SLT 1Q revenue flat; profits impacted by higher operating expenses, finance costs

• Group revenue weighed down by mobile services arm of group, Mobitel

Sri Lanka Telecom Group (SLT Group), the national ICT solutions provider, recorded positive consolidated revenues of Rs.26.6 billion for 1Q 2023, an increase of 2.1 percent compared to the same period last year.
SLT Group’s marginal revenue growth was mainly driven by SLT company revenues of Rs.17.6 billion recorded for the quarter, an increase of 10.7 percent from last year’s corresponding period. Notably, SLT Group management’s strategic vision for the company and prudent action to mitigate the impact of macroeconomic issues have resulted in 
this achievement.
However, group revenues were weighed down by the mobile services arm of the group. 

SLT Group Chairman Rohan Fernando stated, “We are proud of the stride we have made towards stabilising our business, unifying our operations and platforms and transforming into a future-ready technology company. However, the true testament to our success lies in our lean and target-based operational structure, which has enabled us to weather the most trying circumstances and emerge with optimism for the future.”
Overall, SLT Group profitability was impacted by direct operational costs. At group level, direct costs swelled to Rs.15.9 billion, an increase of 7.6 percent year-on-year, while at company level, it was at Rs.9.8 billion, a rise of 6.8 percent. The escalation in costs was related to international payments, electricity tariff hikes and annual maintenance charges to foreign vendors. 
Additionally, administrative costs rose significantly to Rs.5.8 billion at group level and Rs.4.5 billion at SLT company level for the quarter, an 8.7 percent and 7.4 percent increase, respectively, once again mainly attributed to inflation and the devaluation of the LKR against the USD. On a positive note, depreciation and amortisation has been reduced, at SLT group level by 13.6 percent and at company level by 19 percent, reflecting the true value of assets.
Group operating profit has been impacted by the hike in operating expenses, which include an increase in utility cost attributed to the tariff increase, international payments and annual maintenance costs, because of the depreciation of the local currency against the US dollar and inflation that prevailed in the country. 
However, at company level, SLT recorded a healthy YoY increase of 74.4 percent in operating profit. Overall, at group level, profit before tax has reduced by 54 percent YoY, mainly driven by finance costs, due to the massive increase in interest rates. 
Noteworthily, eliminating forex losses, SLT recorded an improvement in earnings at company level for the quarter under review. Profit before tax, after eliminating the forex loss at company level, is Rs. 1.1 billion. Additionally, normalised profit after tax by eliminating forex impact is Rs.0.9 billion at company level.
The group’s mix of foreign currencies supported Mobitel’s and VisionCom’s gain from the rupee appreciation during 1Q compared to last year’s corresponding period, due to bearing US dollar loans and liabilities. However, SLT incurred a loss because of its US dollar reserves.
Despite the ongoing macroeconomic challenges, SLT Group remains committed to delivering value to all stakeholders. Investments in the SEA-ME-WE 6 cable and facilitation of the fibre network to ensure high-speed connectivity are also ongoing to enable seamless access to transition into an era of digital services.