Leading the way

Last year Oman was catapulted to the forefront of the region’s telecoms sector through the decision by the sultanate’s regulatory authority to licence and award mobile reseller licences. While Jordan’s regulator preceded its Omani counterpart in terms of creating the first regulatory framework for the introduction of such a class of licensee in the region, the initiative passed to Oman as it became the first market in which agreements between a service operator and licensees were actually ratified

Oman’s two mobile reseller licensees – Friendi Mobile and Renna (Majan Telecommunication), are in the final stages of launching their commercial services respectively, having originally given a guide of looking to launch within Q109.

Each licensee has adopted a distinct approach along the road to commercialisation, with each keen to take advantage of launching before the other, thus being able to communicate its value proposition ahead of its competitor.

Early last month Friendi Mobile began a number booking campaign, which allowed interested parties to pre-select a mobile number ahead of the launch of commercial services. Interested parties  are not required to make a payment in order to reserve a number, and as such the campaign has generated significant early interest.

“To be perfectly honest, we were surprised by the response to our campaign,” comments Mikkel Vinter, CEO of Friendi Group. “Thousands of people tried to access our website in Oman at the same time, which slowed its operation down. We resolved those issues, and now have a substantial five-digit number of reserved numbers,” he adds.

“We haven’t announced our final prices or features, so some people are understandably cautious to committing to the unknown, commented Antti Arponen, CEO of Friendi Mobile in Oman at the time the campaign was launched in the middle of March. “But there is absolutely nothing to lose – booking your preferred number is free of charge and does not commit you to anything. But when we soon reveal our product details and if you like our great offers, at least you will have the number you want.”

Meanwhile, rival reseller aspirant Renna last month announced the successful completion of thousands of test calls and text messages with the deployment of Intelligent Network (IN) technologies and billing systems from HP and Convergys. Renna CEO Niklas Nielsen confirmed that the service is set to launch commercially in April.

“All is well, progressing towards launch. As you know, we expected it to be in March, but it seems more like April now,” Nielsen says. “We are basically ready but some external issues are still pending. That’s just the way it goes.”

Friendi Group’s Mikkel Vinter says his company will be looking to target Omani residents who have a piece of their hearts outside of the country

Both reseller licensees consider this an exciting time and have duly given credit to the Telecommunication Regulatory Authority (TRA) as well as to incumbent mobile operator Oman Mobile, for showing sufficient faith in the reseller model to see it through to commercialisation. While six reseller licences were granted in Oman, only Friendi Mobile and Majan Telecom were able to secure agreements with a service operator, with only Oman Mobile willing to enter such an agreement. Second player Nawras, which has made tremendous progress since entering the market in March 2005 and enjoys a market share of around 47 per cent, has been unwilling to share its network with the services of a reseller.

Instead the operator has looked to develop a dedicated segmentation programme of its own, and last November announced the launch of its Shababiah offer; which is a youth orientated brand providing services targeted at customers aged between 16 and 25 years of age. Shababiah subscribers can call their community friends for 29 baizas (US$0.075) per minute and send them SMS for just 9 baizas. Shababiah also comes with free Rannati (personalised greeting service) subscription as well as exclusive mobile news and content designed for under 25’s. Shababiah offers all these elements for a monthly subscription of 500 baizas.

In an attempt to directly impact the effectiveness of the reseller launches, Nawras has offered further concessions to customers who sign up to the Shababiah service before January 27, 2009, allowing them to automatically receive three months’ free subscription and OMR1 free Internet data usage.
Shababiah customers will also be able to use the low community calling and SMS rates for every call and SMS sent to any Nawras customer to January 27th.

“Over the next year we expect to see other new brands and resellers entering the Omani mobile market. We are delighted to launch Shababiah as the first in the market. Based on our detailed market research and understanding of the youth market, we are thrilled to be launching this service full of value and excitement, developed by youth for youth,” commented Shababiah’s Nasra Al-Habsi at the launch of the brand last November.

Friendi Mobile is unfazed by Nawras’ tactics. “We consider  ourselves to be in a leadership position in the reseller space both in Oman and elsewhere,” says Vinter. “So as professionals we conduct competitor analysis and intelligence, but these findings do not drive our own plans.”

Vinter contends that the company is far more driven by its own plans than what the competition is doing, but also accepts that the mobile reseller model is a niche proposition, which will mean intense competition between the two players.

“Even in Scandinavia, which is one of the most advanced markets in the world for virtual operators, the combined market share (in percentage terms) is somewhere in the 20s, so I believe each MVNO opportunity will always be about a single digit market share,” Vinter explains.

Both Friendi Mobile as well as Renna have been establishing a strong distribution network, which they hope will maximise their ability to service their market segments effectively. Vinter believes his company is establishing a network that will meet and even exceed any of the service providers in the market, including the network operators.

