COLOMBO, Feb 20: Sri Lanka's telecom sector soared in 2006 to 7.3 million users, led by a 59 per cent jump in new mobile phone connections on competition and falling call rates, the telecom watchdog said on Tuesday.

Despite a waiting list of around 366,000 for fixed-line phone services, the Sri Lanka Telecommunications Regulatory Commission said mobile phones, including GSM and CDMA systems, had allowed rural residents to get phone services immediately.

Fixed-line subscribers rose to 1.9 million in 2006 from 1.2 million a year ago after the commission gave CDMA (code division multiple access) licences allowing three firms to use the cheaper technology and expand in rural areas.

The number of cellular phone users grew to 5.4 million in 2006 from 3.4 million a year earlier, as operators slashed tariffs by up to 40 per cent.

The clear majority of new users buy pre-paid cards, the commission said.

With India's largest private phone company, Bharti Airtel, lined up to be the fifth mobile phone player, analysts expect further price cuts, especially outside the capital, to tap rural users in the nation of 19 million.

Bharti, which is due to start services by year-end, has promised to invest $100 million within the first year of operation.

However, Sri Lanka's mobile phone market may grow at a slower pace this year as galloping inflation puts the breaks on tariff cuts, industry analysts said on Tuesday.

“We are looking at just over seven million customers in 2007 and about 8.9 million in 2008, which is a tad slower than the annual 50 per cent growth we have been seeing over the years,” equity brokerage Capital Alliance said.

With inflation showing little sign of easing after touching 20.5 per cent in January from a year ago, Alliance said cellular operators should not be in a hurry to slash tariffs.

“With Bharti coming in, there is certainly going to be some price pressure, but mobile operators are better off holding their tariffs at current rates because inflation is biting in,” the brokerage said.

Sri Lanka, which became one of the few South Asian countries to offer 3G (third generation) services commercially in 2006, was also the first in the region to introduce cellular phones by unveiling an analog network in 1989. —AFP