Royalties cut boosts Omantel earnings

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Omani operator Omantel almost doubled net profit to a record in the third quarter after the government cut royalties the company pays on revenue.

Omantel made 34.03 million rials ($88.41 million) in the three months to September 30, up 92.4% from the year-earlier period, Reuters calculated from nine-month data the company published on the Muscat bourse website.

The stock, the second best performer on the Muscat stock index this year, rose more than 3% in early trading.

The quarterly earnings, the highest on record according to Reuters data going back to 2004, beat the 24.63 million rial profit forecast of Gulf Investment Services in a Reuters survey last month.

The survey was conducted before the government announced it would cut the royalties Omantel pays to 7% from 12% on mobile revenue and to 7% from 10% for fixed lines. The reduction took effect from January 1.

The royalty reduction accounted for 13% of net profit in the nine months to September 30, Omantel said. Revenues rose 12.5% to 270 million rials, it said.

Nine-month net profit was 82.50 million rials, compared with 60.60 million rials, the company said in a statement on the Oman bourse website.

Shares of Omantel have surged 38% since October 3 when the government said it would cut the royalties and prepare to sell a stake in the firm to a long-term investor. Etisalat has since said it was interested in buying into and running the firm.

HSBC set a price target for the stock of 2.26 rials. Omantel shares were up 3.53% at 1.81 rials at 0700 GMT.

Amer Al-Rawas, managing director of Omantel's mobile phone unit, could not immediately comment when Reuters called him. Mohammed Al-Wohaibi, Omantel's Chief Executive, could not immediately be reached.

Operating expenses rose 5% to 177 million rials in the nine months, Omantel said.

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