The announcement of the tender selling controlling interest in Bezeq will be published in the last week of April. Knock on wood that it will really happen. Meanwhile, four telecom companies, Cellcom, Ofek – the New World, Barak, and Golden Lines, will submit bids for the integrated inland communications license tender and for wireless frequencies, and will compete for three licenses entitling the holders to compete with Bezeq.
What chance does the market have of taking off? Will it look like the international calls market, in which all the concerns have been losing money since it was opened to competition? Will competition be only for the business sector? Who wants to compete with Bezeq? What other concerns are operating in the market? What about the cable TV companies? How does the Yes satellite company fit into the picture? All this and more.
The Israel Corporation – everything is open and it's not too late
More than a few concerns have previously announced they would compete for the controlling interest in Bezeq. Examples are Koor Industries (NYSE: KOR), Poalim Investments, Discount Investments, the Israel Corporation, and the Gad Zeevi group. Except for the Israel Corporation, which has not said its final word on the matter, and Gad Zeevi, who will compete, all the others have given up.
The Israel Corporation is not definitely competing, as can be seen from the statements by president and CEO Yossi Rosen. It has other opportunities to invest in communications, such as the cable companies, the existing cellular companies, the companies competing for an inland communications license to compete with Bezeq, and the tender for an additional cellular operator. Meanwhile, anything is possible; in fact, the Israel Corporation even intends to buy the tender for an additional cellular operator and study it. So, who knows?
Rosen: ”We have made a decision in principle to enter the communications field. Bezeq is part of communications. It all depends, however, on the terms. If the terms are good, we’ll compete. If the State fixes a minimum price, as it’s considering doing, we may not. Forming a group costs money. Today it is very hard to recruit a foreign group. It amounts to a very big investment, under unknown rules. No one knows what the regulators will do.”
”Globes”: Investing in Bezeq is currently considered a good deal. The delay in opening the market to competition has benefited the company and given it the opportunity to better prepare itself for competition.
”That’s right, but look at the international calls market. When Bezeq was a monopoly, it was making money hand over fist. When the market was opened to competition, things got out of hand and led to losses.”
So you don’t want competition?
”No one expects Bezeq to be sold to me as a monopoly.”
What do you think about Bezeq’s market value?
”The Government Companies Authority is talking about a market value of $4-5 billion. It is hard for me to believe anyone will offer that kind of money.”
Do you want to pay less than the market value, which is also considered extremely low?
”This is a very bad time for privatization. Multinationals are busy with their own affairs, and I’m not sure they’ll enter Israel – and participation by a foreign company is a condition for competing in the tender”
So is it yes or no?
”We’ll buy the tender booklet and study it carefully, then decide.”
With which foreign concerns are you negotiating?
”We’ve been in touch with all sorts of concerns, but have not yet signed an agreement. This definitely won’t be easy. If anyone thinks companies are standing in line, he’s got it wrong.”
The Zeevi group is competing, no matter what
One group that has already guaranteed its participation is the Zeevi group. Former Ministry of Communications director-general Shlomo Wachs is in command of the group’s campaign for the Bezeq controlling interest is. Wachs says, “We’ll be happy whether or not there are more participants in the tender. As an Israeli and former Ministry of Communications director-general, however, I say it is very important to privatize Bezeq, particularly when the market is opened to competition. The regulator may then treat the whole system differently.”
What do you mean?
Wachs: ”It is ridiculous that the State is both a regulator and owner.”
So you are actually referring to the State in its capacity as an owner. What should the State do?
”The State should encourage concerns to compete. A clear communications policy should be defined and applied, without changing its policies twice a week, which, to my regret, has occurred during the past two years. I said that before I joined the Zeevi group. With the proper policy, Bezeq will also be attractive to the world market. The Israeli market consumes, breathes, and needs communications.”
What do you really want, not as an Israeli or as an ex-director-general, but as a Zeevi employee?
”You have to say exactly what the policy will be during the next four years. For example, you can’t publish a 1998 Bezeq prospectus based on competitors using independent infrastructures, then suddenly start talking about unbundling. You can’t suddenly pass legislation altering franchises and guaranteed terms, like they did to the cable companies, when they brought in the satellite [company].”
What valuation for Bezeq would you find acceptable?
”At least the values at which it is currently traded on the stock exchange – about $4 billion. Under normal conditions, a company like that would be worth a little more.”
Zeevi has a problem of internal conflict of interest. On the one hand, as a large shareholder, he wants the share price to rise. On the other hand, as a potential buyer of the controlling interest, he is interested in a low price. It’s a difficult dilemma.
