‘Lanka’s ICT literacy, penetration below global averages, remain a focus in macro development agenda’

- Sri Lanka Telecom Group CEO Greg Young


Sri Lanka Telecom Group Chief Executive Officer Greg Young says that it was imperative that Sri Lanka now gears itself to increase ICT literacy and penetration, both of which are below global averages and added that it remained a focus of the country’s macro development agenda.

SLT is the vital power behind the connectivity, delivering faster access to information and communication now as tourism related sectors such as airport and aviation, leisure and transport gear up to service thousands of travellers with Sri Lanka being well poised as a tourist destination as we rapidly work our way towards the target of 2.5 million tourists by 2016, he said..

Here, he is in conversation with The Island Financial Review:

Q: What are the core competences your company possesses and what are the strategic moves the entity is willing to take to enhance such a competitive edge in facing rivalry in the mobile and telecommunication industry?

We are focussing on the four goals of Services, Operations, Network and a Synergetic approach as key strategies of the group, all of which will ensure we remain competitive. The telecommunications market for voice, broadband and TV is highly competitive in both fixed and wireless segments. Sri Lanka’s telephone penetration is at 100 percent including fixed and mobile users while the country sees marginal growth in fixed line telephony. However, growth in broadband internet subscribers and usage has been exponential. Broadband penetration – both fixed and mobile – is relatively low when compared to regional averages, and total broadband access remains under 10 percent.

To exist as a unique and strong player in the industry, SLT has focused on an integrated platform and strategy to deliver our Megaline offerings of Single Play (Telephone only), Double Play (Telephone and Broadband/PeoTV) and Triple Play (Telephone, Broadband and PeoTV) positioning ‘One line offering three unique experiences’. We have designed our broadband packages to suit the many lifestyles and needs of our customers. New packages with higher data volumes and high speeds allow users to select download speeds ranging from 2Mbps up to 16Mbps. Volume based packages were also introduced to improve users’ internet experience with data volumes starting from 2GB to 300GB per month. Further, we are working towards making broadband affordable and accessible, connecting every home and bringing people online so that information and knowledge is easily available and accessible to all.

SLT’s internet protocol enabled PeoTV services offer customers a reliable platform to enjoy the best of local and international news and entertainment from around the world at a click of a button, thereby revolutionizing traditional television viewing with characteristic features such as digital quality pictures, Time Shifted TV, Rewind TV and Video on Demand with content such as movies, music, educational shows and more.

Q: Ending of the longstanding ethnic war has unleashed a great potential to most corporates across sectors. What are the segments that you expect to position to reap immense benefits from this outcome and what are the steps that are being taken to do so? In this context, what fresh waves of opportunities are you leveraging especially in the North and the East and in addition to the rest of the country?

The year 2010 Saw the completion of the expansion of our fibre optic core network to the Northern Peninsula, via the A9 main route.. This includes; improving customer access to high performance broadband, empowering business expansion, enabling all telecommunications operators to expand their operations, enhanced quality, performance and capacity to meet all future ICT requirements of the Northern Peninsula. Development spreads widely across the land, from north to east, south to west, bringing with it employment, growth, income and investment that will naturally follow in its wake.

Sri Lanka is well poised as a tourist destination as we rapidly work our way towards the target of 2.5 million tourists by 2016. Now as tourism related sectors such as airport & aviation, leisure and transport gear up to service thousands of travellers, SLT is the vital power behind their connectivity, delivering faster access to information and communication.

Sri Lanka’s Banking industry, a key platform for economic development, relies heavily on communication systems for the transfer of data between Banks, between Bank branches and even between Banks and their corporate customers. The availability of broadband access through virtual private networks has made it possible for Banks to exchange information securely and in real time, enabling transactions such as the deposit of cash at one branch and its withdrawal from another. The ATM (Automated Teller Machine) is an extension of this system that revolutionized banking in this country. Today, with the advent of Internet Banking (online transaction - eCommerce) and Mobile Banking (mobile cash - mCommerce), data communication in banking has moved ahead again, with the average consumer able to remotely execute a range of banking transactions. ‘SLT intelligent solutions’ takes care of more than 90% banking networks in Sri Lanka creating new possibilities and opportunities for their growth as well as country’s economy.

