Sri Lanka News Updates with Discussions

Mihin leases an Airbus at a monthly rental of Rs. 110 million

By Mandana Ismail Abeywickrema

Mihin Lanka is to take on a wet lease a second aircraft at an estimated monthly rental of over US$ 1 million it is learnt

http://www.irudina.lk/UpdatePDFs/CurrentAffairs.pdf

Rush to wrap up multi-billion SLT deal with Malaysian firm

A Government-appointed Presidential Committee on Friday rushed to wrap up a proposed agreement between Maxis, Malaysia?s biggest mobile telephone operator, and Sri Lanka Telecom (SLT) to purchase a part of the stake owned by the Nippon Telegraph and Telephone Corporation (NTT), completely ignoring a rival offer from one of Indonesia's largest telecom operators.

No official announcement has been made by any of the parties in what appears to be a 'mad-rush' to close the deal with the Malaysians, according to insiders. The NTT sale of at least a part of its 39 per cent stake at SLT is valued at more than US $ 260 million (Rs. 27.5 billion), carrying a brokerage fee of around 8 percent of the sale value which was estimated to be a sum of US $ 24 million (Rs. 2.64 billion), largely handled by Sri Lankan officialdom.

?We concluded the shareholders agreement between Maxis and the government. The buyer had already been identified,? a committee source, who declined to be named, said. He said the new agreement would be neutral and provide more powers to the government than the earlier one with NTT which could be manipulated to suit the Japanese company.The Sunday Times learns that Telecomsel, Indonesia, a company listed in the New York Stock Exchange and with 40 million customers in Indonesia had faxed PERC, the Sri Lankan state agency overlooking privatisation programmes, and made an expression of interest for the NTT shares, but the matter has not been even considered.

Many officials of the Presidential Committee told The Sunday Times that nobody had informed them of the Telekomsel Indonesia offer.
The Indonesian firm?s proposal included providing a broadband series, a long-haul investment programme with a view to making Sri Lanka its South Asian hub. It was the company's first major investment bid overseas.

Their first fax had been to the Finance Ministry, The Sunday Times learns, but upon being told that the Ministry had not received their offer, they re-faxed their proposal to PERC. NTT, Japan?s largest telecommunications company, has a 39 percent stake in SLT which it purchased in 1997 for US$ 225 million and now wants to exit from the country?s largest telecommunications provider in which the government has a 49.5 percent stake.

The sale will be handled by Usha Tegas Sdn, a subsidiary of Maxis Communications Bhd, and for the moment involves 25 percent of the NTT stake. ?The company is purchasing 25 percent in order not to trigger the Takeovers & Mergers Code which requires a mandatory offer (for 30 percent and over) to all shareholders. Later they would purchase the other lot,? the source said.

The committee which includes officials from the Treasury, the Planning Ministry, the SLT chairman and director-general of the Securities & Exchange Commission, was appointed by the cabinet to clear the Maxis proposal. The Malaysian company has already completed a due diligence of SLT. There were plans for some SLT directors to visit the Maxis headquarters in Kuala Lumpur ? accompanied by a group of business journalists ? to further the discussions and look at the Maxis operation but latest reports say the trip has been postponed.

The largest single owner of Maxis is Ananda Krishnan, a Malaysian businessman with roots in Jaffna. His company has some 6 million telecom customers in Malaysia. The source said the shareholders agreement was lapsing with NTT and the government felt it was a good opportunity to work out a new agreement. ?In the earlier agreement, issues like tenders could be manipulated by NTT. They had a lot of powers under the former agreement,? he said.

?On the other hand we don?t want to have an agreement that is one-sided and would kill the spirit of cooperation because the partner comes to add value in addition to investment. The new agreement will give more powers to the board which is chaired by a Sri Lankan government nominee,? he said.

Privatisation specialists say the agreement is similar to what the government is seeking in the case of SriLankan Airlines in which the management agreement with Emirates is up for renewal next year. Under current proposals prepared by a government-appointed committee, the new shareholders agreement at SriLankan (currently under negotiation) will give the board more authority in decision-making, appointment of senior managers, procurement and route permits.

The government has a majority 51 percent stake against Emirates? 43.6 percent but the latter is in full management control and most important decisions are taken without board consent, In the SLT case too, NTT was responsible for management and most of the decision-making. ?Some of the government-appointed directors on the SLT board hardly question NTT decisions as they are either not conversant with the topic or have not done their homework,? an SLT official said.

Darkness looms with BIA night-time closure

Hoteliers and cab services say new security measures at the airport will further affect their businesses

By Nalaka Nonis

The suspension of night flights and the closure of the Katunayake Internnational Airport from 10. 30 p.m. to 4. 30 a.m. have landed a double blow on the already limping tourism industry with hoteliers and cab services complaining about the drop in business. They said just the news about the night time closure ? which came into operation on Thursday? had caused a fear psychosis among would-be foreign tourists to Sri Lanka.

Some of the worst hit by this current security measure are those hotels in Negombo which were depending on transit passengers to keep their business on course, following a drop in business in the past months due to the general security situation. But the night closure of the airport will see a drastic drop in these transit passengers too, hoteliers say.

Negombo Hoteliers Association president and Goldi Sands Hotel General Manager Expedit Croos said several main hotels in Negombo depended on transit passengers to keep them afloat, but with the new regulation they were gradually losing their arrivals and occupancy forecasts for the coming months were gloomy. He said about 3,000 people in Negombo depended on tourism and in the coming months hotels may be forced to retrench staff if the situation continues.

He said 25 tourists had cancelled bookings to his hotel in the past few weeks. He also said foreigners who come to Sri Lanka from far off destinations may opt for other destinations because they wouldn?t like to languish for long hours at transit points due to restricted travel times to travel to Sri Lanka.



A few tourists enjoying the sun at Browns Beach hotel

?The occupancy rate in main hotels such as Browns Beach, Golden Star Beach, and Goldi Sands will go down drastically in the coming months and beach vendors and cab service operators will also lose business if things continued like this,? he said. Browns Beach Hotel?s Front Office Manager Nalaka Weerasekara had a similar tale of woe and complained about the drop in tourist arrivals and transit passengers as most of them came to Sri Lanka at night time.

He also said that the news of the closure of the airport has given tourists a confirmation of a fear that it is not at all safe to visit Sri Lanka presently. Ayurvedic Pavilions General Manager Rookamanie Fernando however feels that things will improve soon. She added that the lack of effective promotions and proper planning to handle crisis situations has cost the country a lot.

On another front, a beach vendor Daisy Fernando who has been selling clothes to tourists on the beaches of Negombo for 13 years said her business had dropped and for the past three consecutive days she had sold only a few clothes as there were only a few tourists on the beach.

A similar fate has befallen a large number of cab service operators especially those who ply between the airport and hotels. They said the night time closure will further hit their business which was running low with tourist arrivals dropping due to the security situation. Maxi Fernando, manager of Abans Tours at the airport said though they have business at daytime the lack of night hires will be a big blow to them.

Buddhika Cabs Service which operates an airport service said their business too had slumped during the past few weeks. S.C. Sylvester secretary of the Cab Drivers Association in Negombo which has more than 120 cabs operating in 14 hotels said there has been a drop in their business too.