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Sri Lanka Dialog, cable company shares weaken
12 Jan, 2009 16:08:05
Jan 12, 2009 (LBO) - Sri Lanka's dominant mobile firm Dialog Telekom sank below five rupees on the Colombo bourse Monday as India's Bharti Airtel entered the market while cable companies fell sharply on news of copper hedging losses at one firm.

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The All Share Price Index edged up 0.10 percent (1.54 points) to end at 1,533.79 while the more liquid Milanka lost 1.75 percent (28.57 points) to close at 1,606.78.

Turnover was 45 million rupees.

Sujeewa Pieris of Bartleet Mallory Stock Brokers said he believed Dialog Telekom fell as investor sentiment weakened with the entry of India's Bharti Airtel, adding more competition into an already tough market.

Dialog Telekom fell over 12 percent or 70 cents to 4.80 rupees with 427,000 shares done

"Airtel's entry probably impacted sentiment. Also, we expect Dialog's profits to be lower," Pieris said.

"There's no significant buying coming in even at these levels for Dialog."

Dialog Telekom, a unit of Telekom Malaysia, reported a loss in the September 2008 quarter amid a price war among existing operators ahead of Airtel's entry.

Airtel held a news conference Monday to announce the launch of its services.

The other big losers on the Colombo bourse Monday were the cable companies.

ACL Cables fell over nine percent or three rupees to 29 rupees on small volumes after its profit warning on Friday which said it had been hit with un-quantified losses on derivatives bought to hedge against changes in copper prices.

The firm said in a stock exchange filing that it expected "a significant decline in the company's profitability following exposure to hedging contracts" in copper, a key raw material in electrical and other cables.

Kelani Cables fell over nine percent or six rupees to 59 rupees also on small volumes while Sierra Cables fell eight percent or 10 cents to 1.10 rupees with 600,700 shares done.

Pieris said ACL Cables profit warning triggered the panic selling and probably brought down the share prices of the other listed cable makers although there was no indication they too had bought material at higher prices.

Until the news broke there had been interest from both institutions and small investors on ACL Cables.

Lanka Cement was the most actively traded stock Monday, rising 12.50 percent or one rupee to nine rupees with 486,700 shares done

Peiris said investors were buying into the stock on speculation that Lanka Cement's defunct factory in northern Jaffna could be revived now that the army had seriously weakened the Tamil Tiger rebels.

Two Indian cement manufacturers and Holcim's local unit had shown interest in reviving the plant which sits on a rich deposit of limestone, the basic raw material for cement manufacture.

The plant had been closed because of the threat from Tamil Tigers who have now been driven away by the army and cornered in the island's north-eastern region.

"Investors may be thinking that investment will now come in as it might be viable to restart the plant," Pieris said.

Conglomerate John Keells Holdings gained almost six percent or three rupees to 54 rupees with 148,700 shares traded after a big shareholder was quoted in the Sunday Times newspaper as saying that he would not be selling anymore.

The share had been sliding in recent weeks as significant quantities were sold.

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READER COMMENT(S)
4. Hanumantha Jan 13
Hemantha, are you working for Airtel?
3. Janaka Jan 13
I think Airtel will dominate in the market. Changing the number is what most corporates are worried about.. but the real numbers are on pre paids who do not see this as a major barrier

I think Dialog has paid dearly.. as well as their losses on Dialog broadband and TV

2. I Hemantha Jan 13
New Players (In this case Airtel) in the market (specially in a saturated market or close to saturation) would be in a better position in telecom sector if they have following advantages,

1) They are coming with the newest technology at a substantially lower capex,

2) Subscribers are willing to churn if the call rates are so cheap and no switching cost in terms of number loyalty,

3) Regulator encourage the competition and make the infrastructure available etc. (interconnection and Sufficient spectrum allocation).

I think new player like “Airtel” can attract customers from existing players if they have above advantages which I believe they would.

“The Future Today” it self make the Dialog to become a Market Leader with NO Profits at the movement. Especially in telecom industry, competitive advantage over technology will not last longer. However, proper timing and understanding the customer profile is the key.

Massive investment on 3G (at early stage of the 3G infrastructure at a substantially high cost) with very slow internet penetration and mobile habits in the country, investment in satellite TV which they could not show the profit yet, and the poor internal control system and spending lavishly on administration and selling would be the possible causes of failure of the giant.

In my view, David‘s comment on number loyalty is no longer a valid scenario in Sri Lanka where anyone can buy a SIM at a no cost or as low as Rs 300 with credit on it.

Yes, 3-4 years back, mobile number of a person is “The NUMBER” where lot of value attached to it. Now it’s become just another commodity where you consume it and buy a new one.

1. David Jan 13
Dialog will be in comand after 3 months.Beacause the new comer's plans will be over after 3 months. And no one will not want to loose their old number which many people keep as their contact.

So put the bet on Dialog. But one thing, people are angry with dialog as they charged more money in the past.That's why most of them supported the newcomer.