NTT’s attempt to sell Sri Lanka Telecom: Smart Move?

After Sri Lanka Telecom’s biggest decline in a month, Nippon Telegraph & Telephone (NTT) Corp’s attempt to sell a stake in Sri Lanka Telecom to Usaha Tegas Sdn, Malaysia’s biggest wireless operator and parent of Maxis Communications was suspended after a former Sri Lankan minister challenged the transaction.

Sri Lanka Telecom’s Deputy General Manager W. M. U. Mahamithawa said that the sale cannot be concluded before it hears Sripathi Sooriyarachchi’s petition alleging corruption in the sale process. Tokyo based NTT owns 35.2 percent of Sri Lanka's biggest telephone company, with the government holding 49.5 percent.

Sooriyarachchi, who was dropped as a minister by President Mahinda Rajapaksa from his government in February, claimed the stake sale by NTT is tainted and called for a bidding process to ensure transparency, Mahamithawa said.

Sri Lanka Telecom on May 15 said it plans to invest about $200 million in two years to expand its basic and advanced mobile-phone services. Networks that run calls based on the Global System for Mobile Communications standard and offer third-generation, high-speed services will be enhanced, Sri Lanka Telecom said. Chief Executive Officer Shoji Takahashi expects the company's mobile-phone unit to turn profitable this year and broadband and Internet services to add to earnings.

The company had 917,435 mobile-phone users at the end of March and plans to expand its base to 1.75 million users.

Maxis is betting that Sri Lanka's proximity to India, the world's second-most populous country, would boost earnings at Sri Lanka Telecom. Usaha Tegas is controlled by billionaire T. Ananda Krishnan, who has offered to buy out Maxis in a 16 billion ringgit bid ($4.6 billion) to accelerate expansion in faster-growing markets. About 70 percent of Malaysia's 27 million people own mobile phones.

Is NTT being hasty in selling off Sri Lanka Telecom? Can Sri Lanka Telecom gain from the highly competitive Indian market?