By Shihar Aneez

COLOMBO, Nov 13 (Reuters) - Sri Lanka`s top mobile phone
operator, Dialog Telekom DIAL.CM, a unit of Telekom Malaysia
(TLMM.KL: Quote, Profile, Research, Stock Buzz), on Thursday posted its first quarterly loss since
going public in 2005.

The company lost 192.5 million Sri Lanka rupees ($1.75
million) in the quarter ended Sept. 30, compared with 2.43
billion net profit in the same period last year.

January-September group net profit slid 86 percent to 1.03
billion rupees ($9.36 million) from 7.3 billion rupees in the
same period a year ago. Overall group turnover for the period
rose 9 percent to 27.4 billion rupees.

The company`s shares, which make up more than 9 percent or
57 billion rupees ($517.8 million) of the market capitalisation,
ended flat at 7.25 rupees, before the release.

The company said results were hit by a rise in costs, driven
mainly by inflation, up 24 percent year on year. Energy and
network costs also rose 48 percent from a year ago.

`The cost structure of the company is very high,` Mohandas
Thangarajah, an analyst from First Guardian Equities in Colombo
said. `Its telecom sector is not making profits, while its pay
TV and broadband will need more time to make profits.`

Net profit plummeted 78 percent in the April-June quarter,
while it fell 54 percent in the January-March quarter.

Shares in Dialog Telekom hit a life low of 6.50 rupees on
Oct. 8, a drop in half of its value since it reported the
second-quarter fall in profits in August.

It had already lost its status as the biggest company on the
exchange by market capitalisation on Sept. 18.

The company cut tariffs and introduced low-cost mobile phone
packages to encourage customers to talk more amid high inflation
and declining consumer spending power.

Chief Executive Officer Hans Wijayasuriya said in October
the firm had no plans for a share buyback.

He blamed high interest rates, high inflation and a global
credit crunch for the share`s fall, as well as squeezed profit
margins.

The company had earlier said renewed fighting between the
state and Tamil Tiger rebels has led to a drop in tourism, which
in turn had affected roaming revenues.

Business has also suffered from the military switching off
sections of the network in conflict areas from time to time.

With more than 5 million subscribers, Dialog still has the
largest share of Sri Lanka`s mobile market.

Rivals include Sri Lanka Telecom Ltd.`s SLTL.CM Mobitel,
Hutchison Telecommunications International Ltd. (2332.HK: Quote, Profile, Research, Stock Buzz) and
Millicom International Cellular SA (MICC.O: Quote, Profile, Research, Stock Buzz), while Bharti Airtel
(BRTI.NS: Quote, Profile, Research, Stock Buzz) is to start operation by the end of this year.

(Edited by Bryson Hull and David Cowell)