US embassy cable - 05MUSCAT674

UNCLAS SECTION 01 OF 02 MUSCAT 000674 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/CIP/DROHATGI AND NEA/ARPI 
STATE PLEASE PASS USTR/JBUNTIN AND AAUGEROT 
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, MU, Economic Affairs 
SUBJECT: OMAN: TELECOMS UPDATE 
 
 
1. (U) Summary:  A series of local press reports in mid- 
April outlined three noteworthy developments in Oman's 
telecommunications sector.  The launching of the Falcon 
submarine cable project will transform Oman into a regional 
hub for broadband and advanced telecom services.  The 
project will connect Oman to GCC countries, India, Egypt, 
and onward to the rest of the world.  A separate 
announcement April 13 heralded a new Royal Decree 
stipulating an increase of state-owned Omantel's capital to 
USD 195 million.  Finally, a Chinese telecoms firm April 18 
signed a lucrative contract with Omantel to extend a 
wireless local loop to rural and remote areas in Oman.  End 
Summary. 
 
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Falcon Lands in Oman 
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2. (U) On April 12, Minister of Transport and Communications 
Mohammad bin Abdullah al-Harthi officially launched the 
Falcon submarine cable project in Oman.  The Falcon project 
is a new high-capacity resilient loop cable system with 
multiple landings throughout the Gulf region. Its submarine 
links will stretch from the Middle East and Egypt in the 
west to India in the east. The investment, estimated at 
hundreds of millions of dollars, is promoted by FLAG 
Telecom, an international wholesale communication services 
firm.  State-owned Omantel is investing in the project under 
a 15-year contract that grants it capacity rights along with 
the ability to plug into the system for high-speed 
connectivity and broadband services.  Two landing stations 
reportedly will be built in Oman. 
 
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Another Step Toward Omantel's IPO 
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3. (U) A Royal Decree issued April 12, 2005 increased state- 
owned Omantel's capital to USD 195 million, retroactive to 
December 31, 2003.  Article Two of the Decree stipulates 
that the company "may" be transferred into a joint stock 
company according to the provisions of the Commercial 
Companies Law.  Determination of the company's rules and 
procedures for forming its board, as well as other 
provisions mentioned in its articles of association, are 
subject to decisions to be made at its general meeting. 
According to the decree, the Council of Ministers shall 
regulate the percentages, terms and procedures to sell or 
offer to the public any part of the government-held shares 
in Omantel's capital, specifying their nominal value, and 
determining parties or persons who may buy or subscribe. 
Such rules will be exempted from the Commercial Companies 
Law, Capital Market Laws and Privatization Laws. 
 
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Chinese Entry in Rural Telecoms 
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4. (U) Local newspapers carried front-page coverage on April 
19 of a deal signed between the Ministry of Transport and 
Communications and Chinese telecoms firm Huawei to develop 
Wireless Local Loop (WLL) services in rural and remote areas 
in Oman.  The initial WLL rollout will cover 200 villages, 
with an expansion to 450 villages envisioned in the future. 
The contract, valued at roughly $8.7 million, is touted as 
part of Omantel's commitment to extend telephony across the 
entire Sultanate.  Press reports indicated that the WLL 
service is based on CDMA2000 technology at 450 megahertz, 
and the system will provide voice, low-speed data, fax, and 
Internet services. 
 
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Comment 
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5. (SBU) Telecommunications remains one of Oman's last 
privatization frontiers, and these recent developments 
largely aim to bolster Omantel's services in advance of its 
expected IPO this summer.  While the new Royal Decree opens 
the road to this long-awaited partial privatization of 
Omantel, two points are worth highlighting: the first is 
that any public sale of Omantel's shares will be exempted 
from the commercial companies, capital market, and 
privatization laws, further indication that the 
telecommunications giant will be treated as an exceptional 
case in the Omani economy.  The second is that projects like 
Falcon and the WLL initiative give a future exclusive 
competitive advantage to Omantel at a time when the 
Sultanate is supposedly opening the doors to competition and 
the free market.  We will watch Omantel's actions very 
carefully, particularly in light of the free trade agreement 
negotiations underway, where telecoms remains a sticky 
issue. 
 
BALTIMORE