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OPERATING COMPANIES BUSINESS REVIEW
Axiata Group Berhad | Annual Report 2016
041
Dialog has been at the forefront of innovation
in the mobile industry in Sri Lanka since the late
1990s, propelling the nation’s mobile telephony
infrastructure to a level of advancement on par
with the developed world. The Company delivers
advanced mobile telephony and high speed
mobile broadband services to a subscriber base
of 11.8 million Sri Lankans, via 2.5G and 3G/3.5G
and 4G networks.
Dialog supplements its market leading position
in the mobile telecommunications sector with
a robust footprint and market presence in Sri
Lanka’s Fixed Telecommunications and Digital
Pay Television markets through its fully-owned
subsidiaries Dialog Broadband Networks
(Private) Ltd (DBN) and Dialog Television
(Private) Ltd. (DTV). DBN is Sri Lanka’s second
largest Fixed Telecommunications service
provider, serving residential and enterprise
customers with voice, broadband, lease lines
and customised telecommunication services.
DTV operates a Direct-to-Home (DTH) Digital
Satellite Pay TV service and is the market leader
in Sri Lanka’s Pay TV sector and delivers high
quality infotainment to a viewer base of over
800,000 Sri Lankan households.
Business Review 2016
Dialog witnessed another year of stellar
performance amidst intense competition,
registering
significant
improvement
in
profitability along with operational efficiencies
driven by Cost Rescaling Initiatives. The
Company’s subscriber base reached 11.8
million in 2016 compared to 10.9 million in 2015,
expanding its subscriber market share by 1.5pp.
While voice continues as the dominant service,
mobile broadband services demonstrated
robust revenue growth. This was the result of
data network coverage expansions, attractive
tariffs, and growing smartphone penetration
driven by digitisation, increasing affordability
and availability of devices, as well as the
adoption of data-intensive applications, such
as gaming and video streaming. Data revenue
grew by a strong 52% Year on Year (YoY),
while mobile broadband subscriber base grew
by 41%. Smartphone adoption within Dialog’s
network increased to 44% in 2016.
Dialog invested substantial capex towards
increasing its 3G and 4G base stations,
expanding by 12% and 71% respectively in 2016,
while fixed 4G LTE sites increased by 76%.
During the year, Dialog commissioned the
Ultra High Capacity 100G-PLUS Bay of Bengal
Gateway (BBG) Submarine Fibre Optic Cable
with an investment in excess of USD34.5 million
(SLR5 billion). The BBG system represents a
significant step-up in connectivity speeds which
will further augment the multiplicity of global
networking options for Sri Lanka's enterprise
ICT sector, as well as speeding up Dialog's 3G
HSPA+, 4G and fibre optic networks. Dialog
also launched the country’s first Voice over
LTE (VoLTE) service, enabling ultra-high quality
voice and video calls over its 4G LTE networks.
Within its digital services segment, Digital Health
Private Limited (DHPL), which operates the
digital health app Doc990, launched commercial
operations with the Asiri Group of hospitals, thus
expanding its reach to over 100,000 customers.
Ideamart, Dialog’s own Application Programme
Interface (API), began operating within the Hutch
network in 2016, enabling Ideamart developers
to widen their app reach to Hutch subscribers.
During the year, Ideamart had a development
community of over 5,600 individuals and nearly
11,000 active apps, with its user base surpassing
the 1.6 million mark.
In the Digital Money sector, eZ Cash grew its
customer base to 2.8 million, with over 30,000
merchants island-wide. The Digital Commerce
sector recorded strong growth in monthly
turnover and Merchandise Value, with a user
increase of 37%.
DBN’s customer base comprises over 570,000
individuals and corporates providing multiple
services including fixed telephony, hosted PABX
offerings, broadband, Internet leased lines, data
communication, Internet Data Centre (IDC),
converged ICT solutions, telecommunication
infrastructure, transmission and backbone
services. DBN’s IDC received the ISO 27001:2013
certification during the year, becoming the first
and only Sri Lankan service provider to receive
the accreditation and recorded 56% YoY growth
in both co-location and Cloud business.
Dialog also successfully completed 4.5G
technology
trials,
which
demonstrated
download speeds in excess of 1Gbps. The fixed
LTE demonstrated an accelerated uptake where
the customer base grew by over 100% in 2016,
surpassing 200,000 subscribers.
Meanwhile, DTV subscribers grew by 29% during
the year. DTV continued to consolidate its
growth momentum with subscribers surpassing
the 800,000 milestone to reach a subscriber base
of over 838,000. DTV added 13 new channels,
including three new HD channels, thus expanding
its number of channels to more than 130.
Financial Performance
Dialog continued its strong performance
trajectory, delivering a consolidated revenue
of SLR86.7 billion in 2016. This represented
significant double digit growth of 17% YoY,
underpinned by strong growth across all
business segments. On the back of substantial
revenue growth combined with operational
efficiencies derived through continued focus
on Cost Rescaling Initiatives, Dialog recorded
EBITDA growth of 23% YoY to reach SLR29.2
billion. EBITDA margin for 2016 also improved to
33.7%.
Net PAT (NPAT) grew significantly by 74%
YoY to SLR9.0 billion. NPAT performance was
driven by improved EBITDA and lower non-
cash translational forex loss of SLR0.8 billion
compared to a loss of SLR2.2 billion the previous
year. The Sri Lankan Rupee depreciated against
the US Dollar by 3.9% in 2016.
Dialog’s capital expenditure for 2016 was SLR23.2
billion, with investments to capture leadership
position in Sri Lanka’s Broadband Sector.
Accordingly, capital expenditure was directed
towards investments in High-Speed Broadband
infrastructure encompassing capacity upgrades
for 3G and expansion-focused investments for
4G along with the extension of the Company’s
Optical Fibre Network to support robust
seamless connectivity.
Outlook for 2017
Sri Lanka is seeing a rapid transition in its
telecommunications industry, with a shifting
trend towards data connectivity and digitisation.
The mobile subscriber growth rate in Sri Lanka
has been increasing rapidly and is expected
to moderate in the near future as the market
reaches a state of maturity. However, the mobile
broadband market is exhibiting strong growth
driven by 3G and 4G adoption and increased
smartphone penetration.
Digital transformation is reshaping the way
businesses operate, with big data and analytics
as key business drivers. This has resulted in more
corporates migrating to Business Intelligence
platforms which Dialog intends to leverage on
for future growth.
The Internet of Things (IoT) is playing an
increasingly crucial role in the development
of Smart City, with more users turning to IoT
enabled devices within the key segments of
Health, Near-Field Communication (NFC), Radio
Frequency Identification (RFID) tagging, Home