• Industrial action demanding December bonus impacts Sri Lanka Telecom operations and clients
• Management says SLT loss making and heavily in debt hence cannot afford bonus
• SLT CEO issues memo to staff detailing the challenges and efforts put in place for turnaround

Industrial action by trade unions demanding December bonus amidst current financial challenges has impacted operations and clients of Sri Lanka Telecom (SLT).

Unions-influenced workers have struck work for the second day as enterprise customers complained about lags in SLT services. Payment of one month December bonus is among demands made by the unions which also want recent Government nominees on the Board being removed and sale of Treasury stake suspended.

Industry sources said SLT has a dozen unions and latest industrial action does not augur well for the on-going efforts to divest State ownership. “It is certainly a big blow for the confidence of prospective investors,” they said, adding that trade unions had made unfair demands in terms of bonus.

Industrial action is despite SLT CEO Janaka Abeysinghe on Monday explaining to Union representatives about the organisation’s financial challenges.

It was pointed out that although SLT achieved an Operating Profit up to Q3 2023 similar to 2022, there was no basis for paying a bonus for the year 2023 when the Profit Before Tax up to the third quarter of 2023 shows a loss. The latter is due to the unfavourable situations and actions taken in the past.

SLT is also saddled with long-term and Short-term loans of over Rs. 71 billion, and over

Rs. 80 billion at Group level including Mobitel.

In a memo to the staff SLT CEO emphasised that during the past two years, Sri Lankan companies including SLT Mobitel Group have been facing challenges due to rupee devaluation, increase in inflation, increase in Tax and levies, increase in interest rates, increase in cost of electricity and fuel, increase in Annual Maintenance Cost (AMC) etc.

SLT Mobitel, as any other telecom operator, should make significant investments in network expansions and technology upgrades to be competitive in the market. Borrowing to fund these projects has increased our costs.

Rising interest rates has also resulted in increased cost of servicing debts taken during the past. Some of the large investments on infrastructure projects undertaken in the past have not given adequate returns to recover our investments. Due to these factors our operational costs have increased significantly compared to growth in revenue.

Further, SLT employee cost is 24% of the revenue and 37% of OPEX, whereas for Mobitel and many other Telcos it is single digit as a % of revenue. It is imperative to rectify this issue by improving staff efficiency and productivity. Needless to say, irrespective of the economic crisis SLT’s Operations remain very inefficient. Prior to 2022, Mobitel was a significant contributor that funded SLT. Mobitel, due to internal mismanagement, has incurred losses in 2023.

Further, the introduction of a 2.5% social security levy, increase of VAT rate from 8% to 15%, increase of corporate tax rate from 24% to 30%, increase of spectrum fees by 20% during 2023, have adversely impacted Company profits. In addition to the high inflation that increased to around 70%, Government increase of taxes and levies impacted the customer affordability. Due to the economic downturn, customers were forced to reduce their spending on our services and also resulted in an increased customer churn. As a result, our expected revenue growth has slowed down. The low revenue growth and relatively higher increase in costs have ultimately impacted our profitability.

“Before I became the CEO in 2022, the company had committed long term investments in large capital-intensive projects such as FTTH, LTE, Mobitel building in Welikada etc. None of these investments have yielded positive returns as expected and have a huge drain on our profitability. Therefore, this situation may have occurred even if there was no economic crisis. Further, the economic downturn has aggravated the situation and that has caused these projects to become significantly inefficient and ineffective in the present context. Hence, the accountability vests with all of us to tum around the company to more favourable levels,” said SLT CEO Abeysinghe in his memo to the staff.

In addition, due to the long-term investments done prior to my tenure as CEO (before 2022), the Company had to incur high depreciation costs, high borrowing costs, high cost of supplies etc. that has negatively impacted the present Company profits. Further, Company funded dealer commission scheme in Mobitel has negatively impacted the Mobitel profits. This has resulted in non-payment of dividends by the Mobitel to SLT that they used to pay in previous years, further impacting the SLT profits.

The CEO also listed the many actions to rectify this perilous situation and turnaround the company. Therefore, we are confident that the organisation will benefit from those resulting in much better financial results in 2024.

Some of these key initiatives are as follows.

• Redirecting investments in revenue generating projects with short term pay back periods and profitable projects rather than non-revenue generating projects

• Improving the FTTH port utilisation by investing in areas where there is a demand for the FTTH service, while giving highest attention to profitability. Stopped the FTTH port developments except in areas with demand.

