Sri Lanka’s leading telecommunication service provider, Dialog Axiata PLC posted a net profit of Rs.2.29 billion or 28 cents a share for its June quarter (2Q16) recording an increase of 19.9 percent from a year ago.
But the growth was somewhat slowed due to adverse impacts originating from the imposition of value-added tax (VAT) and floods in May, the interim results showed.
Dialog Axiata, which now has a subscriber base exceeding 11 million, saw its top line growing 19.2 percent from a year ago to Rs.2.1 billion.
The group however said its June quarter growth had been constrained due to the introduction of VAT, Nation Building Tax (NBT) and the floods in May, which caused a significant impact on livelihoods and commerce in general. “The introduction of VAT at 15 percent and NBT at 2 percent on telecommunication services resulted in aggregate telecommunication service consumption taxes increasing from 27.6 percent to 49.7 percent for voice services and from 12.2 percent to 31.7 percent for data services,” the company said in a statement.
However, the hike in VAT from 11 percent to 15 percent has now been suspended by the Supreme Court for not following the due parliamentary procedure in enacting the higher VAT.
The group earnings before tax depreciation and amortization (EBITDA) – a profitability measure widely used by the industry – for the June quarter edged up by only one percent to Rs.7.1 billion, demonstrating the growth slowdown.
But the group said although the consumption taxes would have a near-term impact on consumption, they remained hopeful that the performance to return to the standard levels in the longer term.
The group during the six months ended in June 30, 2016 (1H16) has contributed as much as Rs.16.9 billion to the government by way of direct taxes, levies and consumption taxes collected on behalf of the state. Meanwhile, the group administrative costs increased 21.1 percent year-on-year (YoY) to Rs.3.38 billion while distribution costs rose 35.3 percent YoY to Rs.3.41 billion.
The net finance cost of the group for the 2Q16 increased to Rs.597 million from Rs.125.9 million during the same period last year as the group raised net borrowing of Rs.8.6 billion during the period.
During the first six months, the Dialog Axiata group committed as much as Rs.7.1 billion as capital expenditure on high-speed broadband infrastructure alongside the extension of the group’s optical fibre network to further strengthen the group’s leadership in Sri Lanka’s ICT sector.
Further, at the company level, Dialog Axiata PLC, which operates mobile, international and tele-infrastructure segments of the group portfolio, recorded a net profit of Rs.2.32 billion, up 26.8 percent from a year ago.
For the 1H16, the group posted a net profit of Rs.4.96 billion or 61 cents a share, up 27.5 percent from a year ago on revenue of Rs.42.2 billion, up 20.2 percent YoY.
The group EBITDA for the 1H16 was up by 18 percent to Rs.14.1 billion while the margin was 33.3 percent, the company said.
The segmental information showed the group’s key mobile operation increasing its operating profit by as much as 40 percent YoY to Rs.6.82 billion on revenue of Rs.35.9 billion, up by 20 percent during the 1H16.
The group’s television operation (DTV) turned an operating loss of Rs.196.2 million from a profit of Rs.177.9 million a year ago but the revenue rose 12.1 percent YoY to Rs.3.14 billion. The segment’s net loss for the period was Rs.228 million compared to a net profit of Rs.114 million during the corresponding period last year.
“Cost expansion arising from aggressive customer acquisition alongside service and product expansion activities, resulted in a medium-term contraction of DTV EBITDA by 59 percent on a year-to-date basis to record at Rs.212 million,” the company said.
Meanwhile, the group fixed telephony and broadband business saw its operating profit narrowing 69 percent YoY to Rs.23 million but the top line grew 23.6 percent YoY to Rs.4.35 billion. The net loss for the period was Rs.40 million compared to the net profit of Rs.48 million a year ago.
The Malaysian parent, Axiata Investments (Labuan) Limited held a 83.32 percent stake in the company while the state-controlled private sector pension fund, the Employees’ Provident Fund held a 2.22 percent stake, down from 2.38 percent held in March 2016, being the second largest shareholder.
Norges Bank, the world’s biggest sovereign wealth fund, has further accumulated shares in Dialog Axiata to hold a 1.19 percent stake, up from 0.9 percent in March 2016, being the fifth largest shareholder.