On both a local and national level, Oman’s ICT sector continues to expand, while also preparing for new technologies and the benefits and challenges that they may bring. New innovations in cloud services, e-commerce and e-government have enabled both private and public organisations to cut costs, and strategic thinking by the sultanate’s authorities has also brought rewards for the sector. This has helped lay the groundwork for a successful industry for many years now, encouraging tech start-ups and establishing a clear ICT roadmap, as well as building on the country’s global connectivity and its reputation for stability and security.
Nevertheless, the sector faces many of the challenges experienced by others worldwide. In telecoms, this includes the surge in demand for data and mobile market saturation, while new innovations, such as artificial intelligence (AI), pose new challenges as well as opportunities. So, too, does the continuing question of cybersecurity, while the global market for data centres and cloud services continues to be highly competitive. Oman now has a significant stake in both industries. This highly integrated sector is evolving quickly, and telecoms providers and IT companies will need to work hard in order to continue to grow.
Structure
The Ministry of Transport and Communications (MoTC) is the main government policy-making institution for ICT, led by Ahmed Mohammed Salem Al Futaisi. Telecoms is overseen by the Telecommunications Regulatory Authority (TRA), which was established by the Telecoms Act of 2002. The TRA is responsible for implementing government policies, ensuring wider access to telecoms facilities and regulating fair pricing.
There are three types of telecoms licences available in Oman; Class I, Class II and Class III. Class I licences are issued by royal decree, with TRA approval, and permits the licensee to establish a public or international network. Class II licences are awarded by the MoTC to operators that rely upon a Class I network, so these licensees are also referred to as resellers. Class III licences are granted by the TRA to private operators that are not connected to a public network.
In 2003 a sector liberalisation strategy began, with the TRA awarding the sultanate’s first fixed network licence to Omantel, the first telecoms company to be established in Oman, while at the same time, the first Class I mobile licence was given to Oman Mobile. The second mobile licence was then awarded to the Omani Qatari Telecoms Company in 2005. Further liberalisation followed, with five Class II licences issued in 2008, while Nawras, a telecoms firm founded in 2004, also gained a fixed-line licence in 2009. A string of other Class I and II licences were subsequently awarded, including international gateway services, which allow international calls to be re-routed to appear as a local number to cut costs.
Currently, the telecoms sector is dominated by two full-service providers, Omantel and Ooredoo, which was known as Nawras until 2014. Both operators provide mobile and fixed-line broadband, as well as international gateway calls. In addition, Awasr provides fixed broadband and international gateway services, with the latter provided by Telecom Oman (TeO) and Connect Arabia International. There are two Class II, reseller, mobile virtual network operator (MVNO) licence holders, Renna and Friendi, with Zajel holding a Class II international gateway licence, while three hold Class III licences – Rignet, Azyan and Mahd.
Subscription Rates
The telecoms sector generated OR854.6m ($2.2bn) in revenue in 2017, up 2% on 2016. Of this total, 70% came from mobile services, 29% from fixed-line and 1% from other lines of business. In 2017 average revenue per mobile subscriber (ARPU) stood at OR7.20 ($18.70), down from OR7.30 ($18.96) the year before, while fixed-line ARPU stood at OR4.10 ($11), down from OR5 ($13) in 2016. This decline aligns with global trends, as voice usage declines in favour of data, and markets become saturated amid booming data demand. A PwC study of 59 markets around the world showed ARPUs falling by an average of 5% in 2017. The reduction in voice usage has required telecoms firms to adapt. “The assumption that data can compensate for lower voice consumption has not been the case at this stage of market maturity, as the growth dynamics in data differ from voice”, Talal Said Marhoon Al Mamari, CEO of Omantel, told OBG. “We have understood that voice is not the driver anymore, especially to the younger generations, and as a result we have introduced voice and data combination plans.”
The preponderance of mobile internet also showed up in TRA data, with fixed-broadband ARPUs down from OR30.80 ($80) in 2016 to OR27.10 ($70) in 2017. TRA figures for 2017 also showed that total mobile subscriptions hit 6.94m, bringing the mobile penetration rate to 152.3%, up from 151% the previous year. Of the total subscriptions for 2017, mobile pre-paid accounted for 90.63% of the market, with 6.3m subscribers, while mobile post-paid had 651,000 subscribers, representing 9.4% of the market. Pre-paid plans remain popular, as around 2.1m out of the total population of 4.6m in 2017 were expats, many of which are on short-term and relatively low-wage contracts. There is an increasing global trend towards pre-paid, as pricing differentials with post-paid decline with heightened competition. Consumers may also sometimes purchase multiple SIM cards to utilise different operators’ deals and services, contributing to declining ARPUs.
