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Viewing cable 06MUSCAT293, OMANTEL TO FACE FIXED-LINE COMPETITION

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Reference ID Created Released Classification Origin
06MUSCAT293 2006-03-01 14:29 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Muscat
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 MUSCAT 000293 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARPI, EB/CIP (AGIBBS) 
STATE PASS TO USTR FOR JBUNTIN 
 
E.O. 12958: N/A 
TAGS: ECPS EINV PREL MU YM
SUBJECT: OMANTEL TO FACE FIXED-LINE COMPETITION 
 
REF: SANAA 221 
 
CONTAINS SENSITIVE BUSINESS INFORMATION, PLEASE PROTECT. 
 
------- 
SUMMARY 
------- 
 
1. (SBU) A Telecommunications Regulatory Authority (TRA) 
Commissioner predicted that Oman would issue a second 
fixed-line license within the next year, ending Omantel's 
monopoly.  She also predicted that Oman would open up the 
value-added services sector within the next three months, but 
would not address the issuance of another mobile license 
until 2008.  Meanwhile, Omantel sets its sights on growth, 
rather than shareholder value, with an eye toward 
international expansion.  End Summary. 
 
------------------ 
COMPETITION COMING 
------------------ 
 
2. (SBU) In a February 21 meeting with Econoff and USTDA 
contractor, TRA commissioner Naashiah Saud al-Kharusi said 
that Oman intends to tender a second fixed-line license 
within the next year.  The move, in keeping with Oman's WTO 
and FTA commitments, would end government majority-owned 
Omantel's fixed-line monopoly.  The TRA has prequalified 
seven companies for the consultancy contract, and al-Kharusi 
expects to move forward with the bidding in the next 3 
months.  Al-Kharusi further noted that the TRA would also 
open the value-added services sector (i.e. internet 
providers) within the next 3 months. 
 
3. (SBU) Plans to expand the mobile market beyond incumbents 
Oman Mobile (a subsidiary of Omantel) and Nawras (an Omani, 
Qatari, and Danish consortium) are on hold, a result of a 3 
1/2-year moratorium established with the issuance of a second 
license in June 2004.  While al-Kharusi did not rule out the 
addition of a third mobile license, she commented that future 
expansion would depend on a thorough market analysis. 
 
-------------------- 
GROWTH AT WHAT COST? 
-------------------- 
 
4. (SBU) Al-Kharusi surmised that Omantel would need to move 
quickly to next-generation technology.  She dismissed 
concerns that Omantel would suffer commercially as a result 
of second license, noting that Oman Mobile would not have 
grown its business had it not been for competition from 
Nawras.  Al-Kharusi also disavowed TRA intervention in newly 
emerging technologies such as Voice over Internet Protocol 
(VOIP), stating that the government would not stand in the 
way of advances so long as providers held both voice and data 
licenses.  (Note: Omantel, as the sole internet service 
provider, has been blocking subscribers' ability to download 
VOIP software.  End note.) 
 
5. (SBU) Omantel, meanwhile, is looking beyond its borders to 
grow its business.  In a January 23 meeting with investors, 
Omantel Executive President Mohammed bin Ali al-Wuhaibi 
stressed continued growth, rather than strengthening 
shareholder value, as key to Omantel's future profitability. 
Omantel's stock on the Muscat Securities Market has been 
taking a pounding in recent months, and is consistently the 
volume leader in daily trading activity. 
 
6. (SBU) In a separate meeting on February 20, Dr. Rasheed 
al-Huraibi, Director of Strategic Development for Oman 
Mobile, told econoff that Omantel was looking to Yemen, 
Sub-Saharan Africa and the GCC for further market growth. 
Regarding Yemen, al-Huraibi acknowledged that Omantel's $100 
million bid for the third mobile license was "too much," but 
suspected that Omantel, keen on gaining access to a market of 
20 million should Unital's "winning" bid of $150 million not 
materialize, would be willing to negotiate on the terms of a 
contract. 
 
------- 
COMMENT 
------- 
 
7. (SBU) Omantel faces the dilemma of being a large legacy 
player in a small market that is becoming more competitive. 
In looking for expansion opportunities, Omantel is seeking 
high population, low penetration markets.  What remains to be 
seen, though, is how much Omantel will pay for access to 
these markets in the wake of investor anxiety over falling 
share prices, which have recently plunged 42% on 
disappointing earnings reports. 
BALTIMORE