Intense competition to impact telecom market ahead of third operator’s entry in Oman

Vodafone is set to become a strategic partner in Oman’s third mobile communication operator for which the licence is likely to be issued soon

  
iPhone user viewing illuminated screen. Image used for illustrative purposes.

iPhone user viewing illuminated screen. Image used for illustrative purposes.

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Muscat - With operators already witnessing a slowdown in their revenue growth, Oman’s telecom market is likely to witness a more intense competition between existing players ahead of the entry of a third mobile operator, putting pressure on growth and profits.

Omantel said it is witnessing a slowdown on the core telecom market revenues mainly resulting from economic slowdown and increased competition in domestic market.

‘Under these market circumstances, we start to see a more aggressive competitive behaviour between existing players, putting additional pressure on revenue growth and margins. This is impacting especially the mobile market, which is showing signs of stagnation or even slight declines, only partially compensated by growth in fixed line services’, Omantel said in a company report submitted to the Muscat Securities Market on Wednesday.

The introduction of new players in the market, such as the third mobile license and the new license for Oman Broadband, will further accelerate the pressure on the market conditions, and will likely limit the revenue growth potential across all players, Omantel said. ‘The execution of our Omantel 3.0 strategy remains the essential tool for Omantel to defend our position in the market and deal with the changing market dynamics’, it added.

Vodafone is set to become a strategic partner in Oman’s third mobile communication operator for which the licence is likely to be issued soon. The Telecommunications Regulatory Authority (TRA) recently confirmed that a memorandum of understanding (MoU) has been signed between a company owned by local investment funds and Vodafone to complete the procedures for obtaining the licence for Oman’s third mobile operator.

Gulf Baader Capital Markets (GBCM), the largest brokerage firm in the sultanate, believes that the third mobile operator may commence operations during the first half of 2020 (in another 9-12 months).

‘We believe the next key timelines towards the commencement of third mobile operator would be towards the formation of the company (post MoU with local funds and Vodafone as strategic partner), issue of third mobile license (through Royal Decree) and the steps taken towards the creation of commercial terms with the existing operators for infrastructure sharing (Omantel, Ooredoo and others) to start the operations’, GBCM said in a research note issued after the TRA’s announcement.

Post third mobile operator launch, GBCM sees a scenario of intense competition in Oman’s mobile telecom space, which is already highly penetrated (139 per cent mobile penetration rate). ‘This could negatively impact the current operating margins of existing telecom companies. On the other hand, this news has been anticipated among telecom players and they are already in the process of countering this competition’, it said.

To counter the entry of third operator, on a strategic perspective, Omantel acquired a stake in Zain Group in 2017 to emerge as a multi-market telecom player. ‘This would in a way lower the overall impact. Currently Omantel is consolidating the performance of Zain Group in the accounts, which would act as a hedge to the overall performance’, GBCM said.

On the other hand, Ooredoo Oman has the support of the parent (Ooredoo Qatar) to work positively on strong branding, procurement, marketing and other benefits, the brokerage firm added.

 

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