Broad digital transformation is at the heart of Oman Vision 2040, the government’s long-term economic development blueprint. In the years leading to the Covid-19 pandemic the sector’s governance structures was overhauled to improve efficiency, while private investment in ICT activities had already been growing. To support this, the authorities have prioritised deepening the local tech talent pool, and enhancing the sultanate’s ecosystem of start-ups and small and medium-sized enterprises (SMEs).
The swift shift to online education, work and commerce during the pandemic necessitated further development of local digital skill and service bases. To that end, government entities have been teaming up with local and international players to enhance such capacities. Meanwhile, in order to keep abreast of an increasingly complex global digital landscape, new laws and regulations on issues such as cybersecurity and data protection have been rolled out, and national capabilities enhanced in related areas.
The government’s own digital transformation continues apace and is surpassing targets, resulting in significant cost savings. Private entities from key sectors such as banking and energy are focusing on digitalising their operations in recognition of the benefits brought by integrated and advanced tech infrastructure. Even with the wide-ranging developments, the ICT sector’s contribution to GDP has been in decline in recent years, although global tech company SAP estimated in a 2021 whitepaper that the market is expected to nearly double in value by 2024 to OR2.2bn ($5.7bn) from OR1.2bn ($3.1bn) in 2019. As such, it will be important to leverage improved business models and higher levels of international investment to reverse this trend.
Overarching Strategies
Oman’s economic development is guided by Vision 2040, which was approved by Sultan Haitham bin Tarik Al Said in December 2020. Under the guise of Vision 2040, the government aims to diversify the economy by developing sectors with high value-added potential, reducing dependence on hydrocarbons revenue, and strengthening the sultanate’s standing in the global knowledge and information economy.
Oman has long followed five-year plans (FYPs), with the 10th covering 2021-25, the first to be implemented under Vision 2040. The sectors targeted in the 10th FYP to drive economic diversification are manufacturing; agriculture and fisheries; mining and mineral products; logistics activities, culture and logistics services; and education, scientific research and innovation. Building infrastructure and improving technology to increase efficiency and productivity are fundamental to the FYP.
Structure & Oversight
The Ministry of Transport, Communications and IT (MTCIT) is responsible for overseeing the sultanate’s digital transformation. The MTCIT’s remit affords it a prominent role in developing Oman’s physical and digital infrastructure. The ministry is responsible for formulating and implementing ICT-related policies and strategies that enable operational agility and increase efficiency by integrating digital processes and services for public and private entities.
The MTCIT is implementing several policies to develop the sector, such as the National Digital Economy Programme, which aims to guide the next stages of Oman’s digital transformation (see analysis), the Government Digital Transformation Programme (GDTP), the e-Commerce Programme, the Technological Infrastructure Programme, the Digital Industry Programme and the Cybersecurity Programme. These offer considerable potential for economic transformation, in addition to opportunities for private investors to expand in the market.
The MTCIT is taking a whole-of-economy approach to digital transformation and advancement, collaborating with government bodies and private entities to localise and centralise digital systems, including those that are oriented around data protection, cloud storage and cybersecurity. The MTCIT is also promoting ICT investment opportunities, with the ultimate goal of increasing revenue derived from the sultanate’s digital economy.
Given the telecoms sector’s scale and unique demands, it is overseen by a separate government entity, the Telecommunications Regulatory Authority (TRA). Established in 2002, the TRA works to regulate and coordinate telecoms activities within the sultanate and is responsible for issuing licences to sector operators. Licences are divided into three categories, with classification dependent on the services the applicants intend to provide. The TRA’s objectives revolve around creating a telecoms industry with fair market competition, and accessible pricing for both consumers and operators. It also focuses on service delivery, the expansion of infrastructure and access to global markets for Omani businesses. In 2012 the TRA’s remit expanded to include oversight of the sultanate’s postal services.
