With market leading ARPU values and enormous investments in broadband networks and submarine cables, Oman is on its way to be a champion of data usage and monetisation.
Oman boasts of a well-established mobile broadband, and is on its way to making some good progress in the development of fixed broadband infrastructure. As part of the National Broadband Strategy, Oman Broadband Company hopes to connect all homes and businesses connected to the national broadband infrastructure by 2040.
When it comes to the introduction of new technologies, “Oman has also been one of the fastest countries in the region in deploying LTE and fibre optics, encouraged mainly by the high income levels in the country, which lead to higher demand for new technologies”, says Mohammad Shawwa, acting general manager, Arab Advisors Group. Amongst the GCC countries, the Omani mobile market with 6.5 million subscribers, in terms of size, is similar to Jordan. It’s obviously not as large as the 53 million in KSA and 17 million in the UAE but in regards to ARPU it performs high.
Oman’s telecom market is relatively sophisticated for its size, according to Darren Tong, CFO and acting CEO, Telecom Oman. “Our technical capabilities are good, but more can be done in the area of competition, coverage, and service delivery.”
One of the biggest current challenges is the economic environment. “We are in a time, with fluctuating oil prices, of companies and individuals needing to monitor and manage their spending more closely. However, we manage this by providing products and services that allow both great value and also greater control”, says Greg Young, CEO, Ooredoo Oman.
Talal Said Marhoon Al Mamari, CEO, Omantel focuses on the impact of Over-The-Top (OTT) applications on how customers use telecom services, and how such applications put pressure on the traditional voice and messaging revenues from operators. “As the majority of these services are free, customers are getting used to being able to communicate at almost zero cost.” At the same time, customers utilise more and more data, which requires huge investments from operators to upgrade their networks and meet the customer’s demands. “Oman is a geographically challenging country to roll out network, which further increases the required investments”, adds Al Mamari.
Quick to jump on the technology wagon
Oman has been witnessing impressive growth levels in fibre optics and leased lines adoption, with a CAGR of 82.7% between the years 2011 and 2015, according to Arab Advisors Group. “We also expect this growth to continue in the future, albeit at a slower pace; we project the adoption of these technologies to grow at a CAGR of 47.2% between 2016 and 2020”. Other internet technologies have also been witnessing healthy growth figures. For example, DSL and WiMAX subscriptions have registered a CAGR of 31.8% and 28.6% between the years of 2011 and 2015, respectively.
When it comes to the cellular market, and although the market is quite saturated with a penetration rate of around 154% by end of 2015, it is still registering growth. Shawwa says: “We project the country to have over 7 million cellular subscriptions by end of 2016, and the market to continue its growth in the foreseeable future”.
Al Mamari says Omantel has seen a very rapid adoption of 4G mobile broadband services. On the content side, the usage of streaming content services is becoming very popular. “When Netflix opened up its service to worldwide customers, we have seen a dramatic increase of data traffic as a result. This also drives the growth of fixed broadband demand.”
Omantel commercially launched the first 4G LTE network in Oman in July 2012, and a few months later, in February 2013, Ooredoo Oman announced the commercial launch of its 4G LTE services.
“GCC countries were among the first adopters of 4G in the world and as of today, all Gulf countries have commercial 4G networks launched”, says Al Mamari. He adds: “At Omantel, we provide 4G coverage to 87% of the population and already have live 4G LTE-FDD network with 3 bands in same site – 800 MHz,1800 MHz, 2600 MHz to be carrier aggregated and upgraded to LTE-Advanced soon.”
“In 2015 Ooredoo saw an 80% increase in demand for mobile data and 40% growth in uptake of fixed services. Indeed, data services now account for 50% of our revenues”, says Young. He adds: “We are investing heavily in expanding our 4G footprint across the country, to serve both mobile and fixed customers. And of course, our fibre backbone provides endless online possibilities with our new unlimited packages and superfast speeds. These days homes have multiple devices online when people are on-the-go, they expect to stay connected and be able to stream videos, participate in online gaming and be on social media. Therefore, it is important for us to make sure they get a great online experience.”
