By Ishara Gamage
Ceylon Finance Today: Sri Lanka's mobile telecoms giant Dialog is currently negotiating to buy the Colombo operations of Bharti Airtel for US$ 100 million, sources close to negotiations told Ceylon FT yesterday.
"The transaction will be a mix of cash and an equity stake in Dialog at 'current' market prices, where the total value would be $ 100 million", they said.
Bharati Airtel Lanka Ltd and Dialog Axiata PLC officials, when contacted declined to comment.
Sources also said that Dialog Axiata is planning to transfer all its towers business to separate company.
Recent Indian media reports said that Airtel will separately look at selling its towers business in Sri Lanka and Bangladesh. Bharti Airtel has about 2,500 telecom towers of Sri Lanka and 4,000 in Bangladesh, it said.
Bharti Airtel, India's leading telecoms operator, is planning to sell its Sri Lanka and Bangladesh operations and for this purpose has roped in two bankers, Indian media had further said.
The move is a part of company strategy to move out of unproductive operation.
Bharti Airtel in a reply to an Indian stock exchange query said, "The company keeps evaluating various opportunities, on an ongoing basis in its ordinary course of business and will make necessary disclosures as and when required."
Speaking to Ceylon FT telecoms sector analysts welcome this move and said, "Spectrum is a critical factor for telecoms sector growth. Telecoms sector voice income has dropped by 32% and data income raised by 25% on a year on year basis. So, if they want to increase the current 1MBPS data speed to 5 to 10 MBPS data speed they definitely need additional spectrums".
They also said that the possible Mobitel- Hutchison Lanka deal is also a good move for the telecoms sector.
"At the moment, Mobitel has only an 'interrupted' spectrum. If they tie up with Hutch, Mobitel will be a powerful mobile operator", they said.Government sources alleged that the Mobitel- Hutchison Lanka deal is now before the Mobitel evaluation committee.
Recently Fitch Ratings has maintained a negative outlook on Sri Lanka's telecoms sector.
This is based on uncertainty over proposals to increase taxes, which are likely to lower profitability and increase leverage for telcos, if implemented.
The original tax proposals were to impose a one-off 'super gains' tax of 25% on profits, and a tax of LKR250m (USD1.8m) on each telco. The proposals also shift the burden on to the telcos of a recurring telecom levies of 25% and 10% on prepaid voice and data revenue, respectively, having previously been borne by consumers. These tax proposals were originally introduced in February 2015, and in October 2015 government withdrew only the recurring taxes.
"We expect the industry's 2016 revenue to grow by the mid-single-digit percentage, driven by data services as cheaper smartphones proliferate. Yet, apart from the tax impact, profitability may still decline in 2016 as low-margin data services replace traditional, more profitable voice/text revenue.
We expect both Sri Lanka Telecom PLC (BB-/AAA(lka)/Stable) and Dialog Axiata PLC (AAA(lka)/Stable) to invest around 22%-25% of their revenue on capex. Both firms are exposed to depreciation of the Sri Lanka rupee - given that 95% (USD180m) and 81% (USD170m) of their respective debt are US dollar-denominated - while we estimate they each generate only around 15% of their revenue in US dollars.
Two smaller, unprofitable telcos - Hutchison Lanka and Bharti Airtel Ltd.'s Sri-Lankan subsidiary, Airtel Lanka - may exit the industry amid competition and the uncertain tax regime," Fitch further said.
Ceylon Finance Today: Sri Lanka's mobile telecoms giant Dialog is currently negotiating to buy the Colombo operations of Bharti Airtel for US$ 100 million, sources close to negotiations told Ceylon FT yesterday.
"The transaction will be a mix of cash and an equity stake in Dialog at 'current' market prices, where the total value would be $ 100 million", they said.
Bharati Airtel Lanka Ltd and Dialog Axiata PLC officials, when contacted declined to comment.
Sources also said that Dialog Axiata is planning to transfer all its towers business to separate company.
Recent Indian media reports said that Airtel will separately look at selling its towers business in Sri Lanka and Bangladesh. Bharti Airtel has about 2,500 telecom towers of Sri Lanka and 4,000 in Bangladesh, it said.
Bharti Airtel, India's leading telecoms operator, is planning to sell its Sri Lanka and Bangladesh operations and for this purpose has roped in two bankers, Indian media had further said.
The move is a part of company strategy to move out of unproductive operation.
Bharti Airtel in a reply to an Indian stock exchange query said, "The company keeps evaluating various opportunities, on an ongoing basis in its ordinary course of business and will make necessary disclosures as and when required."
Speaking to Ceylon FT telecoms sector analysts welcome this move and said, "Spectrum is a critical factor for telecoms sector growth. Telecoms sector voice income has dropped by 32% and data income raised by 25% on a year on year basis. So, if they want to increase the current 1MBPS data speed to 5 to 10 MBPS data speed they definitely need additional spectrums".
They also said that the possible Mobitel- Hutchison Lanka deal is also a good move for the telecoms sector.
"At the moment, Mobitel has only an 'interrupted' spectrum. If they tie up with Hutch, Mobitel will be a powerful mobile operator", they said.Government sources alleged that the Mobitel- Hutchison Lanka deal is now before the Mobitel evaluation committee.
Recently Fitch Ratings has maintained a negative outlook on Sri Lanka's telecoms sector.
This is based on uncertainty over proposals to increase taxes, which are likely to lower profitability and increase leverage for telcos, if implemented.
The original tax proposals were to impose a one-off 'super gains' tax of 25% on profits, and a tax of LKR250m (USD1.8m) on each telco. The proposals also shift the burden on to the telcos of a recurring telecom levies of 25% and 10% on prepaid voice and data revenue, respectively, having previously been borne by consumers. These tax proposals were originally introduced in February 2015, and in October 2015 government withdrew only the recurring taxes.
"We expect the industry's 2016 revenue to grow by the mid-single-digit percentage, driven by data services as cheaper smartphones proliferate. Yet, apart from the tax impact, profitability may still decline in 2016 as low-margin data services replace traditional, more profitable voice/text revenue.
We expect both Sri Lanka Telecom PLC (BB-/AAA(lka)/Stable) and Dialog Axiata PLC (AAA(lka)/Stable) to invest around 22%-25% of their revenue on capex. Both firms are exposed to depreciation of the Sri Lanka rupee - given that 95% (USD180m) and 81% (USD170m) of their respective debt are US dollar-denominated - while we estimate they each generate only around 15% of their revenue in US dollars.
Two smaller, unprofitable telcos - Hutchison Lanka and Bharti Airtel Ltd.'s Sri-Lankan subsidiary, Airtel Lanka - may exit the industry amid competition and the uncertain tax regime," Fitch further said.
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