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Omantel posts record profit on royalty cut

Omani telecom nets biggest ever Q1 income of $99.74mn after paying less royalties and gaining users.

Omani telecom Omantel posted its biggest profit ever in the first quarter after paying less in royalties to its government owner as a share of revenue, and adding income from extra users.

The results flew past analysts' expectations and helped push Omantel shares sharply higher.

Net income in the three months to March 31 surged 60% to 38.4 million rials ($99.74 million), compared with 24 million rials in the year-earlier period, the state-controlled company said on the Omani bourse website.

Revenue advanced 15% to 98.2 million rials, while operating expenses declined 3% to 57 million rials, the company said. It did not give more details.

"Profit mainly came from prepaid and wholesale services," Omantel Chief Executive Mohammed Al-Wohaibi told newswire Reuters by telephone. He declined to give details.

Omantel stock surged almost 10% in early trading, the maximum allowed. It was up 6.4% at 0654 GMT.

The government last year cut the royalties Omantel and competitor Nawras, an affiliate of Qatar's Qtel, Qatar, have to pay on mobile phone services to 7% from 12%, and for fixed line services to 7% from 10%.

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That saved Omantel as much as 14 million rials in 2007. Though the cut was retroactive to the beginning of the year, the impact mainly came in the third quarter when the cut generated about 9.8 million of extra profit for Omantel. The company's previous record profit was in that quarter.

Analysts' forecasts for Omantel's first-quarter profit ranged from 25 million rials to 32.5 million rials, with the average at 29.44 million rials, according to a Reuters survey last month.

Oman's $40.3 billion economy may grow 5.7% this year, according to economists surveyed by Reuters in December, as the government spends its oil revenue windfall on infrastructure and industry.

That compares with between 7% and 8% last year, according to Central Bank Executive President Hamood Sangour Al-Zadjali. The economy grew 7.2% in 2006, the fastest pace in five years.

Shares of Omantel were up 8.1% this year to Sunday's close, compared with almost 25% for the main stock index.

HSBC Holdings started coverage of Omantel in October with an "overweight" recommendation and a target price of 2.26 rials per share. The stock last traded at 1.97 rials. (Reuters)

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