Fitch removes SLT negative rating

Fitch Ratings Lanka Ltd. (FRL), removed Sri Lanka Telecom Ltd. (SLT) from Rating Watch Negative. The 'AAA (Sri)' implied long-term senior unsecured senior debt rating has been affirmed by the agency. The rating outlook is stable.

AAA (Sri) credit ratings denote the lowest expectation of credit risk. This rating is assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

This action comes after FRL placed the rating on Watch Negative on January 10, 2005, and follows the agency's review of SLT's FY04 accounts as well as circumstances that prompted the rating review action.

The bad debt equates to 3% of SLT's FY04 revenues. The termination of the calling card product may cut SLT's future ILD revenues as the Sigiri card had previously been the source of around 30% of traffic originating from the UK and terminating on SLT's network. However, FRL expects SLT to mitigate the potential loss of revenues through alternative sources.

These developments preceded the devastation caused by the tsunami, which included damage to the group's infrastructure, loss of revenues and some bad debts. However, most of the areas affected were not highly penetrated in terms of telecom services. SLT currently estimates the long-term replacement value of damaged infrastructure to be around Rs.750 million.