Mobile Market Share
Ooredoo held 43% of the mobile market in 2017, closely followed by Omantel with 42%, while resellers held around 15% between them. In terms of the pre-paid market, Ooredoo and Omantel hold 79% of the market between them, with reseller shares in decline in recent years due to fierce competition in the sector, causing a squeeze on smaller companies. In the first quarter of 2018 resellers held 14.6% of the market, compared to 17% in 2016.
Omantel
Omantel, which is 51% government owned, held an initial public offering for a 30% share on the MSM (Muscat Securities Market) back in 2005. Omantel’s unaudited report to the MSM showed group revenue of OR914.2m ($2.4bn) and net profit of OR125.4m ($325.7m) in the first half of 2018. This was a considerable increase on the first half of 2017, when revenue reached OR265.5m ($689.5m) and net profit was at OR39.8m ($103.4m). The 2018 report stated that the total domestic subscriber base was 3.43m, down slightly from 3.44m at the end of the first half of 2017. Omantel has also made moves to expand its reach in the region, purchasing 21.9% of shares in Kuwait’s Zain Group and 80% of Oman Data Park. Omantel also made a successful bond offering in April 2018, in two tranches – one for 5.5 years and another for 10 years, with a combined value of $1.5bn and the income going to offset the Zain Group purchase.
Ooredoo
Ooredoo has been listed on the MSM since 2010 and has operations in 10 countries, with Oman responsible for 8.12% of total revenue in 2017. That year, total group revenue was QR32.7bn ($84.9bn), meaning that revenue from Omani operations stood at around QR2.7bn, or OR279.9m ($726.9m). According to the unaudited results from the first three quarters of 2018, Ooredoo saw total revenues of OR211.9m ($550.3m), up from OR204.9 ($530.6) in the first nine months of 2017. Net profit also increased from OR112.7m ($292.7m) to OR114.9m ($298.4m). However, the company reported that at the end of September 2018, it had 2.9m mobile and fixed customers, down from 3m in the same period of 2017. Nevertheless, Ooredoo did experience a rise in fixed-line and post-paid mobile customers over the period, although not by enough to completely offset declines in pre-paid mobile numbers. The company attributes the decline in pre-paid packages to TRA’s standardisation of regulations in welcome pack offers.
Resellers
There have been changes in the MVNO market recently, with the five Class II licences initially issued now reduced to two operators, the Omani firm Renna and Friendi, which operates in both Oman and Saudi Arabia. Renna launched in 2009 using the Omantel network, and was taken over by TeO in 2016, with TeO subsequently closing its Samatel MVNO business, to concentrate solely on Renna. Currently, the TRA is looking to advance the reseller segment, given that the two companies still operating have seen their market share decline in recent years.
Household Services
Growth in fixed-line subscriptions, meanwhile, was dramatic between 2016 and 2017, although this was largely caused by technical adjustments in the way this data was recorded, bringing Oman into line with International Telecommunication Union regulations. The fixed-line penetration rate for households went from 73% in 2016 to 87% in 2017, or from 422,518 subscribers to 509,756. Around 73% of subscribers in 2017 were residential lines, and the remaining 27% business. There was also an increase in fixed internet subscriptions, from 269,549 in 2016 to 351,335 in 2017, giving a household penetration rate of 60.1%. According to a report by U-Capital, these figures are lower than average within the GCC, which has a rate of 90.9%, but higher than the global average of 54.5%, demonstrating potential for further growth.
Helping facilitate this expansion is the National Broadband Strategy (NBS), being rolled out by Oman Broadband Company (OBC). Founded in 2014, the organisation works with Omantel, Ooredoo and Awasr to ensure every resident and business in Oman has access to high speed broadband, regardless of where they are located, with a particular emphasis on enabling access in rural communities, which have long been on the wrong side of the digital divide. By the end of 2020, the NBS aims to see 80% of Muscat and 30% of other urban areas in Oman with access to high speed fibre-to-the-home (FTTH) connections, which would cover around 50% of the country’s population. The rollout of FTTH is being achieved in collaboration with municipal canalisation projects, reducing costs by running fibre cables through ducts and pipes that are already being installed. “We are always five to six months ahead of the plan,” Said Abdullah Al Mandhari, CEO of OBC, told OBG. “Take-up is also above forecasts”.
