Financial Times

Fitch: Etisalat's entry could affect profits of other Sri Lankan Telecom operators

 

The entry of Emirates Telecommunications Corporation (Etisalat) into Sri Lanka can further delay any prospects for recovery in the Sri Lankan telecom operators' profitability, according to Fitch Rating. In a press release this week, Fitch stated that Millicom International Cellular SA recently sold its fully-owned subsidiary in Sri Lanka, Tigo, to Etisalat in a competitive bidding process.

Tigo is the third-largest mobile telephony operator in Sri Lanka with a market share of around 20% and a nationwide network footprint. Fitch stated that competition in the mobile space is already highly intense with five operators vying for market share. Price competition has led to a rapid deterioration of tariffs over the last four years which has weakened profitability of the operators, especially in the wake of the licensing of India's Bharti Airtel Ltd ('BBB-'/Stable) as the fifth mobile operator in 2007.

There was some hope for consolidation in the market with several local mobile operators interested in Tigo (most notably Bharti Airtel, which Fitch believes would have benefitted most from Tigo's wide network footprint).

"If Etisalat's track record is anything to go by, it is possible that it may invest heavily to acquire more market share in Sri Lanka, which will intensify the challenges facing other operators," noted Buddhika Piyasena, Director of Fitch's Asia-Pacific Corporates team.

 
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