Sri Lanka’s Dialog sees cost cutting benefits by fourth quarter
May 13, 2009 (LBO) - Benefits of Dialog Telekom’s six month long cost reduction program, including retrenching 280 staff, will start kicking in by the fourth quarter of this year, one of the Sri Lankan firm's top managers said.
The top celco’s revenues fell 6.9 percent in the December quarter last year owing to price competition ahead of the launch of Indian Bharti Airtel group’s local venture and depressed economic conditions when people took fewer calls.
Dialog’s December quarter loss topped a record 3.9 billion rupees forcing the celco to reduce costs.
“Our cost rescaling exercise started around Q3 last year and it gathered significant momentum in Q4 of last year… you will see the benefits of this by Q4 of this year,” says Nushad Perera, Dialog’s Chief Marketing Officer.
“Results can’t be delivered overnight, we have to renegotiate contracts and need to re-look at the supplier arrangements,” he told ETV’s Lanka Business Report programme in an interview.
Cost Cutting
The Dialog network, which connects 5.7 million mobile users islandwide, is however being expanded apace despite the downturn.
Through a combination of money from its parent Axiata (earlier called Telekom Malaysia International) and debt, Dialog plans to invest 160 million dollars widening its footprint and increasing its ability to accommodate more calls and texts at one time.
Last year the firm invested 140 million dollars.
While investments continue unabated the firm's ruthless cost cutting in the last few months grabbed headlines. A voluntary retirement scheme (VRS) offered to executive and higher grades has been concluded.
“We have 4,000 employees and 280 employees opted to take the VRS. There was no compulsion or force. On the 24th of April we completed the programme,” said Perera, who refused to reveal the monthly cost saved.
“We invested in human resources ahead of the curve, and if you see that the economy is in a storm, you have to take action,” he explained.
Overall group revenues, which include Dialog’s satellite TV business, fixed line and broadband, fell 2.4 percent in the December quarter.
Perera, who is also chief executive of Dialog TV, says flat revenues over the last several months triggered the cost capping.
Recently the firm gave up expensive office space at the World Trade Center, in Colombo’s main business district and floors at Access Towers and the HNB high-rise head office building.
Staff was relocated to existing facilities, asked to share workstations and even work from home.
Dialog's popular “Blaster” call package offering 1,000 outgoing minutes within the network was introduced to prevent users leaving the network and to attract new ones.
Perera says Dialog, which is the island's largest mobile network, could have fended off competition for longer without a price cut.
Phone bills of those who switched to the 1,000 minute outgoing call free Blaster package would have halved, according to Perera.
However, the incentives to tempt people to make more phone calls didn’t have the desired results.
“Obviously the consumer is not reacting in the way he used to. The consumer sees his mobile phone and television and thinks he can do without these things for awhile."
Despite the bullishness on investment Perera forecasts a modest five percent growth in mobile subscribers this year to six million.
Re-branding
The island's exchange rate policy shift this year has also affected Dialog’s budgeting.
“That is significant because most of our payments to outside parties are in dollars. Whether it’s a roaming call, international TV channel or bandwidth. Though we bill in rupees, the costs are incurred in dollars,” said Perera.
The firm, which used to be a technology leader before the competition caught up, now sees its higher service standards as the key differentiator.
“We haven’t downsized our service standards. Our call centers remain intact, our customer service points are expanding; we haven’t reduced any of our service points,” says Perera.
Dialog is one of five celco’s where Telekom Malaysia controlled Axiata has a majority stake.
A group wide re-branding of operations took place recently.
“’Dialog’ will also be a single ‘Dialog’. There won’t be GSM, CDMA, TV or Broadband suffixes. We believe that simplifying everything is the way forward. Everything is about having less clutter,” explains Perera.
Beside logo change reflected in its advertising the rest of the branding will be phased-in over time when facilities need upgrading.
Perera however emphasizes that “costs have to be incurred in order to continue delivering to the customer what he wants.”
"The success of the exercise can’t be measured overnight; these are all long term costs that we are attacking."