The TRA states that household broadband connectivity reached 59.7% at the end of 2017. This represented an increase on 46.4% in 2016, from 266,983 households to 348,926. Mobile broadband subscriptions increased during the same period, from 3.9m to 4.4m, giving a mobile broadband penetration rate of 95.4% by the end of 2017, up from 86.5% at the end of 2016.
Government Strategies
The Information Technology Authority (ITA) is a key government body for the ICT sector. The ITA was established by a royal decree in 2006 and is responsible for implementing national ICT infrastructure projects related to a central government policy – the Digital Oman strategy (eOman). This dovetails with the sultanate’s overall development strategy, Vision 2020, which in turn forms the current phase of the long-term Oman Vision 2040 programme. ICT is vital to all three main pillars of the latter, from developing national technical capabilities under the “People and Society” rubric, to constructing leading ICT infrastructure under “Economy and Development”, while also improving governance through the use of e-services under “Governance and Institutional Performance”. eOman was launched as a first step of Oman’s development strategy back in 2003 and has six main pillars. First, is the task of developing the IT skills of the general public and government personnel via training and education, while also reaching across the digital divide. Second, e-government and e-services have to be enhanced, and third, the local ICT sector has to be more thoroughly developed, with a specific focus on small and medium-sized enterprise (SME) development, with the emphasis on encouraging local talent and content creation, while also developing international partnerships and skills transfers. The fourth pillar is concerned with ensuring that governance structures, both legal and administrative, are evolving in line with technological developments, with a move towards standardisation of technical architecture and infrastructure. Fifth, that physical infrastructure will be subject to a national infrastructure development programme, aimed at hosting and integrating services in a scalable manner. Lastly, promotion and awareness campaigns are to be rolled out in order to increase the public’s understanding of e-services and digital technologies.
Training & Education
The ITA provides a number of services in this field. For example, the authority works in collaboration with outfits such as Microsoft, Oracle and Adobe to offer specialised IT training programmes such as CompTIA, as well as practical and project-oriented training and a variety of certificate courses. In a similarly facilitating role, the ITA acts as hub of knowledge exchange between its partners. Sheila H. Hopper, CEO of Al Madina Development & Supply, a prominent Omani IT services provider, tells OBG that “Most of these companies depend on the ITA for consultancy, and as a result, a lot of big brands like Oracle push their systems and products to the ITA in order to disperse them to other companies.”
The ITA has established a network of 10 Community Knowledge Centres and nine Community Knowledge Centres for women, which provide a range of training courses aimed at Omani adults. There are also several programmes available to youth. The IT Kids Innovation Theatre runs a summer programme to develop ICT skills and introduce kids to entrepreneurship, while the free and open-source Oman Summer of Code initiative helps older youth to develop applications and works with the Scientific Research Council, universities and businesses to spur innovation and software development.
E-Government
The ITA’s decision to prioritise the transformation of e-government services has prompted a shift among ministries, departments and municipalities towards electronic service delivery. The ITA manages several functions central to this process, including the Oman government network and the Oman government cloud, which together connect 1060 websites run by 70 public agencies; the front-end Omanuna portal, which acts as a central point of access to a range of government services; and the National Digital Certification Centre, which uses encryption and authentication tools to certify and protect citizens’ digital identity cards. As of October 31, 2018 the ITA had managed 13.1m transactions through the ID service, including 3.7m transactions through its dedicated mobile application.
The National Data Centre also provides a central repository for information collected via e-government services, which supports a strong screen of cybersecurity solutions. Indeed, the sultanate has established a global reputation for robust cybersecurity and anti-cybercrime activity. The Oman eGovernance Framework, established in 2009, also sets a systematic and enforceable standard of best practices within e-services, providing clear guidelines and rules for different government agencies, while also helping to build confidence in the overall system. These structures provide a framework for the Oman Government Network, a telecommunications infrastructure linking government agencies and departments together, and the Oman Government Cloud. The latter provides a shared IT infrastructure working across government agencies, boosting efficiency and availability of information.
