Ringing in the glory
The No. 1 company of 2005, Omantel continues its good show in 2006 on the back of a monopoly in certain verticals of the telecom sector

After making a grand debut last year, this majority government-owned company continued its commendable performance in 2006 to retain its numero uno status. The company, which was established in 1980 pursuant to Law No. 43 of 1980 as the General Telecommunications Organisation (GTO), has been a monopoly provider of telecommunications services since then. In view of emerging competition in the mobile market, Omantel Group established Oman Mobile in 2004, as a subsidiary company. Omantel became a public listed company in 2005. Omantel is currently owned 70 per cent by the government and 30 per cent by private investors (including pension fund). The sector competition began in March 2005 and the mobile segment was the first one to open up for competition.

Industry overview
The government has started implementing the telecom sector liberalisation in line with World Trade Organisation (WTO) agreement. Beginning March 2005, the industry witnessed competition in the mobile sector through the licensing of a second mobile operator. The recent signing of the free trade agreement between Oman and the USA is expected to accelerate the sector liberalisation process. The indications are that the Internet and value-added services will be liberalised soon, followed by fixed telephony services. Omantel has already initiated steps to prepare for this evolving competitive scenario and has appointed a renowned international consultant to assist the management in this process.

“With fixed business services set to open up for competition in 2007, the telecom market in Oman would undergo further dynamic changes in telecom service offerings. New Internet and other value-added service providers are expected to enter the market soon. This would provide the market with numerous service offerings that are not available at present. We realise that there are still opportunities to increase customer base and penetration levels in Oman,” said Dr Mohammed Ali Al-Wohaibi, CEO, Omantel.

As the leading telecommunication service provider in Oman, Omantel Group is strongly placed not only to compete with newcomers in the fixed line business segment, but also to benefit from the same through providing wholesale services to new telecom operators. This is due to strong national brands, fully built-out and up-to-date network, and capable workforce in development, national distribution as well as systems and processes efforts to provide and deliver services and support customers.

However, liberalisation would further stimulate the telecom market, and as witnessed in other such markets, the likely price dilution would significantly impact the sector’s profitability.

Financial performance
The total group revenue at the end of December 2006 rose by 20 per cent to RO323.6 million, compared to the corresponding period the previous year. Net profit is RO81.1 million, an increase of 19 per cent compared to the previous year’s period. Earning per share for the year is RO0.108. Total operating expenses of the Omantel Group amounted to RO230 million in 2006, an increase of 19 per cent compared to last year. As a percentage of total service revenue, Opex was 71.1 per cent in 2006, while the ratio in 2005 was 71.6 per cent. The total assets of the Omantel Group have, over the past three years, increased, reflecting the capital investments that the Omantel Group has incurred to upgrade and expand its network especially in the mobile and fixed line services. The fixed assets, principally telecom equipment and facilities, now account for 68 per cent of the total assets. Total subscriber base (all services) has recorded a growth of 12 per cent. Total number of subscribers has increased to 1,629,000 as on December 2006 compared to 1,453,000 in the corresponding period previous year.

Major achievements
Some of the major achievements of 2006 were:

Investment in telecom infrastructure: During 2006, the company signed over RO32 million worth of contracts, mostly infrastructure-based covering both Omantel and Oman Mobile.

National E-Government and BankNet project: These projects are next generation network services based on the latest Multi Protocol Label Switching (MPLS) technology. This innovative network service will have the capability of supporting data, voice and video over the same infrastructure and will ensure service delivery according to defined and guaranteed Service Level Agreements (SLA). Omantel signed an agreement with Information Technology Authority (ITA) for the establishment of e-government network and with Central Bank of Oman (CBO) for the establishment of BankNet network. While, these agreements would provide integrated telecommunication solutions, they would also support diverse needs of telecommunication requirements of each of these entities.

Wireless fixed phone lines service (WLL): First phase of the service was launched on March 25, 2006, covering 25 rural villages in the Government of Dhofar. The project is expected to cover 200 rural villages over two phases, providing telecommunication facilities to remote population.

WiFi (Hotspot) Service: The service was launched on March 27, 2006, under the brand name ‘Ibhar.’ The service is available in over 12 locations comprising major shopping malls, coffee shops and hotels.

MoU with Flag Telecom Company: Omantel signed a memorandum of understanding on June 25, 2006, with Flag Telecommunications Company. This will make the Sultanate an Internet transit point between the Middle East and Africa.

Pakistani Trans World Associates (TWA): Omantel and the leading Pakistani Trans World Associates (TWA) Telecommunications Company launched submarine fibre optics cable project on July 28, 2006, which will provide a telecommunication link between Oman and Pakistan. The TWA project is one of the successes of the Falcon project, as it will enable Omantel to sell some of its vast cable capacities.

