Following pressure on Minister of Communications Moshe Kahlon to intervene against the new sales campaign by HOT Telecommunication Systems Ltd. (TASE: HOT), he has begun meeting executives of the Internet service providers (ISPs) who charge that HOT is creating unfair competition that the Ministry of Communications is ignoring. The ISPs asked Kahlon to block HOT's campaign, but he refuses, even though he was shown figures indicating that the campaign requires ministry intervention.
Tomorrow, the Ministry of Communications will hold another meeting to examine whether it is possible to intervene in HOT's campaign, and whether it is legal under the regulations.
It seems that Kahlon will not stop the campaign. On the other hand, he will consider ways to help the ISPs. As "Globes" reported, Kahlon wants to move forward on Frontier Advisors' work on the wholesale market, and he is urging implementing some of the recommendations before the full report is completed.
The second thing that Kahlon asked to be examined was the giga agreement - the agreement under which ISPs pay tens of millions of shekels to Hot and Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) to use their infrastructures. Payments are based on usage. The giga agreement was greatly reduced last year, but the ISPs contend that HOT's move creates unviable prices, and cross subsidizing of supervised services, and should therefore be cancelled forthwith.
Figures presented to the Ministry of Communications indicate that HOT.net is selling at a loss, because NIS 20 for 100 Mbps is an unrealistic price. In other words, the ISPs lose money if they sell at this price. They told the ministry that they would have to pay HOT at least double this amount per 100 Mbps for use of its infrastructure. HOT's bundling allows it to offer subscribers to buy a services package that includes cable television, unlimited telephone calls to all destinations, and Internet infrastructure.
For an extra NIS 20 per month, the customer will receive HOT.net as his ISP. Every customer who opts for the bundle can choose his ISP; the problem is that no ISP can offer such a low price, because HOT cross subsidizes its bundle, and rival ISPs cannot. This is why they are demanding the cancellation of the giga agreement, which would enable them to compete against HOT.net.
HOT's share price fell 0.9% by mid-afternoon today to NIS 43.82, giving a market cap of NIS 3.4 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on February 20, 2012
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