The Mahinda (Rajapakse )’connection’ and a multi million dollar deal

Damning documents and details have emerged to prove that the government has yet again moved to place the interests of President Mahinda Rajapakse’s family before the state and the public, in a well thought out move to persuade state telecom operator, SLT to shell out millions of rupees to yet another family company.

The shocking details will show that the family company was set up for the specific purpose of securing a multi-million dollar deal with SLT while withholding vital approvals from SLT to force it to go into business with the Rajapakse family business.

If ‘Helping Hambantota’ was the Rajapakse family’s proverbial baby’s first steps into the world of nepotism and family corruption, the facts exposed on this page show that the President’s kin are long past crawling: they are now fit to run a marathon. And it shows that the ‘Helping Hambantota’ scandal has not brought a blush of shame to the collective cheeks of the Rajapakse family.

‘Help yourself while the spoon is in your hand,’ it appears has become the motto of the Rajapakse administration.

Here are the facts.

The board of Sri Lanka Telecom (SLT) of which the government has a majority stake, in its attempt to enter the WiMax broadband internet market, is this week slated to finalise the purchase of a 40% stake in privately owned Sky Network (Pvt) Ltd. The man behind Sky Network is none other than the nephew of President Rajapakse, Defence Secretary Gotabaya Rajapakse, Senior Presidential Advisor, Basil Rajapakse and Ports and Aviation Minister, Chamal Rajapakse. That man is their sister’s son, Himal Laleendra Hettiarachchi.

The decision has come following repeated requests from SLT to the Telecommunications Regulatory Commission to issue WiMax frequencies to the state telecom giant. SLT’s application to the TRC for Wi-fi frequencies has been collecting dust at the commission for years now, whilst private operators, Dialog Telekom and Suntel have been granted frequencies and moved full speed ahead with their operations.

Application on hold

SLT applied for WiMax frequencies around two years ago, along with the other major mobile operators. Senior SLT officials have told The Sunday Leader that despite repeated reminders and requests the TRC never acted on the SLT WiMax request, despite serving other operators and even new entrants to the field.

Whilst waiting for the TRC to authorise its access to WiMax frequencies, SLT conducted the necessary field trials to launch the new broadband service. But alas, as of June 2007, SLT had still not heard anything positive from the TRC, and with competitors Dialog and Suntel moving rapidly to bring their service offerings to the market, the state dominated company was once again on the verge of missing the bus.

Then came the messiah, brought to SLT’s board of directors by Board Paper PLC/T/65/2007 tabled on June 29, 2007 by Japanese CEO, Shoji Takahashi and government appointed Chief Corporate Officer (CCO), Pat Abayasekara.

The two top officials revealed to the board that “Lyca Group in UK which is a virtual operator in UK has approached SLT for business through its 95% owned subsidiary, Sky Network, which has been given WiMax frequency to operate islandwide.” They highlighted that SLT was “considering an acquisition strategy as an option” to get into the WiMax market. (See box for full board paper)

What is so special about Sky Network Private Limited that they should be able to acquire facilities from TRC when they were not even operating in Sri Lanka where SLT as the pioneer and custodian of the state’s telecom infrastructure, failed?

Rs. 20 company

When Sky Network was incorporated on May 9, 2006, it was effectively a Rs.20 company, with two initial shareholders, holding a single Rs.10 share, each. They were Hettiarachchige Sirisena of Horana and one K.M.S. Bandara of 175/2, Old Kottawa Road, Mirihana, Nugegoda. Please note that Mirihana is the Rajapakse neighbourhood which also featured prominently in the ‘Helping Hambantota’ scandal. Practically the entire family have their houses in Mirihana.

This Nugegoda address also serves as the registered company address of Sky Network Private Limited. The two subscribers were the initial directors of the company, and an electrical engineer, Ajantha Karunadasa of Gangodawila, Nugegoda was appointed to the ‘board’ on May 24, 2006.

By March 2007, this shelf company had been able to accomplish what giant SLT could not, having secured three separate frequency reservations from TRC in the WiMax range, which would be assigned to them with an Internet Service Provider licence, subject to the submission of an accepted business plan.

Thus on March 15, 2007 some 950,000 shares were issued by the company to Hastings Trading E Services of Portugal, which is a subsidiary of the UK-based Lycatel pre-paid international calling card group. Two weeks later, on March 30, 2007, Karunadasa resigned from the board of Sky Network, and was replaced as a director on the same day by none other than Himal Laleendra Hettiarachchi whose address as per Form 48 is 175/2, Old Kottawa Road, Mirihana, Nugegoda.

Same address

Himal Hettiarachchi is the son of one of President Mahinda Rajapakse’s sisters. Despite his entry to the company only well after it was formed, his residential address being the same of Sky Network is also the same as one of the initial subscribers to the company, K.M.S. Bandara. It will be seen that Bandara was only a front man who was put in place till the groundwork was done so that no suspicions were raised at the outset of the game afoot.

The location of Hettiarachchi and Bandara’s residence – also the registered office of Sky Network – is symbolic. Going back to the days of ‘Helping Hambantota,’ many of the 30 something trustees to then Prime Minister Rajapakse’s famous Standard Chartered Bank account, Rajagiriya Branch, were residents of the Mirihana area, which even then was a bastion of Rajapakse’s relatives.

