Colombo: International Finance Corporation, the private sector financing arm of the World Bank has inked a $100 million deal with Sri Lanka’s biggest mobile operator, Dialog Telekom, which is strengthening its telecommunication infrastructure to take on its Indian rival Airtel.
Washington-based IFC will lend $70 million in debt, while the balance would be used to buy shares from Dialog’s parent company, Telekom Malaysia, officials said.
“Our investment in Dialog is the largest we have ever made here, where we currently have an exposure of just over $90 million in telecom, ports, financial services and power,” IFC’s Country Manager for Sri Lanka Gilles Galludec told reporters on 24 September.
Meanwhile, Airtel is working overtime in Sri Lanka to start its operations early next year. “We are being sent in batches from India to work out the modalities for operationalising our system”, an Airtel engineer said.
Expert are of the view that Airtel will have to be steadfast in its approach due to the bottlenecks it could face before beginning its operations, saying operators need nine different approvals to set up a tower and it would take at least 12-18 months to launch such service. It would also have to pay VAT on every imports that could push up costs.
Meanwhile, IFC is planning to invest around $200 million in Sri Lanka within the next two years, mostly to help the local companies here who are in the process of expanding overseas, he said.
As part of the deal signed on 24 Sept with Dialog, Telekom Malaysia sold 1.6% of their 89% stake in Dialog to IFC for $15 million.
“We have signed call up agreement with IFC which allow IFC to buy another $15 million worth of shares from us at a future date,” said Telekom Malaysia’s International CEO Yusof Annuar Yaacob.
Dialog’s Chief Executive Hans Wijayasuriya said the money would be used to expand its cellular network and build new telecommunication networks, particularly in rural areas.
With 3.9 million subscribers, Dialog controls 60% of Sri Lanka’s 6.4 million cellular market.
“We hope to have 100% population coverage within the next 12 months, from 90% we have now,” Wijayasuriya said.
“About 60% of our $450 million investment pipeline for the next two-years will go into mobile and the rest into new areas like WiMax, cable TV, fixed-line telephones and grow our Internet business,” Wijayasuriya said.