Outlook remains stable

Fitch Ratings expects the outlook for incumbent telecoms operators Sri Lanka Telecom (BB/AAA(lka)/Stable) and Dialog Axiata (AAA(lka)/Stable) to remain stable, supported by their strong balance sheets and ability to meet planned capex mostly through internally generated funds. High capex may weaken the credit profiles of challengers to a greater degree.

The industry as a whole will benefit from rising demand across most product segments. Rising demand: Average revenue per user (ARPU) should continue to increase in 2013 from strong growth in minutes of use, supported by Sri Lanka's post-war (since May 2009) growth and limited tariff competition. The pace of mobile subscriber growth will decelerate further as headline penetration approaches 90 % (Q 212: 87 %), while the ongoing decline in fixed-wireless subscribers and demand is likely to continue.