Group Chairman’s Review

As the national telecommunication provider, the SLT Group continues to add to its iconic status in Sri Lanka. By seizing the opportunities brought about by the digital economy, SLT is well poised to lead Sri Lanka into the digital future.

The plethora of digital innovations at our customer’s fingertips attest to our claim of being the preferred digital lifestyle provider. As a Group, we continue to excel by delivering sound business performance, exemplary corporate governance, and fulfilling our social responsibility.

The year 2017 was another turbulent year for the global and local telecommunication industry as revenue from IDD and other traditional avenues declined due to the threat from OTT players. The margins from data is decreasing while the capital expenditure in infrastructure is on the rise. The world has witnessed a digital revolution that ushers in huge change at an accelerated rate. The worldwide shift towards digitalisation will continue to transform the way the world communicates, conducts business, socialises, receives healthcare, and education.

SLT Group Vision 2022

The SLT Group has anticipated these transformations and strategically prepared ourselves to meet the challenges of the future, today. Initiated in 2016, Vision 2022 will transform the Group from a communication service provider (CSP) to a digital service provider (DSP). It will enable the Group to become the most preferred digital lifestyle provider by the year 2022. The Group has implemented a Capital Expenditure (CAPEX), Operating Expenses (OPEX), and services plans and has identified other KPIs in the roadmap to Vision 2022. We have also set a digital services revenue target of 15% by 2022.

In line with our strategy, the SLT Group offers a suite of exciting new digital products and services like cloud computing, data centres, global connectivity projects, and smart living solutions, etc., to our customers.

An integral part of Vision 2022 is achieving complete Group synergy. Through different initiatives, the Group will combine all operations into one enterprise. Furthermore, it will include the streamlining of the internal structure, systems, and processes. Vision 2022 will position the SLT Group as a market leader with one face, one view across all integrated Group platforms.

Accolades in 2017

The numerous accolades that were bestowed on the SLT Group in 2017, attest to our leadership as the national telecommunication service provider. We were judged to be 12th among the Best Sri Lankan brands in 2017 by Interbrand. Lanka Monthly Digest ranked SLT 10th of LMD top 100 entities. We were also ranked 10th in Business Today’s Top 30 entities in Sri Lanka.

Ookla, a popular, independent internet testing tool, recognised SLT Mobitel as the winner of the Speedtest Award as the fastest mobile network in Sri Lanka, further strengthening SLT Mobitel’s network leadership in the country.

Recognising digital excellence and innovations

The SLT Zero One Awards is a unique programme that recognises and rewards excellence in digital initiatives across the island. We are happy to announce that the first edition was a huge success with over 450 entries which recognised individuals as well as corporates. The second edition of the Zero One awards will take place later in the year.

Sri Lanka’s first ever, innovation and entrepreneurship-based tech reality show, realised by SLT Mobitel in partnership with Sirasa TV, returned for its second season in 2017. This popular and highly-anticipated programme inspires brilliant individuals to address real life challenges through the power of modern technology. Our winners are given financial assistance and guidance to venture into business startups which will develop the young entrepreneurial spirit of the country.

Investing in innovative network technologies

The SLT Group has recognised that investing in fibre and upgrading the fixed network ensure that our infrastructure remains best-in-class. We have invested over Rs. 75 billion in the last three years in providing the nation with state-of-the-art ICT infrastructure: the ultra high speed National Backbone Network (NBN) with 100G technology was built to cater to the future needs of all ICT operators in the country. The SEA-ME-WE 5 submarine cable’s advanced 100Gbps technology will easily facilitate the quadrupling of bandwidth demand between Europe and Asia. We see our high capital expenditure as investments. With our state-of-the-art infrastructure - extensive optical network extending nearly 30,000 km, the link to the SMW 5, and the venturing into 5G, we have made great leaps in laying the ground work for the digital transformation outlined in Vision 2022.

Building on the human capital

Our employees form the heart of the SLT Group with a workforce of over 10,000. Over the years, we have created meaningful relationships with our employees. There is healthy, regular engagement between the Management and our dynamic workforce. Over 22% of Group revenue is dedicated to our staff, since we consider our human capital to be our greatest strength.

In 2017, SLT invested in targeted professional training for its employees and managers to ensure that they will be ready to face future changes in technology and market conditions and to improve our competitiveness in the sector. There were over 122,149 hours of local and international training along with 109 foreign training programmes.

With dedicated, intrinsically motivated employees, we aspire to offer an even better customer experience, resulting in greater customer loyalty.

Our financial performance

During the reporting year Group Operating Profit Before Interest Tax Depreciation and Amortization (EBITDA) improved by 5.4% to Rs. 21.2 billion. This improvement is a result of revenue growth and minimum escalation of operational costs.

