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Dec 09, 2010 (LBO) - The removal of a tariff floor by Sri Lanka's telecommunications regulator could see the resumption of a price war that led to loss among mobile phone operators, Fitch Ratings has warned in a report. "Dialog also benefited from reduced tariff pressure within the mobile industry and its strong market share amid improving market conditions." "The regulatory tariff floor implemented in June 2010 has curbed aggressive price competition within the mobile market, and may allow operators to reduce leverage, or preserve balance sheet quality," the rating agency said.

"In Fitch’s view, the local mobile sector is overcrowded, and therefore renewed tariff competition cannot be ruled out if the floor is removed."

This could continue to be a key risk to Dialog Axiata, the island's dominant mobile operator over the longer term, given the company’s still significant exposure to the mobile market, Fitch said.

Dialog derived 67 of revenue and 77 of EBITDA (earnings before interest, tax, depreoiation and amortisation) at the end of the first half of the 2010 financial year.

Fitch Ratings in October 2010 upgraded Dialog Axiata's National Long-Term Rating to ˜AAA(lka)’ from ˜AA(lka)’, an