The key demographic that Friendi will focus on is those people living in Oman who have “family and loved ones” living abroad, and as Vinter further explains, Friendi Mobile’s services shall have a particular resonance with people “who have a piece of their hearts outside of the country.” As such, the reseller has been working on the development of appealing bundles that
will allow subscribers to make and receive calls from abroad at attractive rates.

Niklas Nielsen of Renna believes the opportunity exists for Oman’s two resellers to make a successful business of servicing niche markets

“There are potentially a lot of different services and content within the segment we are targeting,” says Vinter. “Good prices and services are required, and I don’t think that price competition as a model is the only one that is right for this region,” he adds.

Earlier this year Friendi Group revealed it had expanded its original coverage area from 14 markets in the Middle East and North Africa, to incorporate new markets in sub-Saharan Africa and South Asia, bringing its beefed up area of interest to over 20 countries. Friendi Group’s strategy to want to play in a number of different markets resulted in the company’s structure modifying somewhat, in order to separate group functions from operational country functions.

“Because we believe in multibrands, we may offer more brands down the road in certain markets, which would fall under Friendi Group, but which may be distinct and different from the Friendi brand,” Vinter reveals. “We want to create an emphasis on partnerships, from operators to media companies and others, and we take a more pragmatic view of cooperation and conversations are maturing,” he adds.

Renna by contrast confirms it has systems up and running in Oman, thoroughly tested and ready to go.

“We have all our staff, of which around 75 per cent are Omani’s, in place, well trained and armed to their teeth with good arguments with regards to ‘why buy Renna?’”, Nielsen explains. “We have two Renna branded shops ready to open and have a few hundred SIM card dealers ready, with a few thousand recharge card dealers lined up.”

Nielsen states that Renna’s offers and promotions are defined, with products and marketing material ready to be pushed into the market.

“Everything is lined up and ready to go so the minute we press the button the Renna man comes out all guns blazin’,” Nielsen describes.

“Our aim is to be light and easy on the wallet. We are going to create a Renna universe, which offers a connection to friends and family,” reveals Nielsen. “Everything we do will be transparent and straight forward.”

The battle of the brands has already begun pre-commercialisation

So while as many as six consortia were awarded Class II mobile reseller licences in Oman only two were able to reach agreement with Oman Mobile and Nielsen believes it is unlikely that the network operator will sign up any further partners of this nature. Given that Nawras remains unconvinced of the merits of partnering with resellers, it is unlikely that it will sign such an agreement in the medium term, and even if it were to, the prospects of success for a third reseller in Oman appear decidedly limited.

100,000 subscribers is typically regarded as an MVNO benchmark with respect to viability, and Nielsen remains
confident that the Omani market will be in a position to viably support more than one reseller in that particular market. And while this benchmark may vary from case to case with regards variations in ARPU, subscriber acquisition costs and wholesale rates, Nielsen remains surprised that there are people who doubt the prospects of a reseller in Oman to gain 100,000 subscribers within a five-year period.

With a population of a little over three million, Nielsen previously estimated the total size of the addressable market for mobile communications in Oman at more than two million people.

“Normally you say that MVNOs are able to reach a combined market share of 20 per cent dependent on the size of the market and number of players. This leaves around 300,000 subscribers to the reseller space,” Nielsen commented.

Nielsen also forecasts that his company will be profitable within a few numbers of years, offering the best response possible to operators and market commentators that questioned whether the introduction of service-based competition of this nature was ever going to be sustainable.

The stiffest resistance in the Oman telecoms market to the launch of the two new resellers is set to come from Nawras, which has been impressive in establishing its brand and working at establishing long-standing relationships with customers.

Having launched in March 2005, the Nawras subscriber base has been growing faster than ever, according to the mobile operator’s ebullient CEO, Ross Cormack. He believes the operator has gained the credibility of offering a wide range of services, while maintaining its mission of being caring, excellent and pleasingly different.

“When we launched 3G+ in December 2007, 20 per cent of handsets on the network at that time were already 3Genabled,” Cormack states. “For many, it was their first ever access to the Internet and the network extends to 40 per cent of the population. Nawras currently covers 97 per cent of the population with its EDGE network, using national roaming where necessary,” Cormack adds.

Nawras’ operational success, having succeeded in garnering almost 50 per cent market share, representing more than 1.5 million subscribers, is matched by it financial success. The operator became profitable on an EBIT level within two years of operation, and is now looking towards the preparation of an initial public offering.

As part of its licensing conditions, Nawras agreed to list 40 per cent of the operator on the domestic stock exchange by February 2010. According to Cormack, financial advisors have already been retained, and it is now a board decision regarding when the process officially kicks off.

“Going forward, my priorities are continuing to build the brand. We have created a lifestyle brand and the point is to look after employees, who will in turn look after customers, who will ultimately take care of the shareholders,” Cormack comments.