SLT Group recorded a Rs. 75.7 billion in revenue for the year which is a year on year growth of 2.6% despite the challenges on mobile revenue due to indirect taxes levied on mobile usages. As a result of several initiatives, the operational costs were reported at Rs. 54.5 billion with a YoY increase of 1.6%.

With our state-of-the-art infrastructure – extensive optical network extending nearly 30,000 km, the link to the SMW 5, and the venturing into 5G, we have made great leaps in laying the ground work for the digital transformation outlined in Vision 2022.

The Group operating profit was reported at Rs. 3.9 billion with a 31.6% drop due to the increase in depreciation and amortisation. We continued to invest in state-of-the-art infrastructure to provide world-class services to our customers. This investment is reflected in our Group operating profit for the year 2017. The Group profit after tax for the year 2017 was reported at Rs. 3.9 billion which is a YoY increase drop of 17.7%.

SLT: The national ICT service provider

Access to telecommunications is critical to the development of all aspects of a nation’s economy including manufacturing, banking, education, agriculture, and Government. The synergy effect of the digital economy where information becomes more accessible and available makes communication a lot easier.

As the nation’s telecommunication carrier, our Vision 2022 is aligned with the Government’s Digital Economy Strategy and other policies. The SLT Group has contributed immensely to the national economy and nation building. In 2017, we were able to contribute an impressive Rs. 38.58 billion in levies, taxes and license fees to the Government of Sri Lanka.

Apart from our investments in bolstering the nation’s ICT infrastructure, we have served the nation through numerous initiatives. SLT was chosen as the communications provider for the eGovernment initiative: The Lanka Government Network (LGN 2.0). SLT has set up the LGN fibre optic network to cover 315 Government establishments. SLT will connect 860 Government institutions by the end of 2018.

I am proud to state that Sri Lanka’s first purpose-built, Tier III data centre is now in operation at Pitipana. It is named as the “national data centre”, since it provides secure, reliable data hosting facilities, and cloud services to all Sri Lankans.

To celebrate our 160th year anniversary, SLT implemented the “160 School Development Programme”. The project's focus was to provide ICT infrastructure: broadband connection with 12-month rental free with a free Wi-Fi router. By providing access to ICT to school children, we serve the nation and the future of our nation.

For a sustainable future

The SLT Group is aware of the role of telecommunication providers in reaching the UN Sustainable Development Goals. Broadband powered digital services and ICTs in Sri Lanka have a unique potential to support to meet the SDGs. ICT is a powerful enabler for each of the 17 goals, and an essential catalyst in driving rapid transformation. The principles of sustainability and the drive to achieve SDGs are embedded in our Vision 2022.

Our future looks bright and digital

In the coming years we are excited to reap the rewards from the ground work laid during the past few years: our heavy investments on ICT infrastructure, preparation for the digital transformation, streamlining of internal processes, our digital offering, improvements in customer care, drive towards excellence in governance, incorporation of global best practices, alignment with the national policies, strategic future planning, and investments on human capital. We will continue to invest in these areas, but I am happy to report that the foundation has been laid and it is strong and stable for achieving the objectives of Vision 2022.

We have also become a trusted provider of ICT services to top enterprises in the country. We have provided them with seamless and sophisticated connectivity to carry out local and global business operations. We will continue to expand our enterprise customer base in 2018. Our objective to become a key regional player providing ICT services will also come to fruition through our link with multiple international undersea cable systems such as SEA-ME-WE 3, SEA-ME-WE 4, SEA-ME-WE 5, Bharat-Lanka and Dhiraagu-SLT submarine cable systems.

In 2017, SLT became the first telco to successfully field test pre-5G LTE advanced pro-technology in South Asia achieving 855.9 Mbps user throughput using Advanced Carrier Aggregation in TD-LTE 2500 MHz band. This throughput was further improved up to 999.9 Mbps at subsequent field tests. SLT Mobitel was also the first to initiate the roll out of the 4.5G network to revolutionise the industry and to significantly enhance user experience for its valued customers. 4.5G will act as a bridge for the eventual adoption of the 5G standard, while bringing significant improvements to SLT and Mobitel’s existing 4G networks.

In terms of the telco industry, growth will focus on broadband-related digital services. Broadband revenues will dominate the Income Statement within the next three years. Improvements of revenues from digital services will drive our Company for the next eight years and beyond, as technology unlocks unprecedented potential to build seamless digital ecosystems, reshaping the way we live, work, and interact.

A final note of thanks

In a time of change and accelerated transformation, moving towards a digital future, our stakeholders, including our shareholders, customers, employees, the Government, regulatory bodies, and others have come together to create a Group that serves the nation. To our customers, we thank you for your continued trust and loyalty. We also extend oursincere thanks to our employees whose enthusiasm and service deserve our heartfelt gratitude. The SLT Group will continue to deliver landmark innovations in the sector to create greater value for all our stakeholders and our nation.

P G Kumarasinghe Sirisena
Group Chairman

29 March 2018