SLT sees modest top line growth in 4Q; earnings boosted by tax reversal

• New lease standard, higher interest cost from new borrowings weigh on operating results 

Operating results at Sri Lanka Telecom PLC (SLT) were hurt by higher depreciation charges resulting from the application of new lease standard and higher interest costs resulting from new borrowings made to fulfil the growing capital expenditure needed to stay on par with global technological trends. 

The telecommunication giant reported Rs.1.46 billion in operating profits for the October-December 2019 quarter (4Q19) compared to Rs.2.29 billion in the year earlier period as direct and administrative costs rose from higher depreciation charge while revenues languished.  

Direct costs rose to Rs.12.8 billion from Rs.11.4 billion while the administrative costs rose to Rs.5.36 billion from Rs.4.92 billion in the year earlier period. 

“The SLFRS 16 adjustment had a significant impact on the profitability of the company,” a SLT statement said of its fully owned subsidiary, Mobitel Private Limited. 

During the year, the new lease standard SLFR 16 had a significant bearing on the group bottom line as it resulted in an additional Rs.2.4 billion in new depreciation and Rs.1.4 billion in finance cost, a note accompanying the financial statements showed. 

The group, which provides fixed and mobile telephony services, broadband, enterprise intelligent business solutions, PEO TV service, national backbone services and other digital services, recorded revenues of Rs. 22.1 billion for the 3 months under review, up 3.3 percent or Rs.700 million from the same period last year. The finance cost for the quarter rose to Rs.667 million compared to Rs.73 million in the year earlier period. 

The company however was able to contain the foreign exchange translation losses from its foreign currency loans to Rs. 385 million compared to Rs.695 million a year ago. Part of that reduction was from the settlement of foreign loans.

SLT reported earnings of 74 cents a share or Rs.1.34 billion for the three months under review compared to earnings of 53 cents a share or Rs.957 million in the year earlier period. 
For the full year ended on December 31, 2019 (FY19), SLT reported earnings of Rs.3.50 a share or Rs.6.32 billion compared to Rs.2.74 a share or Rs.4.95 billion in 2018. 

The group had revenues of Rs.85.9 billion, up from Rs.81.4 billion in 2018. 

The group’s fixed ICT operations advanced both revenues and profits while mobile operations showed some pressure on profits, mainly from SLFRS 16, although the top line continued to increase.   

SLT is in the process of offering broadband speeds up to 1 Gbps from its fiber-to-the-home (FTTH) connections from the current speed of 100 Mbps and will deploy fifth generation technology across the country. 

“The ongoing accelerated fibre expansion project under the National Fiberization Programme will increase the fibre footprint across the country targeting consumer, enterprise and government sectors,” SLT CEO Kiththi Perera said.