Dialog Telekom to start Sri Lanka’s biggest IPO

DIALOG Telekom Ltd, Sri Lanka’s biggest cell-phone operator, will start the island’s biggest share sale today, testing investor confidence in a country ravaged by a two-decade civil war and the Dec 26 tsunami.  

Dialog’s parent, Telekom Malaysia Bhd, plans to raise as much as 8.54bil rupees (US$85mil) from the sale of a 9.6% stake in Dialog. Telekom will get three-fifths of the proceeds, according to NDB Investment Bank, which is arranging the sale.  

Dialog has a 60% share of Sri Lanka’s mobile-phone market and expects the number of cell-phone users in the country to almost triple in the next three years.  

“Foreign investors like companies with good management and good liquidity,” said Channa Amaratunga, vice-president of asset management at Asia Securities Pvt. in Colombo.  

“Big portfolios want a return of 25% to 30% per annum in share value over a period of three to five years and Dialog offers that.”  

Colombo-based Dialog, which competes with a unit of Sri Lanka Telecom Ltd, Celltel Lanka Ltd and Hong Kong’s Hutchison Telecommunications International Ltd, said it would sustain the 66% annual average profit gain since 2000 for the next three years as the country’s market almost triples in size.  

The island’s cellular-phone market is expected to expand to six million subscribers by 2008, Dialog chief executive Hans Wijayasuriya said recently. The phone company will probably have as many as four million customers by that time as more than 30% of the country’s 20 million people are expected to use mobile phones, from 11.5%, he said.  

Dialog expects its subscribers to increase 33% by the end of the year from 1.5 million.  

“The potential for growth is there, considering the population,” said Kelvin Miranda, who helps manage US$210mil at Asian Asset Management Sdn Bhd.  

About 712 million Dialog shares will go on sale today, priced at 8 rupees to 12 rupees apiece. The company will offer the shares until July 27 at the latest, NDB’s chief executive officer said last month. – Bloomberg