OMANTEL READIES FOR COMPETITION, VOIP

UNCLAS SECTION 01 OF 02 MUSCAT 000083 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/ARP, EEB/CIP/BA, EEB/CBA STATE PASS USTR FOR JBUNTIN COMMERCE FOR ITA THOFFMAN E.O. 12958: N/A TAGS: ECPS ECON ETRD PGOV MU SUBJECT: OMANTEL READIES FOR COMPETITION, VOIP REF: A. 07 MUSCAT 1102 ¶B. 07 MUSCAT 972 This message contains sensitive business information. Please protect accordingly. -------------- Summary -------------- ¶1. (SBU) Omantel's CEO reaffirmed company plans to restructure itself in advance of government efforts to open the fixed-line telecommunications sector. While unclear of the nature of the impending regulatory changes, Omantel is most concerned about competition from small niche players. Omantel, in acknowledgment of technological advances, hopes to roll out its own VOIP services by June. End Summary. -------------- Restructuring Underway -------------- ¶2. (SBU) On January 29, the Charge met with Omantel CEO Mohammed Ali al-Wahaibi to discuss the future plans of the telecommunications giant. Wahaibi acknowledged that Omantel's privileged status as the Sultanate's fixed-line monopoly would soon be coming to an end, and thus was searching for a strategic partner to acquire close to 20% of the company. The CEO stated that a financial advisor would be brought on-board within two weeks to draft public tender documents, which would be ready for distribution in April. The sale of the stake, valued roughly at $400 million according to Wahaibi, would be completed by October 2008. ¶3. (SBU) In addition to searching for a strategic partner, Omantel is also in the process of merging with its sister company, Oman Mobile. As a precursor, the newly formed board at Omantel mirrors that of Oman Mobile. Wahaibi added that reorganization efforts were underway to maximize the synergies between the fixed-line and mobile service operators in providing customers with greater options. He forecasted that the unified company would be "very competitive" in one year's time, and anticipated that employment in the combined entity would drop from 2,700 to 2,000. -------------- Regulatory Landscape Unclear -------------- ¶4. (SBU) The changes at Omantel come at a time when the Telecommunications Regulatory Authority (TRA) is nearing completion of its work on defining the parameters of opening the fixed-line sector. Wahaibi acknowledged the projection made earlier this week by TRA Chairman Mohammed bin Nasser al-Khusaibi to Reuters on the opening of the sector by the end of 2008, but added that Omantel did not know which direction the TRA would take in offering additional licenses; whether the TRA would permit a full-service fixed-line competitor to come on-line, or whether it would only be services-based companies that would buy wholesale from Omantel. Of particular concern to Waihaibi was the possible emergence of smaller, more nimble firms that would exploit niche markets, which would be "tough competition." He did not believe another competitor would come in to offer services on the scale of Omantel, given that it was "too expensive to build infrastructure." -------------- VOIP on Horizon -------------- ¶5. (SBU) On offering Voice Over Internet Protocol (VOIP) services in Oman, Waihabi remarked that, "Until today it is illegal." The CEO added, however, that Omantel was preparing its infrastructure to support VOIP and projected that the company would be ready to carry both local and international VOIP calls by June. He admitted that VOIP would cut into Omantel's revenues, but resigned himself to the fact that the presence of the technology in Oman was inevitable. To make up for lost revenues, Omantel intends to post tariff charges for VOIP services. (Note. CEO did not provide tariff rates. End Note.) -------------- Comment -------------- MUSCAT 00000083 002 OF 002 ¶6. (SBU) Omantel is moving forward on its restructuring plans, as announced by Minister of National Economy Ahmed bin Abdul Nabi Macki in October 2007. While the government will make good on its promise to liberalize its fixed-line sector per its FTA and WTO commitments, the nature of that liberalization will depend on the completion of a study currently underway in the TRA. Given that the Ministry of National Economy is a 70% owner of the company, and that the Chairman of the TRA is the deputy of the Minister of National Economy, the pace of liberalization will most likely grant Omantel enough time to ready itself for competition. On VOIP services, Wahaibi's declaration that the technology is illegal in Oman contradicts statements made by the TRA to the Embassy. The TRA maintains that it's "technology neutral" and that Omantel is licensed to provide such services, but chooses not to. End Summary. FONTENEAU