New growth strategies

A saturated market and the imminent entry of a third player in Telecommunications will certainly bring in more competition

As the Omani telecom market has reached a saturation level, the majority state-owned Oman Telecommunications Company (Omantel) was looking for growth opportunities to diversify its revenue sources for several years. The company’s acquisition of 21.9 per cent stake in Kuwait’s Mobile Telecommunications Company (Zain Group) was in line with the strategy. The $2.20 billion-deal made the Omani telecom firm the second largest shareholder in Zain group, which was in line with Omantel’s strategy to diversify investment and market position in the region.  The acquisition creates a new digital telecom powerhouse, capable of leading digital transformation across the Mena region. Also, the new group will be the third largest combined telecom group in the Mena region, with 52 million customers.

Omantel has financed this transaction with a combination of long-term and bridge loan facilities. The bridge loan facility will subsequently be taken out through long-term capital markets instruments. In another development, Oman is going to end the duopoly enjoyed by two major mobile service providers – Omantel and Ooredoo Oman – as the new operator will compete with these two giants. The Sultanate is set to issue a licence to the third operator, which would be a consortium of local investment funds and an international operator. Earlier, the Sultanate’s Telecommunication Regulatory Authority (TRA) has cancelled a tender seeking bids from international and regional operators for a third licence. It is in line with the general policy of the government as well as the TRA’s mandate to promote market entry under the Telecommunications Regulatory Act.

Radio Spectrum

The availability of a range of additional radio spectrum is expected to provide a multitude of mobile telecom services, particularly mobile broadband, to the consumers in Oman. An entry of a new telecom operator is expected to bring the prices down as well as increase the quality of the telecom services. Oman’s telecommunication firms are facing a relatively tough period with an increase in royalty and the government’s decision to allow one more main service provider. The companies will have to devise new strategies to strengthen their earnings and market position.

However, the financial performance of telecom service providers was fairly better during the first quarter, despite an increase in royalty and income tax rates last year. For instance, the Sultanate’s biggest telecom service provider, Omantel group, has achieved a net profit of RO57.4 million in the first quarter of 2018 compared to RO23.7 million net profit reported in the same period of last year. The group net profit includes RO52.8 million contributed by Zain Group. However, Omantel’s net profit attributable to the shareholders of the parent company fell to RO16 million in the first quarter of this year from RO23.8 million reported for January-March period a year ago. Group revenue for the first quarter of 2018 touched RO470 million compared to RO131.6 million for the corresponding period of 2017. Group revenue includes acquired business of Zain Group, which contributed a revenue of RO325.2 million in the first quarter. Omantel Group results for the first quarter of 2018 included fully consolidated Zain Group results, while the financial results for the first quarter of 2017 did not include Zain Group.

Omantel’s revenues from domestic operations – which include parent company and domestic subsidiaries – rose 9.8 per cent to RO144.5 million in the first quarter of this year compared to RO131.6 million recorded in January-March period of 2017. Omantel’s domestic subscriber base (including mobile and fixed businesses) recorded a growth of 2.1 per cent at 3.43 million as of March 31, 2018 compared to 3.36 million subscribers a year ago. The company’s total subscriber base, including mobile resellers, reached 4.41 million at the end of March this year. In the international wholesale arena, Omantel is considered one of the most prominent and competitive wholesale telecommunication providers in the Middle East.  In addition, it is one of the leading companies in the field of undersea cable networks and a key participant in several submarine cables, complemented by direct terrestrial links, which link Asia, Europe and America passing through Oman to meet the growing international capacity requirements of customers locally and internationally.

Oman Qatari Telecommunications Company (popularly known as Ooredoo Oman) has reported a 0.3 per cent increase in revenues for the first three months of 2018 at RO68 million compared with RO67.8 million for the same period of last year, which was driven by increases in both mobile and fixed data revenue. Net profit for the first three months of 2018 stood higher at RO8 million compared with RO6.9 million in the same period of 2017. Higher net profit for the quarter is driven by lower depreciation in the first quarter had a one off reversal relating to last year. Total number of customers at the end of the first three months of 2018 remained stable at 3.06 million. The fixed service customer base of Ooredoo Oman increased by 33.4 per cent to 124,176 customers in the first quarter of 2018 compared to 93,092 for the same period 2017. The mobile post-paid customer base grew by 0.5 per cent to 224,427 customers compared with 223,222 customers in the first quarter of 2017.

Ooredoo Oman expanded its high-speed 4G network to over 1,000 locations, covering 90 per cent of Oman’s population.  Ooredoo’s Superfast Fibre Home Broadband service, which is now available to thousands of residents, extends its reach as the company continues to provide coverage across the capital, so more families can enjoy the company’s high speed connectivity. For quite some time, telecommunication service providers are focusing on broadband segment for better growth.  Oman’s telecommunication firms are facing a relatively tough period with an increase in royalty and the government’s decision to allow one more main service provider.The telecom firms are also focusing on internet of things (IoT) for boosting revenue.  In line with the strategy, the speed of Internet services is expected to improve in the future as telecom firms are switching over to high-speed fibre optic cable networks for the next phase of long-term development, with an active support of Oman Broadband Company (OBC).

All these initiatives are also in line with the Telecommunications Regulatory Authority’s national broadband strategy, aiming at introducing high-speed Internet connection throughout Oman, especially in far-flung places. TRA has launched the national broadband strategy way back in 2010, with the ultimate aim of introducing a broadband connection into every home and business.

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