As the Economy Grows
The National economy grew by 6.9% in 2008. The Telecom sector was a key driver, with over 40% growth during the year.
Such significant levels of growth in the sector are testament to the vast potential that remains to be tapped in further proliferating telecom services across the island.
With such lucrative market conditions on offer, the communications sector is an attractive proposition for other operators whose entry to the market could pose a threat to SLT.
However, within such an enabling environment, it is difficult to fully mitigate such risks.
We are confident that SLT’s emancipated strategic focus and business planning will maintain the Company’s competitive edge to meet future challenges.
The Changing Face of Telecommunications
Mirroring world trends, Sri Lanka too is proceeding with ever-increasing speed along the path of product and service diversification, moving away from traditional, fixed location voice telephony, towards a world of Internet enabled products delivered to the customer via superior network and technology platforms.
Statistically speaking, as at December 2008, the telecom industry in Sri Lanka achieved a total market penetration of 51%, of which 13% was in the fixed line category and 38% was in the mobile telephony segment.
The phenomenal potential that broadband technology, promises is not without risk. In general, there is risk from not ‘keeping up with developments’ - there is also risk from unplanned entry into a ‘highly complex new market place’.
In terms of broadband, the demand for SLT’s service offering has been growing YoY, by 100% over the past 04 years.
SLT has been travelling this new path for some years now – ours has been a strategically planned journey in which the Company has built the infrastructure and skills necessary to deliver, in the emerging ‘com-media world’.
Thus, by broadening our product and service portfolio to encompass this emerging world and through strategic diversification, international expansion and convergence, SLT is well placed to mitigate risks in this area.
Product Substitution
With particular reference to convergence, as the ‘platform of tomorrow’, we could face a threat from technologies that are developed in parallel processes outside the industry, which could themselves overtake and supersede those that telecom operators are familiar with.
Convergence could also throw up threats from VoIP (Voice over Internet Protocol), wireless networks and mobile Internet.
Happily, SLT is the market leader in IP-based solutions, including VoIP, delivered on our extensive IP network.
Some of the most exciting opportunities being introduced to the world of communications through the process of convergence is IPTV (Internet Protocol TV) and Mobile TV. SLT has already launched IPTV services whilst Mobile TV is ‘on the radar’ of our subsidiary Mobitel, who has already obtained a licence to operate such services.
Our diversification strategy fully addresses these opportunities whilst managing associated risk.
Tariff Structure Related Process
SLT’s operations in terms of timely launching of products/services are largely dependent on timely approval of relevant tariff structures by the Telecommunications Regulatory Commission (TRC). Since 2006, SLT has been engaged in a dialogue with the TRC in order to address the broader policy issues related to the tariffs approval regime. Whilst it has been observed that there is some progress in the recent past, this area of risk remains a concern.
Licensing Issues
The currently prevailing regulatory regime favours new entrants to the industry. In our continuing dialogue with the TRC, we seek to reinforce the case for a level playing field approach signified by an unified licensing regime and a more accurate assessment of competing service providers.
Delays in reclaiming TDC
The mandatory International Telecommunication Operators’ Levy (ITL) imposed by the State includes a component called the Telecommunication Development Charge (TDC), two-thirds of which may be reclaimed in lieu of development work carried out in unserved and underserved areas, subject to the proviso that all such claims are approved by the TRC.
Through a process of meaningful dialogue, SLT has been able to claim the due component of its TDC for Telecom infrastructure development work around the country.
New Interconnection Regime
The TRC has embarked on the determination of cost-based termination charges for all domestic operators. This process is intended as a replacement of currently prevailing 'Sender Keeps All' (SKA) regime . The effects on, and risk to SLT’s net cash flow as a consequence is to be ascertained, once such charges are known. |
