Suntel buy to help Dialog beat SLT as Lanka’s number one telco

Friday, 16 December 2011 02:10 - - {{hitsCtrl.values.hits}}

The strategic buy of Suntel Ltd., by Dialog Axiata this week is likely to propel the latter to become Sri Lanka’s number one teleco relegating the longstanding giant SLT to the second place.

Industry analysts said Dialog is tipped to be the biggest teleco in terms of revenue when 2011 or 2012 1Q results are announced after incorporating Suntel performance.

They said that Suntel’s 2010 revenue was in the range of Rs. 4.5 billion and year to date in 2011 there has been growth.

In the first nine months of this year, SLT Group revenue amounted to Rs. 37.4 billion whilst Dialog trailed with a figure of Rs. 33.6 billion.

Profit wise the tussle between Dialog and SLT is mixed. In the first nine months Dialog’s pre-tax profit was Rs. 4.34 billion as against SLT’s higher figure of Rs. 4.82 billion whilst as per bottom line Dialog leads with Rs. 3.93 billion versus SLT’s Rs. 3.49 billion.

However assets wise, SLT is the biggest with Rs. 93 billion as against Dialog’s Rs. 76.1 billion.

In terms of market capitalisation SLT ranks above Dialog with Rs. 81.2 billion versus latter’s Rs. 65.1 billion as of yesterday.

In its statement on Wednesday Dialog said the combined operations of Suntel and DBN are accordingly envisaged to crystallise the formation of a strong second ranked player in the fixed telecommunications sector with a combined revenue and subscriber market share of approximately 16% and 23% respectively.

Linked to the announcement, Dialog share price yesterday gained by 20 cents to close at Rs. 8 after peaking to a high of Rs. 8.10 whilst SLT share price dipped by 30 cents to Rs. 45 though it hit an intra-day high of Rs. 45.40.

Dialog on Wednesday announced that its fully owned subsidiary Dialog Broadband Networks Ltd (DBN), entered into a Share Purchase Agreement (SPA) to acquire 100% of the ordinary shares of wireless fixed line operator Suntel Ltd. from its current shareholders.

The share purchase agreement signed between DBN and the shareholders of Suntel envisages the transaction to be completed at an EV (Enterprise Value) in the range of US$ 33.9 m to US$ 34.9 m, corresponding to a Valuation Multiple of 3.0 x- to 3.1x of FY10.

The transaction, leading ultimately to the merger of Suntel with DBN, will secure the distinction of being the single largest consolidation initiative within Sri Lanka’s telecommunications sector.

Since 2006, Dialog has invested Rs 11.8 b in the expansion of its fixed telecommunications and broadband infrastructure with a particular focus on the development of its optical fibre network, which is being rolled out on a nationwide basis.