On June 1, 2007, both K.M.S. Bandara, who according to the official records lives at the same Old Kottawa Road address of the President’s nephew, and Hettiarachchige Sirisena of Horana, resigned from the board of Sky Network, to be replaced by Indian national, Rabindra Gaitonde and Lycatel UK CEO, Milind Kangle. The game was now well and truly underway.

By the end of the same month, the now foreign controlled company was in a position to ‘lend a helping hand’ to state telecom company SLT, by offering a joint venture or collaboration for WiMax services, using the frequencies reserved by Sky Network. Of course, for his labour, Laleendra Hettiarachchi was given a 5% stake of the company.

If the step-child treatment meted out to SLT by TRC, followed by President Rajapakse’s nephew obtaining Wi- Max frequencies over the counter and offering to sell their use to SLT together were insufficient to smell a rat, the proof of the pudding was soon to follow.

Diffident

The Sunday Leader contacted top SLT officials in order to ask them about their plans for entering the WiMax market and also to find out whether plans were afoot to buy a stake in a private company in order to move into WiMax. The officials however requested anonymity.

Our sympathies are with the board of directors of Sri Lanka Telecom. The external pressures on them to please the Rajapakses aside, SLT was truly stuck between a rock and a hard place when it received the Lycatel offer through Hettiarachchi’s Sky Network. They could either accept playing second fiddle to a Presidential upstart, or sit out the national Wi- Max revolution.

Thus, at the board meeting on June 29, 2007 where the CEO and COO of SLT presented Hettiarachchi’s proposal, approval was granted to carry out a valuation of Sky Network and proceed with negotiations for an equity acquisition of the company.

The largesse

By January 2008, the board of SLT had agreed to very tough conditions put forth by Himal Hettiarachchi’s group, which would ensure that the Rajapakse family had a piece of the action. It was agreed that whilst SLT would hold only a 40% stake in the new joint venture (the remaining 60% would be held by Hettiarachchi’s Sky Network) SLT was supposed to put up 70% of the multi-billion rupee investment cost of the project.

Therein lie the means of the Rajapakse poshanaya. The President’s nephew’s minions are granted access to a valuable telecommunication facility by the state regulator, which was denied to state dominated SLT. The state-owned company was thus almost blackmailed with the prospect of being left out of the WiMax revolution, unless it agreed to put up 70% of the cash for a multi-billion rupee venture and take only 40% of the profit from the said venture.

Compare SLT to Hettiarachchi’s Sky Network. The former was the founder of the Sri Lankan telecom industry, is a public quoted, state owned company whose management is held by a 40% stakeholder (Japan’s NTT) who in turn is well established in the international telecommunications industry. How NTT of Japan as a minority shareholder would look at this deal remains to be seen.

On the other hand, Sky Network is a two year old, Rs.20 company that managed to acquire lucrative facility reservations from the state regulator over the counter. Following the gain of this valuable facility, President Rajapakse’s nephew, Himal Hettiarachchi makes his debut into big business along with a UK pre-paid IDD calling card conglomerate.

The only asset of any value that Sky possessed were its frequency reservations. SLT was unable to get its own WiMax approval from the TRC, which comes directly under the purview of the President, and is effectively chaired by the President’s Secretary, Lalith Weeratunga.

No choice

Thus in order to keep up with other telecom companies such as Dialog and Suntel and not be left out, SLT was left with no choice other than to negotiate an extorting joint venture with the poshanaya (family empire.)

A board memo submitted by CEO Takahashi dated January 21, 2008 was indicative that the deal was virtually sealed with only the number of directors each company is to have on the board to be finalised. (See box for memo)

Given that the deal is to be finalised by SLT’s board of directors this week, it is incumbent on us to advise the SLT board of the TRC’s current stance on the company’s WiMax allocation. When The Sunday Leader contacted current TRC Director General, Priyantha Kariyapperuma, he advised us that SLT’s WiMax application was first taken up during the term of his immediate predecessor, Kanchana Ratwatte.

“The SLT WiMax application ran into some delays during the former DG’s time. I only assumed duties on January 2, 2008. Since then, they have not raised the WiMax issue with the TRC. I myself asked SLT officials but they dismissed the issue stating that they had ‘other priorities’ at the time.”

Kariyapperuma told this newspaper that he had spoken to the Spectrum Management Division of the TRC regarding the SLT request, and that there were a few issues with frequency distribution that would be resolved shortly in order to accommodate the SLT request. “I have told SLT officials who met me that there is no problem, and the request will now be granted. We should be able to give them WiMax within about 45 days,” the director general told us on record.

Explanation

Asked for the reason that the SLT request was delayed for two years whilst other telecom providers were granted WiMax frequencies, the incumbent Director General asked that we speak to his predecessor, since he was not aware of the conditions at the time.

When The Sunday Leader spoke to former TRC Director General, Kanchana Ratwatte, he informed us that a conscious decision was taken by the TRC to not provide SLT with WiMax facilities, before his tenure.

