Silver Lining

October 4, 2006 (Dow Jones)–Sri Lanka’s two listed telecommunications companies are poised for record profits this year as the country’s low penetration levels and the new products on offer continue to lure subscribers, offsetting the impact of higher interest rates and any possible slowdown in the economy. Analysts expect Sri Lanka Telecom shares to rise further to around 22.50 rupees by year-end from its 21.00 rupees at Tuesday’s close while Dialog is expected to climb to around 23.00 rupees from 22.50 rupees close on Tuesday. Net profit for Sri Lanka Telecom, which controls 85 percent of the country’s fixed-line telecommunications market, is likely to rise 48 percent to 4.6 billion rupees in the year ending Dec. 31 from 3.1 billion rupees in 2005, said Rajive Dissanayake, head of research at HNB Stock Brokers.

Dialog Telekom, the biggest of the country’s four mobile phone operators with over 60 percent of the market, is expected to report a 37 percent rise in full-year net profit to 9.6 billion rupees from 7.01 billion rupees in 2005.

The two companies will announce third quarter results early in October and full-year earnings in January.

“There aren’t too many downside risks for the sector in the next two years because the current low penetration levels suggest there is room for