Hans Wijayasuriya, CEO, Dialog Axiata: Interview

Interview: Hans Wijayasuriya

Considering its demographic profile, how saturated is Sri Lanka’s telecoms market?

HANS WIJAYASURIYA: In terms of nominal penetration, the numbers are north of 100%, but there is a significant incidence of multiple subscriptions, so real penetration sits somewhere between 60% and 65%. In that sense, there is room to grow in terms of new users. Adoption among younger segments is increasing, and the same can be said of previously under-penetrated age and demographic segments. With these dynamics in play, the market cannot be rated as being saturated, although subscriber growth rates are on the decline in relative terms.

The potential to grow from a revenue perspective is subject to the parallel pressures of pricing – as well as the dynamic of voice-to-data substitution. In 2014, the two main telco players in the country – Sri Lanka Telecom Group and Dialog Group – both found themselves restricted to single-digit revenue growth, which is less than encouraging in an emerging market context.

We need to also factor in exchange rates and inflation when casting nominal growth figures in real terms. The challenge we face is less about driving service and usage adoption, and more about being able to monetise consumption on the backdrop of hyper-competition and pricing pressure. Intense competition certainly has its positives and brings out the best in terms of service delivery innovation; however, it is unfortunate that pricing has been driven down to levels that are less than viable in the context of funding long-term growth.

Given the relatively crowded market of five mobile players and seven telco players overall, consolidation of the industry might be one potential lever to enhance long-term sustainability. I would aver, however, that the discipline of rational pricing should remain an imperative of overriding priority for the sector, irrespective of the market structure.

What are the implications of the move from mobile voice to data usage for Sri Lanka?

WIJAYASURIYA: Mobile data in Sri Lanka is the cheapest in the world. Voice services are, again, the cheapest in real terms. There is a structural correction that needs to take place in order to ensure sustainability of future investments. In terms of revenues, data sits at around 18%, but in terms of capital expenditure, data infrastructure accounts for around 65%. Operators are building out huge data networks but are not recovering the cost, due to unsustainable pricing structures.

The telecoms industry in Sri Lanka, like most across the world, is on the cusp of a significant techno-economic transformation, moving from voice to data, and also from markets dominated by traditional service providers to new disruptive models of service provision and consumption. The response to this change needs to come in the form of vertical and horizontal consolidation, rationality in data pricing and cost rationalisation via infrastructure sharing.

We need to move to more sophisticated forms of infrastructure sharing, including active network sharing and virtualisation of network elements combined with cloud architectures. We are strong proponents of active network-sharing models – moving to shared 4G networks. The industry probably needs a first-mover initiative in this regard, which also calls on the regulator to put in place regulations capable of supporting such structures.

Telecoms regulation in Sri Lanka has been singularly progressive so far, and has enabled it to be ahead of the region in terms of technology deployment as well as inclusion and per capita penetration of basic as well as advanced services. Provided we optimise cost and pricing structures, Sri Lanka will continue to be a leader in the region with respect to connectivity and digital empowerment, and the country’s ICT sector will be well positioned for long-term growth.