Oman: Broadband services are central to growth

OmanICT

Economic News

30 Nov 2012
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With mobile penetration already well above 100%, the increasing popularity of high-speed mobile and fixed broadband is proving to be the key to growth in the Omani telecoms sector. Increasing operating costs and declining text usage are cutting into profits, however.

Oman Telecommunications (Omantel) posted an increase in third-quarter net profit to OR28m ($72.51m), slightly higher than OR27.43m ($71.03m) it saw in the third quarter of 2011. Amer Awadh Al Rawas, the CEO of Omantel, said in a statement that increased network coverage and attention to improving customer service contributed significantly to the company’s success, particularly given growth in the customer base. Subscriptions to mobile and fixed broadband increased by 67% and 32%, respectively, over the first nine months of the year, Al Rawas said.

According to a statement by Omantel, net profit for the first three quarters of 2012 rose 9.2% to OR90m ($233.05m) and revenue increased by 2.9% to OR342.9m ($887.93m). The company said a 67% rise in mobile broadband subscriptions has been a key driver of revenue growth this year. An increase in wholesale revenue, which rose by 8.5% year-on-year (y-o-y), also supported growth.

Quarterly revenue, however, was down by OR1.4m ($3.63m) y-o-y, sinking to OR108.5m ($280.96m) from OR109.9m ($284.58m) in the third quarter of 2011, likely due to higher operating costs. Total operating expenses for the first three quarters of the year increased by 1.3% to OR247.2m ($640.12m), compared to OR244m ($631.83m) for the same period in 2011. This increase in operating expenses is attributed to rises in employee costs, administration for international calls, marketing, distribution fees and interconnection costs, according to a statement by Omantel.

The Sultanate’s second-largest mobile services provider, Nawras, was also hit by a significant increase in operational costs, reporting a y-o-y drop in both profit and revenue for the quarter. The company announced a third-quarter profit of OR7.2m ($18.64m), a 46.7% fall from OR13.48m ($349.06m) in 2011, and third-quarter revenue of OR46.9m ($121.45m), down from OR49.2m ($127.4m) in 2011.

In addition to increased maintenance costs, which were temporarily inflated during the quarter due to the company’s switch of network maintenance from Ericsson to Huawei, a decline in text revenue was singled out as a reason for the decrease in overall earnings.

At the same time, mobile internet once again appears to be paving the way to renewed growth, with data revenue rising 8% in the third quarter. “The growth in data revenue still has not made up for the fall in revenue from SMS, but this is starting to come good,” Ross Cormack, the CEO of Nawras, told Reuters. “We are trying to open up the taps for data over the next few quarters.”

Indeed, Nawras is already a strong player in both mobile and fixed broadband: around 60% of its mobile customers use mobile broadband and the firm holds a nearly 40% share of the national in-home broadband market. Continued development and marketing of broadband services to mobile users, in-home users and businesses alike will almost certainly lead to continued increases in data revenues.

“The key to the national IT infrastructure strategy is delivery of broadband to the mobile user, home consumer and business,” Cormack told OBG earlier this year. “Each of these requires different types of services delivered in a different manner.”

Nawras is also expected to add extra frequency at the end of 2012, a move that should more than double 3G network speed and capacity in the Greater Muscat area in the coming months, as well as nationwide within the next three years.

Given the high mobile penetration rate in the country – reported to be around 165% in June 2011 – there is not much room for growth in subscriptions. Rather, companies are focusing on improving the extent and quality of their offerings. While the increasing popularity of data services and smartphones may be eclipsing some traditional mobile services such as texting, the development of broadband services is proving to be the main driver of growth in a quickly evolving industry.

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