VZCZCXRO7980
RR RUEHDE RUEHDIR
DE RUEHMS #0083/01 0330926
ZNR UUUUU ZZH
R 020926Z FEB 08
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 9202
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MUSCAT 000083 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP, EEB/CIP/BA, EEB/CBA 
STATE PASS USTR FOR JBUNTIN 
COMMERCE FOR ITA THOFFMAN 
 
E.O. 12958: N/A 
TAGS: ECPS ECON ETRD PGOV MU
SUBJECT: OMANTEL READIES FOR COMPETITION, VOIP 
 
REF: A. 07 MUSCAT 1102 
 
     ¶B. 07 MUSCAT 972 
 
This message contains sensitive business information.  Please 
protect accordingly. 
 
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Summary 
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¶1. (SBU) Omantel's CEO reaffirmed company plans to 
restructure itself in advance of government efforts to open 
the fixed-line telecommunications sector.  While unclear of 
the nature of the impending regulatory changes, Omantel is 
most concerned about competition from small niche players. 
Omantel, in acknowledgment of technological advances, hopes 
to roll out its own VOIP services by June.  End Summary. 
 
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Restructuring Underway 
---------------------- 
 
¶2. (SBU) On January 29, the Charge met with Omantel CEO 
Mohammed Ali al-Wahaibi to discuss the future plans of the 
telecommunications giant.  Wahaibi acknowledged that 
Omantel's privileged status as the Sultanate's fixed-line 
monopoly would soon be coming to an end, and thus was 
searching for a strategic partner to acquire close to 20% of 
the company.  The CEO stated that a financial advisor would 
be brought on-board within two weeks to draft public tender 
documents, which would be ready for distribution in April. 
The sale of the stake, valued roughly at $400 million 
according to Wahaibi, would be completed by October 2008. 
 
¶3. (SBU) In addition to searching for a strategic partner, 
Omantel is also in the process of merging with its sister 
company, Oman Mobile.  As a precursor, the newly formed board 
at Omantel mirrors that of Oman Mobile.  Wahaibi added that 
reorganization efforts were underway to maximize the 
synergies between the fixed-line and mobile service operators 
in providing customers with greater options.  He forecasted 
that the unified company would be "very competitive" in one 
year's time, and anticipated that employment in the combined 
entity would drop from 2,700 to 2,000. 
 
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Regulatory Landscape Unclear 
---------------------------- 
 
¶4. (SBU) The changes at Omantel come at a time when the 
Telecommunications Regulatory Authority (TRA) is nearing 
completion of its work on defining the parameters of opening 
the fixed-line sector.  Wahaibi acknowledged the projection 
made earlier this week by TRA Chairman Mohammed bin Nasser 
al-Khusaibi to Reuters on the opening of the sector by the 
end of 2008, but added that Omantel did not know which 
direction the TRA would take in offering additional licenses; 
whether the TRA would permit a full-service fixed-line 
competitor to come on-line, or whether it would only be 
services-based companies that would buy wholesale from 
Omantel.  Of particular concern to Waihaibi was the possible 
emergence of smaller, more nimble firms that would exploit 
niche markets, which would be "tough competition."  He did 
not believe another competitor would come in to offer 
services on the scale of Omantel, given that it was "too 
expensive to build infrastructure." 
 
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VOIP on Horizon 
--------------- 
 
¶5. (SBU) On offering Voice Over Internet Protocol (VOIP) 
services in Oman, Waihabi remarked that, "Until today it is 
illegal."  The CEO added, however, that Omantel was preparing 
its infrastructure to support VOIP and projected that the 
company would be ready to carry both local and international 
VOIP calls by June.  He admitted that VOIP would cut into 
Omantel's revenues, but resigned himself to the fact that the 
presence of the technology in Oman was inevitable.  To make 
up for lost revenues, Omantel intends to post tariff charges 
for VOIP services. (Note.  CEO did not provide tariff rates. 
End Note.) 
 
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Comment 
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MUSCAT 00000083  002 OF 002 
 
 
¶6. (SBU) Omantel is moving forward on its restructuring 
plans, as announced by Minister of National Economy Ahmed bin 
Abdul Nabi Macki in October 2007.  While the government will 
make good on its promise to liberalize its fixed-line sector 
per its FTA and WTO commitments, the nature of that 
liberalization will depend on the completion of a study 
currently underway in the TRA.  Given that the Ministry of 
National Economy is a 70% owner of the company, and that the 
Chairman of the TRA is the deputy of the Minister of National 
Economy, the pace of liberalization will most likely grant 
Omantel enough time to ready itself for competition.  On VOIP 
services, Wahaibi's declaration that the technology is 
illegal in Oman contradicts statements made by the TRA to the 
Embassy.  The TRA maintains that it's "technology neutral" 
and that Omantel is licensed to provide such services, but 
chooses not to.  End Summary. 
 
FONTENEAU