Omantel attractive despite rival's inroads

Like many state-owned telecommunications companies around the Gulf, Omantel has been challenged by a plucky competitor - in this case Nawras, established in 2004 and listed on the Muscat Securities Exchange last year.

In the UAE, du's challenge to the dominant Etisalat has cost the older company market share and helped to push its share price down to its lowest level since 2009, but analysts do not necessarily see Nawras hurting Omantel in the same way.

Unlike operators in other Gulf markets, Omantel and Nawras face a big challenge from resellers of mobile services. These service providers take a much larger chunk of market share in the sultanate than elsewhere in the Gulf.

Both Nawras and Omantel have lost mobile market share to the resellers. That levels the mobile playing field between the two operators but allows Omantel's broadband offering to give it an edge over Nawras.

"Omantel [is] currently better positioned to benefit from broadband-driven revenue growth," according to a research note from JPMorgan. "On the back of its more comprehensive network and well-established services, we believe Omantel is better positioned to benefit from revenue growth driven by the under-penetrated broadband sector."

Government stimulus measures in Oman, put in place this year to head off social unrest, have led to rising employment and incomes. That bodes well for internet and telephone revenues, the note added.

Omantel is set to pay an "attractive" dividend of 8.3 per cent this year and next, JPMorgan estimates.

But what of Nawras? It will continue to gain market share from Omantel, analysts from NBK Capital wrote.

"We maintain our long-term view of market growth being driven by Nawras as the operator takes market share from the incumbent," they said.

But Omantel is still in a more attractive position for equity investors, with the larger expected dividend a key reason to buy, NBK's analysts wrote.

Omantel's share price has risen 6 per cent this year to 1.35rials, compared with a fall of 15.3 per cent in the sultanate's MSM30 Index.

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