Dialog Axiata's subsidiary to buy Suntel in up to $34.9 mln deal

Sri-Lanka's largest telecommunications company Dialog Axiata PLC (COL:DIAL), said recently that its subsidiary, Dialog Broadband Networks Private Limited (DBN), has agreed to acquire 100 percent of wireless fixed line operator Suntel.

The deal is expected to have an enterprise value in the range of US$33.9 to US$34.9 million, corresponding to a valuation multiple in the range of 3.0 to 3.1 times 2010 EBITDA, subject to due diligence, the companies said.

The consummation of the transaction over the next few months is expected to provide advanced fixed line and broadband services to Sri Lankan consumers.

Suntel is ranked second in Sri Lanka's fixed telecommunications sector in terms of fixed telecommunications business and revenue market share. The company began operations in 1996, and is currently a subsidiary of Swedish telecom operator Overseas Telecom AB.

Other shareholders of Suntel include National Development Bank, C-Tech Investments, Kelmarsh Investments, Townsend Limited and International Finance Corporation (IFC).

“The Sri Lankan telecom sector after 15 years of robust growth is soliciting consolidation,” said managing director of Suntel, Jerry Huxtable.

“Suntel is committed to providing a superior service to our loyal customer base, and today are at a point in our evolution where bullish and forward thinking investments are needed to elevate our broadband infrastructure to best in class standards.”

“I believe industry consolidation which crystallises economies of scale and brings together the shared effort and investment capacity of leading industry players is an optimum strategy to deliver enhanced value to consumers and the industry at large going forward."

Suntel’s fixed telecommunications infrastructure is based on a 382 base station-strong network, delivering fixed voice, broadband and data communication services using CDMA, WiMAX and other fixed wireless access technologies The company provides fixed telephony and converged voice/data/broadband services to around 0.7 million corporate and retail customers.

DBN, a fully owned subsidiary of Dialog Axiata PLC, was the fourth entrant to Sri Lanka’ fixed telecommunications sector in 2006, and has a portfolio of fixed telecommunications, broadband and optical fibre based transmission infrastructure services.

In fact, since becoming a member of the Dialog Axiata Group in 2006, the company has invested LKR 11.8 billion in the expansion of its fixed telecommunications and broadband infrastructure with a particular focus on the development of its optical fibre network, which is now being rolled out on a nationwide basis.

DBN's chairman and group CEO at Dialog Axiata, Dr. Hans Wijayasuriya, added: “We are indeed privileged to have been afforded the opportunity to combine with Suntel through this beachhead industry consolidation initiative."

"Going forward, the combined strengths of DBN and Suntel will be synergised towards establishing a best in class infrastructure platform for the provision of high quality fixed telecommunications and broadband services which are expansive in their availability, and inclusive in terms of affordability to Sri Lankan citizens.

"Suntel is a much admired service provider on Sri Lanka’s telecommunications landscape and will bring to the merger, very significant value in terms of a best in class fixed line operations framework, highly competent human capital and a longstanding customer base earned and retained through an impeccable record in service delivery.

"Through the combination of our strengths, we look forward to providing our mutual customers with unparalleled value and quality of service as we enter an exciting new era of broadband centric telecommunications development."

For the nine months ending in September, Dialog Broadband Networks reported revenues and EBITDA of LKR 1.8 billion and LKR 456 million, respectively.

DBN said the combined operations of the two companies are expected to have combined revenue and subscriber market share of approximately 16 percent and 23 percent, respectively.