In April 2016, Ericsson and Omantel signed a four-year managed services contract in which Ericsson will operate and maintain Omantel's network as the sole managed services supplier. The operator has also selected Ericsson to provide real-time customer value management (CVM) service. With CVM, Omantel can deliver targeted, personalised campaigns with advanced capabilities focused on enriching customer experiences and driving cognitive marketing.
To meet rising demand for data usage, Ooredoo Oman and Omantel acquired an additional spectrum of 800/2600 MHz in August 2015. Take-up of LTE is expected to accelerate further now that spectrum has been assigned.
Oman has witnessed continued growth of mobile subscriptions, driven by 3G and 4G take-up; hence, operators are focusing on data services to increase average revenue per user (ARPU). “Operators have launched multiple data plans and smartphone bundles to boost data usage over their LTE networks, and telcos are expected to maintain their investment in high-speed networks in the coming years. Operators are looking to develop other revenue opportunities through VAS and other innovative services”, says Tarek Saadi, head of Ericsson Pakistan and GCC countries.
Al Mamari says that 5G preparation will be achieved through evolution from 4G-LTE to LTE Advanced – Carrier Aggregation and then evolution to 5G. Omantel, and few other operators in the region have already launched LTE-Advanced. “It is being forecast that 44.2% of all mobile connections will be 3G by 2021, while 4G will account for nearly 24% (excluding M2M). We believe it is too early to comment on the future and adoption of 5G as the ecosystem is not yet fully shaped and ready for the launch of 5G networks especially in our region where the first 5G network is expected to see light by 2020. However, 5G forms part of our technology roadmap for the period 2018 – 2020”.
Ooredoo has invested over OMR 124 million ($ 322.08 million) since 2012 in infrastructure modernisation, with recent completion of its 5,500 kilometre nationwide fibre backbone and WiMAX migration to LTE in July 2015. Young says: “Our LTE spectrum is future-ready, able to meet the speed, capacity and coverage requirements into the future. Additionally, our recently completed national fibre backbone, coupled with our two new submarine cables coming online over the last six months, assures business continuity. And as it eliminates dependence on other operators and lease lines, we can provide high-speed data packages at very competitive rates to customers and businesses countrywide.”
Subsea cables determine a country’s connectivity with the rest of the world, in the area that is most important to tomorrow’s digital economy: data. Oman occupies a very strategic location between the continents of Europe, Asia and Africa. “The more landing stations we have, the more opportunities we will have to collaborate with regional and international businesses”, says Tong.
Ooredoo Oman has invested in two international submarine to land cables in Oman, which will be a significant long-term venture. Though the cables will originate in Asia (Singapore, Hong Kong and Malaysia) and end in Europe, they will run in both directions and are likely to connect to one or more countries along the way. According to Young: “The important thing is that they will give us much greater capacity and connectivity to Europe, Asia, and North America; the three areas where most internet traffic originates and terminates. An integral part of the future-proofing of our network, our ongoing investment in subsea cables will give us greater connectivity to a global communications network.”
Al Mamari says: “Oman being the entry into the Middle East makes Omantel the natural partner for international operators coming to the region. Our geographical advantage of having access to the open sea has for years made Oman the preferred landing point for all the major undersea cable systems coming into the region, and it has given Omantel the opportunity to be part of, as of today, 20 major cable systems. As a ‘hub’, Omantel is the key interconnection point for carriers from Asia, Africa and Europe meeting here in Oman.”
Data in Oman, as in the case with all other countries, will get more important to operators going forward. By the end of 2015, Arab Advisors Group estimates data revenues to have contributed to 23% of cellular revenues, with this percentage projected to keep growing in the future.
Robert Varty, head of sales, Workz group tells CommsMEA that last year, the monthly ARPU in Oman was just under $21 which when compared with the UAE market’s value of $2 is significantly higher. He adds, “As we know, operators are in the process of migrating from traditional voice and SMS systems to digital services. When they hit upon an effective business model is when you will see ARPU return to significant strength. Aside from the variety of new digital offerings, operators are looking to increase their voice revenues through a superior VoLTE offering. Given Oman’s LTE investments in infrastructure, they could be well-placed to do this.”
