$100m to expand Dialog Telekom's network

IFC, a member of the World Bank Group, will provide financing to Dialog Telekom PLC in Sri Lanka to expand its telecom network and build new telecommunication infrastructure networks.

The US$100 million package includes a US$ 70 million term loan facility and a US$ 30 million equity commitment via the acquisition of a 1.6 percent holding in Dialog from Telekom Malaysia (TM).

The loan facility will enable Dialog to improve public access to affordable and reliable telecommunication services by increasing capacity and extending coverage, particularly in rural and under-served areas.

The US$ 30 million equity commitment will also facilitate a potential improvement of liquidity for DIAL shares in the market. The funding will be deployed towards partially financing Dialog Group's "quadruple play strategy". A significant portion of the proceeds via the debt financing will be channelled towards augmenting coverage and capacity in the mobile network to consolidate and grow market leadership and product leadership in the segment.

Investments will also be made in the Fixed Line, Broadband and Digital Television media businesses.

These beachhead investments would establish a solid platform for the Dialog group to benefit from the burgeoning mobile market and from growth in relatively under-served segments such as Broadband Internet, Enterprise Solutions, Fixed Telephony and Digital media leveraging on infrastructure and convergent technology platforms.

The IFC South Asia Enterprise Development Facility (SEDF) 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 setting up of an independent Telecommunications Regulatory Commission, reflect the Sri Lankan government's strong commitment to liberalise 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 5.96 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.

Chief Executive Officer of TM International Sdn Bhd, Dialog Telekom PLC's majority shareholder, Yusof Annuar Yaacob - 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 the period 2006 to 2008."

Director and Chief Executive, Dialog Telekom, Dr. Hans Wijayasuriya, said, "We are delighted that IFC has reinforced its commitment to Dialog's growth story. Building on the relationship seeded in 2004 through a long term financing arrangement, we are strongly encouraged that IFC has increased its participation in Dialog in the form of equity and expanded debt financing.

We are also appreciative of the high degree of market sensitivity displayed by IFC in structuring a tailor made financing package to meet the company's needs and opportunities".

IFC Director for South Asia, Paolo M. Martelli, said, "IFC's support to Dialog, comprising 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."

IFC's Country Manager for Sri Lanka and the Maldives and Program Manager at SEDF, Gilles Galludec said, "We are excited by the company's strategy and its countrywide 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, said, "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."