Omantel nets $36mn from royalty cut

Operator's profits set to soar this year as gov't cuts royalties demand to 7% of revenue, official says.

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By  Reuters Published  October 6, 2007

A cut in the royalties that Oman Telecommunications (Omantel) pays to the government is expected to add about 14 million rials ($36.37 million) to its 2007 profit, a senior company official said on Saturday.

Nawras, the Omani mobile phone subsidiary of Qatar Telecommunications Co, said it expected the cut to add 2 million rials to its profit in 2007. "Based on the first-half results, the benefit to the group (both Omantel and its wholly owned subsidiary Oman Mobile) is 7.15 million rials. If we assume the same revenue for the second half, the gain will be 14.3 million rials," said the Omantel official, who declined to be named.

"However, the actual benefit will depend on the extent at which Omantel lowers tariffs and the subsequent growth in usage or business volume," he said.

Nawras CEO Ross Cormack said his company would gain 2 million rials in 2007 from the royalty cut.

"This money will be spent for enhancing customer service. We are spending it for further building our network," he told Reuters. He said Nawras has a customer base of over 800,000.

Oman's government announced the cut on Wednesday and said it expected Omantel to lower tariffs.

The royalties were cut to 7% of revenue from 10% for fixed-line services and from 12 percent for mobile phone services.

Omantel's subscriber base rose 12.3% to 1.73 million in the year to end-June, including 1.35 million mobile phone customers.

"There will not be any revenue loss (for the government), as the business volume or usage grows along with tariff reduction," said Sankar Kailasam, vice president of Gulf Investment Services.

Oman's government also said it is planning to sell a portion of its 70% holding in Omantel to a strategic investor to make the company more competitive overseas.

According to Omantel's statutes, the government cannot sell more than 19%, Kailasam said.

"However, if the strategic investor wants more than 19%, the government can change the company's (statutes) after getting approval from shareholders," Kailasam added.

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