The cost of cellular calls between operators is set to fall dramatically. Minister of Communications Moshe Kahlon has given the cellular operators 30 days to respond to his order today to reduce inter-network connectivity fees. The fees will be slashed over 80% from NIS 0.25 per minute (not including VAT) to less than NIS 0.05 per minute (not including VAT) in a single move. The reduction is based on the recommendations by NERA Economic Consulting, and are supported by the ministry's economics departments and by the Ministry of Finance.
IBI Investment House analyst Ori Licht says that the reduction from NIS 0.25 to NIS 0.05 per minute is bad news for Israel's mobile operators, which could see their aggregate annual earnings before interest, taxes, depreciation and amortization (EBITDA) cut by almost NIS 200 million, and their aggregate net profits cut by NIS 150 million. However, the companies will probably recoup these losses by raising user fees and other means.
Licht advises keeping exposure to telecommunications stocks, especially Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), but reducing exposure to mobile stocks, especially Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL).
The shares of Israel's mobile operators are falling on the TASE. By early afternoon, the share price of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) was down 2.5% to NIS 71.10, the share price of Cellcom was down 2.3% to NIS 112.60, and the share price of Pelephone Communications Ltd. parent company Bezeq was down 1.7% to NIS 9.03.
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2010
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