Shawwa believes that the tide of data and the decreasing revenues from voice are unstoppable. And instead of trying to encounter this trend, the best way for operators is to ride the new wave. “The operators can use the high speed access networks in order to provide additional solutions and content that would represent a new revenue stream for them. This is further supported by the reach telcos have to the regular consumers, which puts them in a position to become a one-stop-shop for the provision of telecommunications, IoT applications and content.”
Competing amidst the regulations
Until 2002, the Ministry of Communications was the sole government entity responsible for telecom regulation in the country. In 2002, the Omani telecommunications law was approved by Sultan Qaboos. This law included the establishment of an independent telecom regulatory body; the TRA. “I believe the Omani regulator is doing a good job and encouraging competition to through the licensing of MVNOs and other telcos in the country, and that is reflected in the advancement of the telecom sector in Oman”, says Shawwa.
Young agrees that although Oman’s telecoms industry is relatively young, in a short space of time there have been some commendable and significant achievements, “thanks to government bodies like the Telecommunications Regulation Authority (TRA) whose approach serves to protect the interests of subscribers, while encouraging innovation and investment”.
Tong is of the opinion that competition, coverage and service delivery are the top concerns for consumers in the country. “We believe the TRA’s initiatives for reference access & interconnect offers and a potential third mobile network operator licence will go a long way to addressing these issues”.
In terms of the competition level in the market, Oman ranks somewhere in the middle compared to other countries of the region. According to Arab Advisors’ cellular competition intensity index for 2015, Oman ranked 10th in the MENA in terms of competition in the cellular market.
In fact, according to a 2015 International Telecommunications Union report, Oman is amongst the cheapest countries in the world for mobile services, says Young. However, he adds that the mobile market is highly penetrated and becoming saturated and the risk of introducing a third mobile operator is that significant infrastructural investment will be required to reach more remote areas. “A new entrant is more likely to focus on areas with a denser population, which is already well served by the existing two operators”.
Overall, competition has driven the Omani market forward, according to Al Mamari. “Before the introduction of the second mobile operator in 2004, Oman had approximately 800 thousand mobile subscribers. Today, the total market has grown to over 6.5 million. With 2 mobile network operators, 3 mobile resellers and several other players in the international gateway and fixed services, we see a healthy competitive play which leads to better services for the customers while growing the overall market and delivering a growing contribution to the Omani economy.”
Tong believes that more can be done and that the TRA is on the right track. He adds: “Like banking, the telecom industry is a key economic multiplier. A vibrant telecom industry will stimulate economic activity, innovation, social interactions, etc.”
Omantel was the first operator to host MVNOs in the Middle East back in 2009 where two MVNOs were launched. These MVNOs have been steadily growing and enjoying healthy and sustainable market situation. MVNOs controlled over 15% of the cellular market by end of 2015 (source- Arab Advisors), which is an impressive figure for MVNOs. Moreover, the MVNO market is dynamic in the country, as evident by the recent acquisition of Renna by TeO.
The introduction of MVNOs in Oman has enabled extended reach to many niche segments, especially those that were previously untapped. Al Mamari says that through MVNO partnerships, Omantel has been able to increase its overall network market share to more than 58%, contrary to the global phenomenon of decreasing share of incumbent operators, thanks to the victorious strategy and the win-win situation created for all partnering parties. This also resulted in establishing a new revenue stream under wholesale for MVNO business. He adds: “Today, the market share of Omantel MVNOs is around 16%, which is the highest MVNO market share outside Europe and among the top 5 worldwide according to recent international reports. This reflects the significance and role of our MVNO partners in the highly competitive telecom market of Oman”.
“There are several reasons for Oman’s mobile reseller model being successful. But this is principally down to the dynamics of the two incumbent operators, their customer mix, and their expansion plans. We believe Omantel has implemented a very successful model – hence our decision to acquire Renna a few months ago”, says Tong.