Dialog Telekom Corporate Performance Announcement

Dialog Telekom Corporate Performance Announcement
Half Year (Jan-Jun) 2005

Dialog Telekom Ltd., (DTL) Sri Lanka's leading Mobile Telecommunications operator released Tuesday (23rd August 2005) an overview of its Financial Performance for the six months ended 30 th June 2005.

Dialog Telekom confirmed that a limited review has been carried out on the half-year financial results of the company prior to release.

Financial Results - Six months ended 30 June 2005

DTL profit after taxation increased by 77 per cent to Rs. 3.45 billion for the six months ended 30 June 2005, compared to Rs 1.95 billion in the same period in 2004.

DTL results for the period ended 30 June 2005 and for the corresponding period in the previous year are depicted below. The results are based on a Limited review carried out by the Company's Auditors,

Profit & Loss Statement	Six months ended 30 June		% Increase
Rs Billion	2004	2005
Revenue	5.04	8.14	62%
Direct Cost	1.77	2.59	46%
Gross Profit	3.27	5.54	69%
EBITDA	2.78	4.55	64%
PAT	1.95	3.45	77%

* Based on a limited review carried out by the auditors

Table 1: Profit and Loss for the six months ended 30 June 2004 & 2005

The Board of Directors of Dialog Telekom places great emphasis on instituting and maintaining leading edge Corporate Governance practices with respect to the operations of the company. In keeping with the latter paradigm, the company has adopted the voluntary measure of subjecting quarterly financial statements to a limited review by the company’s auditors.

REVENUE

 

For the six months ended 30 June 2005, DTL recorded a revenue of Rs. 8.1 billion, representing a growth of 62 per cent above the Rs. 5.04 billion recorded for the corresponding period in the previous year.

Revenue growth during the preceding year is representative of the company’s consistent Year on Year (YoY) revenue growth trend over the past few years fuelled by parallel growth in the key revenue drivers of subscriber base, network reach, increase in usage per customer and expansion in international business.

Revenue growth has been driven by the consistent growth in both pre-paid and post-paid subscriber base. The post-paid active subscriber base increased by 51 per cent from 267,024 (for the period ended 30 June 2004), to 403,200 as of 30 th June 2005. In parallel, the pre-paid active subscriber base increased by 68 per cent from 794,362 to 1,336,990. during the same period. When compared with 2004 performance, the contribution from pre-paid services has increased from 35per cent to 37per cent.

COSTS

 

Direct Costs

Total direct costs for the period amounted to Rs. 2.59 billion compared to Rs. 1.77 billion in the previous year, which is a 46 per cent increase. Direct costs to revenue for the six months period ended 30 June 2004 and 2005 were 35 per cent & 32 per cent respectively exhibiting an improvement of performance in revenue relative terms.

Significant components of direct cost are Telecom equipment depreciation, Network cost, International Origination cost, Outbound roaming cost, and Lease circuit rental costs.

Operating Costs

Operating costs constitute mainly of selling and distribution expenses, manpower and general administration costs. Total operating costs for the six months period ended 30 June 2005 amounted to Rs. 1.99 billion amounting to 24.39 per cent of revenue. The comparative figure for the six months period ended 30 June 2004 was 24.56 per cent.

International Telecommunication Levy

Based on the Finance Act No. 11 of 2004 enacted by the Parliament in late 2004, a levy was imposed on International Telecommunication operators with retrospective effect dating back to March 2003. Accordingly DTL has provided for this levy in full in its financial statements under direct cost. The PAT figures for the periods ending 30 th June 2004 & 2005, are stated after the deduction of this levy. It is envisaged that the Telecommunications Regulator would determine a refund of a part of this levy as compensation for rural network development. Any such refund would be reflected as a cost reversal at a future date and has not been taken in to account at this stage.

OPERATING PROFIT (EBIDTA)

 

The Company has shown substantial growth in earnings before Interest, Tax, Depreciation and Amortisation (EBITDA). EBITDA was recorded at Rs 4.55 billion for the period ended 30 June 2005 compared to Rs 2.78 billion for the period ended 30 June 2004 representing a growth of 64 per cent.

PROFIT AFTER TAX

 

The company recorded a profit of Rs. 3.45 billion, representing a 77 per cent earnings growth relative to the figure of Rs 1.95 billion for the corresponding period in 2004.

Earnings growth is underpinned by revenue growth of 62 per cent combined with enhancements in operational efficiencies as demonstrated by the fact that net profit after tax has displayed a growth off 77 per cent.

The Company enjoys a fifteen-year tax holiday expiring at the end of 2012 by virtue of its Flagship Investor status under the aegis of the Board of Investment of Sri Lanka.