November 12, 2009 / 2:50 PM / 10 years ago

UPDATE 1-Oman Telecommunications could take $24 mln Q4 hit

* Omantel has offered 134 people voluntary redundancy

* Awaits approval to inject cash into Pakistan unit (Adds details)

By John Irish

DUBAI, Nov 12 (Reuters) - Oman Telecommunications Co OTL.OM (Omantel) could take a one-off charge of 9.2 million rials ($23.90 million) in the fourth quarter after offering voluntary redundancies as it looks to cut costs.

“The assumption is the entire 134 people will sign up for the programme... the likelihood is high,” Vice President for finance Talal Said al-Mamari said in a post-earnings conference call on Thursday.

Omantel reported third-quarter net profit of 32.8 million rials ($85.21 million) on Wednesday, up 1.86 percent from a year earlier. The earnings came in below forecasts by two analysts. [ID:nL4398422]

The Gulf Arab region’s second-smallest telecommunication’s company, which employs about 2,800 people, could make savings of about 2.8 million rials from the redundancies.

“We expect savings from 2010 onwards,” Mamari said.

Gulf Arab telecom operators including Saudi Telecom (7010.SE) and Emirates Telecommunications Corp ETEL.AD have been expanding aggressively overseas after losing their monopolies at home.

Omantel, Oman’s largest company by market value, is also waiting for shareholders to approve a $50 million injection into struggling Pakistani unit Worldcall (WCTL.KA), Mamari said.

“We have gained back the control... we have injected a few members in the board to cover technical and product development where we see weakness,” Mamari said. “The potential returns are still there because it operates in an underpenetrated market.”

The group is still deciding whether to use equity or raise debt to finance the injection, he said.

Omantel bought 488.8 million shares of Pakistan’s Worldcall Telecom Ltd (WCTL.KA), equivalent to 65 percent of the company, in February 2008. The $193 million deal marks its biggest foreign investment so far.

But Worldcall’s shares have fallen sharply since.

Omantel shares closed down 0.2 percent on Thursday.

COMPETITION RISES

Omantel’s earnings have suffered over the last few quarters since its monopoly was broken by Nawras, a unit of Qatar telecommunications Co QTEL.QA and faces more competition with... the onset of mobile virtual network operators (MVNO).

A MVNO is a mobile operator that does not own its own spectrum, and usually does not have its own network infrastructure, but which enters into business arrangements with traditional mobile operators.

“The impact of these (MVNOs) will take place in 2010,” Mamari said.

Dubai-based Friendi Mobile won a licence as a third mobile service provider in Oman in June.

In June, NBK Capital cut its fair value estimate on Omantel shares, saying the firm could face challenges due to increased competition from rival Nawras.

NBK Capital cut its estimate to 1.930 Omani rials from 2.190 Omani rials. The shares closed at 1.382 rials on Tuesday.

Nawras also won a licence to set up Oman’s second fixed-line network in November, three years after ending Omantel’s mobile monopoly.

Oman, which owns 70 percent of Omantel, invited investor interest in July 2008 for the sale of a 25 percent stake in the operator, but halted the process as the financial crisis swept across the Gulf Arab region. ($1=0.3849 rials) (Reporting by John Irish; editing by Louise Heavens and Hans Peters)

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