One of the main functions of these structures is the development of e-tendering services. The government Tender Board (TB) has now digitised all tendering and procurement processes for the state sector, with all contracts worth more than OR3000 ($7791) having to be processed publicly. Companies must register with the TB to make bids, which involves an examination of their level of Omanisation and in-country value. According to royal decree, at least 10% of the contractors used on a project must be SMEs. “There has always been a challenge in monitoring the SME requirement,” Hermant Murkoth, CEO of BGI, told OBG. “But we are able to fix this by bringing all contractors with a 10% obligation onto the platform. This will make a huge impact on ICT, with transparency being the key.” International companies are increasingly operating in Oman’s tendering and contracting market, such as Business Gateways International (BGI), which has been in Oman since 2010. BGI works in the oil and gas sector, implementing a national business framework and a joint supplier registration system. These have been integrated into a single platform, with great success.
Local Companies
The Omani government has launched several initiatives to help local IT start-ups and more established businesses, such as Knowledge Oasis Muscat (KOM), an industrial estate dedicated to ICT. Located on the suburbs of the capital, this 20,000-sq-metre technology park run since 2003 and includes technical colleges alongside SMEs and international ICT companies. Run by the Public Establishment for Industrial Estates, KOM offers incentives for firms to partner with the site, including tax exemption on profits for a renewable five-year period, an exemption from Customs duties on imported equipment, export credit and financing arrangements, repatriation of profits, and the provision of a one-stop problem-solving shop.
The headquarters of the ITA is at KOM, where it also runs the SAS Incubation Centre for Entrepreneurship. This was launched in 2013, specifically to aid new ICT companies, with the centre running a three-year incubation programme for successful applicants. The first batch of companies from this graduated in 2016. The centre runs a variety of other courses and training days as well, alongside free consultancy services, coaching, legal and accountancy assistance, help with access to finance and other necessities.
Meanwhile, the Oman Technology Fund is a government entity set up to invest in emerging companies and innovative ideas in the ICT field. It runs three investment programmes – Techween Incubator, which supports angel and start-up companies with funds of up to $50,000, Wadi Accelerator, which takes such companies to the next level or development with investments of up to $100,000, and Jasoor Ventures, which invests in the growth of global venture capital companies, with investments of $500,000-3m.
Data Centres
The KOM has also become home in recent years to another thriving IT subsector – data centres. The leading light here is the Oman Data Park (ODP), which provides a range of services, including managed network and co-location, private and public cloud products, and managed security services Companies are taking up cloud services in particular, given their flexibility and scalability, while managed and outsourced services can also help cut costs. The cloud can also assist with security, as instead of hiring multiple security services on a per-company basis, a centralised system can cover a range of different functions.
Expanding existing capacity to cope with more demand for cloud services is central to the segment’s plans, along with developing the skills and infrastructure needed to facilitate this. Gaining the trust of financial institutions is equally important, particularly as more blockchain services become deployed. “Blockchain is a transformational advancement that will enable growth in the sector, and it is a big step forward,” Maqbool Al Wahaibi, CEO of ODP, told OBG.
In October 2018, Cisco signed a memorandum of understanding with Data Mount, another Omani data centre hosting service, to develop a next-generation cloud service centre in Jebel Al Akhdar, a region of the Al Hajar mountain range. This will be the largest of its kind in Oman and will leverage the lower mountain temperatures to run the facility with less energy.
The growth of e-commerce will also benefit from cloud and AI expansion, although this is still at an early stage of development in Oman with the cost and duration of shipping the main challenge. However, the TRA is working on new initiatives in the postal sector designed to address some of these issues. Last mile delivery is particularly competitive, with the TRA due to announce new guidelines in this area in late 2018. In 2016, the Central Bank of Oman launched the OmanNet Debit Card E-Payment Gateway, with the legal framework around e-payments also being constantly refined. In addition, social media is increasingly being used as an e-commerce channel, particularly by SMEs.
Outlook
E-commerce looks likely to see significant expansion as the logistical network catches up. This will also feed demand for data centres and cloud services as commerce becomes digitised. Meanwhile, the government will continue to roll out the eOman strategy, from boosting rural and urban FTTH networks to training and supporting more Omani ICT start-ups. Much will depend on ensuring the way young people are taught is evolving in line with the digital transformation taking place, particularly because the Omanisation drive requires a strong local workforce. In telecoms there are also challenges for the main providers in keeping healthy margins in a saturated market. Some consolidation seems likely, with MVNOs perhaps evolving into market segmentation vehicles for the larger outfits, targeting specific consumer groups. Competition on services is likely to increase, which is good for customers, as prices fall, although this may also mean some leaner times ahead for providers. With the authorities and an increasing number of companies benefitting from eOman policies, the year ahead should continue to see positive developments in a range of branches of ICT.
