Pelephone, of the Bezeq The Israeli Telecommunication Co. Ltd. (TASE: BEZQ) group, controlled by Shaul Elovitch, has joined the campaign against the planned reduction in inter-network connection fees. After several months of silence on the matter, last Thursday the company submitted a detailed study arguing against the move.
Sources inform "Globes" that, like its two competitors, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), Pelephone finds serious errors in the calculations of the Ministry of Communications and in the study prepared for the ministry by consultancy NERA>
Pelephone hired another consultant, TASC Strategic Consulting, which over the past few months has carried out research to examine the consequences of lower fees. TASC finds errors in NERA's work leading to substantial gaps between its recommendations to the Ministry of Communications and Pelephone's actual costs.
One alleged error is in the number of sites Pelephone operates 1,700 in NERA's model, compared with 2,100 according to the company. NERA's low number stems from erroneous assumptions about the radius covered by each site and failure to take into account special conditions applying to the deployment of a network in Israel, such as the high population density, limitations arising from constraints imposed by local authorities, lack of optimization of the network, for historical reasons, and other factors.
Pelephone claims NERA failed to take into account additional investment costs, including massive investment in network control: advanced control and monitoring systems, engineering teams, and other costs.
Pelephone also argues that NERA used an accounting depreciation method, whereas the accepted method is economic depreciation, which would give connection costs 20% higher.
Another matter that Pelephone says has not been adequately addressed is the effect of a reduction in connection fees on callbacks. It says that lower fees will widen the gap between wireless-to-landline calls and landline-to-wireless calls, diverting traffic from the former to the latter, especially in calls between wireless telephones carried overseas and landline telephones in Israel. Recently launched applications have made callbacks as convenient as a regular call.
Published by Globes [online], Israel business news - www.globes-online.com - on June 27, 2010
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