Oman Telecommunication Company - Case Study Example

Oman Telecommunication Company (Omantel) has been the sultanate's principal telecom service provider for decades now. Formerly it was entirely controlled but after Oman's accession to WTO in 2001, Government control has been slackened and finally the privatization is on the cards. In compliance with its agreement with the WTO pertaining to the liberalization of the telecom sector, the Government of Oman has opened up Oman Telecommunication.30% stake in the company was sold at the Omani Stock Market in June/July2005, with 9%sold to specific pension and charitable funds. There is a 49%cap on foreign ownership in Omantel.However no single party can hold more that 5% of the company's shares currently. Telecom Landscape in Oman and the key players. The telecom landscape is primarily dominated by the state owned incumbent operator Oman Telecommunication Company (Omantel) It is the sole licensed operator of public fixed lines, telecommunication services including local, long distance and international telephony besides data communication and value added services, dominates the telecom landscape in Oman. It has launched its digital cellular network in 1996 and was the only mobile service provider in Oman until 2005, when new entrant Nawras telecom forayed into the market.Nawras won the tender for a second cellular license in June 2004 and received it in Feb 2005.Omantel's cellular subsidiary, Oman Mobile was given a the formal cellular license in Feb 2004.Both the players operate in the cellular market under a three year period of exclusivity that will expire next year. For the year ending Jan 2006,there were an estimated 1,78,000 internet users in the sultanate, out of which a vast majority accounted for Omantel's subscriptions.Howver since it's launch in March 2006,second mobile license holder Nawras has claimed 20% of the market share and has added over 3,00,000 new subscribers In the current scenario, there is no schedule for awarding the third generation (3G) universal mobile telecommunication system (WMTS) licenses in Oman. In the meantime, however Oman Mobile is applying for additional 2G frequencies most likely in the 1800MHz band.Nawras is depending on the nationwide interconnection agreement with Oman Mobile and Omantel for providing services in those parts of the country where its network has not yet been deployed. The Telecommunication Regulatory Authority(TRA)expects to license a second national public fixed line network operator as well as a second national public data operator in the near future but has not yet set a schedule for the endowment of the license. Market Potential. Statistics from the Telecommunication Regulatory Authority reveal the following: Mobile phone subscriptions: 1.5 million Fixed phone lines: 2, 69,000. Out of this Omantel's subscriber base amounted to 1.242 million (all services) in June 2005.For mobile services its market share was a staggering 91.7% for the same period. There has been a significant rise in the number of internet users, yet the penetration rates in Oman are low compared to other regions in GCC. Most of the internet users are concentrated in and around the capital region of Muscat. Despite persistent attempts, little progress has been made in other parts of the country, particularly in regard to the access of high-speed ADSL services. Therefore, it maybe inferred that there is a lot of untapped market potential in Oman. The Arab Advisors group forecasts that by the end of 2009 increased penetration figures, greater account usage and multiplier ratios might account for as many as 5,08,000 internet users in the sultanate. The installation and access charges are plunging, therefore the internet and data services market is promising. In recent times, Nawras has introduced wireless EDGE broadband services. High-end business users constitute a major chunk of the clientele, but it is a small segment of the market and nearing saturation. In this context, the under twenty-five market segment is likely to drive growth. In markets like Europe and East Asia which have already seen EDGE and 3G rollouts it has been established that the 16-24 segment sustains the high ARPU(average revenue per user).The chief reasons are their interest in messaging,gaming,music and ring tone downloads. A large part of the internet savvy population is either fluent in English or Arabic or both. Omantel:Mission Statement Over the period of 2003 to 2006, Omantel has undergone a significant transformation. A new management structure has been adopted in line with the best international standars, with particular respect to the activities of the board of directors. Regarding recruitment of personnel, Omanisation has been a managerial priority with nearly 90% of its 2200 employees being local citizens.Furthermore, mobile services have been separated from mainstream services and a separate subsidiary Oman mobile has been created for this purpose. The company has been committed to the sultanate's modernization and has formulated an ambitious mission statement. "To be one of the biggest three telecommunications company in the Gulf Cooperation Council (GCC) and Middle East and to increase the stockholder's wealth." The key managerial objectives include: Extend coverage to all the regions in the country (including the hitherto neglected ones) and provide telecom services like normal voice line, GSM, internet access, leased line along with TV broadcasting. Collaborate with international telecom companies and enter into strategic alliances to build network infrastructure and benefit from their expertise. Omantel: Activities and future plans .Oman is in the middle of a major economic makeover and driving this is the rapid transformation of the telecom sector. The company enjoys robust financial health and has been on an expansion spree. The following section