• Established a customer retention manager in each Regional Manager office to manage chum

• Taking action to procure inter-operable third-party FTTH ONTs, that will reduce the ONT cost by approximately 50%, and will avoid vendor lock-in

• Identifying cost drivers and appointing cost owners to manage costs and minimise wastage

• Reviewing unit rate contracts to reduce the effective rates by 30 to 35%

• Improving efficiency of procuring equipment and services to obtain best price

• Appointed a cross-functional team to Benchmark global prices to get the best price in procurements

• In-sourcing of AMC activities thereby reducing impact due to devaluation

• Established SLT Mobitel Unified organisational structure to optimise costs and increase efficiencies of the company and the Group

• Reviewing the sales incentive schemes to fix any shortcomings

• Promoting a performance-based culture

• Taking steps to improve the financial position of SLT. The restructuring proposals submitted by SLT on the company debts have been approved by the relevant Banks. Work has already commenced in this regard and is expected to conclude by early 2024. This will improve the liquidity position of the company.

• Established Digital Service Centres in OPMC, to provide digital services to Enterprise and SME customers, and save on support costs paid to Systems Integrators

The CEO recalled that during the meeting some non-executive trade union representatives wanted to know why SLT doesn’t pay a Bonus when there is a provision made to pay Bonus.

“We have explained that we have made provisions at the beginning of the year anticipating that we will make profits. If we have made profits, then we have to pay a bonus and for that we need such a provision. We have clearly explained to them that having a provision does not guarantee the payment of a bonus. Bonus is not a mandatory payment and will be paid at the discretion of the Board and the management based on the company’s profitability. Further, they have voiced that they are aware of corruption and malpractices that took place in huge investments that have happened in the past so many years. I am unable to comment on this, but however it is a fact that these investments are not making the expected positive returns. We have established a whistle-blower unit for the employees, contractors, the public etc., to report such malpractices and corruption, if any,” the CEO said.

“We have explained to these trade union representatives that the management is sensitive to the economic hardships that the employees are going through. Therefore, the management will pursue a mechanism to give some relief to the employees to overcome their economic hardships. However, when we try to alleviate hardships of employees we need a clear demonstration of hard work, efficiency and effectiveness by the employees,” Abeysinghe added.

Staff were told that corrective action being taken may be painful to all in the short-term, and will affect certain groups who may not be working or have not worked for the best interests of the company. They will try to muster your support to destabilise the performance of the company and to achieve their ulterior motives. The employees should not get carried away by the various incorrect claims made by various parties, to achieve their own individual and political agendas, risking the company’s future and welfare of all employees. Management reiterates that it will not hesitate to take necessary disciplinary actions on any employee who violates the disciplinary procedure and violate any directives given in CEO’s Circular No: 69/2023 on Adhering to Company Procedures with regard to spreading false information and CEO’s Circular No. 94/2023 on Maintaining Uninterrupted Operations and Customer Services.

Going forward we all have to understand that things have to be different to what we practiced in the past. Mobitel is a 100% owned company of SLT and SLT-Mobitel will move towards one organisational structure. Any industrial actions by even a minority will reflect the business of SLT Mobitel and in turn will affect salaries, benefits and incentives for all staff.

We are determined to put the company on the right track and we wish to let you know that we expect your support and cooperation at this time of difficulty. Management will not tolerate the various actions taken by a few individuals that are harmful to the business and reputation of SLT-Mobitel Group, detrimental to the progress of the company, disturbs and disrupts the smooth operation of the company, and harmful to the employee’s future.

SLT management trusts that all staff at SLT will avoid engaging in such harmful and disruptive activities detrimental to the organisation’s smooth operation and their own future. Such harmful activities will result in company facing further challenges that will benefit our competitors and further reduce the growth of our company.

Each day we have internal aggravation we lose business, and the competition grows. It is you who will ultimately have to face the consequences which will lead to losing your hard-earned benefits. As such, in the best interest of the company and its employees, the management stresses that it will not tolerate any harmful actions taken by a few individuals to achieve their individual and political agendas and will not hesitate to take disciplinary action against them. Any trade union actions will not stop us from achieving our company objectives.

We appreciate your support and co-operation to tum-around SLT Mobitel in the coming months. In order to support the efforts taken by the Board and the management to provide you with some relief to overcome the present economic hardships, the management requests all employees to desist from indulging in any actions that are detrimental to the smooth operation of our business and operations.