BUSINESS REPORTER
International ratings agency Fitch Ratings has revised the outlook on Oman Telecommunications Company SAOG’s (Omantel) Long-Term Foreign-Currency Issuer Default Ratings (IDR) to stable from negative and affirmed the IDR at ‘BB-‘.
The revision of the outlook reflects that on the Sultanate of Oman’s Long-Term Foreign Currency IDR.
“The revision of Oman’s outlook reflected improvements in fiscal metrics and reforms supported by high oil prices and potentially reduced need for external financing. Fitch rates Omantel under its Government-related Entities methodology (GRE), given close ties with the government and significant domestic operations in the country,” it noted in a press statement.
Key ratings drivers:
Government linkage assessed as strong: Omantel’s rating is constrained by Oman’s sovereign rating, said Fitch, adding: “The company is 51 per cent owned by the state and our assessment of the overall links under the GRE methodology is strong with a score of 25. We view the status, ownership and control factors as well as the financial implications of default as strong.”
Potential tower sale:
Omantel has agreed to sell Helios Towers its 2,890 mobile towers in the Sultanate of Oman for USD 575 million. The transaction is expected to close in 2H22, according to the company, pending regulatory approvals. A disposal of more than 50 per cent of infrastructure assets could trigger prepayment clauses under Omantel’s existing term loan agreement. We do not factor in the proceeds of sale in our base case. However, we acknowledge that proceeds could be used to repay debt and reduce leverage.
Strong domestic market: Omantel maintained its leading market share in mobile and fixed segments at 54 per cent and 70 per cent, respectively in 3Q21. According to Fitch, the prepaid market in Oman suffered the most during the pandemic, resulting in a 17 per cent loss in subscriber base and 7 per cent decline in prepaid average revenue per user (ARPU) by end-2020.
“The company continues to monetise its mobile subscriber base through migration to postpaid plans, resulting in 18 per cent growth in its subscriber base and offsetting a 4 per cent decrease in ARPU as competition intensifies. We forecast the fixed broadband customer base will keep growing in 2022, supported by continuous 5G network and fibre roll out in the country,” the ratings agency noted.
Multi-layered competition:
Competition is expected to increase significantly with the entrance of Vodafone in January 2022, and potentially pressure mobile revenue. Omantel has thus far managed to maintain market share and limit ARPU deterioration through its bundle offers.
The mobile segment in Oman consists predominantly of prepaid subscribers, similar to other GCC markets. The migration of customers to high value-added packages remains subdued by significant competition between Ooredoo and mobile virtual network operators, which represented 46 per cent of Omani mobile subscriber market share in 3Q21, it added.
