Sri Lanka Telecom shares in demand

The share sale is Sri Lanka's biggest ever flotation

The sale of a 12% stake in Sri Lanka Telecom, the country's dominant fixed-line phone operator and biggest-ever stock market float, has met with strong investor demand.

The bank handling the sale, DFCC Bank, said the sale of 217 million shares at 15 rupees each could be completed by the end of the day

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The privatisation of the country's dominant fixed-line phone company is worth an estimated $34m to the government, which is hoping to raise $220m from asset sales this year.

But Colombo's all-share index finished slightly lower on thin trade as brokers said there was uncertainty about whether the initial public offering would be fully taken up.

The sale of shares can continue until 18 December, and are expected to start trading on the stock exchange later that month or in January.

Investor confidence

Market conditions have improved dramatically this year after a ceasefire was signed in February to end two decades of civil war with the Tamil Tigers in the north of the country.

On Monday, an international donor conference in Norway pledged up to $70m in reconstruction aid to support the peace process.

The tiny Colombo stock market has gained about 30% this year as peace talks encouraged foreign investors to return.

The sale is expected to boost the market's $1.6bn market capitalisation by more than 17%.

Good outlook

Compared to the float of China's fixed-line giant China Telecom, worth $1.43bn, the issue of Sri Lanka Telecom shares is tiny.

Japan's Nippon Telegraph and Telephone has a 35.2% stake and employees own 3.3% of the firm valued at $280m.

Sri Lanka Telecom is expected to post a 55% growth in net profit this year to 3.2bn rupees ($33m) and a 14% growth next year, according to research from local broker Asia Securities

Sri Lanka Telecom lost its monopoly on international calls in August, but still has 86% of the fixed-line and 15% of the mobile phone market.