Local telecommunication sector growing

The telecommunication industry in Sri Lanka is growing at a remarkable rate with the competition easing in the industry.

A telecommunication tower

According to CIMB Investment Analysis that the country's economy is recovering and competition in telecommunication sector is easing with the Regulator's intervention.

CIMB says optimism is running high in Sri Lanka, both in economy and in the telecom sector. GDP growth accelerated from 7.1 percent in first quarter in 2010 to 8.5 percent in the second quarter, due to the restoration of peace and the global economic recovery.

Telecommunication industry anticipates good revenue growth from the rise in tariffs following the imposition of floor rates in July, higher usage and rising tourist arrivals.

CIMB believes that India faces higher regulatory risks than Sri Lanka. Also, Sri Lankans are very upbeat on their future as the three-decade conflict finally ended. The worst of competition appears to be over in both countries as newcomers' attempts to disrupt the market with aggressive prices. SIM penetration was 77 percent in the first quarter in 2010, Dialog estimates unique user penetration to be about 55 percent due to multiple SIMs. It expects SIM penetration to rise to 85 percent by 2011, implying SIM growth of 10 percent over the next 18 months. This is below Sri Lanka Telecom (SLT) expectations of subscriber growth of 15 percent p.a in 2010 and 2011. SLT expects the mobile industry revenues to increase 10-12 percent in these years.

Dialog believes that mobile usage has potential to increase and narrow the difference with India. It expects economic growth and falling inflation to stimulate usage.

Dialog is optimistic about the potential of small (smartphones) and large screen (PCs, notebooks, netbooks) data for several reasons. PC penetration is a modest 15 percent of households, which suggests sufficient demand for broadband. Smartphone demand should increase on the back of declining prices and the robust economy. IH