May 09 2012
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Agility is the key
Dr Amer Awadh Al Rawas, CEO,
Oman Telecommunications Company
underscores the reasons for the company's enduring success on the OER Top 20 charts in a candid chat with Mayank Singh and Visvas Paul D Karra
We have been able to transform and improve our competitive readiness. We have taken a number of initiatives in this direction - one, we have improved our internal efficiency by merging the two companies ( Omantel and Omanmobile) under one operating model and finally into one company. Second, we have transformed ourselves into a customer oriented company, offering products and services according to their needs, desires and aspirations and delivering those with an improved customer experience. The third dimension is improving our infrastructure to increase the quality and reliability of our service. Omantel has achieved an average of nine per cent annual growth since competition started.
Being the biggest may not necessarily be synonymous with the best. How do you ensure that size does not become a deterrent to efficiency?
If you look world over a lot of big companies have lost ground to newer companies. Size is not enough to survive, survival is all about agility. Agility is the ability of an organisation to transform itself when the environment around it changes. Companies which are not able to move from an incumbent status lose ground. The transformation that Omantel has undergone since 2009 underscores our ability to transform ourselves and compete in the market. All our business domains are open to competition, but despite this we are holding ground and doing well in the market.
Internal efficiency in the telecom sector is judged by EBITDA, which is the money that you make from your revenue. Omantel 's EBITDA of 53 per cent (2011 figures) is the highest in the region amongst telecom players. This is commendable as our operations are diverse due to our size in the market. In the fixed line service for example, we have 222 fixed line exchanges and somebody has to manage them and this requires a larger staff strength. Omantel has three times the staff compared to our nearest competitor. We also have a larger asset base with commensurate depreciation, but it is good for our shareholders.
Can you cite a few measures taken by Omantel that reflect its nimble footedness?
Muscat has been designed according to an urban plan that dates back to around 40 years. As the city landscape has changed, it has become increasingly costly and difficult to provide services according to our previous plans. Imagine the cost of digging up trenches, laying cables and providing the last mile services in a changed landscape.
Instead we brought in an innovative solution that acts as a neighborhood exchange. For example, switches were built according to an older urban plan, so accordingly the switch at Madinat as Sultan Qaboos (MQ) served Al Khuwair as well. As Al Khuwair expanded, the switch at the Al Khuwair roundabout had to serve Al Khuwair 33 and the Bausher area. As the landscape changed, we could have expressed our helplessness, but instead we installed new switches and have grown our broadband service too. Omantel used to charge customers with deposits, security etc, but all those charges have now been wiped away. We moved into unlimited offers, such offers require one to adjust various systems so that one can handle the increase in traffic. We were able to open up to the idea of MVNOs and resellers, adapt and use them in a positive way to complement our work in the market.
Omantel is offering all-time low rates for its services - one can avail of a 1GB monthly Hayyak broadband connection for RO5, off-peak rates for international calls to India have dropped to RO0.065 per minute. What has enabled you to drop rates so drastically, does it also mean that the company was overcharging its customers earlier?
This is linked to what I said earlier; you need to build your capacity to render a service, and before you are able to give it at a lower price or as an unlimited offer. It all comes down to infrastructure and once you reach a certain scale then you can offer unmatched innovative offers and prices. As a company we need to strike a balance because if we invest too much in infrastructure then the depreciation will be too high and the company will not be in a position to give shareholders the return on investments that they expect. So there has to be a tight balance between these competing objectives of pleasing customers, building infrastructure and offering shareholder value.
What is Omantel 's broadband penetration rate and what kind of a percentage growth do you expect this year?
We have grown our fixed broadband (ADSL), not just in terms of the number of subscribers but also in the type of subscribers that we are getting. Earlier people struggled to get half MB for RO12, but now every subscriber gets two MB. We have customers who have taken upto 40 MB, but for most people we can offer upto 24 MB, if they do not have fibre. Not only have the number of subscribers grown but so has the level of service and that is helping our revenues to grow. The number of subscribers for our mobile broadband service too has grown tremendously, although we are very conservative in calculating our subscriber base. We calculate our subscriber base by measuring whether a customer has been using his line for "certain period" at least for one month. So if customers have not been using their mobile phones, then we take them off our records and such prudence has worked in our favour. Our mobile broadband subscriber base stood at 276 K as of December 31, 2011.
Oman's telecom market has a mobile penetration of almost 170 per cent, given such a scenario where is Omantel 's future growth going to come from? Is there also a fear that your average revenue per user (ARPUs) may come down drastically from here onwards?
We have been in a position to sustain our ARPUs for a long time now. Worldwide, ARPUs have been declining for telecom companies as rates are going down and we cannot fight this trend. However, we can counter this by allowing and encouraging customers to use more devices. So we can increase revenues either through enhanced machine-to-machine communication, usage of additional devices and services like broadband.
A lot of people say that mobile service pricing is still higher in Oman compared to other markets like India?
It is unjustified to compare Oman to India because of the difference in the scales of the two countries. In the Arab world, our rates are one of the best and this has been proved by reports from independent bodies like Arab Advisors Group and Arab Regulators Network. Though the size of the market is a challenge we will continue to focus and build our infrastructure for three reasons - one, we want to partner and contribute to economic growth by building telecom infrastructure in newly developed economic zones; second, to enable the business of our corporate customers to grow and finally, better coverage to satisfy our consumers and as a contribution to the community.
Being a partially owned government company, does Omantel have to live up to a larger social obligation and is this a burden from a business point of view?
We are fulfilling our social obligations by continuously covering places that are not necessarily profitable. We do this for two reasons, to satisfy and please our customers and to fulfill our corporate social responsibility and we will continue to do this as a contribution to the national economy.
After WorldCall's acquisition in 2008 Omantel has not made any forays in the international market. Is this a sign that you are going to be focused on Oman in the near future?
The GCC region has not witnessed a significant number of mergers and acquisitions in the last three years as there have been a few compelling opportunities. The Greenfield opportunities that came up were not appropriate for our size. We are constantly on the lookout for M&A opportunities that are in conformity with our size and offer a reasonable return on investment. We have a set of criteria to filter proposals, but until now we have not found any good opportunity. We are happy with WorldCall's last year performance as it ended 2011 with a profit of $3.4mn.
What is the company's growth strategy for 2012 and are there any specific areas of operations that you are targeting?
Enhancing our broadband service is a specific growth area that we are targeting. So we will upscale our broadband infrastructure. In addition, we are looking at building corporate solutions and increasing our international capacity, connectivity and service.
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