Dialog Axiata is officially taking over Airtel Lanka

Dialog Axiata PLC, Axiata Group, and Bharti Airtel have signed a binding term sheet that will see Dialog acquire Airtel Lanka. The agreement is set to be a mix of cash and share swap where Bharti Airtel will gain a stake in Dialog that would reflect the fair value of Airtel Lanka as part of the acquisition.

The announcement was made public amid efforts by both parties looking to finalize the proposed transaction. The two companies are expected to enter into more definitive agreements with the necessary closing conditions, which include regulatory and shareholder approval considerations. Commenting on the matter, TRC’s Acting Director General Helarisi Ranatunga reaffirmed the regulator is yet to grant approval on the matter. Either way, Dialog states that it will announce any material development to the Colombo Stock Exchange.

Years in the making for Airtel Lanka

Both Dialog and Airtel have been in discussion over acquiring Airtel Lanka’s operations for a few years. As early as 2015, Dialog was reportedly in discussion to acquire Airtel Lanka, although no final deal was made. Three years later, talks between the two companies recommenced, and Ceylon Today reported that the negotiating price would be between USD 100 and 150 million. Although the deal is finally moving ahead in 2023, Time will tell if it will follow the same price range.

Interestingly, Airtel Lanka isn’t the first Lankan telco to sell off its operations in the country. Back in 2018, Etisalat and Hutch entered into a similar deal that saw the Etisalat Group sell its Sri Lankan operations to Hutchinson, the parent company of Hutch Lanka. The Etisalat Group gained a 15% stake in Hutch Lanka with the remaining majority stake under Hutchinson. Following the deal, Hutch Lanka expanded its operations, particularly with regard to 4G services.

Setting up for 5G

As of now, it’s unclear what the implications of Dialog’s takeover will be, though the telco will likely look to capitalize on Airtel’s assets in a bid to build its infrastructure and services for 5G in Sri Lanka. Airtel has already begun shutting down its 3G network to expand 4G. Last year, Dialog announced that the company is pumping USD 152.4 million to grow its 4G LTE network. The investment was also aimed at upgrading the IP and fiber networks, enhancement of big data analytics, and customer interaction capabilities, among others.

In any case, it’s worth noting that the recent economic crisis has taken its toll on the telco sector, especially around energy, forex, and other financial expenditure. Dialog Axiata PLC reported LKR 33.4 billion losses for the year ending 31 December 2022, a 296.3% year-on-year drop from 2021’s LKR 17 billion profit. Meanwhile, Airtel Lanka reported an LKR 23.9 billion loss for the year ending 31 March 2022, down from LKR 5.8 billion loss the previous year.

[Update 03/05/2023]: Added comment from TRC