Omania E-Commerce Company (Tejari Oman): Omantel announced the signing of an agreement with Omania E commerce company (Tejari Oman) to provide electronic purchase solutions known as ‘Tejari Transact.’ This is a set of commercial solutions over the Internet, which guarantees flexibility and transparency as well as reduces purchasing costs.

Belgacom International Carrier Services: Omantel signed a MOU on November 22, 2006, with Belgacom International Carrier Services, to establish the framework for a partnership that will further develop respective international carrier services. The MOU will form the basis of a cooperation deriving mutual benefit for both operators, with the aim to be amongst the top providers of international wholesale services within the Middle East.

Telecommunication backbone service to PDO: Omantel signed a long-term contract for the provision of Telecommunication Backbone service to PDO for the total amount of RO12 million, covering a period of over 11 years.

Telecommunication backbone service to Ministry of Information (MoI): The Tender Board has awarded a contract to Omantel to provide terrestrial links for TV transmission for the MoI at a total amount of RO1.4 million per annum.

Mobile Number Portability (MNP): Mobile Number Portability (MNP) was introduced on August 26, 2006, by both mobile operators (Oman Mobile and Nawras). This was implemented as part of the directive from the Telecommunication Regulatory Authority, which would allow customers to switch to other mobile operators without changing their numbers.

Gulf Economic Award: Omantel won the 2006 Gulf Economic Award organised by Dubai-based Datamax Company. The award is granted annually to the best organisation and institutions which play a positive role in supporting the Gulf economy, attracting foreign investment and realising good practical results through sound management and leadership.

Deals of the Year Award: Omantel won the ‘Deals of the Year’ award from the British magazine (The Banker). Omantel was selected amongst other Omani companies on the basis of the largest IPO in Oman, in addition to the company’s strong appeal amongst smaller investors.

5th Gulf Excellence Award: Omantel was presented with the ‘GulfExcellence Award’ for their outstanding accomplishments for playing active role in the economic diversification drive.

Fixed Business
Special consumer promotions with attractive offers for fixed line services, Internet with PC bundle offers, Broadband (ADSL) service, free surfing hours, etc., were offered during Muscat/Khareef Festival, Comex’06 and Ramadhan. Special Fixed Line additional services were offered to subscribers free of costs like caller ID, call waiting, follow me, three party conversation, and Omantel automatic call transfer (Self Hunting). With this service one can transfer calls to a vacant number from a specific group of numbers when the subscriber’s phone is busy. Also, there were FIFA World Cup offers where 12 winners were given fully paid tickets to the World Cup.

Outlook
The company is readying itself to face stiff competition as the government is in the process of issuing license to a second fixed-line operator. “We always welcome healthy competition and we are gearing up to face the expected competition in the fixed-line segment. We have implemented projects involving more than RO100 million between 2005 and 2006 to enhance our fixed network infrastructure. The thrust is always on building a robust and resilient fixed-line network, which will position Omantel as ‘carrier of carriers’ in a developing competitive scenario,” Al-Wohaibi said. Capital projects, involving RO250 million (including RO100 million for fixed network expansion and RO130 million for mobile network expansion) were implemented between 2004 and 2006.

New initiatives adopted by the company to equip itself to face stiff competition ahead included appointment of an international consultant to advise the company on scientific development strategies, especially to face competition in fixed-line segment. An international consultant will also advise the company on how the free-trade agreement between Oman and US will affect Omantel.

Also, Oman is witnessing a major information, communication and technology sector liberalisation. Economic liberalisation provides enormous opportunities for international and regional telecom companies to do business in Oman. The fixed-line base of Omantel, as on December 31, 2006, stood at over 271,000 as against 258,000 at the end of December 2005.

On the other hand, Oman Mobile no longer enjoys monopoly as a second public mobile licence was awarded to Nawras in 2005. Oman Mobile enjoys a market share of 72 per cent (1.246 million subscribers). Total mobile phone subscribers in Oman stand at over 1.7 million. The company is also getting ready for competition in the Internet service sector.

Apart from gearing itself up for the domestic competition, the company is looking beyond Oman. “We are keeping an eye on all markets in the region for expansion – not only in the Arab region but also in North African and South Asian countries,” Al-Wohaibi said. He said the Omani company was interested in bidding for a mobile service provider’s licence in Qatar. But the company will have to wait for the new network to get ready. In all, the next 2-3 years could turn critical for the company as the sector opens up further, and the pressure of shareholders too mounts with regard to the company’s performance on the bourses.

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