In light of new data published by the Telecommunications Regulatory Commission of Sri Lanka, the island nation’s mobile subscriber growth over the next five years will likely be lower than expected, according to BMI.
Both the mobile and fixed-line sectors experienced slow growth in 2011, with Sri Lanka’s fixed-line market expected to decline in 2016 after a few more years of sluggish performance. The bright spot in the Sri Lankan telecoms sector is reserved for the internet, specifically the mobile broadband segment. There were 368,000 mobile broadband subscribers in the country at the end of June 2011, representing an impressive 206.5% increase y-o-y. Momentum should remain robust as operators continue to roll out 3G and next generation mobile technology networks.
Debt-laden alternative fixed-line operator SunTel has been a target for several companies with the latest being Sri Lanka Telecom (SLT). A potential US$200mn deal was reported, which would be almost double the sum offered by India's Mahanagar Telephone Nigam in 2010. SunTel’s large and comparatively robust enterprise customer base is likely behind SLT’s attraction. In addition to basic voice services, SunTel offers hosted PABX, broadband internet, virtual mail server, web creation/hosting and managed security services for businesses. By buying SunTel, SLT could substantially increase its own enterprise services business.
Sri Lankan telecoms companies have been actively deploying and improving their networks since the civil war ended in May 2009, which would contribute towards the long-term outlook for the telecoms industry. SLT announced in July 2011 that it would invest LKR11bn in the next two years to upgrade its mobile and copper networks. This development chimed with similar activities by mobile operators to extend their mobile coverage into rural and underserved regions.
Economic growth in Sri Lanka accelerated to 8.2% year-on-year in Q211 from 7.9% in the previous quarter. However, while the overall economy appears healthy, overheating risks continue to mount. Despite the apparent supremacy of the ruling United People's Freedom Alliance (UPFA), which swept the final phase of the local authority elections on October 8, its long-running popularity, and hence its position at the top, is gradually looking uncertain. The violent intra-alliance gunfight that ensued in polling day could push the UPFA closer to its own political demise.