SRI LANKA TELECOM PLC Financial Summary
SLTL.N0000 · SRI LANKA TELECOM PLC · Telecommunication Services · 2026-08-17
Sri Lanka Telecom PLC Financial Summary and Investment Analysis
Company Overview
Sri Lanka Telecom PLC is an integrated telecommunications and digital-services provider spanning fixed voice, fibre broadband, IPTV, mobile voice/data, enterprise connectivity, cloud, data centres, cybersecurity, IoT and international connectivity. Strategic investment is increasingly directed toward fibre, 5G, cloud/data-centre infrastructure, AI-enabled services and international digital connectivity. Commercial 5G was launched during 2025 following spectrum investment, while international infrastructure includes multiple submarine cable systems.
The Group is transitioning from a traditional telecommunications operator toward a broader technology-services model. Key periods covered: Q1 2024–Q2 2026, CY2024, CY2025, with market information through 2026-08-17.
Executive Overview
Sri Lanka Telecom PLC has moved from weak profitability in early 2024 into a substantially stronger earnings phase. CY2025 Group revenue increased only 2.7% to LKR 114,176 Mn, but gross profit increased 15.2%, operating profit 26.9%, profit before tax 87.6%, and profit after tax 221.0% to LKR 10,014 Mn. The improvement came primarily from lower direct costs, recovery in mobile operations, fibre/broadband growth and falling finance costs rather than high headline revenue growth.
Momentum strengthened further in H1 2026: revenue rose 11.1% YoY, operating profit 34.6%, PBT 51.4%, and PAT 54.4%. Q2 2026 PAT reached LKR 3,533 Mn despite revenue being slightly lower than Q1 2026, indicating further margin expansion.
Balance-sheet leverage and liquidity have also improved significantly, although large future network investments, regulatory exposure, low public float, competitive pressure and technology/cybersecurity risks remain important considerations.
Financial Performance
Revenue and Profitability Trends
*Group figures; LKR Mn. Margins calculated from reported figures.*
| Period | Revenue | Gross Profit | Net Profit/(Loss) | GP Margin | NP Margin |
|---|---|---|---|---|---|
| Q1 2024 | 26,929 | 10,775 | 156 | 40.0% | 0.6% |
| Q2 2024 | 26,618 | 10,134 | (479) | 38.1% | (1.8%) |
| Q3 2024 | 28,543 | 12,310 | 1,093 | 43.1% | 3.8% |
| Q4 2024 | 29,058 | 12,920 | 2,350 | 44.5% | 8.1% |
| Q1 2025 | 27,851 | 12,822 | 2,001 | 46.0% | 7.2% |
| Q2 2025 | 27,316 | 13,055 | 2,275 | 47.8% | 8.3% |
| Q3 2025 | 29,479 | 13,870 | 2,188 | 47.1% | 7.4% |
| Q4 2025 | 29,530 | 13,405 | 3,550 | 45.4% | 12.0% |
| Q1 2026 | 30,797 | 14,627 | 3,068 | 47.5% | 10.0% |
| Q2 2026 | 30,517 | 15,062 | 3,533 | 49.4% | 11.6% |
The clearest trend is margin-led earnings growth. Q2 2026 revenue grew 11.7% YoY, while gross profit rose 15.4%, operating profit 30.4%, PBT 47.8% and PAT 55.3%. QoQ revenue slipped 0.9%, yet PAT increased 15.2%.
Q4 2025 PAT was unusually high relative to PBT because the quarter contained a LKR 1,690 Mn income-tax reversal. Consequently, the Q4 2025 net margin and any trailing earnings valuation using that quarter should be interpreted cautiously.
For CY2025, broadband revenue increased to LKR 55,417 Mn from LKR 47,138 Mn, while international settlements declined to LKR 8,216 Mn from LKR 11,752 Mn. Domestic revenue was LKR 104,379 Mn versus international revenue of LKR 9,797 Mn, showing continuing domestic concentration.
