Oman Telecommunications (Omantel) reported a 38.9 per cent decline in group net profit for the six months period ended June 30, 2017.
The company posted a net profit of RO40.8mn ($103.9 million) for the first half of this year compared to RO66.8mn ($173.5 million) in the corresponding period of 2016, according to Omantel’s initial results announced at the Muscat Securities Market.
Omantel said the fall in its net profit is predominantly attributed to the increase in royalty rates effective from January 1, 2017. Royalty paid by the company jumped by 70.8 per cent to RO29mn in the first half of this year against RO17mn in the same period of previous year. The increase in royalty expense was RO12mn in 2017 compared to the corresponding period in 2016.
Omantel recorded group revenue at RO267.7mn in the first half of this year compared to RO270mn for the corresponding period in 2016, a marginal decrease of 0.8 per cent.
Omantel’s operating expenses rose 12.7 per cent to RO220.8mn in the first six months of 2017 from RO195.9mn in the same period of last year.
The company reported a loss of RO2.3mn from discontinued operations in the six months period ended June 30 compared with a loss of RO2mn in the same period a year ago.
Net profit margin fell to 15.2 per cent for the first half of 2017 from 24.7 per cent in the same period of last year.
EFG-Hermes in a research note said that Omantel’s preliminary earnings for the second quarter of 2017 missed its estimates on weak margins despite a stable top-line. According to EFG-Hermes, the company’s second quarter earnings came at RO17mn, missing its estimate by 17 per cent.
"We note that Omani telecom operators have been subjected to substantial pressure following the increase in corporate tax rate to 15 per cent from 12 per cent starting 2017, as we all as an increase in royalty rates to 12 per cent from seven per cent as of 2017," EFG-Hermes said.
EFG-Hermes said it expects more headwinds from the upcoming introduction of a third player in Oman’s telecom market.
The Telecommunications Regulatory Authority (TRA) has already received bids from regional heavyweights such as Saudi Telecom (STC), Etisalat Group, and Zain Group.
‘The winning bid should be announced in September 2017. The entry of a third player in a highly-penetrated market such as Oman is likely to usher aggressive price-based competition’, EFG-Hermes added.
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