Oman’s telecom sector is bracing for the much-anticipated entry of Vodafone as the country’s third operator – a development that promises to further ramp up the challenges for leading incumbent service providers Omantel and Ooredoo already weighed down by the effects of COVID-19 and the accompanying economic slowdown.
Majority state-owned Omantel warned recently that the arrival of the third Mobile Network Operator (MNO), coupled with the rollout of 5G telecom technology – developments imminent during the second half of this year – would likely impact the industry.
“The arrival of the third operator in Oman will have a profound impact on the current competitive dynamics,” said Omantel in the Board of Directors’ report of its operations for the six months ended June 30, 2020. “The Omani market is showing signals of saturation and we are witnessing a decline in both core telecom market revenues (such as voice, data and messaging) and subscribers, as the number of expats is expected to decrease due to the overall economic impact. It is expected with the entry of the third operator will impose further challenges on the existing operators.”
Last September, the Telecommunications Regulatory Authority (TRA) announced the signing of a strategic partnership pact between telecom heavyweight Vodafone Group and Oman Future Telecommunication Company (OFT). OFT, a consortium of Omani government investment and pension funds (owning around 55 per cent of the equity), said at the time that it plans to roll out a new mobile network under the Vodafone brand with commercial launch slated during the second half of 2020.
A key concern for existing market players is the sizable capital costs required to fund the rollout of 5G telecom technology amid the ongoing economic slump and the uncertain outlook. Market experts have long speculated that Vodafone’s launch will spur the adoption of 5G in the Sultanate, but that outlook has since been overshadowed by the pandemic and the downturn.
Articulating this concern, Omantel noted: “Even with the far superior services 5G can provide in terms of speed and latency, as well as the possibility to develop a new stream of advanced smart services and IoT (Internet of Things) solutions, history in previous network upgrades such as 4G has proven that the monetisation of these advanced features is challenging in the short term. As with every new technology, the real use cases will only become clear once the network has been rolled out and the appropriate echo system is developed. This will provide a dilemma for operators to decide when and how to pace the deployment of 5G networks.”
Both Omantel and Ooredoo reported a decline in profits from their domestic operations during the first half of 2020, citing the pandemic as well as the downturn. In particular, the dual shock is having a substantial impact on the spending capacity of customers, as well as the business and public sector, according to Omantel.
“Business closures and budget deficits will all have a direct impact on the demand for services as well as increase the risk of non?payments and termination of services,” the country’s biggest telecom player further noted in its Board of Directors’ report.
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