Another entity integral to sector development and expansion is ITHCA Group – formerly known as the Oman Information and Communications Technology Group – the ICT-focused arm of the Oman Investment Authority (OIA), the sultanate’s sovereign wealth fund. Established in 2019, the group absorbed prominent sector operators Oman Broadband, Oman Technology Fund, and Oman Towers and Space Communications Technology. The core functions of ITHCA Group are to develop Oman’s ICT infrastructure and help it adopt digital technologies. The group will also play a key role in executing the GDTP in close collaboration with the MTCIT, as well as focus on strengthening public-private collaboration in the development of the digital economy.
The group has signed a number of agreements designed to boost tech adoption in Oman, including with five ICT companies in December 2021 to develop AI products, digital solutions, blockchain technology and a framework for the internet of Total 5G fixed broadband subscriptions, 2021-22 Source: TRA 20,000 40,000 60,000 80,000 100,000 120,000 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Q2 2021 things. These efforts are set to increase the volume of private investment in the industry.
Size & Performance
Growth in Oman’s ICT sector slowed from 10.3% in 2014 to 1.1% in 2017. This trend continued, with the sector registering contractions each year between 2018 and 2021. The sector’s contribution to GDP fell from a high of OR664m ($1.7bn) in 2017 to OR597m ($1.6bn) in 2021, according to the National Centre for Statistics and Information. ICT’s contribution to GDP remained relatively steady at around 1.8% from 2012 to 2022.
Telecoms are a key contributor to the ICT sector’s GDP, and total wholesale and retail mobile revenue rose from OM111.6m ($290m) in the second quarter of 2021 to OM117.2m ($305m) during the same period in 2022. The contribution of mobile telephone services – which includes calls, connections, rentals, SMS and multimedia messaging services – fell by 3.7% from OR28m ($72.8m) in 2021 to OMR26.9m ($70m) in 2022, reflecting the fact that mobile devices are increasingly used for web-based digital services, rather than as telephones.
Oman’s two largest telecoms companies are the government-owned Omantel and Qatar’s Ooredoo. Omantel’s annual revenue gradually fell from OR2.6bn ($6.8bn) in 2019 to OR2.4bn ($6.2bn) in 2021, with operating profits contracting during that period from OR481m ($1.2bn) to OR378m ($980m). Increased competition is one of the factors that is driving the downward trend, and another potential reason is the significant reduction in Oman’s expatriate population from 2014 to 2021 due to low oil prices and the pandemic. However, Omantel’s performance improved over the first nine months of 2022, with revenue up to roughly OR2bn ($5.2bn) from OR1.8bn ($4.7bn) for the corresponding period in 2021, giving the company a 58% share of national mobile revenue and an 82% share of fixed-line revenue. Ooredoo’s Oman operations recorded revenue of QR1.9bn ($521.5m) over the first nine months of 2022, an 8% year-on-year increase.
Looking to the future, UK-listed market research firm Global Data forecasts the value of Oman’s ICT sector to reach $2.2bn by 2024, which would represent an 83.3% increase compared to the sector’s 2019 revenue of OR1.2bn ($3.1bn).
Telecommunications
Around 95% of internet users in the sultanate access it through their mobile phones, and as such, the telecoms market offers significant potential to international investors. The segment has long been dominated by the operators Omantel and Ooredoo, which hold respective market shares of 41% and 37%, according to the TRA’s report for the second quarter of 2022. The remaining market share is divided between three different players, including Vodafone. However, Vodafone is relatively new to the market, having only received its operating licence in January 2020, and the arrival of this established international operator is expected to disrupt the existing duopoly of Omantel and Ooredoo, as well as bolster competition in the telecoms sector.
