US billing company AMS is expected to announce, in the next few days, that it is cancelling its contract with Bezeq for the setting up of the billing project. Bezeq is moving to find a replacement supplier.
Following information that reached "Globes", Bezeq general manager Ami Erel said: "If AMS breaks the agreement, we will find a way of setting up a billing system so that our preparations for going into competition will not suffer".
In a report it forwarded to the US stock exchange on July 15, AMS created a provision of $20 million before tax due to losses accrued in the past six months in the project with Bezeq. These were added to the $7 million allowance before tax created for the same reason in the 1998 annual report.
The notes on the allowance stated that due to recent events, it seemed unlikely that differences of opinion between the company and Bezeq would be resolved. Bezeq took the hint and started to look for another supplier.
The $100 million contract for setting up Bezeq’s new billing system was signed in September 1997. Of the $100 million, the AMS share was $53 million, Amdocs has a share in the set-up of one of the modules worth $7 million, and Israel's Formula has a $13 million share. The balance of the contract is being performed by Bezeq’s Information Systems and Computers division headed by Raz Hyperman. Formula is also expected to by given part of the AMS contract as its sub-contractor.
"Globes" learned that the main problem encountered by AMS related to the fact that, in 1997, it signed an agreement with Bezeq for a fixed price for the project. Under the agreement, the billing system is to become operational in 2001.
After AMS started work, it reached the conclusion that if it continued the project in the current format, it would sustain significant losses. The company proposed two alternatives, consisting mainly of different payment terms, designed to increase the consideration payable by Bezeq by tens of millions of dollars.
A senior Bezeq source told "Globes" that the increment demanded by AMS amounts almost to the original cost of the contract which was, as stated, $53 million.
Erel commented to "Globes": "Since the first quarterly report was published, the company has been constantly in touch with AMS. At a certain stage, a Bezeq team travelled abroad to examine their proposals. As of today there is a dispute. They asked for tens of millions of dollars. We said we insisted that they perform their contractual undertaking on time at the agreed consideration, with no increment.
"We demanded that they confirm that they would do so with no further financial demands. We are waiting for an answer. At the same time, we are doing our homework. So that if AMS breaks the agreement, we will find the way to set up a billing system so that our preparations for going into competition will not suffer".
"Globes" learned that the work on the project is meantime continuing as usual, including work by AMS staff.
Published by Israel's Business Arena July 22, 1999