Q: A team of competent and talented Board of Directors is the backbone of a successful company. Transparency facilitates accountability and creates the conditions for engendering trust. What measures does Sri Lanka Telecom implement in boardroom process for greater disclosure? In your opinion does this facilitate or hinder desired changes in boardroom behaviour?

I must thank my Board of Directors for their absolute cooperation and confidence placed in me, to carry out these revolutionary changes in the company and in this industry. The establishment of the Technology Strategy Committee as a sub-committee of the Board has given enhanced technology direction and leadership to the Group. They have guided our strategic investments, building a cohesive technology strategy and steering us towards the future. I’m very happy to mention that today plans are in the delivery and execution stage.

The Board sets the Group’s strategic aims, ensuring that the necessary financial and human resources are in place for the Group to meet its objectives and review management performance. The Board of Directors is accountable to shareholders for the overall direction and control of the Company and its subsidiaries. It is committed to high standards of governance designed to protect the interests of shareholders and all other stakeholders while promoting the highest standards of integrity, transparency and accountability.

Four principal committees assist the Board to fulfill its responsibilities. They are namely: Audit, Remuneration, Technology Sub-Committee, and Senior Tender Board. The Board and committees are supplied with full and timely information to enable them to discharge their responsibilities.

Q: What is the benchmark your company uses in attributing funds for future growth and paying dividends for shareholders?

SLT firmly believes in sustainable growth.  With a history of 150 years, SLT has displayed the commitment to mapping and leading the journey of sustainability and being future ready. So, investing funds for the future growth is a top priority. On the other hand, providing a return in terms of dividends to shareholders is also a top priority as we are driven by a mission to create value to shareholders and other stakeholders. So, in determining the dividend, SLT considers the optimum mix of profit retention for future growth and return of dividends to shareholders.    

Q: What is your current market share in the mobile and telecommunications industry? How are you willing to position yourself in entering into new market segments?

Sri Lanka Telecom has a significant 41% market share from the total fixed line customer base in Sri Lanka which includes both Fixed Wire Line (SLT Megaline) and CDMA (SLT Citylink) services. SLT owns nearly 48% market share in the broadband internet services sector where SLT fixed broadband(ADSL) contributes for 33% and the balance 15 % share comes from  our  subsidiary "Mobitel" through it’s 3.5G wireless broadband Services. This is a fast growing sector in Sri Lanka’s  Telecom Industry and Sri Lanka Telecom , together with Mobitel , has played a significant  role for the growth in this sector by investing  extensively for bringing in technology and expanding and improving their network coverage and capacities.

Q: Sri Lanka’s fixed and wireless broadband penetration and density remains low at 3.2% where the fixed line penetration is a mere 1.3% and broadband at 1.9%, well below the densities of developed countries and way below to support the national development agenda. Your comments? How will you improve?

Sri Lanka also reflects growing global trends which sees a marked shift from traditional voice communication to Internet enabled services that discerning customers demand as their right. The industry therefore must be geared to deliver against these expectations via superior networks and technology platforms. It is imperative that Sri Lanka now gears itself to increase ICT literacy and penetration, both of which are below global averages and remain a focus of the country’s macro development agenda.

Along with the plethora of unique broadband services being offered by the company, its success lies in its heavy investment in network modernization and capacity improvement. SLT’s Next Generation Network (NGN) implementation includes converging all access networks into a singular platform. Shedding historic legacy platforms which are cumbersome and expensive, will bring about cost savings, improved efficiencies, faster service delivery, increased speed and performance and new capabilities for future services. The company commenced the implementation of NGN Phase 4, and when completed in 2013 will serve an additional 600,000 customers on its platform. The explosive growth and demand for high speed Broadband bodes well for SLT’s investments in infrastructure and its marketing plans have been integrated to ensure that NGN benefits can be delivered islandwide.

