Sri Lanka Telecom is 44 percent owned by Malaysia's UT group and 49.5 percent by Sri Lanka's Treasury.

Revenues in the December quarter rose 9 percent to 13.5 billion rupees, expenses also rose 9 percent to 8.6 billion rupees allowing margins to also keep pace, rising 9 percent to 4.9 billion rupees.

Operating profit after depreciation grew 14 percent to 1.8 billion rupees.

At the core wireline company also revenues grew 7 percent to 8.5 billion rupees and profits after depreciation grew 6 percent to 1,156 million rupees.

"The strong underlying growth in operating profits demonstrates our sound growth strategy balancing profitable growth coupled with significantly increased capital investment in network modernization and capacity expansion," chairman Nimal Welgama said in a statement.

"Our i-Sri Lanka project is delivering high speed island wide broadband enhancement for fixed line customers, whilst our fibre based optical backbone network expands its footprint to serve not only the SLT group but other operators also.

"Meanwhile, at Mobitel, we are rapidly expanding network capacity to keep pace with growth in voice and mobile 3G (third generation) broadband customer demand."

But the group was hit by 1.6 billion rupees in finance charges up from 154 million rupees. It included 1.4 billion rupees in forex losses coming from its foreign exchange denominated liabilities.

Many Sri Lankan firms which have taken dollar loans amid high domestic interest rates were hit by the steep depreciation. The depreciation came after several years of exchange rate stability, as the Central Bank engaged in sterilized sales of foreign currency.

The firm said in a statement that most of the forex losses came from Mobitel, its mobile unit.

The firm lost 816 million rupees in the quarter, though revenues grew 12 percent to 5.84 billion rupees. Without exchange losses it has earned after tax profits of 575 million up 50 percent from a year earlier.

The firm had invested 4.1 billion rupees in plant in the quarter. Short term investments also rose to 10.6 billion rupees from 3.7 billion rupees as its cash position improved.