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| Wednesday, 3 December 2003 |
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Sri Lanka Telecom posted an impressive nine months profit of Rs. 2.5 billion after tax despite the negative market conditions with the liberalisation of the Telecom industry. However this figure would be sliced off with a Rs. 710 million VRS payment, which would cut back the net earnings to a still healthy Rs.1.84 billion. The net earnings per share of Rs. 1.88 before VRS will be trimmed to Rs. 1.36 as against 1.49 in 2002. The company experienced a drop in sales growth due to the delay in implementing the tariff revision, which was finally approved from September 1, 2003. The tariff revision of 15 percent was due from the beginning of the year but was later approved for a 12.5 percent increase from September 2003. This delay resulted in a drop in revenue for the period. However, the real effects will be felt in the last quarter to 31st December 2003, where four months of a 12.5 percent increased tariff would be available to the company's revenue for the year. SLT has shown that it has the financial stability to meet all competition and still maintain its profitability. The company settled a substantial number of loans for which high interest rates were paid, Thereby effectively reducing the interest cost. The company's long-term debt is currently at Rs. 19.6 billion from Rs. 25.4 billion in the year ended 2002. This shows a very healthy cash flow and augurs well for the future. The free cash flows of the company improved to Rs. 14.7 billion from 12.5 billion in 2002 which helped to pay off the high interest loans and the VRS scheme which is due to be recovered in two years. SLT has maintained a healthy interest coverage ratio of 2.38 times after extraordinary items. The company has also benefited from lower tax provisions due to the revised tax rates prevailing currently. The reported EPS was up from Rs. 1.49 in 2002 to 1.88 for the 1st 9 months prior to extraordinary items. SLT has shown that despite liberalisation the company is able to maintain its competitive nature. The drop in international call charges, which subsidised domestic operations, has seen the company utilising other value added products such as ADSL, IPVPN, Internet and other products to increase its market share. Although international revenue was lost at the initial stages of the revision, international call traffic volumes have increased to match the pre-liberalisation revenues. The company will be able to maintain the international call traffic revenues as a result of these volumes. The value added growth of new products and the aggressive marketing outlook will ensure that the company will remain strong into the future. The company's results have shown its true potential and remained a highly liquid stock on the market. |
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