H1 2026 Growth
| Metric | H1 2025 | H1 2026 | YoY |
|---|---|---|---|
| Revenue | 55,167 | 61,314 | +11.1% |
| Gross profit | 25,877 | 29,689 | +14.7% |
| Operating profit | 7,551 | 10,165 | +34.6% |
| PBT | 5,651 | 8,555 | +51.4% |
| PAT | 4,276 | 6,601 | +54.4% |
| Net margin | 7.8% | 10.8% | +3.0 pp |
Fixed ICT external revenue grew 8.8% to LKR 34,898 Mn and mobile revenue grew 12.6% to LKR 25,276 Mn. Segment PBT before eliminations rose approximately 66.5% for fixed operations and 60.4% for mobile operations.
Balance Sheet Analysis
| LKR Mn | 2024-12-31 | 2025-12-31 | 2026-06-30 |
|---|---|---|---|
| Total assets | 239,161 | 234,350 | 240,191 |
| Current assets | 44,714 | 46,268 | 54,266 |
| Equity | 91,475 | 100,929 | 106,273 |
| Total liabilities | 147,686 | 133,421 | 133,918 |
| Current liabilities | 54,817 | 50,574 | 47,465 |
| Cash | 8,546 | 9,935 | 12,040 |
Equity increased 10.3% during CY2025 and another 5.3% by 2026-06-30. Reported borrowings excluding leases/vendor financing declined to LKR 62,516 Mn by June 2026 from LKR 68,449 Mn at December 2025. However, vendor financing increased from LKR 776 Mn to LKR 3,364 Mn, partly offsetting conventional debt reduction.
The June 2026 current ratio was approximately 1.14x, compared with 0.91x at CY2025; reported quick ratio improved to 1.09x, while debt/equity declined to 0.69x from 0.76x.
Cash Flow Analysis
| LKR Mn | CY2024 | CY2025 | H1 2025 | H1 2026 |
|---|---|---|---|---|
| Operating cash flow | 22,931 | 39,977 | 16,333 | 21,564 |
| PPE capex | (23,108) | (11,591) | (6,645) | (9,622) |
| Intangible capex | (2,557) | (5,657) | (273) | (152) |
| Derived FCF* | (2,734) | 22,729 | 9,415 | 11,790 |
*Operating cash flow less PPE and intangible purchases.
CY2025 operating cash generation increased 74.3%, turning the simplified free-cash-flow measure strongly positive. H1 2026 operating cash flow increased another 32.0% YoY and derived free cash flow 25.2%. Financing cash outflows in CY2025 primarily reflected debt repayments and reductions in vendor financing.
Future capital requirements remain substantial: at 2026-06-30, approved PPE expenditure included LKR 17,909 Mn already contracted and LKR 22,116 Mn approved but not yet contracted.
Key Financial Ratios and Growth Indicators
| Indicator | CY2024 | CY2025 / Latest |
|---|---|---|
| EPS | LKR 1.73 | LKR 5.55 |
| ROA | 1.30% | 4.27% |
| ROE | 3.41% | 9.92% |
| Operating margin | 10.07% | 12.44% |
| Debt/equity | 0.99x | 0.76x; 0.69x Jun-26 |
| Interest cover | 1.46x | 2.39x; 3.29x H1-26 |
| NAV/share | LKR 50.61 | LKR 55.85; 58.81 Jun-26 |
| DPS | LKR 0.25 | LKR 0.75 |
Revenue CAGR from CY2023 to CY2025 was approximately 3.6%, while profit CAGR is not meaningful because CY2023 was loss-making. H1 2026 EBITDA calculated from operating profit plus depreciation/amortisation was approximately LKR 24.7 Bn, implying a margin near 40.2%, versus approximately 39.4% in H1 2025.
At the 2026-08-17 price of LKR 88.00, price/NAV based on June 2026 NAV is approximately 1.50x. Derived trailing-four-quarter EPS is about LKR 6.84, implying a simple trailing P/E around 12.9x, although this is flattered by the Q4 2025 tax reversal.
Economic and Market Context
Management attributes part of the recovery to Sri Lanka's stabilised macroeconomic environment, relatively stable currency and easing interest rates, which improved cost predictability and financing conditions. The sector nevertheless requires continuous capital investment while facing rapid technological change, spectrum costs, competition and cybersecurity threats.
