With the end of the civil war in 2009 Sri Lanka entered what is referred to as a ‘post-conflict’ phase.
By 2012/2013 there were positive signs of a general improvement in the country’s social and economic well-being, and the telecom sector in particular is starting to build a fresh momentum, according to Research & Markets.
Over the past few years the Sri Lankan economy has rebounded from the difficult state it was experiencing back in 2009. The country had been hit by a balance of payments crisis in that year and needed a US$2.6 billion IMF loan to bail it out. Since then, however, the US$65 billion economy has been reporting strong economic growth - around 7% in 2012 - and the unemployment rate had hit a record low. The IMF has forecast annual growth of 6%-7% in the short term.
The generally improving market environment has seen the country’s telecom sector well positioned for continuing vigorous growth. The already modern and progressive telecommunications sector is certainly high on the list of priorities for further expansion and development. This also fits well with the government’s wider agenda for national development.
A good start has been made on expansion and provision of infrastructure that is capable of providing a sophisticated level of telecommunications service to the population throughout the whole country. Extending infrastructure into the North and Eastern provinces, those parts of the country most affected by the long-running war is being given high priority. It is well recognised that the growth and development of any country’s telecom sector is necessary to provide, among other things, an impetus for national economic activity. Nevertheless, much still needs to be done to complete the build-out of the necessary national infrastructure.
After a five-year period of strong growth the fixed-line subscriber market flattened out and then entered into a decline. Considerable uncertainty hangs over this segment of the telecom market. The widespread application of the Wireless Local Loop (WLL) platform has been one positive element in a struggling sector. There was a large concentration of fixed services in the capital Colombo which has a penetration of 35%.
In the meantime, the country’s mobile telephone services have continued on a positive growth path. (The subscriber numbers appeared to have experienced a ‘correction’ in the first half of 2013.) As an effective and efficient alternative to the fixed-line networks, with their earlier problems in meeting the demand for telephone services, the mobile phone quickly became a popular and essential service. The Sri Lankan mobile market was still growing at an annual rate of around 50% in 2009 in as it headed towards the 60% penetration mark. However, since then subscriber growth has moderated to less than 10% per annum. The country’s four competing mobile operators – Dialog Axiata, Mobitel, Etisalat Sri Lanka and Hutchison Lanka – have been joined by a fifth operator, Bharti Airtel Lanka, adding vigour to an already highly competitive market.
The development of the internet remains of particular concern for Sri Lanka. In a country whose population is increasingly undeniably internet savvy and the government rhetoric positively supporting the nation going online, the estimated user penetration remained relatively low coming into 2013. Despite signs of an enthusiastic user market, coverage and accessibility have continued to be limited and the sophistication of the available services generally low. The level of broadband access has been of particular concern. By 2012/2013, however, fixed broadband internet services were being supplemented by a rapidly expanding mobile broadband segment.