At the end of June 2022 Oman had over 6.2m active mobile telephone subscriptions, a 6% increase from 5.9m in the same period of the previous year, equating to a penetration rate of 140%. The split between pre-paid and post-paid subscriptions was 77% to 23%. There were close to 5.4m mobile broadband subscriptions as of the second quarter of 2022, equalling a penetration rate of 141%. Coverage across the sultanate is also high, with 99.8% of the country’s land mass serviced by 3G and 97.9% by 4G. Meanwhile, the average monthly mobile phone usage per subscription was 93 minutes, while the average amount of mobile data used was 6.7 GB. In terms of fixed services, there were roughly 574,400 telephone and 526,500 broadband subscriptions at the second quarter of 2022, for respective penetration rates of 82% and 75%.
UK-based ICT infrastructure investment firm Helios Towers announced in December 2022 that the company had closed a deal to acquire 2519 tower assets from Omantel for $495m, with the group aiming to acquire more than 1500 additional sites by May 2024. The transaction, conducted in partnership with Rakiza, Oman’s infrastructure fund, is Helios’ first in the region, and it should allow Omantel to become an asset-light telecoms operator.
5G
Since 5G provides the foundation for the integration of artificial intelligence (AI), blockchain, robotics, virtual reality, cloud services and other advanced technologies, the sector’s key players are working to expand the sultanate’s 5G infrastructure. Indeed, Muscat was named among the top-10 world capitals in terms of 5G speeds for the first half of 2021. As of the end of June 2022, 5G coverage had reached 86.8% of the country’s land mass, up 41.9 percentage points from the end of 2021. Fixed 5G subscriptions saw quick growth between the second quarters of 2021 and 2022, up 193% from 38,173 to 111,984 over that period, while the country had 2024 mobile sites with 5G as of June 2022.
In May 2022 Omantel announced a partnership with Microsoft to facilitate its digital transition and improve its business procedures, with a focus on enhancing customer experience and optimising 5G networks to enable the adoption of advanced cloud solutions, big data, data science, AI and cybersecurity. Under the terms of the agreement, Microsoft will take the lead in upskilling Omantel’s workforce.
AI
The government is giving priority to the implementation of AI across sectors targeted by the 10th FYP, and in additional areas of high socio-economic importance such as smart government, education, health care, security and defence, and emergency and disaster management. To that end, in 2020 the MTCIT established the National Programme for AI and Advanced Technologies.
The key pillars of the national programme include developing human capabilities in relation to AI, accelerating the adoption of AI, enhancing productivity in targeted sectors and ensuring robust governance of its usage. The framework has a particular focus on user privacy, data collection and non-invasive algorithms.
Of the AI programme’s many objectives, the government has identified four key performance indicators (KPIs) to gauge its success. One of these involves the periodic raising of Oman’s standing in Oxford Insights’ Government Readiness Index for AI from 52nd in 2022 to minimum rankings of 40 and 35 by 2025 and 2030, respectively. Furthermore, the government aims to increase the number of local SMEs that provide AI-related services by 20% a year. The remaining two KPIs aim to see the MTCIT working to raise the value of AI investment in Oman from $20m in 2021 to $250m by 2025 and $400m by 2030, and to boost the sultanate’s AI-related research output by 20% per year.
The goals of the National Programme for AI and Advanced Technologies can be seen in the launch of initiatives such as the Ministry of Health’s drive to enable the early detection of breast cancer, which returned a 96% success rate during its trial period and resulted in the deeper implementation of AI in five Omani hospitals. Another example is the Nibras Project, which has seen the oil exploration and production firm Petroleum Development Oman implement a digital platform to integrate internal processes and make troubleshooting more efficient.
The authorities have also looked to adopt tech solutions in the agriculture sector. AI-powered drones have been used to detect pests and aid pollination to facilitate Oman’s drive to plant 1m date palm trees. Additionally, smart water and electricity meters have been rolled out as well, and the implementation of smart water meters has resulted in an estimated OR42m ($109.2m) in savings per year.
