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Summary of Project Information (SPI)

This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Project number11730
Project nameDialog GSM
CountrySri Lanka
SectorMobile Telephony
Department
Company nameDialog
Environmental categoryB
Date SPI disclosedMay 29, 2003
Projected board dateJune 10, 2003
StatusCompleted
Previous EventsInvested: August 5, 2005
Signed: January 23, 2004
Approved: June 17, 2003

Description of company and purpose of project
MTN Networks (Pvt) Ltd (known under its brand name (Dialog or the company) is Sri Lanka’s leading cellular service provider, offering a wide range of standard and value-added mobile services in the country. The project consists of the nationwide expansion and upgrade of Dialog’s GSM digital cellular network. Dialog was awarded a license in 1993 by the Government of Sri Lanka, through a standard application and award process, to provide GSM 900 mobile telecommunication services in the country.

The company is 100% owned by Telekom Malaysia Berhad (TM or the sponsor) through its international subsidiary Telekom Malaysia International Sdn. Bhd. (TMI). The company plans to expand its network to accommodate new subscribers and improve its nationwide coverage. It also intends to improve network quality and its customer service operations as the steep growth in subscribers during the past two years has caused congestion on Dialog’s network. The total project cost, covering the capital expenditure for the expansion and added working capital, is estimated to be $110 million.

The project will help improve telecommunications services in Sri Lanka by:
- providing much needed telecommunications infrastructure in previously underserved areas of the country (especially those areas previously closed due to civil conflict);
- providing a demonstration effect to foreign debt and equity providers who have been unwilling to invest as a result of civil conflict;
- supporting the liberalization of the sector and strengthening competition;
- providing new technologies to the Sri Lankan market; and
- upgrading service to existing customers.

Project sponsor and major shareholders of project company
The project sponsor is Telekom Malaysia, which is the leading telecommunications company in Malaysia and the 100% owner of Dialog. TM provides voice and data services through its fixed-line, mobile, and Internet subsidiaries. For the fiscal year ending 2002, TM posted net income of $278 million equivalent from revenues of $2.6 billion equivalent. TM is listed on the Kuala Lumpur Stock Exchange with a market capitalization of approximately $6.4 billion equivalent, with a majority being owned by the government. TM recently established TMI as an investment holding company for its international assets which include operations in South Africa, Malawi, Guinea, Ghana, Bangladesh, Sri Lanka, Thailand and Cambodia. TM provides financial, strategic management, and technical support to its portfolio companies through TMI.

Total project cost and proposed IFC investment
The total project cost is estimated at $110 million equivalent, covering capital expenditures and other investments. The proposed IFC investment is up to $50 million, comprised of a $40 million senior A Loan and a $10 million subordinated C Loan, both for IFC’s own account.

Location of project and description of site
The project is located in Sri Lanka, with company headquarters in Colombo. The company will expand its network throughout the island, in both urban and rural areas.

Project Development Impact and IFC's Role
The project will have significant development impact, including benefits for consumers and businesses in Sri Lanka. The Sri Lankan market for telecommunications is currently characterized by low national penetration, unreliable service with high fault rates, and long waiting lists for connection. At end-2001, fixed line penetration was estimated at only 4.3%, while wireless penetration stood at only 3.8%. In particular, it will:

- provide access and lower the entry barrier to affordable, high quality communications services;
- spur further competition; and
- foster economic growth.

IFC has a strong demonstration and catalytic role in this Project. On a broad scale, IFC’s involvement will show support for private sector participation in the Sri Lankan telecommunications sector and demonstrate to other potential investors that longer-term financing is available in Sri Lanka for such projects. Further and more generally, given the depressed state of the global telecommunications sector, support to and financing for emerging markets telecommunications projects is extremely important.

Environmental and social issues - Category B
This is a category B project according to IFC's environmental and social review procedure. Potential environmental and social issues include corporate environmental and social management systems to ensure compliance of project facilities with local requirements and World Bank policies and guidelines; tower site development, including site selection criteria, land acquisition procedures, access road construction, control of hazardous materials including liquid fuels, and development of previously undisturbed land; use of PCBs and CFCs; solid and liquid waste treatment and disposal; fire prevention and emergency response; and workplace health and safety and training programs. Dialog has prepared Environmental and Social Management Policies and Procedures for its operations to address the above issues and ensure compliance of Project facilities with local requirements and World Bank policies and guidelines.

To view the environmental documents for this project, click here


Location of environmental documents in locally affected community
- Head Office: 475, Union Place Colombo 02
- Colombo Arcade: 502, R A De Mel Mawatha, Colombo 03
- Meewella Branch: 329, Meewella Building, Galle Road, Colombo 04
- Crescat Service Centre: Level 2, Crescat Boulevard Shopping Mall, Colombo 05
- Nugegoda Arcade / Service Center: 84, Stanley Thilakerathne Mawatha, Nugegoda
- Wennappuwa Arcade: 225, Colombo Road, Wennapuwa
- Kandy Arcade: 105, Kotugoddella Veediya, Kandy
- Galle Arcade: 149, Colombo Road, Kaluwella, Galle
- Kaluthara Sub Branch: 189B, Main Street, Kaluthara South
- Badulla Branch: Block C, D, Unit 35, 37 & 39, Cocowatta Road, Badulla

To contact the project company, please write to:
Mr. Wan Zeidan Wan Mahyudin, General Manager - Finance
MTN Networks (Pvt) Ltd
No. 475 Union Place, Colombo 2
Sri Lanka
Phone: 94 1 678 700
Fax: 94 1 669669
Email: wanzaidan@dialog.lk

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