Telecom: In expansion mode

The entry of new operators is expected to enhance competition in Oman’s mobile telecommunications market 

telecom

Oman is going to end the duopoly enjoyed by two major mobile service providers – the majority state-owned Oman Telecommunications Company (Omantel) and Omani Qatari Telecommunications Company, which is popularly known as Ooredoo Oman. The country’s telecom regulator – Telecom Regulatory Authority (TRA) – is aims to enhance competition in the mobile telecommunications market, which will benefit consumers as well as the economy of the Sultanate. An entry of a new telecom operator will bring the prices down as well as increase the quality of telecom services.

It is also in line with the general policy of the government as well the TRA’s mandate to promote market entry under the Telecommunications Regulatory Act. Three regional players – the UAE-based Etisalat, Kuwait-based Zain Group and Saudi Telecom Company – have joined the fray for a license in Oman. The TRA has invited bids from telecom operators in November 2016 to enhance competition in the mobile telecommunications market to benefit consumers and boost economic growth. The offer was limited to companies with a turnover of at least $250 million a year from telecommunication and a minimum net asset value of $400 million. Also, companies must have provided services in their country of origin for ten years and in at least another country for five years.

New entrant
The shortlisted applications will be announced on August 14, with the winning bid to be announced on September 4, 2017. 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. With GCC telecom service providers are facing a saturation in their home market, the best option before them is to look for opportunities within the region. Most of the regional telecommunication players are mega corporations with ample fund for investment. The bids are in line with the telecom service providers’ expansion strategy considering the market potential and similarities and footprint proximity to its core market.

The regional telecom service providers believe that the Oman market still has room for growth in the mobile segment. It is a strategic market for regional operators to get into and grow when compared to other markets in the Middle East. It is definitely going to make the market crowded but Oman is one of the major growing markets.

The Sultanate, which has a population of about 4.80 million by end-March 2017, had a mobile penetration rate of 151 per cent with 6.87 million users in the fourth quarter of 2016. The sector is expected to be worth more than $700 million in Oman next year, up from $590 million in 2015, according to a study. Despite the economic woes and oil price fluctuation, the Omani telecom service providers have witnessed relatively healthy growth in recent years.

Although the telecom service providers have shown robust growth in both sales revenues and net earnings in the recent past, the recent increase in royalty and corporate income tax started hurting the net earnings. For instance, Oman Telecommunications Company, the Sultanate’s largest telecommunications service provider, has posted a 31.6 per cent dip in net profit at RO23.8 million in the first quarter of 2017, against OMR34.8 million for the same period of 2016.

Omantel

The fall in net profit was predominantly attributed to increase in royalty rates effective from January 1, 2017. The increase in royalty expense was RO6.4 million in 2017 compared to the corresponding period of 2016.

Total group revenue edged down by one per cent to RO132.6 million, against RO133.9 million while operating expenses were down by 3.3 per cent at RO63.8 million. The earnings before interest, tax and depreciation, and amortisation (EBITDA) stood lower at RO68.8 million, against RO72.2 million for the first quarter of 2016.

Likewise, the Omani Qatari Telecommunications Company, popularly known as Ooredoo Oman, showed a decline of 44.4 per cent in profits for the first quarter of 2017.The company’s profit stood lower at RO7 million in the first quarter of 2017, compared to RO12.6 million for the same period of last year.

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Like Omantel, Ooredoo Oman attributed the decline in net profits to an increase in the royalty paid to the government from seven per cent to 12 per cent and an increase in the income tax from 12 per cent to 15 per cent. Revenues rose 2.6 per cent to RO67.8 million in the first quarter of 2017, compared to RO66.1 million in the same period of last year, due to an increase in fixed phones and mobile revenues. The company’s customers rose 9.2 per cent to 3.06 million customers by the end of March 2017. The fixed service customer base increased by 22.9 per cent to 93,092 customers in the first three months of 2017 compared to 75,738 in the same period 2016. The mobile post-paid customer base grew by 6.5 per cent to 223,222 customers compared to 209,695 customers in the same period of 2016. The mobile pre-paid customer base for the three month period increased by nine per cent to 2.74 million compared to 2.52 million for the same period last year. For 2016, the company earlier reported an increase of 11.3 per cent in net profit reaching RO46.3 million, compared to RO41.6 million in 2015.

 

Expansion plans
For quite some time, telecommunication service providers are focusing on broadband segment for better growth. The Sultanate’s two leading telecom service providers are investing heavily in new technologies and network expansion, in an apparent move to strengthen their market share. 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.

Oman is among the more advanced telecom markets in the Middle East, and the continued roll-out of LTE networks by the two main operators, along with factors such as the increasing affordability of LTE-enabled devices, will lead to a rapid rise in the use of this technology over the coming five years.


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