...Negative Outlook Maintained: Fitch Ratings has kept its negative outlook on Sri Lanka's telecommunications sector, based on uncertainty over proposal to increase taxes that are likely to lower profitability and increase leverage for telcos, if implemented. The original proposals were to impose a one-off "super gains" tax of 25% on profits, and a tax of LKR250m (USD1.8m) on each telco; they also shift the burden of a recurring telecom levy of 25% and 10% on prepaid voice and data revenue, respectively, onto telcos from consumers. These tax proposals were originally introduced in February 2015, and the government withdrew only the recurring taxes in October 2015. The government may still re-introduce recurring taxes in part, or full, in 4Q15. Taxes Would Squeeze Margins: We believe the operating EBITDAR margin of Sri Lanka Telecom PLC (SLT) and Dialog Axiata PLC (Dialog) will fall to 26% and 24%, respectively (year-to-date 2015: 31% and 33%), if the recurring tax were reintroduced. Changing...