”In the negotiations on a private placement for financing (early) employee retirement, we weren’t frightened by the possibility of a higher price. We announced we would compete in the tender, even if the company is traded at over NIS 8, which shows we regard the company as a long-term strategic investment. We aren’t afraid of a high price.”
That means the controlling interest will cost at least $2 billion, if not more. Where will you get the money?
”First of all, we need a foreign partner – an international operator. Secondly, Israel’s global financing rating is still high. We think there will certainly be companies willing to finance an acquisition of the national communications company.”
Yaron Jacobs – privatization now
”Bezeq must be privatized as soon as possible,” says Government Companies Authority director-general Yaron Jacobs. “Bezeq can’t get along properly in a competitive market with all the limitations placed on a government company. I am not referring to the principle that the State should not control business sectors – that is self-evident.”
But the timing is terrible.
Jacobs: ”The moment is never ideal from the standpoint of the economic environment. We also take the global communications market, the general situation in Israel, and the state of the stock exchange into account. We believe it’s correct is to begin the process very soon. We reserve the right to stop the process at our discretion at any stage, based on our own considerations, but that seems unrealistic to me.”
Why? The share price is not so good.
”I believe that the moment the company moves toward privatization, interest in acquiring it will grow. It can also be assumed that the share will rise and the sale price will improve, because a company’s attractiveness to the public in a privatization process increases when the public is looking in from outside. It’s all a matter of forecasting the environment, and that’s what we base our decisions on.”
What does Merrill Lynch, your privatization consultant, have to say about that?
”Merrill Lynch shares this opinion.”
What are the State’s valuations?
”We don’t have any yet. We still haven’t discussed the matter with anyone.”
The State is hamstrung by its commitment to Bezeq’s workers to link opening the market to competition with privatization, and to not allow competition until Bezeq is privatized. The process of opening the market to competition has already reached the point of no return.
”Bezeq must be privatized now, regardless of the link to introducing competition. The company already operates in a competitive market and has a hard time functioning. Bezeq continuously requests relaxation of regulations regarding salaries, tenders, and mergers.”
When will the bids be submitted?
”Seven to nine months will pass from the date of the announcement to the end of the entire process, and there will be an attempt to speed up the timetable. Requests to participate in the process will be submitted sixty days after the date of publication, and should include the list of participants in the consortium and proven financial, management, and engineering capability.”
Why is a foreign partner a condition?
”Mostly because the necessary technological capability can come only from outside.”
The Economics Committee – amendments and more amendments
One of the factors affecting the fate of the cable companies is how Amendment 24 to the Telecommunications Law (1982) will look when it is finally approved by the Knesset.
The Knesset recess began the week before last. Economics Committee chairman Avraham Poraz intends to present Amendment 24 for approval at the beginning of May. The amendment includes alternatives to a number of sections. Poraz plans to bring the amendment to the Knesset for its second and third readings towards the end of May. A reminder: Amendment 24 was formulated due to the opinion by Attorney General Elyakim Rubinstein that the cable companies can be granted a license only if the Telecommunications Law is amended accordingly. He also recommended that the opportunity be taken to organize the communications and content markets.
The appointment of Reuven Rivlin as Minister of Communications introduced a new factor. Rivlin will surely wish to make his own mark on the law, although how he will do so is still unclear. Meanwhile, he is studying the law and the changes the Committee intends to institute in the legislation. These are the main changes:
- Infrastructure sharing (unbundling) – The Ministry of Communications reserves the right to require Bezeq to do this, at the Minister’s discretion, while the Committee wishes to force the Minister’s hand.
- Payment for the cable companies’ communications licenses – The Ministry of Communications wants the government to appoint an arbitrator, while Poraz is talking about an appointment by the District Court president.
- The Committee wants to increase the authority of the Council for Cable and Satellite Broadcasting, at the expense of the Ministry of Communications, as stipulated by the amendment to the law.
- Poraz wishes to limit crossover ownership through primary legislation, rather than by implementing new regulations, as desired by the Ministry of Communications.
- Poraz wants a clear distinction between infrastructure and content. The Ministry is ignoring the issue.
- The Ministry did not set a quota for original productions on the various broadcasting channels. Poraz is demanding a clear legal requirement.
- Under the proposed amendment, the subscribers’ chip-based converters cannot be used as security and the company cannot take out loans to pay for them, even though they belong to the company. Poraz proposes changing this. He regards the converters as a significant company asset, even though it is clear that the bank will not repossess a converter installed in a subscriber’s home.
- The Ministry of Communications does not offer any solution to the problem of antennae for wireless access which will be used by Bezeq’s competitors. Poraz wishes to insert a clause exempting Bezeq’s competitors from the need to obtain approvals, as required by the planning and building law, during the process of implementing the antennae.
