Dialog: A failure Brand?

It is simple ” Whoever trying to show a big picture without future potential will ultimately fail”. A good performer does not talk much. These statement has become true in the case of dialog telecom in Sri Lanka.

According to my best of knowledge, it is the only company has promoted its IPO in an exclusive manner by running out huge promotional campaign. I don’t understand the logic behind the promotion of IPO. Its obvious that if a company performs well, people definitely going to buy your shares. The only requirement is issuing a prospectus as per the company law. I still remember how rich the dialog’s prospectus at the time of IPO. Lot of Sri Lankan became shareholder for the first time due the massive promotion of dialog. Still the Dialog holds the third position in terms of market capitalization.

JOHN KEELLS HOLDINGS PLC 79,673,859,875.00 9.91(%)
SRI LANKA TELECOM PLC 75,804,120,000.00 9.43(%)
DIALOG TELEKOM PLC. 42,754,836,626.25 5.32(%)
COMMERCIAL BANK OF CEYLON PLC 33,484,706,437.00 4.16(%)

All these promotional strategy is by the direction of the malayshian parent company, they have cultivated maximum from the dialog. They have gone back to malayshiya with a huge profit in the name of share premium. All are the earning of poor sri lankans. Imagine how much they would have earned at share prices were 26. When they founf dialog is going bad and strucggling in competition they simple transfered their ownership. Now another owner bought the company at the time the reccession is peak. Some times they too dispose thier holding when market prices turned better by making huge profit.Who knows? ultimately these foreign players making Dr.Hans as a innocent victim of all issues.

Because of their heavy promotion a share having a nominal value of two rupees went in to twenties on the first day after it went public. The business minded traders have turned their money into gold through that occasion. But people who turned due to promotion and bonded emotionally with dialog are still have not recovered their cost.

Even share prices went to Rs.3.60 at the peak of the recession. But everybody felt dialog has the potential to fight back and believed Dr.Hans can ride the horse in right direction even though there is high completion.

Despite all hopes, Dialog made a announcement today(14.08.2009) which clearly establishes the weakness and inefficiencies. Here the announcement.

Corporate Disclosure
14th August 2009
“Pursuant to Rule 8.1 (a) of the Listing Rules of the Colombo Stock exchange, we write to inform you that, the Board of Directors at its meeting held today resolved to undertake a one-off network modernization step aimed at converting its Core Network to 100% Next Generation Network (NGN) formulation.

NGNs provide a compelling opportunity to de-scale operating costs by a significant margin, while also reducing future capital expenditure and carrying values of core network assets due to the 80% over reduction in per-subscriber core network capital costs.

The decision to undertake such one-off modernization was based on the fact that the modernisation of Dialog’s core network is slated to deliver a positive impact of Rs. 1.5bn. to the Company’s P&L on an annualised basis going forward. The case for modernisation is further supported by an Internal Rate of Return (IRR) in excess of 100% and a payback period of less than one calendar year from the point of commissioning. Dialog commenced its transition to NGN in 2006, enabling the Company to complete a 100% modernisation with a modest incremental investment of Rs 485Mn (USD 4.2 Mn).
The decision to modernize specific elements of the Core Network requires a provision for impairment of legacy network elements. Accordingly, the Company has provided for an immediate impairment charge amounting to Rs. 6,031,620,039 in the quarter ended 30 June 2009.

My Questions

They said they are aimed at converting its Core Network to 100% Next Generation Network (NGN) formulation. So do they into a 100% outdated or back generation technology as at today?

How a Next Generation Network (NGN) formulation can reduce 80% over reduction in per-subscriber core network capital costs? It is a reliable statement or just to retain the stakeholder?

Wow look at these nice words, its amazing “The case for modernisation is further supported by an Internal Rate of Return (IRR) in excess of 100% and a payback period of less than one calendar year from the point of commissioning.” This is the first time I am hearing a concept of IRR with 100% and payback with in a year. Is that certain? Don’t you feel these are false promises? Can anyone give a practical example for above situation any ware in the world?

Look at the final words from a No 1 branded company some time before “The decision to modernize specific elements of the Core Network requires a provision for impairment of legacy network elements. Accordingly, the Company has provided for an immediate impairment charge amounting to Rs. 6,031,620,039 in the quarter ended 30 June 2009”

This is complete nonsense to accept that a leading company having 6 billion worth impairment loss. Then why a young company investing in 6 billion worth technological assets which can be out dated. I am accepting the fact in technological business its certain. But impairment for 6 Billion, wasn’t it too over for a company running in public fund. Isn’t it disclosing an inefficient situation?

The only reason they are going for such huge investment is, they cant compete in the market with jaint regional players. Any way they have to bring down the cost to retain the market. Their cost reductions pricing strategies lead them the 9 billion loss. so now they transfering every inefficiency to the shareholders.

Ok, anyway I still have believe in Dr.Hans. Can he do some amazing thinks within the only company which announces VRS schemes other than government of Sri lanka.