examines issues of capacity expansion, increased geographic coverage and some strategic alliances of the company with foreign players. Robust corporate performance: Omantel's net profit for the first quarter of 2006 registered a 9.6% growth and touched $55.6million! Growth was recorded in mobile and broadband services. Capacity expansion and geographic coverage: Omantel had inked a landing party agreement with Trans World Association (TWA) of Pakistan in dec 2005 to lay a submarine cable from Seeb Station in Oman to Karachi. The total outlay for the project is $1.2 million. This will make Omantel, a regional multicable operator and unleash business potential within the gulf region as well as within the sultanate. Collaboration with Siemens for GSM network upgrade: Siemens communications, one of the worlds largest communication provider had signed a deal with Oman mobile in late 2005 to extend GSM radio capacity and coverage in regions like Sharqiya, Dakhliya, Daria and Wusta.This deal marked the third phase of the GSM network upgradation.This was facilitate greater geographic coverage and will include formerly unreachable regions. The subscriber base will therefore enlarge! Completion of fiber optic link project in Dhofar(Oct 2005):In it's attempt to modernize and develop telecom infrastructure,Omantel has laid a fiber optic link project connecting Thumrait with Al-Maziyouna from one side and Thumbrait-Salalah from the other, at a total length of 300 kms. Launching of Wi-Fi broadband: The Company also plans to roll out wi-fi broadband service that would enable internet access even from hotels and shopping malls. This of course would be restricted to urban areas initially. Telegeoraphy reported, "Second Emirati cellco Du, which is t launch services next month has inked an interconnection pact with Omantel, the incumbent in neighboring gulf state of Oman. The deal covers voice interconnection and international data services. The exchange of traffic between the two operators will take place via the FALCON submarine cable, a 10,300 km fiber optic system joining Suez to Muscat and looping around the Persian Gulf with a designed maximum capacity of 1.28-2.56Tbps" Attractive packages: In early 2007, Oman mobile rolled out attractive talk time schemes to boost it' sales. On the Muscat festival. 'Hayyak starter kit' and 'Mada' packages were introduced.Hayyak starter kit was available at a price of RO7 and offered free talktime worth RO5, also 20% extra talk time was given on the RO10 recharge card! Appealing offers like this facilitate a boost in the sales and are popular among the customers. It affords them connectivity, mobility and they can avail more than thirty value added services. Operations and support system: In Sep 2006, Omantel had collaborated with the French company, Capgemini Telecom and the Sultanate's Oman computer services to implement an operations and support system. This system will enhance efficiency and improve the quality of services offered .The incidence of breakdowns are also expected to be reduced. Strategic changes in management policies concerning human resources. Recruitment and development of human resource has been acknowledged by Omantel's management as a crucial issue for enhancing employee performance in order to sustain productivity in an increasing competitive environment. The company has devised new performance management system, in the wake of new competitive threats and deregulation of the market place. Historically performance management for human resources, career planning and development have been neglected areas. However, in recent times the company has introduced programs incorporating competency framework, competency self-assessment, personal development paln, goal setting and feedback tools for its employees. It employs nearly 2200 people and there is 90% Omanisation.The implementation of these strategies have yielded favorable outcomes. Employee feedback for the practicality and user friendliness of the new system has been positive, in addition to successful implementation of the program over 2005-06. The company also launched the 'innovative training scheme' which is a part of the strategic plan to promote skills of the frontline staff, in order to deliver better customer services.Omantel has been focusing on areas like 'customer service' in recent times, as new competitive threats emerge from deregulation and much anticipated privatization. The program has been formulated to impart the staff with technical knowledge to assist them in coping with the increasing challenges in the telecom market.290 employees were awarded in a special ceremony that marked the completion of their training. The program proved to be successful as signs of improvement were visible in employee performances. Privatization of Omantel. The Oman Economic Review Online (March 3 2007) reports that the sultanate has approved plans to privatize Omantel this year. The next imperative step would be to draft new telecommunication laws and set up an independent regulatory authority to regulate the market. According to the report, the Government announced that it would divest 40% of the company and that it would be investment option would be open to Omani and foreign investors. An additional 9% of Omantel's equity would be available to local pension funds, whilst the government would retain 51% stake. The underlying aim is to open up the market to global investors to expand the telecom sector and to keep abreast with technological changes.Privitization is likely to improve the company's overall performance as well.Musact, Salalah and the Batinah coast regions will be crucial business locations for the new entrants in the market. Industry analysts are upbeat about the potential of the telecom market. REFERENCES www.iti.com www.openarab.net www.businesstoday.com www.wirelessfederation.com www.oeronline.com Read More