Israel Electric Corporation (IEC) (TASE: ELEC.B22) CEO Amos Lasker has been applying his position to become an especially aggressive activist in the telecommunications market. At the "Globes" Marketing and Communications Conference yesterday, he said that, first and foremost, IEC has the will, motivation, and infrastructure to set up a nationwide broadband network for Israel.
Lasker said that IEC one of Israel's three leading companies with fiber optic infrastructure. (The others are Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and HOT Telecommunication Systems Ltd. (TASE: HOT)) "There is no home or business in Israel that is outside a half or one-kilometer radius of IEC's infrastructures," he said.
IEC is the hottest thing in the contemporary Israeli telecommunications market. Lasker is leading the utility's vision to exploit its infrastructures to provide telecommunications services; and not simply a telecommunications infrastructure, but an advanced fiber optic high-speed infrastructure that, at least in theory, provide 100 megabit per second (Mbps) access to the home.
As Lasker is aware, the problem is not capability, but regulatory restrictions, which are influenced in no small part by competitors and IEC's own problematic record.
"What are you afraid of?" asked Lasker. "After all, we're not talking about the IEC that you know. There is also an IEC with more than 100 Ph.D.s and 1,500 engineers, with one of Israel's largest software houses, and a service center that no communications company can emulate. At night, when we get calls, we go out and fix them; the communications companies arrive in the morning. Our company has the potential to enter many fields besides the electricity chain."
Lasker said that IEC plans to set up a separate company to provide telecommunications services, in which a private party will own the 51% controlling interest. "We'll initiate an international process to find an investor, and whoever wins, wins. There is complete separation between IEC's corporate governance and management and subsidiary. I'm pleased about these barriers, because there will be success if we operate with full transparency."
Lasker claims that, in the end, the consumer will benefit from IEC's entry into the telecommunications market, because prices will fall. However, even before the utility embarks on its new adventure, it will have to deal with its problems, such as its huge debts - and the new telecommunications infrastructure will cost an estimated NIS 600 million.
Lasker's response to this is, "Don’t believe what you read in the papers. It's drivel."
Lasker admitted, "There is a problem at IEC, which is expected to finance all its development from its own sources. We're investing NIS 7-8 billion in development. Our owner isn't giving us capital, and we can only raise capital externally. There is a point at which the financial leverage is completely unreasonable, and that's where we are. We're demanding rate hikes, and a capital injection by the owners to solve the problem of the electricity market."
The IEC owner that Lasker is referring to is the State of Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on July 20, 2010
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