2015 Sri Lanka - Telecoms, Mobile and Broadband

15%+ annual growth for Sri Lanka’s mobile market in 2015

Sri Lanka’s telecommunications sector has had to contend with a developing market in the difficult context of a nearly two-decade-long conflict between the government and separatist Tamil Tiger rebels. With the end of the war came the hope of an enduring peace and a general improvement in the country’s social and economic well-being. This also found the telecom sector well positioned for vigorous growth. A good start has already been made on expansion and provision of infrastructure that is capable of providing a sophisticated level of telecommunications service to the population throughout the whole country. Extending infrastructure into the North and Eastern provinces, those parts of the country most affected by the long-running war has also been given high priority. It is well recognised that the growth and development of any country’s telecom sector is necessary to provide, among other things, an impetus for national economic activity.

There are a range of major initiatives in place that should boost the building of national infrastructure and open the market to more competition. On the regulatory front, Sri Lanka Telecom losing its monopoly in a number of key areas earlier on led the way and since then the market has progressively been opened up to more and more competition.

While mobile penetration has historically been relatively low compared with other more developed Asian markets, it is now catching up, with penetration reaching 115% in 2015. Demand for broadband data services driven by 3G and 4G adoption and increased smartphone penetration should drive reasonably strong growth in the local market moving into 2016 and 2017. The highly competitive mobile market in Sri Lanka had been running with a healthy overall annual growth rate for some years. The market has undoubtedly benefited from its liberalisation and the competition that came with five operators continuing to battle it out for market share. However consolidation in Sri Lanka over the next few years is possible since the market is finding it increasingly difficult to sustain all five operators.

Internet access services in their various forms and associated data services are finally taking off in the country, but coverage and accessibility continue to present challenges. Internet user penetration was estimated at around 30% by 2015. However, the sophistication of the services available is only slowly improving. The early moves to offer broadband internet in the country met with limited success and it seemed that it would be some time before there is a substantial broadband market. However, by 2015 fixed broadband internet services were being supplemented by a rapidly expanding mobile broadband segment. Also during 2015 the availability of e-commerce applications including mobile banking, e-bus ticketing, and mobile points of sale (POS) continued to increase. Demand for broadband data services driven by 3G and 4G adoption and increased smartphone penetration should drive reasonably strong growth in the local market over the next few years.

In the meantime, the government has been promoting such initiatives as the e-Sri Lanka project. It has also established the National Broadband Consultative Committee (NBCC), a special committee appointed to accelerate and promote the availability of affordable high speed broadband internet in the country.

For fixed-line services, after a five-year period of strong growth the subscriber numbers flattened out and then entered into a decline. Considerable uncertainty hangs over this segment of the telecom market. The widespread application of the Wireless Local Loop (WLL) platform was for some time a positive element in this struggling sector. However, even the WLL subscriber numbers are now in decline. There is also large concentration of fixed services in the capital Colombo (penetration of 35%) which makes the national figure look better than it is.

Key developments:

• The mobile subscriber base grew strongly during 2014 reaching 22.1 million subscribers.
• Dialog Axiata continues to dominate the market with 42% market share.
• Dialog Broadband, launched an LTE Advanced pilot network in July 2015.
• IPTV services continue to grow strongly from a small base.
• The WLL platform which initially drove growth in fixed subscribers is now in decline.
• By 2015 fixed broadband internet services were being supplemented by a rapidly expanding mobile broadband segment.
• Potential regulatory inhibitors to the existing market players include the super gains tax and the prepaid card levy imposed by the new government.
• Sri Lanka’s global connectivity will be boosted by the proposed SEA-ME-WE 5 submarine cable.
• Fixed internet subscribers continue to grow but at a slow rate of under 4% per annum.
• The government was rolling out 1,000 WiFi hotspots in 2015.
• The Information and Communications Technology Agency (ICTA) has launched the Lanka Government Cloud (LGC);
• SLT claimed the launch of the first FttH network in Sri Lanka in 2015;
• Also in 2015 SLT launched the first nationwide DWDM fibre-optic backbone transmission network
• The second phase of the ‘e-Sri Lanka’ project was approved by government.

Companies mentioned in this report:

SLT, Lanka Bell, Suntel, Dialog Axiata (formerly Dialog Telekom), Etisalat Sri Lanka (formerly Tigo), Mobitel, Hutchison Lanka, Bharti Airtel Lanka, Data Access; MTN Networks; SLTNet, SkyNet, Suntel, Lanka Bell, BellNet, Wishya Online (Pvt) Ltd, ITMIN Ltd, Eureka Online (Pvt) Ltd.