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by Chandani Jayatilleke

Lanka Bell, Wireless Local Loop (WLL) operator plans to go public with an Initial Public Offer (IPO) which is yet to be determined, Managing Director, Lanka Bell Joey V. Mendoza told the 'Daily News' in an interview.

As a prelude, the company is currently concentrating on its financial stability, management strength and efficiency while carefully observing the capital market fluctuations.

"We hope that the new telecommunications policy will help raise the industry's potential further, making way for our company to go for an IPO," he said adding that "We hope it will be sooner".

Lanka Bell announced a 37% increase in their gross revenue and an increase of 36% in their net revenue during the first five months of the current fiscal year.

In this interview Mendoza talks on the telecommunications industry, its implications and the future of the industry.

Question: Telecommunications being one of the fastest growing industries in the world, what is your assessment of the local industry in comparison with the global industry?

Answer: I think this industry even though it started deregulation in 1996, is still in a very basic point, because investors have just begun to mature, though they came in 1997 or so. For rapid growth in the telecommunication industry we need the continuous support of the Government. The Government should make every effort to create an investor friendly environment in this sector. The private sector, although they are investing a lot of money, they are very much dependent on government regulatory issues. One of the major issues faced by the investors is related to a level playing field. The investors want the regulatory environment to be consistent.

The industry is mainly based on the development of infrastructure. Due to lack of infrastructure development, the industry has not grown to the level where it should really have been.

When investors come here, they come with long-term plans ranging from five to 10 years. When the regulatory issues are not addressed the investors fail to achieve their goals and invest further.

In business we, investors understand that we have a social responsibility other than making profits. But, if we choose social responsibility, before business goals, we may not be able to deliver our services reasonably and efficiently. If we take the social factor first, we have to increase the rates of phone charges which is not possible.

We hope that the present Government will address these issues following the new telecommunication policy. The new policy is important for the telecommunications industry to grow further.

Q: What is your present customer-base? What plans do you have to increase the number in the future?

A: We have given over 100,000 connections through a 50,000-strong customer base at present. The initial target given to us was to provide 100,000 connections which we have successfully achieved. But, plans are under way to provide as many connections as possible. As far as our business goals are concerned, we have a long way to go. We want the growth to be faster.

The government's initiatives look very positive as far as the industry is concerned. This emphasis has to be aggressive or else it will be difficult to attract foreign investors.

Our future plans include a wide expansion in terms of infrastructure, network, coverage and customer base. However, we are closely watching the economic and political situation in the country before we decide to invest more money in the expansion areas. The money we invest in projects cannot be taken back if the project fails. Therefore, we have to be cautious in every step we take.

Q: What is your assessment about Sri Lanka's telecommunication market?

A: We hope the development in the country will be faster in the next five years than in the last five years.

As an industry the country should be looking at four to five million telephone connections in the next five years.

Q: To reach such a goal, the industry needs a substantial amount of investment. Isn't it?

A: Yes. It needs a significant amount of money. The cost of one phone connection may be US$ 150 to 200 on an average. Or it could be even more. You can gauge the amount of investment the industry needs.

We have regular public/private sector discussions where we discuss a host of issues in connection with the industry. We give them a feedback on what the industry wants and our level of commitment. We actually want to grow our investments in the country.

Q: How do you find the competition in the market?

A: The competition is fierce in terms of service, quality and effectiveness. Customers are getting more educated about telecommunications companies and the facilities they offer. Therefore, customers will have a better choice. On the other hand, the companies are also trying to get the latest technology.

When competition is fierce, consumers get the best service. In about three to five years, people will have a diverse choice of phones both fixed and mobile phones.

Q: Is the mobile phone industry a threat to your industry?

A: Yes, the mobile phone industry is a threat to us. At present, there are about 600,000 and 610,000 fixed phones.

Q: Why hasn't your company gone to the outstations?

A: We would like to go to the outstations, but the lack of infrastructure is the main hindrance to this move.

If we invested a lot of money to go to the outstations and offered them our services at a high cost, the people will not be able to purchase our phones.

Q: Will Lanka Bell be picking up shares of other telecommunications companies?

A: It depends on the willingness of the other companies to merge with us. Even if we are to pick up shares in a company, we need some kind of management commitment. However, I don't think there is an opportunity of this sort, right now.

Q: Will Lanka Bell go public with an IPO?

A: Of course, we want to go public as soon as we could. Before, we go public, we want to concentrate on the company's financial stability, management strength, and the timing of the capital market.

People will look into the company's stability and its financial performance before purchasing shares.

We hope it will be sooner. The developments will occur soon when the new Telecommunications Act comes into effect.

The issue of an IPO will be a boon to the industry. The money raised through an IPO could be used to further improve our facilities.

Q: What is your opinion about the present economic and political situation in the country? In your view how does it help business?

A: We are glad to see that the country's economy is recovering and hope that this trend will continue on a positive note. With these developments, we hope that more foreign investors will eye Sri Lanka as a preferred destination.

When a country's economy picks up investors will rush there. You don't have to force them to come and invest.

Investors always explore business opportunities and go to destinations where their money would earn.

Q: How do you see Sri Lanka's potential as a telecommunications hub in South Asia?

A: The concept to become a telecommunications hub in South Asia is a very encouraging concept.

For this, you have to ensure that the country has the right level of infrastructure, the regulatory policy and the latest technology.

When you say a telecom hub, it is very much infrastructure dependent in terms with band-with, speed, technology and services.

To make Sri Lanka a telecom hub, all stakeholders should make a concerted effort. If Singapore could do it, why not Sri Lanka?

In fact Sri Lanka's potential is immense. The country still has only about 70,000 Internet users (as at December 2001).

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Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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