SLT privatisation amidst election rhetoric

The future direction of the State-owned telecom operator – Sri Lanka Telecom (SLT) – has again become a main talking point amidst the Presidential election. SLT dominated the news headlines last weekend when the media reported that NPP Leader Anura Kumara Dissanayake (AKD) had remarked that his party was opposed to selling SLT and instead they would be bringing a foreign investor to manage it. The modality by which a foreign investor will be brought has not been disclosed. Does he intend to bring the particular investor via a management fee/service contract?

Interestingly, last February, at the NPP Banking and Finance Sector Stakeholder Forum held in Colombo, the Presidential aspirant declared the NPP vehemently objected the privatisation of the telecom utility as they felt SLT’s role was critical towards developing the requisite infrastructure for Sri Lanka to progress in the IT sector. Even then IT professionals questioned the stance of maintaining SLT as a State enterprise on the basis of ensuring the development of the IT sector and his explanation was not endorsed by the industry experts.

In 1997, a 35% stake in the State entity was sold to the renowned Japanese telecom giant Nippon Telegraph & Telephone Corporation (NTT) together with its management control for a period of five years. The arrival of dynamic Japanese management with NTT significantly improved the performance of the formerly lethargic Government entity. The sale took place at the height of the civil war and no silly arguments were expressed claiming that transfer of full management control together with partial ownership would endanger the island’s national security.

As expressed by this column on numerous occasions, the Government running commercial enterprises is a medieval concept, but the islanders who lack economic literacy are still arguing in favour of business enterprises being driven by the Government when nations like India, which adopted market-oriented economic policies long after Sri Lanka, has accepted privatisation as the way to go. The transfer of SOEs to private ownership disappeared from the policies of successive governments from 2004 onwards, when the Ranil Wickremesinghe-led UNP administration was replaced by the JVP-inspired UPFA dispensation. Over the last two decades, sans privatisation, taxpayers have become poorer while the losses of SOEs have piled up. A careful observation would reveal that SOEs solely exist for the enrichment of its employees and not for the benefit of the general public.

Many observers have pointed out that SLT is not performing to its true potential while it has again become inefficient as a result of returning to the Government’s operational control after the expiry of the management agreement with NTT. For the financial year 2023, it suffered a loss of Rs. 3.92 billion and for the first six months of 2024, it has posted a loss of Rs. 323 million. It is reported there are 21 trade unions within the telecom operator, causing serious obstacles to the effective functioning of the organisation. Although the market-leading mobile network serves almost 17.5 million subscribers with about 3,500 employees, SLT has around 8,000 employees to serve roughly 8.5 million subscribers through its mobile network – Mobitel. 

SLT’s operational and financial flaws demonstrate that SOEs cannot be reformed through half-hearted measures like listing in the stock exchange or granting management control to a foreign entity as suggested by AKD. The agency conflict is quite acute in State enterprises compared to private companies and the SLT too had been adversely affected from the selfish motives of its past chairmen who enjoyed patronage from the political authorities that appointed them.

Governments in highly developed economies like Australia and the UK do not own telecom companies and there is no reason why Sri Lanka should not follow suit. The acquisition of SLT by a prominent foreign telecom corporate, though it may not be favoured by trade unionists with vested interests, would undoubtedly bring a wide range of benefits to the economy at large.