Suntel, Dialog merge

Dialog Broadband Networks Private Limited (DBN), a fully owned subsidiary of Sri Lanka’s premier mobile services provider Dialog Axiata PLC yesterday entered in to a Share Purchase Agreement (SPA) to acquire 100 percent of the ordinary shares of wireless fixed line operator Suntel Ltd from its current shareholders.

The definitive execution of the acquisition will follow the satisfaction of conditions precedent to the transaction defined in the SPA.

The successful consummation of the transaction during the course of the next few months is envisaged to lead to the merger of the operations of DBN and Suntel and the creation of a merged entity, providing advanced fixed line and broadband services to Sri Lankan consumers.

Suntel commenced operations in 1996 and is currently a subsidiary of Swedish telecom operator Overseas Telecom AB. Other shareholders of Suntel include NDB (National Development Bank PLC), C-Tech Investments (Private) Ltd, Kelmarsh Investments Ltd, Townsend Limited and International Finance Corporation (IFC). “The Sri Lankan telecom sector after 15 years of robust growth is soliciting consolidation,” Jeremy Huxtable, Managing Director of Suntel said. “Suntel is committed to providing a superior service to our loyal customer base, and today are at a point in our evolution where bullish and forward thinking investments are needed to elevate our broadband infrastructure to best in class standards.”

“I believe industry consolidation which crystallises economies of scale and brings together the shared effort and investment capacity of leading industry players is an optimum strategy to deliver enhanced value to consumers and the industry at large going forward. The agreement entered in to by our shareholders with DBN paves the way for a renewed thrust of investment in Sri Lanka’s fixed telecommunications and broadband sector which I believe will be of benefit to all stakeholders.” Suntel’s fixed telecommunications infrastructure is based on a 382 base station strong network delivering fixed voice, broadband and data communication services using CDMA, WiMAX and other fixed wireless access technologies.

The share purchase agreement signed between DBN and the shareholders of Suntel envisages the transaction to be completed at an EV (Enterprise Value) in the range of US$ 33.9 m to US$ 34.9 m, corresponding to a Valuation Multiple of 3.0x- to 3.1x of FY10 EBITDA, subject to the outcome of confirmatory business valuation and due diligence during the period leading up to the completion of the transaction. Chairman of Dialog Broadband Networks and Group Chief Executive at Dialog Axiata PLC Dr. Hans Wijayasuriya commenting on the transaction said, “We are indeed privileged to have been afforded the opportunity to combine with Suntel through this beachhead industry consolidation initiative. Going forward, the combined strengths of DBN and Suntel will be synergised towards establishing a best in class infrastructure platform for the provision of high quality fixed telecommunications and broadband services which are expansive in their availability, and inclusive in terms of affordability to Sri Lankan citizens.”