GOVERNMENT MOVING FORWARD ON PARTIAL OMANTEL SALE

C O N F I D E N T I A L MUSCAT 000380 SIPDIS STATE FOR NEA/ARP, EEB/CIP COMMERCE FOR ITA THOFFMAN E.O. 12958: DECL: 05/21/2018 TAGS: ECPS ECON EINV MU SUBJECT: GOVERNMENT MOVING FORWARD ON PARTIAL OMANTEL SALE REF: MUSCAT 187 Classified By: Acting DCM Eric Carlson for Reasons 1.4 (b and d) ¶1. (U) On May 18, state-owned Arabic daily "Oman Daily Observer" confirmed reftel report that the government is likely to select a consortium of financial advisors, including Citibank and JP Morgan, to prepare majority state-owned Omantel for a sale of an undetermined amount of its stock to a strategic investor. The press report claimed that the government was leaning toward the U.S. firms on the basis of their experience in sales of a similar nature in the telecommunications sector. The actual percentage of the company that would be offered for sale is estimated to be between 19% and 30%, depending on whether the company's articles of incorporation are changed to provide for a larger acquisition. ¶2. (U) On the same day, Omantel posted a healthy first quarter net profit of 38.42 million Omani rials (USD 100 million),a 60% increase from the 24 million RO (USD 62 million) for the same period in 2007. The company attributed this rise in profits to a reduction in operating expenses, lower royalty fees collected by the government, and an increase in mobile phone subscribers. ¶3. (C) Abdullah al-Lootah, Country Manager for Microsoft Oman, noted to Econoff on May 18 that either UAE-based Etisalat or Egpyt-based ORASCOM stood a good chance of emerging from the bidding process with a stake in Omantel. He remarked that in his conversations with Etisalat's Chief Financial Officer, the company was "very interested" in acquiring a stake in the Omani telecommunications provider. Lootah added, however, that discussions between the companies have been strained. ¶4. (C) Comment: The government, by allowing publication of the press story, appears to be taking a pre-emptive role in diffusing possible criticism from local financial circles that a foreign entity will be brought in to sell off part of a prized state institution. The report also provides public assurance that Omantel's restructuring will go forward. The October 2008 completion date for the sale may impact progress on the U.S.-Oman Free Trade Agreement (FTA),which is currently pending Oman's implementation of FTA-compliant telecommunications licensing regulations. End Comment. GRAPPO