INDIAN GIANT TATA TO TAKE OVER SRI LANKA’S SECOND LARGEST LAND BASED TELEPHONE COMPANY SUNTEL AND STARTS NEGOTIATIONS

By Walter Jayawardhana

The Indian industrial giant Tata, has initiated to buy out Sri Lanka’s premier telecom operator, Suntel through its international arm VSNL Global.

VSNL Global already has obtained Long Distance and Internet Service Provider licenses in preparation for the planned buy out of Suntel.

Suntel is currently owned by a joint venture between Swedish telecom giant Overseas Telecom, Metrocorp, Townsend of Hong Kong, National Development Bank, and International Finance Corporation (IFC) — a member of the World Bank Group.

India’s financial publication Economic Times said the initial talks to take over the company has already begun.

The Economic Times further said VSNL was planning to change its business model in Sri Lanka. From inbound voice business currently, the company wants to enter the outbound voice traffic and data, and enterprise businesses, quoting unnamed sources The Economic Times said.

It further quoted the same sources as saying, “VSNL currently provides international voice and data services in Sri Lanka and will soon expand its offerings to include internet services and enterprise solutions,”Quoting a senior executive of the VSNL Global the Economic Times further said, . “Sri Lanka is amongst our earliest international ventures — we are looking at leveraging our opportunities there,”Suntel which caters to a subscriber base of nearly 250,000 homes and offices in Sri Lanka is the largest land based telephone competitor to incumbent Sri Lanka Telecom (SLT) .

Its services include a range of voice, data, ISDN, dedicated packet solutions and internet services.
The Economic Times further reported that the acquisition of Suntel was on the agenda of VSNL’s last board meeting in December. Suntel’s net profit for the six months to June 30 dipped by LKR 93 million year-on-year to LKR 290 million, while revenues virtually doubled to LKR 3.31 billion from LKR 1.96 billion a year earlier, the newspaper further said.

The newspaper further said, “If the deal is successful, Suntel will be VSNL’s third telecom service provider outside India. VSNL already has 51% stake in Neotel, South Africa’s second national operator, and is also in the process of picking up 26% in InfraCo, a new telecom network operator in South Africa.

”On its Sri Lankan strategy, a VSNL executive said, ‘VSNL entered Sri Lanka in 2003 and views it as an important, growing market. The company’s ILD voice and data services have been well received and it plans to leverage its success in this market’.”

The report also said that It is not just the Tatas that are eyeing telecom ventures in Sri Lanka. Both Bharti Airtel and Reliance Communications are in the race for Sri Lanka’s fifth GSM-based mobile operator licence, which is estimated to be worth around $4 million. These companies will, however, have to beat two other Asian powerhouses — Malaysia’s Maxis Communications and Singapore Telecommunications — for the licence. Additionally, in December, Reliance Communications-owned Flag Telecom had signed a deal with Sri Lankan fixedline operator Lanka Bell for an undersea submarine cable link connecting the two countries