It was announced back in April 2018. Now it’s official. Hutch Lanka and Etisalat Lanka have completed their merger. In case you’re lost, Hutch Lanka and Etisalat Lanka announced that they would enter into an agreement to merge their mobile telecommunications businesses.
As per the announcement made yesterday, Emirates Telecommunications Group Company completed the sale of its 100% stake in Etisalat Lanka to Hutch Lanka. As such, CK Hutchison Holdings Limited, which is the parent company of Hutch Lanka will have a majority stake of 85%. Etisalat Group will own the remaining 15% of Hutch Lanka.
Why would Hutch and Etisalat do this?
Well, for starters, there’s some stiff competition in the local telecom market. We have five telecom operators prior to this merger. They were: Dialog, Mobitel, Hutch, Airtel, and Etisalat. Due to the stiff competition between these operators, the easiest way for them to obtain new customers would be to expand coverage. This, in turn, means investing in network infrastructure such as cell towers. But this is not exactly cheap.
There are heavy costs for setting up cell towers or any other form of network infrastructure. Once these towers are set up, recovering the cost of these would take a long time. Sri Lanka is a small market with a low population density. This is why outside urban centers, you might find it challenging to get any form of network signal.
Added to that, the Government of Sri Lanka also added a levy on cell towers of LKR. 200,000 per tower. Facing these heavy costs, telecom operators have opted to share infrastructure amongst themselves as a means of reducing costs. Nonetheless, they still face a challenge with prices at low unsustainable levels. This was following the entry of Airtel into the market in 2009, which resulted in the TRCSL mandating minimum prices for telecom services.
As we learned previously from Dumindra Ratnayake – Former CEO of Etisalat, running a telecom operator is challenging in Sri Lanka due to the above-mentioned prices and the continuous need for investments. As he describes it, “You can cover the entire country with 3G. But then 4G comes along and before you’re done 5G is here.”
What does it mean for you?
In recent times, Dialog and Mobitel have been ahead of the pack. As such, they’re the only telecom operators that offered 4G services to mobile consumers. And while Dialog and Mobitel were on the road to 4G and 4.5G, Hutch, Etisalat, and Airtel were still stuck on 3G. In fact, as of this moment, Airtel and Etisalat are still on 3G. Interestingly, there was an agreement signed in 2013 for Etisalat to bring 4G to Sri Lanka, but it seems that never made it to mobile consumers.
But earlier this year, Hutch, launched 4G. Needless to say, the company is late to the party. But Thirukumar Nadarasa – CEO of Hutch Lanka explained this decision saying, “Although 4G network services have already been launched in Sri Lanka by other operators several years ago, its mass adoption till recently has been limited due to several factors including the availability & affordability of 4G phones and the requirement of applications that really needed 4G (instead of 3G) bandwidth”.
He added that “Both these factors have been overcome. Almost 100% of new smartphones offered in the Sri Lankan market are 4G enabled and the increased use of high bandwidth video services may require 4G. The 4G market is, therefore, lifting off”.
What does the merger hold for the future?
Well, that’s pretty much the all-important question. What would happen to existing mobile network packages? Would they go according to Hutch rates or Etisalat rates? Would they meet in the middle and form new packages? When will Etisalat customers get 4G? These are all questions that we need answers for.
According to Fitch, the merger would create the third largest telecom operator in Sri Lanka amassing approximately 10-12% of the market share. This puts it ahead of Airtel Lanka. Furthermore, the newly merged company would also have access to the 50MHz spectrum and 15MHz of the 900MHz band. In other words, they get access to better spectrum that can offer better data speeds and call quality.
Update [23rd July 2019]
As for what the new merger aims to do, Hutch recently announced what’s happening on that front at their press conference at the Hutch engineering Complex in Walpola.