Oman’s telecommunication firms will have to devise new strategies to strengthen their earnings and market position
Oman’s telecommunication firms are going to face a relatively tough period with an increase royalty and the government’s decision to allow one more main service provider. The companies will have to devise new strategy to strengthen their earnings and market position.
The financial performance of telecom service providers has been affected by an increase in royalty and income tax rates early this year. For instance, the Sultanate’s biggest telecom service provider, Oman Telecommunications Company (Omantel), has posted a 37 per cent dip in net earnings at RO59.9mn for the first nine months of 2017, compared to the same period of last year. The fall in net earnings was mainly attributed to an increase in royalty rates from the beginning of the year, which jacked up royalty expense by RO18mn in 2017 compared to the same January-September period of 2016.
The company’s group revenue recorded a growth of 3 per cent and reached RO406.8mn for January-September period of 2017 compared to RO394.8mn of the corresponding period of 2016. The majority state-owned Omantel said that its royalty and taxes stood at RO52.5mn for the first nine months of 2017, against RO38.8mn. Omantel’s net profit margin stood lower at 14.7 per cent by end-September 2017, against 24.1 per cent for the same period of 2016.
Likewise, the Omani Qatari Telecommunications Company, popularly known as Ooredoo Oman, posted a 38.6 per cent fall in net profit for the first nine months of 2017 at RO23.1mn compared to RO37.6mn for the same period of last year. However, Ooredoo’s revenue edged up by 1.2 per cent to RO204.3mn for January-September period of 2017, from RO201.9mn for the same period of 2016.
Oman is going to end the duopoly enjoyed by two major mobile service providers – Omantel and Ooredoo Oman. The country’s telecom regulator – Telecom Regulatory Authority (TRA) – is aiming at enhancing 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 the 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 race for a licence in Oman.
The TRA has invited bids from telecom operators in November last year 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 telecoms 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. Although the plan was to announce the winner sometime in September, it got delayed.
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 face 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 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.
While Oman is opening up the market for another operator, Omantel has taken a stake in Kuwait’s Zain group. Recently, Omantel had agreed to buy 12 per cent stake in Zain in a deal that will more than double its stake. The stake is worth about $946 million based on Zain’s current market value. In August, Omantel purchased a 9.84 per cent stake in Zain for $846 million, saying the transaction was part of a strategy launched to diversify its investment and market position in the region.
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.
Ooredoo is planning to cover 90 per cent of Oman’s population with a full 4G coverage by the first quarter of 2018, which is against 55 per cent coverage now.
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.