Investor appetite grows in telecom sector

Dialog, SLT contribute over Rs.1 billion to market turnover:

Channa Kasturisinghe

BOURSE: The vast growth potential in the country's telecommunications sector has attracted attention of foreign and local investors and as a result the two major listed companies have been able to be in the limelight at the Colombo Stock Market.

Sri Lanka Telecom (SLT) and Dialog Telekom which have been performing well during the last few months even during turbulent times have contributed to the bulk of the turnover of the market during the last two days.

The market turnover exceeded a tremendous Rs. 1.7 billion yesterday and the contribution of the two telecom sector players was Rs. 1.4 billion. About Rs. 1 billion came from Dialog of which an impressive quantity of 49.5 million shares traded with the share closing up at Rs. 22. Over 14 million SLT shares traded and the share closed at Rs.25.50 gaining Rs. 1.75.

Analysts said the country's economic growth has been bullish at over 8 percent during the first half of this year and the services sector dominated by telecommunication sub-sector contributed largely for the growth momentum.

"The first half growth figures were fueled by this sector and there has been a great amount of investment on telecommunication infrastructure and the profitability of the two companies have increased. This has created interest among both foreign and local investors in the two companies," Indika Rajakaruna of Asha Philip Securities said.

He said the SLT is expected to record about Rs. 5.2 billion profits at the end of the current financial year and Dialogs profits would exceed Rs. 10 billion.

Angelo Ranasinghe of Bartleet Mallory Stock Brokers said that almost all the Dialog selling came from foreigners and there were several crossings from foreign to foreign and foreign to local.

"Dialog has always been the centre of attraction at the market but I think SLT is a relatively undervalued stock which can also attract investor interest.

The company's first nine months results issued on Wednesday would have also played a role," Ranasinghe said. According to the Central Bank's estimates the telecommunication sector is expected to grow at a rate of 32 telephones per every 100 persons by the end of this year compared to 24 at the at end 2005.

During the last quarter the sector recorded a 17.4 percent growth and the mobile phone usage increased by 54 percent compared to the corresponding period of the previous year.

The subscriber level of mobile phone users is reported to be 4.28 million. The fixed line operator SLT through its mobile phone arm Mobitel is presently in an intensive campaign to compete with Dialog which is the market leader.

Ranasinghe said that investor interest in diversified blue chips such as JKH also continued and was a healthy sign at this period of political uncertainty.

Both indices gained considerably yesterday with the ASPI closing at 2,496.10 points gaining 19.32 points. The Milanka Price Index gained 34.16 points to close at 3,196.37.

This was preceded by the strong market performance on Wednesday mainly due to the investor interest on SLT which helped the turnover to reach a healthy Rs. 708 million.

Some analysts said that the unconfirmed reports that the Dubai based telecommunication company Etisalat planning to obtain controlling stakes in SLT also would have fueled investor interest on the stock.