Oman Telecommunications (Omantel) said first-quarter net profit fell 2.5 per cent as rising costs outstripped revenue growth.

Yet the former monopoly's earnings topped analysts' forecasts, with the operator increasing its subscriber base to up the pressure on ailing rival Nawras, a unit of Ooredoo (Qatar Telecom).

Omantel made a net profit of RO29.1 million ($75.6 million) in the three months to March 31, down from  RO29.9 million in the year-earlier period, it said in an emailed statement.

Analysts polled by Reuters had on average forecast a quarterly profit of  RO26.2 million.

First-quarter revenue was  RO114.5 million, up from RO111.1 million a year ago. But operating expenses rose 5.4 per cent to RO83.9 million, due to network upgrades, higher employee costs and increased call costs to Pakistan, which the operator did not pass on to clients.

"We anticipated higher costs related to investments and other operating expenses, but Omantel has been able to manage this well," said Kanaga Sundar, head of research at Gulf Baader Capital Markets.

Omantel's domestic subscriber base rose 9.7 percent to 2.96 million, giving it a market share of 58.6 percent.

Rival Nawras has posted declining profits for five straight quarters.

"Omantel has been dominating the domestic market for the past 10 quarters and this is likely to continue for the year as Nawras continues to revamp its network and competitive strategy," Sundar added.

"The company is strengthening its grip on the market and the competitor needs to catch up."

Omantel also hosts two mobile virtual network operators (MVNOs), Friendi and Renna, and owns a controlling stake in Pakistan's Worldcall.-Reuters