Future Potential and Outlook
Growth avenues identified in the reports include commercial 5G monetisation, higher-value mobile customers, fibre expansion, converged fixed/mobile/TV products, cloud and data centres, cybersecurity, AI, IoT and international ICT services.
SEA-ME-WE 6 provides additional international capacity, although the annual report contains differing timing references: one section expected commercial operation around mid-2026 while an infrastructure table indicates commissioning in Q1 2027. Actual commissioning progress therefore warrants monitoring.
The strongest evidence supporting these strategies is currently operational rather than purely aspirational: H1 2026 shows simultaneous double-digit revenue growth, margin expansion, stronger cash generation and improvement in both fixed and mobile profitability.
Risks and Challenges
- Capital intensity: continued fibre, 5G, submarine cable and digital infrastructure investment can pressure free cash flow.
- Regulation: regulatory risk remains classified as High, although management states it declined somewhat following 5G spectrum allocation and improved compliance.
- Competition: new operators, pricing pressure and changing customer behaviour could affect market share and ARPU.
- Technology/cybersecurity: rapid obsolescence, cyberattacks, privacy obligations and network resilience require continuing investment.
- Execution: international services remain comparatively small and CY2025 international revenue declined.
- Governance/compliance: full compliance with the National Procurement Policy was not achieved, and minimum-public-holding requirements remain unmet.
CY2025 received an unmodified audit opinion; revenue recognition and capitalisation of network assets were significant audit-focus areas. Directors maintained the going-concern basis.
Shareholder and Corporate Information
At 2026-06-30, the Secretary to the Treasury held 50.23%, Global Telecommunications Holdings NV 44.98%, Employees' Provident Fund 1.40%, and Sri Lanka Insurance Corporation Life Fund approximately 0.98%. The two controlling shareholders therefore own 95.21% collectively.
Public holding was only 4.78%, involving 14,874 public shareholders and a float-adjusted market capitalisation of LKR 7.59 Bn. Sri Lanka Telecom PLC remained below the CSE minimum public-holding requirement of 10%. Directors reported no shareholdings at June 2026.
The CY2025 dividend increased to LKR 0.75/share from LKR 0.25 for CY2024 and was paid on 2026-06-26. The share closed CY2025 at LKR 82.50, Q2 2026 at LKR 87.90, and 2026-08-17 at LKR 88.00. Across the latest 90 trading sessions it gained 7.84%, within a LKR 79.30–91.70 range.
Investment Decision Indicators
Strengths
- Sustained profitability improvement from Q2 2024 onward, with record quarterly margins in Q2 2026.
- H1 2026 PAT growth of 54.4% and stronger contributions from both fixed and mobile operations.
- Improving leverage, interest cover, liquidity and equity.
- Stronger operating cash generation and positive free cash flow.
- Strategic exposure to fibre, 5G, cloud, data centres and digital services.
Weaknesses
- Revenue growth historically slower than recent profit growth.
- Capital-intensive operating model.
- International revenue declined in CY2025.
- Extremely concentrated ownership and low public float.
- Q4 2025 earnings benefited materially from a tax reversal.
Opportunities
- Monetisation of commercial 5G and fibre infrastructure.
- Higher broadband usage and mobile ARPU.
- Enterprise cloud, cybersecurity, AI and IoT expansion.
- Greater utilisation of international submarine cable and data-centre infrastructure.
Threats
- Competitive pricing and technological disruption.
- Regulatory and spectrum-related changes.
- Cybersecurity and privacy incidents.
- Macroeconomic or currency deterioration.
- Heavy future capex reducing free-cash-flow conversion.
Overall Assessment
The reports show a material fundamental recovery rather than merely a revenue rebound: margins, profitability, cash generation, leverage and liquidity have all improved, and H1 2026 indicates that this trend continued after CY2025. The principal questions for an investor are whether double-digit 2026 earnings growth can persist once the Q4 2025 tax benefit rolls out of comparisons, whether 5G/fibre investments can generate adequate returns, and whether cash generation can remain strong through the next capital-investment cycle.