Dialog Telekom profit down on losses at television unit

(Bloomberg)

COLOMBO — Dialog Telekom Ltd., Sri Lanka’s biggest mobile-phone operator, said profit fell for a fourth straight quarter on losses from setting up a television unit.

Net income declined to Rs1.11 billion ($10.3 million) in the three months ended March 31 from Rs2.43 billion a year earlier, Colombo-based Dialog, the Sri Lankan unit of Telekom Malaysia Bhd., said in a statement faxed by the Colombo Stock Exchange. Sales rose to Rs8.98 billion in the first quarter from Rs7.91 billion a year earlier.

Dialog, which controls about 55 per cent of Sri Lanka’s mobile phone market, cut rates on outgoing calls December 1 to lure users before operators including Bharti Airtel Ltd., India’s largest carrier, start operations on the island this year. The Sri Lankan company, which started pay television and broadband services to stay ahead of rivals and potential new entrants, posted a loss of 114 million rupees at its television unit.

"Dialog is showing continued losses in the TV subsidiary and an increasing cost base due to inflation," said Vajira Premawardhana, head of research at Lanka Orix Securities Pvt. in Colombo, who recommends a "hold" on the stock. "New subscribers are also coming in at lower margins." The Sri Lankan carrier said the number of subscribers rose 35 per cent to 4.5 million at the end of March.

Reliance Communications Ltd., India’s second-ranked operator, may join larger rival Bharti in planning a foray into Sri Lanka, where fewer than four out of 10 people had wireless connections at the end of last year.

The company, Sri Lanka’s biggest by market value, is down 24.1 per cent so far this year, compared with a 2.3 per cent rise in the key Colombo All-Share Index. Dialog shares rose 3.5 per cent to Rs15 at the 2:30 p.m. Colombo-time close. The earnings were released after the market closed.

New Delhi-based Bharti, which postponed the rollout of its wireless services in Sri Lanka from April following delays in setting up its network, expects to start operations in the island later this year, the company said in a statement last month. Dialog in June said it plans to invest about $300 million in two years to expand its media and phone services. Networks including those that run calls using the code division-multiple access, or CDMA, technology and offer 3G, high- speed services will be enhanced.