Growth has been led by falling handset prices and attractive tariff packages, which have helped cellular phone penetration (mobile connections per 100 people), climb to 21.5 percent in June from 17.09 percent at the start of 2006, stockbroker, Capital Alliance Securities said.
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Sri Lanka's four player mobile phone market is dominate by Dialog Telekom (62 percent), followed by Celltel (16 percent), Mobitel (13 percent) and Hutchison (9 percent). The telecom regulator is in the process of selecting a fifth operator.
As the economy booms and operators offer third generation technologies, spend billions on infrastructure and come up with snappy packages to keep people chatting, the island's telecom watchdog is yet to troubleshoot hotspots like interconnection and spectrum management to help in the growth phase.
Though interconnection rules were drawn up to allow operators to access each others' networks, the fee agreed in 2003 for domestic interconnection is yet to come through.
"Going forward interconnection could be a crucial issue for new entrants particularly the fifth mobile entrant, as already the smaller operators both mobile and fixed (wireless local loop operators) have periodically complained about difficulties in accessing the networks of bigger operators. The TRC is looking in the complaints at present," the report said.
The shortage of spectrum or the difficulty in shifting existing users to clear the way for telco operators' expansion plans, has also been a nagging issue for years.
In June, the cabinet of ministers agreed to clear spectrum in 450 megahertz, 800-900 megahertz, 1800 megahertz and 2-gigahertz radio frequencies, and distribute them among public telecommunication networks.
Spectrum is yet to be set aside for the new fifth mobile phone operator.
Until the recent cabinet decision, existing players have also been having problems with the 900 MHz band and certain operators like Mobitel, had to build extra towers to cover areas under the 1800 MHz band, as their allocation of the 900MHz band were inadequate.
The report says market leader Dialog will find it challenging to secure bandwidth to sustain their growth spurt.
"The problems in clearing the 450 MHz band, where many government agencies have been given generous space in the past, are preventing Dialog from launching their CDMA service."
"Difficulties in clearing up frequencies in the 3.5GHz band have also prevented the TRC from issuing Wi Max licenses. The 1991 Telecom law does not permit the unlicensing of frequencies, which experts believe would be required to spur the growth in WiFi."
Despite embracing a liberalized telecom regime, all operators need the regulator's consent to adjust tariffs, which the report says, is archaic.
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