These developments and others across the economy show not only the potential of AI and other emerging technologies to facilitate sustainable growth, but also that government efforts to develop this space are beginning to pay off. “Despite a somewhat slow start, Oman is now rapidly advancing in its digitalisation journey and all the necessary infrastructure is in place for the sultanate to meet its targets,” Yousuf Al Yahmadi, co-founder and managing director for Muscat-base end-to-end tech firm Expert Software Middle East, told OBG.
Investment
In January 2022 the government announced its intentions to invest OR170m ($442m) in the GDTP. Meanwhile, ITHCA Group has continued to actively invest in the sector, announcing in December 2021 a series of agreements to strengthen and diversify its investment portfolio along with the sultanate’s national capacities relating to AI, data-driven software development, blockchain technology, digital services, cloud solutions and internet-of-things capabilities.
Stronger bilateral cooperation, particularly across the GCC, is a core component of Oman’s ICT investment strategy. In September 2022 the group signed a deal with ADQ, the Abu Dhabi sovereign wealth fund, to establish a $161m venture capital fund to invest in Oman. The initiative is part of a broader alliance between the OIA and ADQ to facilitate roughly $2.7bn in investment. Furthermore, a number of memoranda of understanding (MoUs) were signed between Omani and Saudi entities in October 2022 to reinforce mutual capabilities and strengthen their digital synergies. One MoU between ITHCA Group and the Saudi digital solutions provider Thiqa, is aimed at strengthening cooperation between the two countries by implementing product conformity, standardisation and legal calibration. Other such agreements signed between the two entities include mutual investment to reinforce the integration of ICT services and cloud technology solutions.
Data Centres
Oman’s data centre market is expected to receive significant investment in the coming years, in line with its growth potential, with Arizton Advisory & Intelligence estimating that the revenue from Oman’s data centre market was set to expand to $471m by 2027. The market has shifted towards co-location and managed services in recent years, with some of the established players including Datamount, Equinix, Omantel and Oman Data Park, the last of which won several national and regional awards in recent years, and is the operator of the sultanate’s only virtual data centre.
“Oman has significant growth potential in data centres, given its strategic location and access to open waters connecting to all parts of the world. The infrastructure is ready and data traffic is increasing, though local industry stakeholders need to raise international awareness of our capabilities and potential. Moving forwards, Oman needs to focus on reducing latency as this is essential for clients that use real-time processing,” Maqbool Al Wahaibi, CEO of Oman Data Park, told OBG.
Green Data City, which began operations in December 2022, is in the Salalah region of the Dhofar Governorate, where it will harness its strategic coastal location to utilise renewable energy sources. The project is set to receive more than $3.2bn in funding as part of Vision 2040. It was the first Omani data centre to obtain a crypto-mining licence when it did so in November 2022, and it is expected to reach full blockchain capacity in 2023. The MTCIT announced in December 2022 that it secured OR150m ($390m) in investment from a consortium of local and foreign financiers to develop a largescale data centre at Green Data City. The investment is earmarked for the processing and hosting data; and the adoption of distributed ledger technologies, blockchain and financial technology.
Outlook
Oman’s government has been taking a forward-thinking approach to the development of the economy, with advanced technologies at the centre of its plans to attract higher levels of private investment, strengthen infrastructure and increase productivity. The role afforded to ICT development makes entry into the market attractive for international investors, particularly in light of the sultanate’s efforts to streamline its regulatory frameworks, its stable political environment, and the proliferation of free zones and special economic zones (see Economy chapter).
Despite regional competition, there appears to be a clear understanding across the GCC region of how the cooperative strengthening of digital infrastructure can contribute to economic growth across the board. Furthermore, the strengths and challenges that Oman faces suggest that the country will be well placed to receive forthcoming investment in technology. Indeed, Oman’s focus on positioning itself as a regional leader in data centres is already bearing fruit. If the government can effectively harness its national strategic advantages – and key sector players continue to support the development of a national digital infrastructure – the ICT sector is likely to see a rebound in the forthcoming years.
Read More from OBG
