Sri Lanka Telecom looks to raise US$125mn

Oct 04, 2010 (LBO) – Sri Lanka Telecom, the island’s largest fixed access operator, may raise 125 million US dollars from bonds to fund expansion if the terms are right, as business conditions in the island improve, an official said. “We want to raise 125 million US dollars,” SLT’s chief financial officer Shiron Gooneratne said.

“We have got several good proposals from investment banks in response to a request for proposals. But the board (of directors) is also looking at other options.”

SLT is majority owned by the Sri Lanka government but its largest outside shareholder is Malaysia’s UT group, which has appointed the chief executive.

Fitch Ratings which raised the outlook on SLT’s ‘B+’ foreign currency rating to ‘positive’ from ‘stable’ last month – along with a lifting of the outlook on Sri Lanka’s sovereign rating – said the firm had “strong access” to bank loans.

SLT has a ‘AAA (lka)’ national rating. Sri Lanka’s government last week raised one billion US dollars from a 10-year bond at 6.25 percent.

Standard and Poor’s also raised Sri Lanka’s rating by one notch to ‘B+’ on better prospects after the end of a war and expectations that a deal with the International Monetary Fund will keep excessive state spending in check.

Sri Lanka’s rupee interest rates are low by historical standards with the prime rupee lending rate around 9.9 percent on October 01 against 21.1 percent two years ago, according to central bank data.

Sri Lanka’s commercial banks are liquid and looking for good projects to lend. Loans to private business are now starting to grow faster after slumping for most of 2010.

With the end of a 30-year war the SLT is looking to increase capital expenditure, Gooneratne said.

“We are investing in the North and the East,” Gooneratne said. “We recently extended our fibre optic network to Jaffna. The general business conditions are improving.”

Fitch said better economic conditions after the end of the war and a price floor imposed by the telecom regulator to end a price war (which started in the mobile sector) is expected to stem a fall in SLT’s margins.

Sri Lanka’s wireline business shrank in 2009 as subscribers shifted to mobile use. But during the second quarter of 2010 wireline has started to grow again and fixed access wireless – where SLT is also active – grew at 3.8 percent.

SLT also owns Mobitel, a celco. Sri Lanka’s mobile users grew 25 percent in the second quarter from a year earlier, according to official data.