At first glance, Oman might not appear to be the most alluring of the Gulf region’s telecoms markets, with a relatively small population of some 3 million people spread over a large geographic area, and a mobile penetration rate of more than 130%.
But a forward-looking regulator and extremely low fixed-line and internet penetration rates also mean there is plenty of potential left in the country. Even in the mobile sector, the recent launch of 3G services by both of the main operators, Omantel and Nawras, and MVNO Friendi Mobile, offers plenty of scope for growth.
Oman’s mobile sector is dominated by incumbent Omantel and second operator Nawras, which both have roughly equal market shares. However the two telcos also compete with five MVNOs, although only Friendi Mobile, which uses the network of Omantel, appears to have gained any significant traction in the market, with some 250,000 subscribers reported at the start of 2011.
But with Nawras having almost completed the deployment of its fixed network after being awarded a licence for fixed voice and data services in 2008, the market looks set for a further shake-up, as Omantel loses its fixed monopoly.
With just 42,000 ADSL broadband subscribers in Oman, and a total internet penetration rate of about 17%, according to Australian-based research firm, Budde.com, it is no surprise that Oman’s operators see huge potential for internet services, including 3G.
“Broadband is a key growth area given Oman’s currently low Internet penetration levels,” says a spokesman from Budde.com.
“Growth will be driven by improved affordability due to competition. Wireless will play a significant role in Oman’s future broadband market due to existing low fixed line penetration, high mobile penetration and the competing operator Nawras’ focus on wireless platforms such as WiMAX and HSDPA to offer broadband services.”
Nawras launched fixed services in mid-2010 using a combination of WiMAX and fibre, and has been increasing its coverage since then. Ross Cormack, CEO, Nawras, is particularly upbeat about the potential of the company’s fixed-line network.
“We have built a home broadband network with wireless access using WiMAX to reach approximately 54% of households in the country already,” Cormack says. “We are continuing to build and we will cover at least 80% of households during this year.
“We have also been building a fibre backbone and fibre access so that we can provide sophisticated fixed and mobile services to major corporates, and so we have been building that fairly comprehensively.
“In the built-up areas where we are already providing home broadband services, WiMAX is our first choice, but we will be looking at FTTH over the next few years and we have some prospects of doing some trials later this year,” Cormack adds.
Nawras offers a “plug and play” proposition for home broadband and Cormack says that uptake has been “very pleasing” so far. “If you want internet at your home, then check on the website that you have coverage from Nawras. If there is Nawras coverage, pick up a modem and take it home, and plug it and play it.
“If you have any problems, we come out and fix it for free. Basically 80% to 90% of customers have no problems at all so we are getting very positive feedback,” Cormack says. “The small number who need help get help, so they are also pretty positive about the service.”
Nawras launched a pre-paid weekly package as well as post-paid packages for fixed-broadband. However, while the majority of mobile users in Oman are pre-paid users, most of Nawras’ fixed-broadband customers are post-paid.
“The majority of customers are actually choosing to be contract customers, which was an interesting outcome, but we are extremely happy – it allows us to build a close relationship,” Cormack says.
Nawras is also pushing into the enterprise and corporate sector with its fixed services, and is even deploying fibre direct to the premises of some larger corporates.
“For corporate customers we are also going direct into the building, so when we launched we had already built a fibre network around the city business district, passing 350 major businesses. A lot of companies are interested in FTTP,” Cormack says.
Nawras’ fixed-line offering has also benefited from the company’s reputation in the mobile sector, according to Cormack.
“We are not having to start at the bottom and work up, we are already credible to major corporates. We have banks such as Bank of Oman, Oman Air and a number of hotels and other major businesses.”
Cormack points to a report from BMI, which states that the broadband penetration in Oman stood at about just 2% of the population at the end of 2009. This compared to 10% in KSA and 16% in UAE, which demonstrates just how much growth potential remains in Oman, even when taking into consideration growth in 2010.
“If you compare us with Saudi Arabia, they were showing 10% penetration. That is what excites us about this. We are competing in a relative green field here.”
Oman’s incumbent operator Omantel has also been upgrading its fixed network. The company started to deploy the country’s first FTTH network in parts of Muscat in March 2010.
The company, which is working on the project with Chinese vendor Huawei, initially rolling out the network in two new build developments in Muscat. Given Oman’s extremely low broadband penetration rates, mobile broadband also offers huge growth potential for the country’s telcos.
As of January 2010 an estimated 1.7 million mobile subscriptions had access to mobile broadband services, Budde.com estimates. Nawras was the first operator to be awarded a 3G licence in Oman, and the telco launched its 3G service in Muscat December 2007. By July 2008 the network covered Muscat, Nizwa, Sur, Salalah and Sohar and supported downlink speeds up to 7.2Mbps, according to Budde.com. Some 97% of Oman’s population is now covered by Nawras’ mobile broadband network, including Edge.
“We concentrated the 3G build on where most people work, live or play, so we cover just under half the population with 3G,” Cormack says. “But we concentrate on where people really use it and that is the metropolitan areas of Muscat or greater Muscat, plus the coast up to the UAE border and the other major cities: Soha, Nisrah, Salalah. Cormack says the company “doubled data usage” between the first half of 2009 and the first half of 2010. “Data is probably the single biggest growth area in our mobile sector,” he says.
Last month, Oman’s first and biggest MVNO, Friendi Mobile, also launched 3G services, using the network of Omantel. The virtual telco launched packages including a monthly pre-paid 3G offering, which it hopes will be a hit with many of Oman’s more price sensitive broadband users.
Mikkel Vinter, CEO, Friendi Mobile, says the launch, which included the introduction of dongles, was part of the telco’s plan to move “deeper into our segment and become even more relevant”.
“The market is maturing and the penetration rate is getting high. In a nutshell the answer to this challenge is segmentation and innovation,” Vinter says.
Incumbent operator, Omantel, launched 3G services in March 2009. In terms of challenges in the market, Cormack points to the high level of competition in Oman, and the geographic scale of the country. “We are up against an incumbent that has spent many years, so we are playing catch up in that regard. There is also a challenge in the scale of our country geographically.”
The level of competition is also likely to be a concern for Omantel. Indeed, the operator experienced a 21.6% fall in net profit in the first nine months of 2010, which it attributed to costs associated with network expansion.
Budde.com adds that the challenge for Omantel will be to maintain revenue growth and “evolve from the monopoly mentality that plagues many incumbents” in the face of new competition.
Competition looks set to increase further for Omantel in the coming year, as Nawras further levels the playing field. In 2011, Nawras is looking forward to joining the Tata Global Network, an undersea cable that will connect the telco to Mumbai, Southern Europe and other Gulf countries.
By joining the network of Indian telecoms giant Tata Communications, Nawras will be connected to “almost every city on the planet” according to Cormack. The venture with Tata Communications will allow Nawras to access additional capacity at a lower cost.