Sources inform ''Globes'' that mobile virtual network operator (MVNO) Rami Levy Communications Ltd. is in talks with Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) to allow it to offer unlimited calls and SMS plans at prices that will compete with the plans of the new carriers, Golan Telecom Ltd. and HOT Mobile Ltd. If the companies strike a deal, Rami Levy Communications will cancel its contract with Pelephone Communications Ltd., which currently provides infrastructures to the MVNO.
Rami Levy Communications is owned by Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI), the independent supermarket chain controlled by Rami Levy.
Ever since the launch of HOT Mobile and Golan Telecom, Rami Levy has been trying to reach a new deal that will let his MVNO compete, in view of its current inferior standing in the market. He has set the goal of offering an unlimited calls and SMS plan for less than NIS 89 a month that HOT Mobile is offering.
Rami Levy Communications currently offers a monthly user fee of NIS 17.80, plus NIS 0.17 per minute of calls or per SMS. The offer is greatly inferior to the offers by the new carriers. The MVNO has recruited 60,000 subscribers, but since the new carriers began operations, its recruitment rate has slowed and subscribers are also leaving. Nonetheless, sources believe that the MVNO's recruitment rate is still higher than its churn rate.
Rami Levy Communications incurs various costs for using Pelephone's infrastructures, data systems, and computers. The contract apparently stipulates that the MVNO indemnify part of Pelephone's costs for these systems, should Rami Levy cancel the contract. Before opening the talks with Partner, Rami Levy was in talks with Pelephone in a failed attempt to improve the terms of the contract, in order to enable the MVNO to improve its offers to subscribers.
Developments in the mobile market upset Rami Levy's business plan for his MVNO, which was launched in December 2011. The MVNO's original target was to reach 250,000 subscribers within two years, and to reach an annual turnover of NIS 250-300 million one the target was reached. This would generate a gross profit margin of 23-25%, and an operating profit margin of 10%, or NIS 25-30 million.
It is now clear that Rami Levy has abandoned these targets. Market sources believe that the prices the MVNOs are offering are not profitable for the carriers, and in some cases, may even cause losses. Despite this, the MVNOs are profiting from monthly user fees.
Rami Levy said in response that he did not confirm the negotiations, and that he was seeking to improve value offered to customers.
Partner and Pelephone declined to respond to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on June 7, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012