Could you please give us some information on Lanka Bell in terms of its historical background in Sri Lanka and its main activities and structure?
Lanka Bell is one of the largest Board Of Investments registered companies. Some people consider us as one of the flagship companies of the BOI. This is due to the fact that the government decided to de-regulate the telecommunication industry in 1996. Lanka Bell is composed of several shareholders. The largest of which is the Transmarco Group - Transasia and is also their representative company. Transmarco is based in Indonesia. They are one of the largest conglomerates involved in the business of manufacturing and retail, among others. The other is a pension/investment fund called AIDEC. Although the Japanese are the main shareholders, contributions are also made from the Asian Development Bank. Private individuals including an American, two British's nationals and a Sri Lankan share the balance. The latter is presently the Deputy Chairman of Lanka Bell. Lanka Bell is in the business of telecommunication services. It got its license in 1996 and started its operation in 1997. It makes use of a wireless local loop technology and its strategic partner is Nortell of Canada. We had a partnership in terms of management with GTE, one of the major telecommunication operators in the United States of America. Lanka Bell is in the business of providing telecommunication services using wireless local loop technology, mainly on the voice and data aspects. Recently Lanka Bell has commissioned an installation of V-SAT technology. This technology is very good in providing telecommunication services to be used in rural or remote areas of the country. This is one of the support programmes that we have in order to help the government.
Why is this technology specifically good for rural development?
This technology is wireless. You simply point the terminal to the sky and no matter where you are, be it in a jungle or in a remote area, you get connected via a satellite network. This is more expensive than a wireline but due to its flexibility, it is recommended for schools, universities, hospitals, emergency situations and payphones. You may not be able to provide V-SAT for individual households but you can provide public calling offices. This will be very important for development of telecommunications in rural areas. You cannot expect rural households to have a phone but to be able to provide them with the opportunity to go to a town centre and have access to a pay phone or a public calling office, it is a start of rural development for telecommunication. This is the flexibility of V-SAT. For example, if you were to establish a Bank in a rural town that has no infrastructure, you would most probably need to at least have a telephone system. This would mean that you need to have a wireline facility but with the VSAT technology, all you need to do is to aim the terminal to the sky. Also, establish cyber cafes for rural schools and universities. We know for a fact that as part of Sri Lanka's development, the youth needs to be in touch with technology. This way, getting access to the Internet is possible with VSAT. This is how we can assist telecommunication development.
You got your licence in 1996, what have been the biggest challenges since you got your licence?
The biggest challenge has been two fold. One has been in terms of regulatory environment. This is because the investors coming in need to see an environment, which is conducive for them. Being conducive means that you have to have some level playing field in terms of regulatory policies. The challenge that we have at the moment is to work closely with the government and find a way of being on par with Sri Lanka Telecom. This is a big challenge simply because SLT is 40% owned by the Government. For the government to be independent is also a difficult task as they are part owner of our major competitor. This is where you have to have a close working relationship in order to secure regulatory policies that should be followed to the letter or very strictly enforced. Otherwise if there is no regulatory condition, new players coming in will be at a disadvantage as the monopoly or the dominant player create certain market practices which may not be conducive to new investors. We are presently trying to establish an open communication with the government. This is a major issue for us as on the one hand the government is acting as the Regulator and on the other hand is acting as an Owner of a telephone company. This will improve once the government sells their shares. We are very positive that things will improve after the selling of shares, as the government will have the opportunity to act independently.
Talking about competition, the telecom sector is very dynamic in Sri Lanka, there is a lot of mobile operators, what is your position in the market and what would you say is your biggest advantage?
