Majority state-owned Omantel, the biggest telecom services provider in the Sultanate of Oman, says it anticipates significant challenges – growth and revenue-related -- to market incumbents now that a third operator has entered the fray.
On Sunday, the local subsidiary of Vodafone – one of the world’s largest telecom players with a presence in nearly 50 countries globally – commenced full-fledged operations in the Sultanate of Oman, with a pledge to leverage modern telecom technologies, notably 5G, to accelerate the country’s digital transformation journey.
The launch, coming against the backdrop of significant challenges for the telecom sector stemming from the economic downturn and the pandemic, has the country’s flagship operator concerned.
“With the arrival of the third operator in Oman, we see a profound impact on the current competitive dynamics,” said the Chairman of Omantel’s Board of Directors. “The Omani market is showing clear signals of saturation and we are witnessing a decline in both core telecom market revenues (such as voice, data and messaging) and subscribers. The entry of the third operator has already impose further challenges on the existing operators and we do not see a scenario leading to market growth of core telecom services in short to medium term horizon, unless significant turnaround in macro-economic situation,” he stated in the company’s report for fiscal 2021.
Despite the constrained economic environment of the past year, Omantel Group achieved a revenue of RO 2.408 billion in 2021, which was marginally lower than the previous year’s tally of RO 2.511 billion. The contribution of Omantel Group subsidiary Zain Group to this total was RO 1.887 billion. The Group achieved a post-tax profit of RO 233.6 million compared to RO 229.0 million in 2020. After adjusting for minority interest, the net profit for the period is RO 67.1 million, compared to RO 66.9 million in 2020, an increase of 0.2 per cent
On the domestic front, Omantel revenues reached RO 531.4 million compared to RO 533.1 million for the corresponding period of 2020. Net profit for the year amounted to RO 73.2 million, representing a 5.3 per cent in comparison to 2020.
According to the operator, a number of factors impacted domestic profitability, including damage inflicted by Cyclone Shaheen to Omantel’s network, and a “wide-scale exodus of expats” that contributed to a decline in mobile revenue.
Given these circumstances, operators will face challenges in securing the funding necessary to support the roll-out of their 5G networks, Omantel noted. It also warned that the entry of a third operator would “further intensify competition in an already declining mobile market”.
“The arrival of the third mobile network operator in the Omani market, is putting a significant pressure on existing telco revenues and margins. The market is in a structural decline both on core telco revenues as well as subscribers, and is showing clear signals of saturation. In addition, recovery from Covid-19 impact is slow and unsure, which continues to have an impact on spending patterns from consumers, enterprises and government,” the company added in the accompanying MD&A report.