Fitch upgrades Omantel’s credit rating, citing high oil prices, reforms

Oman’s state-owned telecommunications company, Omantel, received a credit rating upgrade from Fitch Ratings today.

The New York-based credit rating agency upgraded Omantel to “Stable” from its previous outlook of “Negative,” according to a press release. 

Fitch said that Oman’s fiscal health improved for a variety of reasons. Omantel is 51% owned by the Omani government, and high oil prices have resulted in more government revenue. Like other Gulf states, Oman bases its budget largely on proceeds from oil sales. 

Oil prices plummeted in 2020 at the start of the COVID-19 pandemic, but coordination between major oil producers resulted in price increases throughout 2021. Prices went up again last week when Russia invaded Ukraine. 

Oman participated in supply coordination led by Saudi Arabia and Russia last year in an effort to drive up prices. The government of Oman also received a “Stable” rating from Fitch in December. 

Omantel’s financial situation also improved last year when it agreed to sell its 2,890 cell phone towers in Oman to the British telecommunications company Helios Towers for $575 million in cash. 

Fitch also noted Omantel’s customer base grew in 2021 due to its prioritization of postpaid plans, where users pay their phone bills based on their usage at the end of the billing period. 

Omantel has also thus far managed to maintain its market share in Oman in the face of new competition, according to Fitch. Omantel’s market share was 52.4% at the start of 2021, according to Oman Daily Observer. 

Perhaps the biggest threat to Omantel is the British telecom giant Vodafone, which became Oman’s third cell service provider this month. Kuwait’s Zain telecom also operates in the Gulf country. 

Oman began an ambitious reform package in 2020. The effort has focused on economic modernization, including the retirement of long-serving ministers, shrinking the size of government and the launch of a sovereign wealth fund. 

Oman’s economy contracted and its budget deficit skyrocketed in 2020 amid the coronavirus pandemic, in large part due to decreasing oil revenues. 

Economic hardship has forced the Omani government to reconsider its tradition of environmental protection, Sebastian Castelier wrote for Al-Monitor last month.