The biggest advantage of any investor coming into Sri Lanka is to be able to come up with a cost effective network solution. Investors have to understand that although there are a lot of "waiters" for people who need a phone, they have to come up with a technology that is very cost effective and at the best possible price. This is due to the economic structure of the country. Maybe 80% can afford to buy a telephone service that would only give the operator US$ 8 to 10 a month. Therefore, you need to provide a technology that can actually service a market that can afford US$ 8 to 10 a month of telephone service. If you are not able to position your network accordingly, you will come up with a lot of business issues. There is also a social responsibility that you have to partake and have to perform but at the end of the day it has to make business sense for any investor. The challenge for any investor would be to come up with very good technical solutions to address this type of specific market. My advice for any investor is to understand the market forces that are happening in the country. If you count the number of mobile subscribers, at the most it would be 400,000 for a population of 18 million. We are also part of the fixed wire network and if you were to combine all our subscribers it still amounts to 700,000 to 800,000. The potential is very visible for these operators but its important to plan what type of technology is best for Sri Lanka otherwise you will not be able to recover your investment. The balancing act has to be fully understood by any party interested in investing in this sector. What we have done for Lanka Bell is that we have shifted our strategy in such a way that we cater to corporate subscribers simply because of the network capability that we possess. We are looking at the residential market but only to a certain extent because our network costs are too high to offer services to the residential market at present. We are seriously looking for new technology that could cater to this type of economic market.
| You mentioned earlier about your social responsibility coming in as an investor, with the VSAT system you are contributing to the development of the rural sector, how do you see your role as a contributor to this sector?
We would like to actively participate but the question of affordability its still pending. In fact in the VSAT program we get more of a subsidy. What we get from our corporate high revenue market, whatever margins we have, we try to flow it to a certain extent, into the VSAT in order to be able provide this service. In terms of business it may not be as profitable but its part of the social responsibility of making ourselves partners with the government.
Can you give us more facts and figures of the company in terms of the number of staff, how many subscribers and what has been your turnover last year?
We have between 45,000 to 50,000 physical subscribers, and we have 100,000 connections based on the government's program that for every line you install in the rural areas, it is considered as ten. However, the actual physical aspect itself is 45,000 to 50,000. Based on this 26% of subscribers are business and 74% are residential. Our turn over is close to 1.4 to 1.5 Billion Rupees for last year. This is good, as we have not increased our manpower. We have approximately 340 employees and would like to maintain this number of employees despite the fact that we will expand and increase our turnover year after year. Our productivity per employee will be much higher. In fact, when compared to last year, our revenue for each employee has increased by 74%.
You mentioned several services and that you are targeting corporate accounts, what are the new services you recently introduced or which are in the pipeline for launching?
The new services that we are going to introduced are databased services that will offer higher capacity. At present it is only 64kbps and the plan that we have is to increase it to 256kbps, which is important for the corporate sector as its vital for their data requirements and for transferring of data from one place to another. Additionally we will be introducing unified messaging and providing the facility of storing faxes, emails.
You are not necessarily the cheapest operator as you are focussing more on quality, new technology in servicing, how do you see your image in the business community?
The image we want to achieve is being a focussed player and would like to be a leader in the market that we serve, which is business. By putting together an integrated package of services and coming up with a very cost effective solution will be a very good objective for us and this is the image that we would like to have; a small player with very good solutions, high quality service while being a very profitable organization. I would rather have 50,000 or 100,000 high revenue customers than to have a million customers based on very low revenue. This is how we are positioning ourselves.
Regarding your future outlooks and the various projects within this sector, where do you see your company and the telephone sector within the next 2 to 3 years?
I believe that if the government is able to sell the shares in SLT we will have a level playing field and a lot of investors would come in. There is a lot of growth expectations in the telecommunication sector. In Colombo high income level residential customers would need value added services with the telephone lines, better Internet bandwidth and more applications. However, this would be targeting only about 5% of the population. A big majority will still require "voice". If you can offer "voice" that is cheap and of very good quality, you will have a World Investment News Ltdr. I am already advising potential investors on this aspect.
Since you are one of the leaders and key players in the telecommunication sector, what would be your final message to our readers?
In terms of opportunity, this country has a lot to offer. The first is manpower with a good English-speaking population who possesses good educational attainment and literacy rate. The cost of doing business is relatively low when compared to other regions. What we really need to have is the government's support and be able to implement the programmes that we are setting out. Sri Lanka is also a country that offers itself with a lot of opportunity for recreational activities, for e.g. the beaches and life here is good for investors. You have to understand the whole dynamics of the country and its uniqueness. Therefore, the advice I want to share with readers is to have open expectations and once you understand the country and its people, you will be better off and become a happier investor.
NOTE: World Investment News Ltd cannot be made responsible for the content of unedited transcriptions
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