OMANTEL READIES FOR COMPETITION, VOIP

UNCLAS SECTION 01 OF 02 MUSCAT 000083

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SENSITIVE
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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

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Summary
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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.

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Restructuring Underway
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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.

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Regulatory Landscape Unclear
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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."

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VOIP on Horizon
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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.)

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Comment
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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.

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