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Lankan ISP goes bust

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CIOL Bureau
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NEW DELHI: Sri Lankan Internet and telecommunications service provider, Lanka Internet Services Ltd has gone bankrupt and unceremoniously disappeared into thin air with senior management of the company absconding, The Sunday Times has reported. An estimated 3000 to 4000 of its clients have been affected with the abrupt closure of services. Furthermore, it is alleged that Lanka Internet had also billed clients for services not rendered.

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The Sunday Times said that in previous instances when the company had to close down due to financial difficulties, a third party investor came forward to bail them out.

Established in 1994, the company is a Board of Investment (BOI) approved and licensed telecommunications service provider and has filed for bankruptcy twice in the span of a year and now has shut down all its operations without giving any notice to its clients.

Lanka Internet Services was originally set up by a group of Sri Lankans residing in the United States and some of its earliest investors included Central Finance Co. Ltd. and Lanka Ventures Ltd, a venture capital company started in 1992. Reportedly, these investors pulled out after nearly doubling their investment. Lanka Internet has had around two to three sets of investors since its inception.

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Upali Keppitopola, chairman of the Thoso Group of Companies, which backed Lanka Internet was the original owner of the service provider. It was subsequently sold some time ago to Mahinda Ramanayake, chairman of MaxTV and MaxRadio. Ramanayake's acquisition failed and the company continued to struggle.

Sources say the slew of problems was compounded by some share disputes with the former owners and the company was eventually given back to Keppitipola. The Sunday Times said that when contacted Ramanayake said 'he has nothing to do with the company' and refused to comment further.

The newspaper said that the license under which Lanka Internet was operating was actually being used to sell calls to and from the US or overseas, reaping millions of rupees. Allegedly, the email and Internet service provided by the company was actually a front for the data license to sell telephone calls.

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The contract agreed upon with the Telecommunications Regulatory Commission (TRC) of Sri Lanka had provided the company with some unique benefits and a clause, which enabled them to provide these services. In addition, the agreement actually had a 'terminate clause'.

In fact, Sri Lanka Telecom (SLT) filed action against Lanka Internet as the latter was not a licensed telecommunications service provider and was cutting into SLT profits. Sri Lanka Telecom was the only company licensed to handle International Direct Dialing (IDD) incoming calls but Lanka Internet had started to channel IDD traffic using data parts, without permission or a proper license.

The Sri Lankan government subsequently issued international gateway licenses to other interested parties and in total, released 32 international gateway-operating licenses. SLT's case against Lanka Internet was resolved with the issuing of the gateway licenses.

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An Internet website called Goliath which enables users to search for company profiles has a listing for Lanka Internet and describes the company as an 'international private company', dealing in 'communications, provision of information and communication technology services including telecommunications services.' The website further says Lanka Internet is 'backed by Central Finance Co. Ltd, Lanka Ventures Ltd, Esjay Electronics (Pvt) Ltd. and International Internet Services Inc. (USA).'

This is the second time in the past six months that the company’s services have been shut down. Financial troubles have plagued the company with creditors coming in and claiming their dues, the sources said. As the situation currently stands, the inability to locate and contact any of the management is aggravating an already dire situation.

Phone lines are not working and the business address for the company is also shut down. According to a source, 'we have a serious problem.' The Lanka Internet website is also not in operation.

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Since last Friday, Lanka Internet services were off. Moreover, the status of the company for the past month and a half has been 'up in the air operationally.'

The Sunday Times reported that around 15 employees of the company were found on the ninth floor of the Ocean View Building in Bambalapitiya where the Lanka Internet offices are located and are accusing the company of non-payment of salaries for the past four months in addition to non-payment of EPF/ETF for the past two years. The employees were 'holed up in darkness' in the office without any electricity.

Reacting to Lanka Internet closing down, Director General of the Telecommunications Regulatory Commission (TRC) of Sri Lanka had said, "the TRC is in the process of making contact with the relevant organization in order to ensure continuity of service for the consumer and secondly, is considering what kind of action could be taken against the company."

“TRC's main concern is to ensure that dues are paid to the customers and businesses that used Lanka Internet's services. The BOI also has no recourse for intervening with the company. BOI officials say after BOI agreements are entered into, companies 'must follow the law of the land,” he added.

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