Dialog Telekom records Rs. 2.57 bn PAT for first quarter of ’07

PROFIT AFTER TAX: Dialog Telekom Ltd - DTL recorded a PAT of Rs. 2.57 bn up 11 per cent relative to first-quarter of 2006. Company performance comprises in the main of Cellular Business Performance supplemented by contribution from the company’s International Business Operations and Internet Service Provider Operations.

Group results of Dialog Telekom Ltd, post consolidation with subsidiary performance, recorded a Profit After Tax (PAT) of Rs. 2.43 bn for the first-quarter of 2007, representing a 1 per cent Growth relative to the first quarter of 2006, at which stage DBN was the sole subsidiary of Dialog and was in its first quarter of post acquisition operation.

In line with the strategic intent of securing future growth and earnings opportunities arising from convergent technology relate business lines including but not limited to Fixed Line Telephony, Broadband and Digital Television media, Dialog Telekom has over the past year seeded nascent new business through acquired subsidiaries Dialog Broadband Networks (DBN) and Asset Media Group (AM).

DBN is currently engaged in the build out of a CDMA based Fixed WLL Network and WiMax Technology based Broadband Wireless Access (BWA) infrastructure aimed at exploiting the severely under-penetrated Broadband Internet Sector.

Asset Media recently commenced a satellite based pay television services targeting the future earnings potential of the similarly under-penetrated pay television market.

DBN delivered a positive bottom line of Rs. 10.39 mn to Dialog Telekom while the recently seeded business of Asset Media is yet to breakeven having posted an operating loss of Rs. 136 mn for the first-quarter of 2007.

Both subsidiaries are expected to deliver robust revenues and healthy margins over time as the market and infrastructure development phase in which the subsidiaries are engaged in at the present, evolves into a growth and revenue generating phase.

Total operating revenue increased by 24 per cent to Rs. 7.24 bn., driven by robust growth of the cellular subscriber base delivering enhanced call revenues. The prepaid segment contributed a major part of the growth. Other factors driving revenue growth included the growth in coverage and increased international traffic and associated revenues.

Domestic revenues, which consist mainly of pre-paid and post-paid revenue accounted for around 81 per cent of Company Revenue for the first-quarter of 2007.

The revenue growth achieved was on the backdrop of intermittent disruption of the company’s services in the Northern and Eastern Provinces of Sri Lanka - markets which previously contributed up to 7 per cent of company revenue, and a reduction (relative to Q1 2006) of inbound roaming clients-a performance measure which is closely correlated to inbound tourist arrivals.

The major components of total (company) revenue are pre-paid revenue (48 per cent) post-paid revenue (33 per cent) and inbound roaming revenue (4 per cent). When compared with results for first-quarter of 2006, the contribution from the pre-paid segment has increased from 39 per cent to 48 per cent.

The company added over 1mn net subscribers within a period of one year, and accordingly the company’s cellular subscriber base increased by 46 per cent to reach 3.37 mn subscribers by March 3, 2007.

The prepaid segment increased by 56 per cent from 1.84 mn to 2.88 mn. In parallel, the postpaid subscriber base increased by 5 per cent from 0.46 mn to 0.49 mn.

Value added services (VAS) revenues accounted for close to 10 per cent of total revenues. Peer-to-Peer SMS revenue continued to represent the largest component of non-voice revenue accounting for 6 per cent of total revenue.

Revenue from International termination increased from Rs. 526 mn to Rs. 707 mn representing an increase by 34 per cent.

Direct costs for the period under review amounted to Rs. 2.66 bn compared to Rs. 2.07 bn in the first-quarter of 2006 reflecting a 29 per cent increase.

Significant components of direct costs are Network cost (33 per cent).

Telecom equipment depreciation (27 per cent), International Telecommunication Levy (10 per cent), International Origination cost (9 per cent), roaming costs (6 per cent) and Lease circuit rental costs (2 per cent).

Direct costs as a percentage of operating revenue have increased from 35 per cent in firs-quarter of 2006 to 37 per cent in the first-quarter of 2007. Performance relative to revenue is mitigated in the main due to the company not achieving its full revenue potential due to the revenue mitigating factors cited above.

The company’s operating costs recorded at Rs. 1.80 bn grew by 37 per cent relative to those applicable to the first quarter of 2006.

Operating costs comprise mainly of selling and distribution expenses, manpower and general administration costs.

Selling expenses, inclusive of sales commission and advertising and promotional expenses, contributed 41 per cent of the operational expenditure, in keeping with the company’s aggressive thrust towards subscriber additions resulting in an 46 per cent increase in subscriber base over the 12 month period.