Dialog just reported a loss of 3 billion for the year ended 31st December 2008.
Jack Point seems to think the sole reason for it centred around the Blaster Package. But theres more to the story than just the blaster package, the blaster package was necessary to ensure the non erosion of Dialog’s customer base, which was essential taking immediate market implications into consideration.
While the Sri Lankan telco market has almost bordered on a price war over the past few months, this has been good for the population and the economy as a whole as it reduces communication costs and in turn increases productivity, providing a much needed boost to a relative downturn.
Also this has a penetrative effect where new users previously unable to afford a mobile subscription entering the fray, the blaster/ Upahara packages also have a potential to create a loyal customer base provided service levels are high and coverage problems are minimal. And however much Dialog is criticized for its bad customer service, they are still pretty much the best at it in comparison to their competitors. That may not be saying much, but it’s all that matters. Coverage wise Dialog is the undisputed leader with most of its competitors struggling to keep up, but Mobitel is an exception posing a strong challenge and will probably catch up sooner or later.
The problems rather, were caused by a too-big organization, it is a structural/ managerial problem rather than a marketing one. Dialog has a bureaucratic culture with a largely centralized decision making system with a maze of divisions and departments. They need to restructure fast to cope with the suddenly dynamic nature of the Sri Lankan Telco market. To streamline themselves to be able to swim faster. They are also laden with two subsidiaries that are yet to turn a substantial profit (as is evidenced by the disparity between the ‘group’ and ‘company’ losses) Dialog TV and Dialog CDMA, the latter which is seen to be an entry into a declining market by many pundits.
Jack Point also seems to think that the share prices of Dialog will drop to Rs. 2 but it’s my personal opinion that things won’t get that bad, but his reasoning is also realistic. If there is a selling scramble prices could drop to a previously unheard of level but i think the worst has already happened, most investors would not have been expecting a profit for the last quarter anyway, although the level of the loss incurred may have been un-anticipated.
A lot will depend onDialog’s relationship with its major shareholders and their level of confidence in Dialog’s ability to turn a proifit soon. Dialog still has a strong equity base with a relatively small portion of it actually public. This will squeeze demand and increase prices soon enough if they pick up their ball game. But they are notoriously resistive to internal change and it will remain to be seen of they can actually make a drastic pull-together.
2008 was one of the most volatile years the Telco market in Sri Lanka has ever experienced. Mainly due to the hype generated by Airtel. But as I blogged about it earlier, the panic attack generated by the threat of Airtel’s entry is yet to materialize and be justified.
In most stable markets around the world, in any industry, the market leader usually does not possess more than 30% share. Dialog currently possesses closer to 50% of the mobile market if my figures are correct. Any change that happens will be for the overall good of the industry and for Dialog as well, which will have to eventually stabilize with a leaner operation and a more profitable portfolio, in order to remain dominant.