Omantel posts second-biggest profit ever

Operator sees Q4 earnings surge almost 47% after cut in government royalties.

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By  Ola Galal Published  January 27, 2008

Oman Telecommunications Company (Omantel) posted its second-biggest profit ever in the fourth quarter after a cut in government royalties boosted revenue. It also beat analysts' forecasts.

Net income in the three months to December 31 surged almost 47% to 29.43 million rials ($76.46 million), compared with 20.07 million rials in the year-earlier period.

"The main reason for the profit jump is an increase in revenue because the royalty cut had an impact," Menon Gopinath, head of planning and economics in Omantel's strategic finance department, told newswire Reuters. That added about 3 million rials to profit, Gopinath said.

The number of mobile phone users rose more than 18% to 1.48 million in the year to December 31, Gopinath said. Revenue in 2007 rose 12.9% to 365.3 million rials, Omantel said in a statement on the Omani bourse website.

"The economy is booming so this contributed to the rise in the number of subscribers," Gopinath said. Oman's economy probably grew 5.6% last year, and may grow another 5.7% this year, according to a Reuters poll of economists.

Analysts' forecasts for Omantel's fourth-quarter profit ranged from 22.30 million rials to 26.39 million rials, in a Reuters survey last month, with the average of three forecasts at 24.61 million rials.

"With the royalty cut, Omantel should be able to maintain net profit around 30 million rials on the quarterly level," said Marc Hammoud, telecom analyst at Cheuvreux, the brokerage arm of Calyon, at Dubai International Financial Centre (DIFC).

In October, the government cut the royalties Omantel and rival Nawras pay on mobile phones to 7% from 12% and on fixed-line to 10%.

The cut, which was retroactive to the start of the year, added 9.8 million rials to Omantel's third-quarter profit, making it a record.

Oman plans to invite companies this year to express interest in providing fixed-line and broadband services, the country's chief telecom regulator said on Sunday, effectively spelling an end to Omantel's monopoly.

The company did not give details of the performance of its fixed-line and internet services division.

"Given that fixed-line is providing no more growth opportunities and competition is growing in the mobile segment with its high penetration rate, the company's growth should come from its broadband services," Cheuvreux's Hammoud added.

Shares of Omantel, which were trading when the company released its results, closed up 2.43% on Sunday. In this year, the shares were up 1.05% to Thursday's close. (Reuters)

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