
| Total Return |
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9,656,001,000 |
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STAYING CLOSE TO THE MARKET
SLT’s unique industry position and market profile makes it always newsworthy. This was especially so in the year under review, as the NTT/GTH transaction placed the Company under the media spotlight.
Anticipating the attention and the trading activity that would accompany it, the Company remained closely in touch with investors and the financial media. Though share promotion activities were somewhat restricted in view of the anticipated ownership transfer, an investor forum was held in Sri Lanka in February and regular meetings continued to be held throughout the year with stockbrokers, analysts and prospective investors. As usual, the Company’s investor newsletter continued to be published every quarter.
RATING STATUS
Some rating issues affected SLT over the course of the year. These were not due to internal or industry-related causes but to the effects of the overall economic situation and the influence of changes in country ratings awarded to Sri Lanka by international agencies.
Fitch Ratings Lanka has reaffirmed SLT’s AAA(lka) domestic credit rating. Standard & Poor’s international credit rating of B+ for SLT is one notch above the country rating.
RECOGNITION BY OUR PEERS
Sri Lanka Telecom remains a highly admired Sri Lankan company, a position reinforced by the number of awards it received from contemporaries in the year under review. Among these, in the year under review, were
- appearance on the Lanka Monthly Digest list of the top 10 Sri Lankan companies for the fourth consecutive year;
- appearance on the Business Today list of the top 10 Sri Lankan companies, also for the fourth consecutive year;
- a SLIM Nielsen ‘Power of the People’ award for People’s Telecom Provider of the Year;
- a Best Performance Team award at the International Quality Convention;
- a National Business Excellence Award;
- a Silver Award at the 2008 ARC international annual report competition in New York for its 2007 Annual Report; and
- a Gold Award in the Telecommunications category at the Chartered Accountants’ Annual Report Awards 2008
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