Currency depreciation poses fresh challenge for SLT

Almost four years on from the Sri Lankan Government’s decision to walk back on its plan to divest its majority stake in the State-owned enterprise, Sri Lanka Telecom PLC and its mobile arm, Mobitel (Pvt) Ltd, the national Information and Communications Technology (ICT) solutions provider must navigate a climate of increased operational costs due to currency fluctuations, SLT Chairperson Dr Mothilal de Silva said on Tuesday (19).

“There was an auction to sell this company. At that time, it was valued at $ 200 to $ 250 million, which was insignificant. Now, we have made profit, and we want to sustain it,” Dr de Silva said, addressing a media gathering where the financials of the SOE were discussed.

“Geopolitical tensions are there, with conflict in Persia and the Arab countries. This may increase our operational expenditure, but I’m confident that with stringent cost management and prudent financial stewardship, we can manage this situation in a better way and turn these threats into opportunities,” he said.

“Telecom is a capital-intensive industry. We earn in rupees, but unfortunately, we have to spend money in dollars. So any currency fluctuation will affect us, in a good way or a bad way. If the currency depreciates, then we have to pay more in rupees. It is a challenge.”

He went on to say: “Yesterday, the Governor said that within a few months the currency had depreciated by 5%; similarly, our cost goes up by 5%, directly and indirectly.”

At the beginning of the US-Israeli war on Iran, Sri Lanka’s dollar exchange rate stood at approximately Rs 309.50 per US dollar. However, from the end of February to 25 March, the rupee depreciated by 1.6% to around Rs 313-314. The downward trend continued into April, with year-to-date depreciation widening to 2.9% by the end of that month, pushing the rate to approximately Rs 319-320.

In the first half of May, the rupee remained within the Rs 319-321 range until it slid sharply, with its selling rate surging past Rs 338 on 19 May. In a single day from May 19 to 20 May, the selling rate jumped nearly Rs 5, crossing above Rs 342.70, with some state-owned banks reportedly selling the dollar at Rs 345.20.

“In the first quarter of 2026, we have surpassed our own expectations and set a powerful benchmark for the SLT Group. Previously, we were not performing well, and we even experienced losses in 2023. In 2024, we had a slight turnaround, but around 2025 we achieved a turnaround in a formidable manner. And there, we promised that 2026 would be about capturing market share and ensuring sustainability,” Dr de Silva expressed.

“Today, I’m pleased to report that Q1 2026 has delivered fantastic results. Today we gain a confident step forward, despite a volatile operating environment in the country and the world. Group profit after tax surged to Rs 3.1 billion (b); this is a growth of 15% compared to Rs 2 b in Q1 2025.”

“This is mainly driven by broadband growth, enterprise demand, and decisive action on debt and finance cost. There I'd like to mention that we have reduced debt by almost 30% to reach Rs 14 b. US dollar balances also improved, by almost 30%,” he said.

The Sri Lankan Government’s intention to divest its majority stake in the SOE was first announced in November 2022 in the national budget statement for 2023. By March 2023, the Cabinet of Ministers approved the in-principle divestment of the Government’s shares in SLT.

In November 2023, the Ministry of Finance published local and international requests for qualifications (RFQs) for the sale of the Sri Lankan Treasury’s 50.23% stake in the SOE, with an initial deadline of December 2023, which was later extended to January 2024. Three bidders, including India's Jio Platforms, submitted initial proposals. However, the divestiture process was ultimately scrapped as the new administration opted to retain state ownership of the SOE as a national asset, a decision that aligned with the Sectoral Oversight Committee’s recommendation against privatisation on national security grounds.

Source - The Morning