Sri Lanka new ruler's telco taxes are credit negative : Dialog to be affected more: Fitch.

Mar 03, 2015 (LBO) - Sri Lanka's One-off and recurring taxes imposed in the interim budget by the new rulers on the Island's telecom sector would raise regulatory risks and lead to lower profitability and higher financial leverage, says Fitch Ratings in a statement. The rating agency has revised its outlook on the sector to negative from stable.

"If enacted, we believe the proposals may hasten consolidation as two loss-making smaller operators could exit the industry, leaving three remaining," Fitch said in a statement.

Sri Lanka's telco market is one of the most overcrowded markets in the world, with five mobile operators serving a population of 21 million, the statement said.

"If the proposals are implemented, Sri Lankan telcos will pay one of the highest taxes as a percentage of revenue among Asia-Pacific telcos," Fitch said.

The rating agency said that SLT and...