At a press conference this morning, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) CEO Ami Erel set out the mobile carrier's opposition the 80% reduction in inter-network connectivity fees planned by the Ministry of Communications, and the effect it will have on the company's profits.
Erel said, "The current average in Europe is NIS 0.35, and the lowest country is Sweden, with a connectivity fee of NIS 0.17. Does anyone think that the system can digest this? A reduction to NIS 0.04? Connectivity fees aren’t a magic number, it isn't an agenda, it's necessary to compensate the company for the cost, and this is a number that should be set through an economic calculation."
Erel warned against the massive impact on both investors and on the labor market as a result of the measure. "The cellular industry provides a livelihood for tens of thousands of families. The cut in connectivity fees in 2008 was based on a format set by the ministry. It's clear to me that a careful and sagacious decisionshould be made now. I can't remember any such thing in any industry of an 84% reduction in a single move."
Erel also criticized the media for supporting the rate cut, saying, "Economic decisions have turned into populism."
Erel claimed that he welcomes the policy of Prime Minister Benjamin Netanyahu and Minister of Communications Moshe Kahlon to promote fee competition, but added a caveat. "There are huge errors in the calculations in the report. The damage is liable to be much greater."
Erel concluded by asking the media, "Why should we be the smartest in the world? Why should we fall the fastest? There's nothing like this in the world, where the knife and axe are making regulations. I'm sure that no one wants to see us mired like a Soviet tractor."
Cellcom's share price rose 0.5% in New York yesterday to $25.05, giving a market cap of $2.99 billion, and rose by 0.5% in early trading on the TASE today to NIS 97.49.
Published by Globes [online], Israel business news - www.globes-online.com - on July 5, 2010
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