Tele Outlook

Nov 17, 2011 (LBO) – Sri Lanka telecom operators are likely continue spend on fiber optics and network upgrades next year to meet post-war demand, though the sector is facing tighter margins and regulatory risk, Fitch Ratings said. Fitch said large operators would be stable but the outlook for smaller operators was negative and regulatory risk remained.

“Although positive decisions have been made in the last two years, Fitch believes that regulatory risk remains high, and any significantly adverse regulatory imposition has the potential to turn the sector’s outlook to negative,” Fitch said.

“A sustained price war with tariffs at the regulatory floor would be likely to place extreme stress on the smallest companies and weaken the largest,..”

Fitch said Sri Lanka Telecom, the island’s only wireline operator and Dialog Axiata, the largest mobile firm could weather a “significant downturn in their financial profiles before they would be downgraded.”

Fitch said Sri Lanka Telecom and Dialog would continue to invest in optical fiber and next generation technology to up data capacity in 2012.

Revenues are expected to grow at mid single digits, despite tariff pressure helped by new demand for voice and data after th