SLT launched the i-Sri Lanka project in 2011 to enhance and upgrade the existing fixed access network, by expanding the fibre network through FTTN (Fiber to the Node) deployment. By reducing the copper cable length, reliability is improved as are quality and broadband data speeds. This will ensure that SLT’s quality and range of services remain on par with developed countries. The i-Sri Lanka programme targets a broadband data speed of up to 20Mbps, with a target of90% of our fixed customers by 2013.

The company aims to ensure homes and businesses receive ultra high speed internet and high quality PeoTV services while supporting and enhancing business capabilities via superior broadband services.

Q: You have increased the optic fibre network by 4000 kilometres and the nationwide network backbone totalling 11,000 kilometres. Is there much more to be done?

There are around 4+ million households in Sri Lanka, due to an increase in population and demographic changes. SLT has covered 25% of households with our fixed network that includes upgrade via the ‘i-Sri Lanka’ initiative.

We remain the most reliable and consistent provider of broadband in the country, with more than 500,000 broadband customers including both fixed and mobile. Our fixed-line customer base has seen a considerable increase as customers recognise the advantages of the service.

Q: How do you see the improvement of global business network with the IPLC revenue from overseas operators, well poised for growth?

We have seen the increase in traffic volumes from companies and international operators using IPLCs for both voice and data traffic to handle their global communications with the evolution of Global VPN services. We are trusted by many Large enterprises, Global operators, BPOs, IT firms, Banks and SME’s for their global business communication requirements ensuring  the advantages of IP Networking and QOS and we are very competitive on international bandwidth re-selling in this region.

Q: How do you see this in the light of global voice revenue being on a declining trend which has been attributable due to the migration from the fixed line to mobile and technological substitution?

It doesn’t matter whether it is global or local voice services, traffic transmission has converted to an IP based platform, thus voice services are offered over data platforms and are provided over broadband connectivity using various applications. For example voice services are offered by various web services, social media and messenger services. In other words, voice has actually "become" data.

Q: From a sectoral perspective, how do you see the Sri Lanka Telecom subscribers migrating to Megaline and mobile to enjoy broadband capacity?

There is a huge demand for Broadband capabilities and that is the key reason for CDMA customers to migrate to Megaline and mobile. Social media is gaining ground as one of the vital modes of communication globally and Sri Lanka too. Smart devices have revolutionised the entire industry globally. We see WiFi enabled Smartphones and SmartTabs demonstrating a considerable demand for access to broadband capable applications.

Q: How do you see the imposition of the Telecommunication Levy of 20% in the 2011 Budget which has negatively impacted the setting off against input VAT, despite Customs Duties being exempt for additional items relating to ICT and BPO industries?

Before the imposition Telecommunication Levy, the prevailing tax structure was complex with different types of taxes on revenue. The telecommunication levy has reduced the complexity.  Although there are negative impacts due to the imposition of telecommunication levy in terms of VAT input credit, a holistic view has to be taken in terms of advantages and disadvantages of the telecommunication levy.     

Q: What is the progress of the negotiations with the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) in the implementation of the National Backbone Networks (NBN) policy and the development of the Next Generation Networks (NGN)?

Since the Cabinet decision in February, 2011 which authorised the TRC to negotiate with SLT inorder to utilise the SLT fibre backbone network to deliver the National Backbone Network (NBN), TRC and SLT have worked to achieve this target. The license conditions related to NBN operations have been included into the SLT operating licence along with the other license obligations imposed on SLT.

To launch the NBN SLT is in the process of finalizing the Reference Access Offer (RAO), the legal framework for provisioning of NBN services to Access Seekers (other operators), with the consent of the TRC. Under the guidance of the TRC, SLT is implementing the NBN with a target to launch NBN series in the very near future while fulfilling the national objective of facilitation of high speed broadband over NBN.

