The network can access the Internet more than 100 times faster than older networks and enable customers to conduct videoconferences on mobile phones.
The Colombo-based company, which will be the first to offer such services in Sri Lanka, is striving to maintain its dominant market share in a nation of 20 million people as competition intensifies. Dialog competes with Celltel Lanka Ltd., Sri Lanka Telecom Ltd.'s Mobitel unit and Hong Kong's Hutchison Telecommunications International Ltd. in a market Wijayasuriya expects will triple to 6.5 million users by 2008.
"It's a very competitive market," Wijayasuriya, 37, said in an interview in Colombo July 25. "We got to 60 percent market share not through incumbency but starting at zero. We started as a fourth player. We have beaten the competition to come here."
Shares of Dialog Telekom rose to 15 rupees at the close of trading today, said Tushara Jayaratne, a spokesman for the Colombo Stock Exchange. The shares were sold for 12 rupees each.
The unit of Telekom Malaysia Bhd., Southeast Asia's second- largest phone company, wants to maintain over the next three years the 66 percent annual profit growth it has posted since 2000 as the market expands, he said.
'Market Saturation'
Celltel, Sri Lanka's second-largest mobile-phone operator, said it has no plans to dislodge Dialog from its No. 1 position.
"We are happy with No. 2 because we are happy with the growth we are getting," Chief Executive Dumindra Ratnayaka said at a press briefing in Colombo yesterday. "There will be market saturation maybe in five years and we will look at our strategy again." Celltel has about 800,000 users.
Dialog has a "sound business model," said Adrian Lim, who helps manage $12 billion across the Asia-Pacific region at Aberdeen Asset Management Ltd. in Singapore. "It focused on investing in its sales and distribution network, expanding its service offering while at the same time making sure they control subscriber acquisition costs."
The company had net income of 4.1 billion rupees ($41.3 million) in 2004 and made a profit of 1.7 billion rupees in the first three months of 2005, according to its share-sale prospectus.
Demand
Dialog attracted demand for more than six times the 712 million shares it offered investors this month to raise 8.54 billion rupees in Sri Lanka's biggest initial share sale.
The company sold shares at the upper end of the price range of 8 rupees to 12 rupees offered to investors, to become Sri Lanka's largest company by market value.
"We have seen much more foreign buying because this is one company with exceptional liquidity," said Channa Amaratunga, vice-president of asset management at Asia Securities Pvt. in Colombo. "About 88 percent of the turnover on Dialog was from foreign buyers."
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 nation's benchmark stock index is the world's ninth-best performer this year among 80 indexes tracked by Bloomberg, gaining 34 percent in U.S. dollar terms.
Growth
Investors may be attracted by the potential growth of the mobile-phone market in Sri Lanka, where the economy has expanded since a 2002 cease-fire in a 20-year civil war between Tamil Tiger rebels and government forces.
Dialog expanded its coverage to Jaffna, in the northern part of Sri Lanka and the hub of the Tamil separatist movement, 90 days after the end of hostilities that left 60,000 people dead and devastated Sri Lanka's $20 billion economy.
The island's cellular-phone market is expected to expand to 6.5 million subscribers by 2008, Wijayasuriya said. The phone company will probably have as many as 4 million customers by that time as more than 30 percent of the country's 20 million people are expected to use mobile phones, from 11.5 percent now, he said.
"I believe that Dialog is a very good buy as evidenced by the overwhelming demand," said Rengan Rajaratnam, managing partner of Sedna Capital, in an e-mail from New York. "My allocation was far less than I would have liked and I would look to add to my position assuming the stock opens at a reasonable level."
Rajaratnam, whose brother Raj is a founder of Galleon Partners in New York and one of the biggest individual investors in Sri Lanka, manages about $80 million invested in health-care and technology companies.
Dialog 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. - Bloomberg
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