At the end of the second quarter of 2009, Dialog Tekecom PLC recorded its 7667 Million ( 7.66 billion) loss as a group and 7246 Million ( 7.24 billion) loss as a company. But the worst thing is this a 549% increasing of their loss when comparing to the previous quarter. altogether Dialog Telekom recorded 9536 Million ( 9.53 billion) loss for the last six months.
When Dialog making negative profits continuously, Mobitel, Sri Lanka’s National Mobile services provider or main competitor of dialog recorded 757 million ( 0.75 billion) profit for the last 6 months. Mobitel is a full owned subsidiary of Sri Lanka Telekom (SLT). As a group SLT recorded 3163 million ( 3.16 billion) profit for the 6 months ended 30 June 2009.
Mobitel subscriber base closed up on the 3 million mark just after the end of June 2009 growing by 61% from a total of 1.8 million at the end of first half 2008. 6 billion (approximate) is the subscriber base of Dialog Mobile and which grown by 2% when comparing with the last quarter
Lets analyse the reasons for this negative profitability. the main thing is not only the poor performance dialog mobile but also the negative growth of its subsidiaries. Dialog Television (DTV) with 226 million loss and Dialog Broadband Network (DBN) with 591 loss are making some serious problems to the Dialog Group.
Not only that 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 as the fifth mobile operator in 2007.
Now the entry of Emirates Telecommunications Corporation (Etisalat) into Sri Lanka can further delay any prospects for recovery in the Sri Lankan telecom operators’ profitability. Tigo is the third-largest mobile telephony operator in Sri Lanka with a market share of around 20 percent and a nationwide network coverage. Etisalat has entered markets late in the race and aggressively challenged established operators.
We can assume Tigo (name may be change) will come up with good products with low tariffs to attract the market. What happens then? Other competitors have to adjust their packages with new features and low tariffs. means reducing the profitability of all companies. What about Dialog ? How can they achieve the positivity because already making big losses. Its is also a threat for the Mobitel but they can reach more because of the bad performances of market leader dialog. May be up to the market leadership !
Dialog Telekom Group Chief Executive, Dr. Hans Wijayasuriya stated that network modernisation presented a strategic opportunity to reduce operating costs in the future, supplementing other cost reduction measures adopted by the Company. The network modernisation phase of the Company’s cost rescaling programme will be carried out in tandem with a range of other operational cost rescaling initiatives.
This is the story of their capital expenses. When WiMax introduced, SLT had a research on that having ideas to implement a WiMax to their users. According to their conclusions and considering it’s disadvantages they decide if they implement WiMax they are going to fail and they drop it (they had test implements of WiMax).
But Dialog, they thought that if they can provide wireless broadband using WiMax, they can have a huge hit on the market. They spent large amount of money for that (on Fiber optic network, Base stations and on other equipments). Then they initiate Dialog Broadband Networks(DBN) and they took money to invest on that from Dialog GSM. DBN was not successful as they expect and they spent more and more money from GSM even to maintain the DBN.
Dialog CEO state “the reason for that is the Global Economic Problem and they reduce the call charges by thinking about their valuable customers”. But it was unbelievable and they are still keep loosing money because of their “GO ERROR” with WiMax. this is only a simple incident.
Mean time SLT is planing to introduce FTTC, FTTH and FTTN for high speed broad band in the near future. the Best thing is they are making profits with all these capital expenses. then what happened to Dialog? Unbelievable.
You will see what is going to happen to Dialog in the future with the entry of Etisalat, Mobitel’s silent & strategical improvement and Airtel’s reborn. may be losing the market leadership in near future.
compiled by referring the financial statements of dialog telekom PLC, Sri Lanka Telecom, mobitel web site, lanka business online and the article of Srimal Perera.