Dialog Telekom May Seek Debt Rating to Boost Appeal

Dialog Telekom Ltd., Sri Lanka’s No.
1 mobile-phone company, may seek a debt rating to boost its
appeal to investors after completing the island’s biggest share
sale, Chief Executive Officer Hans Wijayasuriya said. Dialog Telekom Ltd., Sri Lanka’s No.
1 mobile-phone company, may seek a debt rating to boost its
appeal to investors after completing the island’s biggest share
sale, Chief Executive Officer Hans Wijayasuriya said. Dialog, a unit of Telekom Malaysia Bhd., Southeast Asia’s
second-largest phone company, attracted demand for more than six
times the 712 million shares it offered investors in the sale
this month. The company will start trading on July 28.

The mobile-phone operator is seeking to become only the
second Sri Lankan company to be rated by a credit assessor,
joining Sri Lanka Telecom Ltd., the nation’s biggest fixed-line
phone-service provider. A rating serves to indicate a company’s
ability to pay debt and is a key requirement for overseas funds
in assessing investment risk.

“A rating for Dialog will make it even more attractive for
international investors,” said Namal Kamalgoda, who helps manage
the equivalent of $145 million as chief investment officer at
Eagle NDB Co., the country’s biggest fund. “I rate Dialog as a
better run company than Sri Lanka Telecom.” The fund owns shares
in both companies.

Dialog raised 8.54 billion rupees ($85 million) in the share
sale that tested investor confidence in a country ravaged by a
two-decade civil war that’s left more than 60,000 dead and the
Dec. 26 tsunami that killed about 39,000.

Stalled peace talks between the government and Tamil Tiger
rebels have cast a shadow on Sri Lanka’s $20 billion economy,
which grew 4.8 percent in the first quarter from a year earlier.

‘Comfort’

Dialog sold shares at 12 rupees each, the upper end of the
price range offered to investors, to become Sri Lanka’s largest
company by market value. A rating may boost its stock further.

Sri Lanka Telecom shares have risen 58 percent in value this
year, according to data compiled by Bloomberg, outpacing the 34
percent gain in the Colombo All Share Index. Telecom shares have
risen on speculation that Dialog’s shares are overpriced, says
Prabodha Samarasekera, who helps manage $25 million of assets at
National Asset Management in Colombo.

“Telecom shares have risen because short-term investors see
Dialog’s issue as too high to make a quick return and then there
are the longer-term investors who still rate Dialog a good buy,”
Samarasekera said.

Telekom Malaysia offered a 9.6 percent stake and will get
three-fifths of the proceeds from the sale, with the remaining
earmarked to fund Dialog’s expansion. Dialog allocated overseas
investors two-fifths of the stock on offer and the rest went to
local investors.

“The only objective we may go for in a rating is to give
some comfort to shareholders since we have a wide shareholder
base,” Wijayasuriya, 37, said in an interview in Colombo on July
25. “We are cash-rich and have no need to borrow.”

In January last year, Dialog secured $50 million from the
International Finance Corp., which it has yet to use,
Wijayasuriya said. Telekom Malaysia has invested more than $200
million in Dialog, setting up infrastructure to expand the mobile
network.

The government of Sri Lanka also plans to apply for its
first sovereign rating before considering a sale of dollar-
denominated bonds, central bank Governor Sunil Mendis said on
June 30. The island-nation wants to secure a rating to attract
more investments.

Bank Presentations

JPMorgan Chase & Co., Standard Chartered Plc, UBS Warburg,
Deutsche Bank AG and Citigroup Inc. in the past made
presentations to advise Sri Lanka on obtaining a rating.

Standard & Poor’s assigned its first rating to a company
from the island last year when it rated Sri Lanka Telecom. S&P
rates Sri Lanka Telecom’s foreign currency debt B+ and its local
currency debt BB-, both junk ratings reflecting the high-yield,
high-risk nature of the company’s debt.

Dialog’s rating will at least match the rating of Sri Lanka
Telecom, said Fitch Ratings Lanka Ltd., the local unit of Fitch
Ratings.

“For an international rating, the sovereign factor will
come in, rating companies would take a call on the country before
they look at the company,” said Alastair Corera, country head at
Fitch Ratings Lanka in Colombo. “In Dialog’s case, a rating
will improve transparency and give investors another level of
review and that can’t be bad.” – Bloomberg