IFC’s Long-term Funding to Dialog Telekom Will Support Sri Lanka’s Telecom Infrastructure

IFC, a member of the World Bank Group, will provide financing to help Dialog Telekom PLC in Sri Lanka expand its telecom network and build new telecommunication infrastructure networks. The $100 million package includes a $30 million equity investment to acquire a 1.6 percent holding in Dialog from Telekom Malaysia (TM) and a $70 million loan. The investment will enable Dialog to improve public access to affordable and reliable telecommunication services by increasing capacity and extending coverage, particularly in rural and underserved areas, while the equity commitment will play a role in enhancing the depth of the stock market.

Through this project, Dialog is adopting a “quadruple strategy” to create new interdependent networks that include mobile, fixed voice, broadband Internet, and pay television, with wide-ranging impacts. This will result in better service to customers in all income groups by taking advantage of shared infrastructure and service bundling. A significant portion of the debt financing will be channeled toward augmenting coverage and capacity in the mobile network.

IFC Advisory Services in the region – the SouthAsia Enterprise Development Facility – will also assist Dialog in implementing its Distributor Retailer Community Network. This will involve imparting better business skills to retail distributors to help them access credit from commercial banks and improve sales.

Several policy initiatives and reforms since the 1990s, including the establishment of an independent Telecommunications Regulatory Commission, reflect the Sri Lankan government’s strong commitment to liberalize rapidly. While fixed line penetration remains low, at 10 percent, mobile penetration has risen from 4 percent in 2002 to 30 percent today, equivalent to almost 6 million subscribers. Projections show about 10 million subscribers by 2010, based on expanded coverage and declining tariffs, which are among the lowest in the world.

Yusof Annuar Yaacob, Chief Executive Officer of TM International Sdn Bhd, Dialog Telekom PLC’s majority shareholder said, “IFC’s renewed support to Dialog at a critical juncture in its expansion is very encouraging and contributes significantly to our commitment to investing over $450 million in Sri Lanka over 2006 to 2008.” Dr. Hans Wijayasuriya, Director and CEO, Dialog Telecom, added, “We are delighted that IFC has reinforced its commitment to Dialog’s growth story. Building on a relationship that began in 2004 through a long-term financial arrangement, we are strongly encouraged by IFC’s participation. We are also appreciative of IFC’s sensitivity in structuring a financing package to meet our company’s needs and opportunities.”

Paolo M. Martelli, IFC Director for South Asia, said, “IFC’s support to Dialog, comprising risk capital, long-term finance and advisory services, is an important milestone for our presence in Sri Lanka. It demonstrates our commitment to facilitating private sector development, which in this case will help address the country’s growing infrastructure needs.”

Gilles Galludec, IFC’s Country Manager for Sri Lanka and Maldives and Program Manager at SEDF, explained, “We are excited by the company’s strategy and its country-wide entrepreneur development program. We are keen to back the program actively, as it aligns with our larger role of developing small and medium enterprises.” IFC’s Head of Investments for Sri Lanka and Maldives, Jeetendra Marcelline, added, “IFC sees Dialog as a key partner in Sri Lanka. The teams worked closely on the new package, which helps address a multitude of Dialog’s needs.”

About IFC
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through loan participations and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit www.ifc.org.

IFC in Sri Lanka
Since 1970, IFC has committed over $200 million in 26 projects in Sri Lanka. Currently IFC has an exposure of over $90 million in Sri Lanka in equity, debt, and guarantees, with exposure to private infrastructure exceeding $60 million. In 2007, IFC committed over $20 million in new investments in Sri Lanka, including over $10 million to local financial institutions under its Global Trade Finance Program.

The IFC SouthAsia Enterprise Development Facility in Sri Lanka, a $5 million facility funded by IFC and the governments of Netherlands and Norway, is part of a multidonor-funded facility managed and operated since 2006 by IFC. It helps increase access to finance and quality business development services to projects in the country. IFC SEDF also helps create a business-enabling environment and supports value addition to firms through tailored advisory services, capacity building programs, training, and research.