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Wed 4 Apr 2012 06:19 PM

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Omantel fears price war, eyes acquisitions

Oman Telecommunications CEO says falling rates have boost international calls

Omantel fears price war, eyes acquisitions
Arab mobile phone, telcos, telecommunications generic

Falling rates have boosted international calls in Oman, but these cuts could turn into a price war, the chief executive of Oman Telecommunications (Omantel) said.

Fixed broadband prices fell by up to 65 percent in two years, according to a JPMorgan note, which also said average mobile revenue per minute for Oman operators dropped 40 percent from the first quarter of 2010 to the second quarter of 2011.

"There are continuous calls to reduce prices," Amer al-Rawas, Omantel chief executive, told Reuters in an interview. "I would hate to see it moving to the next stage of a true price war.

"One of the most elastic services is international (calls) because everybody would like to call home - if the rates are cheaper, they call home more frequently and for longer.

"This is healthy competition. We are just concerned that too much focus on the international rate will put pressure on all of us to do something on the local rates."

About a fifth of Oman's 2.8 million people are foreigners.

Omantel and rival Nawras are thought to be the first telecoms operators in the Gulf to offer low-cost voice-over-IP (VoIP) international calls, which are effectively banned elsewhere in the region.

Omantel, for example, offers VoIP calling cards to India for 57 baisas ($0.15) per minute. This compares with its conventional peak and off-peak tariffs of 175 and 85 baisas respectively. There are 1,000 baisas in a rial.

These price cuts have helped boost usage. Oman made 133 million minutes of outbound international calls in the fourth quarter of 2011, up 8.4 percent from the year-earlier period, according to the Gulf sultanate's telecoms regulator.

Unlike other former Gulf monopoly operators, Omantel has done little to expand abroad, with only a 57 percent stake in Pakistan's Worldcall Telecom, but that could change.

"We are now focused on a policy of non-organic growth," said Rawas. "On the international scene we are listening mode, scouting for interesting ideas. These are few and far between - we are examining a number of opportunities."

When asked if Omantel would make any acquisitions in 2012, Amer said "not necessarily" and ruled out bidding for new licences due to "sky-rocketing" prices, with the company more likely to buy into an existing foreign operator.

"We have proven over the last couple of years that we are an incumbent that has been able to transform itself and this experience we can carry over to other brownfield players that may need a strategic partner like Omantel," said Rawas.

Omantel has fended off competition from Nawras, majority owned by Qatar Telecom, by hosting mobile virtual network operators (MVNOs), including Friendi and Renna.

These have targeted lower income expatriate groups and helped Omantel to raise its share of mobile subscribers to 59 percent in 2011 from 53 percent in 2008. MVNOs now account for 12 percent of Oman's 4.8 million mobile subscriptions, according to the regulator.

"There are market segments that are better addressed through a non-incumbent player," said Rawas. "In this case we have used the MVNOs as that player."

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