Ratwatte highlighted that SLT was the sole controller of the island’s vast wired telephony infrastructure, and was thus charged with its management. Although stressing that the decision to deny SLT’s WiMax application was taken before his time, the former DG openly supported the decision.

He cited the example of SLT being awarded frequencies to commence CDMA wireless operations. “After this, they totally stopped expanding their wired line operations.” Ratwatte said that he himself had made it clear to SLT that giving them WiMax was not an option for this reason, although he allowed that such a decision was never communicated to him in writing.

SLT officials however scoffed at Ratwatte’s explanation. One high ranking SLT official said that if the TRC was planning to restrict the company’s operations due to its exclusive control over the country’s wired infrastructure, the state telecom giant would not have agreed to such a proposal.

Indignant

“How can they say they have the right to tell us what business to go into and what businesses to stay out of, and control our services? Is this the job of the regulator? Why is this concern only extended to SLT and not to other operators who wish to expand from their core business?” the officer charged.

Now that the current TRC administration has gone on record stating that SLT will be authorised to begin WiMax services within 45 days, it can be shown for certain whether SLT’s board of directors went into the President’s nephew’s Sky Network deal for the good of the national telecom provider or at the whim of the first family. All that SLT now has to do is wait for the 45 days and get their own frequencies as promised by Kariyapperuma without having to go into a deal with Sky Network for want of the WiMax facility.

Should the SLT board hasten to seal the deal with Lycatel and Sky Network even after TRC Director General, Priyantha Kariyapperuma’s assurance that he is moving to provide SLT with WiMax, it will be a clear sign that Sri Lanka Telecom’s interests are not being placed at the forefront.

The only viable asset that Sky Network has, that would convince SLT to shell out 70% of the investment for such an enormous project, in return for the scrapings – a mere 40% of the profit, is their WiMax frequency reservation.

Wait and see

With SLT now set to secure the same WiMax facility from the TRC due to Kariyapperuma’s change in policy, all eyes will be on SLT’s upcoming board meeting this week. It remains to be seen whether SLT’s board of directors – including the representatives of the venerable Japanese NTT management – will have the necessary chutzpah to stand up to the Rajapakse poshanaya.

SLT eager to jump on board 21st January 2008 Board Memo Sky Network Joint Venture At the last board meeting of the SLT Board of Directors, the proposed terms of acquisition were approved subject to the revision of the composition of the Board of Directors of Sky Networks (Pvt) Ltd. SLT Board requested the composition as four (4) directors from SLT and three (3) directors from the existing shareholders, one of whom would be the CEO of Sky Networks (Pvt) Ltd and would be selected with the approval of the Sky Networks Board. This requirement was conveyed to the current shareholder Hastings (Lyca Group) and is still under negotiations. Recommendation: Board approval is sought to give authority to CEO to negotiate and resolve this issue. Shoji Takahashi Chief Executive Officer SLT laments delay, moots joint venture 29th June 2007 Board Paper PLC/T/65/2007 Equity Acquisition of Sky Network (Pvt) Ltd – WiMaX frequency owned company 1. Introduction SLT has done field trials on WiMax Services and is awaiting frequency allocation to launch WiMax services in Sri Lanka which is a wireless broadband solution. SLT has already applied for the WiMax frequency from the Telecommunication Regulatory Commission of Sri Lanka (TRCSL) but despite repeated reminders there has still been no progress to obtain these frequencies. Dialog Broadband and Suntel already own frequencies and they have already rolled out their WiMax networks ready for service offering. The time to market and first mover advantage is very critical in this business as well and SLT will lag behind with the delays and SLT will become another follower in the market. Similar experiences have been there in the past too. Lyca Group in UK which is a virtual operator in UK has approached SLT for business through its 95% owned subsidiary Sky Network, which has been given WiMax frequency to operate islandwide. SLT is considering an acquisition strategy as an option. In response to initial inquiry to go forward with partnership with equity acquisition of this company to launch WiMax services was positively responded. It is also, possible to leverage cost advantage and operational efficiency through such arrangements. 2. About Sky Network (i) Name: Sky Network (Pvt) Limited (ii) Company registration number: N(PVS) 46122 (iii) Share Holding: 95% Hastings Trading E Services – Portugal (subsidiary of Lyca Group) 5%, Himal Laleendra Hettiarachchi (iv) Board Members 1. Milind Kangle (Chairman) – CEO of Lyca Mobile UK Ltd 2. Christopher Tooley 3. Himal Laleendra Hettiarachchi WiMax Frequency 1. 2400-2430 MHz (Islandwide) 2. 5470-5850 MHz (Selected urban towns around Colombo) 3. 3500 MHz band to be reserved on exclusive basis upon submission of business plan 3. Recommendations Board approval is sought to carry out a Valuation and Due Diligence on Sky Network (Pvt) Limited with a view of equity acquisition and by retaining Certified Public Accountants Ernst & Young for this purpose. Shoji Takahashi P. N. E. Abayasekara Chief Executive Officer Chief Corporate Officer

---

Possibly related posts: (automatically generated)

• Wimax services for Sri Lankans to get online