At SLT, the migration process of legacy network into the Next Generation Networks (NGN) is already more than 50% completed.

Q: There were recent news reports of a US$ 75 million syndicated US Dollar loan from HSBC, Commercial Bank and Sampath towards expansion for both Sri Lanka Telecom and Mobitel?

A syndicated loan of USD 75.0 Mn was raised in Sept 2011 split between the following banks: Bank of Ceylon- USD 28.125 Mn; Commercial Bank- USD 28.125 Mn; HNB- USD 18.750 M.n

Out of the loan proceeds, USD 36.5 Mn will be used for expansion projects by Mobitel and the balance to upgrade products and services, capacity and coverage expansions, infrastructure development and network modernization.

Q: How will you merge group synergies in terms of technology, skill and knowledge?

SLT offers Telephone, Broadband and PeoTV services via fixedline, wholesale and enterprise solutions while Mobitel offers mobile telephony and related value added services to customers. SLT and Mobitel investments and product roadmaps are aligned according to the above differences in technologies and licenses we own. Additionally we have SLT Manpower, SLT Services and Rainbow pages which provide human resources, IT and Directory Services. Maintaining group synergy and sharing skills and knowledge within the group is always encouraged within our culture.

Q: Your Group revenue is well over Rs. 50 billion with the growth in voice, broadband and voice data but fixed line has declined. Why?

In terms of number of subscribers, fixed lines are growing. But, the Average Revenue per User (ARPU) has declined, driven by the switch to mobile from fixes phones which has been a global trend with the high penetration level of mobile subscribers. However, non voice revenue of fixed lines (Broad band and PEO TV) have recorded impressive growth rates which have offset the reduction in voice revenue.

Q: The numbers have increased and there is an upward curve of 5% in wire line but CDMA has also declined. How do you see this from the light of the competition from Suntel and Lanka Bell?

Suntel and Lankabell provided a good competition in the CDMA market, which positively backed society by improving telephone penetration in the country. However, due to the limitations in the CDMA product, broadband being key, all operators are now facing a decline in this market. Customers now seek mobile telephones and SLT Megaline services to obtain broadband and IPTV services, as an addition to their telephone service.

How will you manage your external risks- Exchange rate risks, credit risks, and interest rate risks? Interest costs have declined but there is a exchange rate loss of Rs. 276 million as at February 17, 2012?

At SLT we manage the Exchange Rate Risk by Netting the currency exposure. For example; we ensure that the value of Foreign currency assets are matching with that of Foreign currency liabilities which has been possible with regular Foreign Currency inflows. SLT’s Debts and Investments are maintained in a mix of Fixed and Variable interest rate instruments and periodic maturity gap analysis is carried out to take timely actions in order to mitigate any possible adverse impact of Interest Rate fluctuations.

Q: How do you see commitments to Corporate Social Responsibility?

Our business is about connecting communities, using modern technology that truly brings the future into the present. For over 150 years, we have continued to connect our stakeholders, the wider community and our environment to ensure that our business positively impacts their lives. Over decades, SLT has infused the foundation of the future into the lives of the people of Sri Lanka and beyond the country’s shores, strengthening the threads that bind modern technology with sustainable development.

The company is an ideal corporate citizen, simultaneously supporting the broader national ICT vision by partnering government initiatives aimed at creating an enabling ICT environment. By popularizing broadband services in Sri Lanka, SLT aims to boost national GDP, support online education initiatives such as connecting universities (LEARN), connecting schools (SchoolNet) and vocational training institutes, National Online Distance Education Service (NODES) and Rural ICT centres (Nenasala).

The company sustains its position as the largest investor towards the economic development of the country, while being the single largest telecommunication company in the country, investing billions of rupees to build th e telecommunications infrastructure in Sri Lanka.

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