SLT September profits down on higher costs; revenue at Mobitel declines

Sri Lanka Telecom PLC (SLT) saw its profits declining in the three months ended September 30, 2022 (3Q22) due to sharply rising costs stemming from a bevy of factors including the sharp fall in the value of the rupee against the dollar and the soaring inflation amid the decline in revenues at its mobile services subsidiary, Mobitel Private Limited. 

The group reported a consolidated revenue of Rs.26.7 billion for the July - September quarter, barely moved from the same period last year. 

While SLT on a standalone basis maintained its top line at Rs.16.9 billion, up 7.4 percent from a year ago period driven by its carrier domestic, broadband and carrier international revenue streams, Mobitel has suffered some setback due to, “macro-economic challenges, tax changes and reduction of domestic interconnect charges”, the company said in a public relations statement.

But the company has sustained international business revenue growth.  
The domestic interconnection revenues affected both SLT and Mobitel after the regulator, Telecommunications Regulatory Commission of Sri Lanka directed to reduce the charges from April onwards. 

As the government reversed course on its tax policy, the telecommunication services industry has seen a slew of tax increases and new taxes on their services since June including the Value Added Tax, Telecommunication Levy and more recently the Social Security Contribution (SSC) Levy which together have sent up what the customers pay for their ICT consumption.  
With the new tax rates, Sri Lankans are now paying 35 percent combined tax for telecommunication services they consume other than internet services and 17.3 percent for internet services effective from September 1 before the new SSC Levy of 2.5 percent which came into effect from October 1 onwards.

Meanwhile, the group reported an operating profit of Rs.2.89 billion for the quarter, which was down by 28 percent, reflecting the challenges in the top-line and the costs front. At the company level, SLT however reported an operating profit of Rs.1.43 billion, up 27.8 percent from a year ago. 
“The year-on-year electricity cost has decreased due to power outage whereas generator fuel cost has increased significantly due to power outage as well as fuel price”, the company said. 

Telecommunication companies became early winners of the pandemic when they had to provide connectivity to people and businesses seamlessly to work and learn from a remote spot without being disrupted from the lockdowns, sending their revenues and profits substantially higher.  
The SLT group reported earnings of 79 cents a share or Rs.1.43 billion for the September quarter compared to Rs.1.79 a share or Rs.3.23 billion in the same period last year. 
At the group level, SLT reported a foreign exchange loss of Rs.537 million in the quarter compared to a loss of Rs.5.0 million a year ago.
 The National Treasury holds 49.50 percent stake in SLT besides its holdings while Global Telecommunications Holdings NV holds 44.98 percent stake.