Nawras competitive threat to Friendi Mobile and Renna will be magnified by the launch of Nawras’ fixedline operation, access to an international gateway, and move to offer an array of converged service offerings.

On November 19, the Telecommunications Regulatory Authority announced it had overturned the award of the country’s second fixed-line licence to the PCCW-Awaser
Oman consortium, and instead passed it to Nawras.

The TRA had previously announced on October 25 that the consortium led by Hong Kong’s PCCW had been the winning bidder. Nawras went on to promise to build the latest generation fibre optic backbone and WiMAX wireless access networks across the sultanate to deliver broadband and Internet access, and to offer innovative IP-based media and communication services to consumers, businesses and government.

Nawras will also build a new international gateway in order to provide both international voice and Internet access choice for all customers in the sultanate.

“We are very proud to have been chosen as the new provider of fixed-line services for the people of Oman,” stated Cormack last November. “The whole company will work together to support the sultanate’s bold vision for delivering the highest possible standard of communications and we are well positioned to leverage Qtel’s growing international expertise in developing and deploying fixedline and broadband services.”

Oman Mobile, as part of Omantel, is a company that is in the clutches of embracing change. Not only was it the network operator to embrace the reseller model and allow them access to its network, Oman Mobile is also undergoing structural change as it reintegrates into parent Omantel.

Nawras’ Ross Cormack believes the pursuit of a converged network strategy and construction of an international gateway will help differentiate the company from the resellers

The restructuring programme at Omantel is significant in many aspects, not least because it involved the consolidation and contraction of its human resources with those of Oman Mobile. Former Omantel CEO, Mohammed Al-Wohaibi believes the restructuring will help stabilise the company and position it for further growth in an increasingly competitive marketplace. Omantel is looking to transform from having been a sluggish government-run organisation, to becoming a more effective and dynamic operator.

In an effort to realise future aspirations and build internal capabilities, the cultures of Omantel and Oman Mobile were analysed, and strategies devised on how to synergise operations between them. Through the review, a number of job vacancies arose and a recruitment drive is taking place to ramp up the new organisation, while the issue of excess staff in other areas of the combined company was also identified.

Omantel’s broader strategy of combining personnel and reintegrating mobile operator Oman Mobile back with the fixed business is to develop a more efficient business model. The service provider started the process of integration in February2008.

Having spun off Oman Mobile in 2004 it seems surprising that in less than five years a process would be underway to reverse that decision and look to integrate the mobile operator within its parent. At the time in 2004, Omantel obtained a 25-year Class I licence, while Oman Mobile gained a similar 15-year concession. However, Al- Wohaibi believes reintegrating the mobile operator into the parent thereby driving synergies will position the unified operator to better compete in the future. According to Al-Wohaibi, several factors influenced this decision including technology convergence, customer needs, regulation and cost efficiencies.

“Most of the technology today is moving towards next generation networks (NGN), IP and softswitches. These technologies are independent of mobile and fixed, whereas before you would have separate networks. As we improve
our networks, NGN is an opportunity for us to converge and reduce the overall capital cost of our infrastructure, while positioning ourselves as a very strong unified operator,” stated Al-Wohaibi.

With regards to customers’ needs, he said that as consumers become more sophisticated, they want to be offered services such as high speed broadband, regardless of technology or location. The operations of the unified operator will also be organised around the customer, with an active segmentation programme in place. Thus Al- Wohaibi also saw regional and international regulation moving towards a unified licensing regime, meaning operators will be able to offer services independent of the technology.

The Omani incumbent also has to face the challenges of the quickly evolving communications market without the support of a foreign strategic investor. Late last year, Oman’s ministry of finance cancelled the sale of 25 per cent of Omantel, citing the decline in world financial markets. The sale would have reduced the ministry’s stake from 70 to 45 per cent.

The ministry received expressions of interest in July 2008 and had planned to complete the process by the fourth quarter of last year. Saudi Arabia’s STC and the UAE’s Etisalat had both expressed interest in acquiring the strategic stake in the Omani operator.

Omantel’s former CEO Al-Wohaibi understood that the company needed to adapt to the changing user profile of communications subscribers in Oman

The timing of the entrance of the resellers into the market coincides with the general hardening of markets, not just in the region but around the world. Omantel recorded a 67 per cent drop in fourth quarter net profit to OMR9.744 million (US$25.31 million) on the back of OMR18.88 million of impairment losses related to its Pakistan subsidiary Worldcall Telecom.

“Deteriorating market conditions in Pakistan due to global financial crisis had an impact on the value of strategic investment made in Pakistan,” the operator said in a statement. Omantel’s full year profit in 2008 came to OMR116.714 million, up 4.2 per cent year-on-year.

The company’s customer base rose 58.1 per cent to 2.955 million subscribers, with 836,000 subscribers in Pakistan.