The rising level of competition among telcos has changed the dynamics of Oman’s telecoms market for good.
With the number of market players now increasing, Oman’s telecommunications sector is starting to enjoy the benefits of competition. This is not only expanding internet provision, but also enabling the entry of new broadband technologies into the sector. Indeed, it is becoming clear that Oman’s connectivity market has rich potential. Furthermore, ICT development and the spread of high-speed internet are now seen as a key part of the Sultanate’s drive to become a knowledge-based economy.
Traditionally, the country’s mountainous topography was held to be the most obvious challenge to telecoms companies, particularly in providing connectivity to the more remote areas of the Sultanate. This is certainly part of the reason why, in 2003, 167,500 Omanis had internet access, whereas 1,105,000 UAE citizens were online. Yet there was another factor behind the limited internet coverage – one that is now giving way to make for a thriving telecommunications sector.
In short, and as might be expected in a relatively young sector, the market suffered from a lack of competition, with just one fixed-line internet service provider until 2005, when private operator Nawras was launched. The monopoly of state-owned OmanTel in the landline telephone and internet access markets up until that point meant that the sector lacked the benefits of competition – specifically higher service standards and lower priced tariffs.
The launch of the National Broadband Strategy in 2010 not only reaffirmed the Sultanate’s commitment to delivering high-speed internet connectivity – a key objective of Oman’s Vision 2020 programme – but was also a clear message from the Telecommunications Regulatory Authority (TRA) that enhancing internet penetration is not an option for Oman, but a necessity. The benefits of broadband were summed up by the World Bank’s recent finding that a penetration increase of 10 per cent among a national population can positively impact GDP by as much as 1.5 per cent.
More positively, two important developments have meant that the telecoms market is entering a new period of expansion. The first is a significant change in market structure. Last year, mobile network operator Sama Telecommunications was granted Oman’s third telecoms licence in a decree issued by Sultan Qaboos bin Said. Inevitably this had an impact on both Omantel and Nawras, but it has been good news for consumers. With the dynamics of Oman’s telecoms market changed for good, strong competition among these providers has certainly been a factor behind rapidly expanding broadband coverage; between 1Q 2011 and 1Q 2012, fixed broadband subscription increased by over 33,000 users to 88,164. The penetration rate per household also increased from 9.92 per cent to 21.92 per cent over the same period, according to the TRA.
A second factor behind a healthier market has been the advent of wireless and mobile broadband, which has completely transformed the scope of telecommunications and widened the platform for internet use. This is an important factor for a country where, despite government programmes to encourage computer literacy, and to promote the use of computers, such as the Digital Oman Strategy (e.Oman), access to computers remains limited. According to the TRA, while demand for broadband grew by 31.5 per cent to reach 2.104 million users in the first nine months of 2011, 1.654 million subscribers – or 78.6 per cent – accessed the internet through mobile networks. Indeed, a recent report by Business Monitor International predicted that subscriber growth will in the main be driven by the mobile broadband segment in the foreseeable future.
However, all modes of internet use are set to benefit from a further positive consequence of Oman’s growing subscriber base and rising competition: the more rapid take-up and implementation of the latest broadband technologies – namely 4G. Whereas 3G (“Third Generation”) was slow to get off the mark in Oman (3G services were a late entry, with Nawras and OmanTel winning their licences in 2007 and 2009 respectively, whereas UAE internet service provider Etisalat has been offering 3G broadband since 2003), now providers are racing to be the first to offer 4G services. In late June it was announced that OmanTel will shortly be launching its 4G LTE (Long Term Evolution) network, offering vastly improved internet speeds. That month Nawras also announced that it will be launching its own 4G LTE service by the end of 2012, which will be introduced according to where market demand is highest, starting with the Muscat and Batinah regions, home to more than 55 per cent of the population.
The rising level of competition is also pushing Omani firms to think outside the box in terms of target markets. In a bid to stay ahead of heightened competition, OmanTel is now looking to cast its net wider. This is taking the form of enhanced integration with the neighbouring UAE. OmanTel’s recent deal with Etisalat, signed in June, is set to enhance connectivity options, overseeing the installation of the latter’s global multi-protocol label switching node in Oman. The net result of this will be to enable Etisalat’s customers to connect their offices (via Etisalat’s services) between UAE and Oman networks, giving both companies greater coverage. Indeed, deepening telecoms integration with the wider Middle East – where mobile internet subscriptions, for example, grew at a rate of 69,230 new connections per day in the first quarter of 2012, according to Ericsson – represents a proactive and positive development. This partnership will allow OmanTel to expand operations into a market that is outpacing North America and Western Europe for subscriptions growth.
According to Mohammed Bin Ali Al Wahaibi, Undersecretary at the Transport and Communications Ministry, the government sees broadband as a key part of the national plan to facilitate social and educational development – part of the Sultanate’s goal to improve economic productivity and access to information, particularly against the backdrop of a move away from dependence on oil and gas. Much is made of the importance of high-speed internet for businesses and communication, but the potential for facilitating the spread of information to build a knowledge-based economy is clear.
The importance of good broadband coverage, therefore, cannot be underestimated. In June, it was announced that Nawras had successfully linked the Ministry of Education with a fast Internet connection to support every state school with quicker access and improved data connectivity. Furthermore, over 140 state-owned schools across the Sultanate have been connected to Nawras Internet Professional service delivered via WiMAX technology. The fact that the government itself chose Nawras over its own telecommunications company is a testament to the success of liberalisation in creating a healthier, more competitive and vibrant local market.