This amendment deals mostly with the cable companies, which are currently in an extremely complex situation, in which psychology plays a significant role. The cable companies, Matav, Golden Channels, and Tevel, once a gold mine, have now become a bottomless, money-swallowing pit. Yitzhak Suari, who was hired by the cable companies, estimates their losses in 2000 at NIS 500 million.
The cable companies: Maybe we’ll close shop
The cable companies are mostly waiting. They are waiting for a communications license to begin providing high-speed Internet services, for permission to merge, and for the appointment of an assessor to determine the amount they must pay for a communications license. “They may determine such a high price that we’ll close shop,” says a senior source.
The cable companies are also waiting for the Antitrust Authority director-general to permit them to develop a cartel with the satellite company Yes and negotiate jointly with the major US content companies in order to lower prices. In the wake of competition between Yes and the cable companies, the cost of content increased several times over. The cable companies and Yes are overpaying US companies for content by $1 million. The absurd aspect is that the principal benefactors of competition are the American cable companies’ shareholders, while the Israeli consumer has yet to benefit.
The least prominent company in the communications market is Tevel Telecom, founded by a Tevel shareholder to serve as the communications company for the cable companies, either separately or merged. This national operator published tenders for equipment to set up a communications network over the cable network, examined bids, chose bids for the final tender phase, and then stopped. Everything has now been halted and is waiting for something to occur. In contrast to the other national inland communications network companies - Ofek, Cellcom, and Barak – Tevel Telecom is not looking for an integrator to set up its network, but rather equipment suppliers. It will carry out the integration itself.
The suppliers that reached the final stage of competition for supplying switching, which is the principal type of equipment involved in the undertaking, are Nortel, Lucent, and Alcatel. Amdocs and Kenan Systems are the finalists for billing services, while SAP and Oracle reached the final stage in the battle to provide ERP systems. In the CRM field, Siebel and Clarify have stayed the course. “But this is all theoretical,” says the senior source. “Nothing has been finalized. The cable companies are losing huge sums. The cable companies are in crisis, Dankner is in trouble, Discount Investments is in trouble, Mark Schneider is in trouble, and Fishman has gone overseas.”
Today, a year after the Attorney General’s opinion was published, the cable companies consider the decision to be a disaster. When Rubinstein published his opinion, however, he wasn’t supposed to weigh financial considerations; he only needs to consider legal factors. Furthermore, the cable companies’ petition to the High Court of Justice asking that the Ministry of Communications be allowed to grant them a temporary communications license until their licenses expire is based on that opinion, and the cable companies have not appealed Rubenstein’s decision.
There are several unclear areas concerning the expected merger by the cable companies. Moshe Gavish, vice chairman of the board at Dankner Investments and Matav Cable for the past three months, does not understand why the Antitrust Authority director-general is not responding to the merger request by the cable companies, which they submitted about a year ago. A query to the current director-general reveals a surprising fact: no such request exists. The cable companies indeed submitted a request to the Court, but did not follow up on the proceedings, and did not submit an application to the director-general.
The director general did, however, receive a request to sell Aurec’s Golden Channels shares to the Fishman group and Tevel. A reasonable assumption is that this request will be rejected. Strum conducted a hearing in writing in recent weeks, in which he asked representatives of the parties – Aurec, daily newspaper “Yediot Ahronot”, Fishman, and Tevel – to respond to the claim that they had in effect already implemented the deal by transferring money and appointing Ami Even as general manager in Fishman’s name, without waiting for the director-general’s approval. There is a suspicion that the Antitrust law was violated.
The hearing took place and Strum will probably not approve the deal. Under the deal, signed in November 1999, the Fishman group, which consists of Eliezer Fishman Properties, Monitin Publishers, “Yediot Ahronot”, and cable company Tevel, bought 44% of cable company Golden Channels from Aurec for $420 million. The item purchased consisted of 200,000 subscribers, and the Fishman group and Tevel received 100,000 each at $2,100 per subscriber – the highest value to date for a cable company in Israel.
Under the terms of the deal, the Fishman group in effect took control of Golden Channels with a 64.8% share. Tevel holds 22%, while Aurec remains with 13.2%. The Fishman group held 42.8% of Golden Channels before the deal.
A senior source wishing to remain anonymous finds the merger issue very disturbing. He said, “Why doesn’t Poraz insert a clause in the law saying that the cable companies are allowed to merge the day it is approved? Such a merger process takes six months; it is a very complex move. We have parallel and in some cases identical operations. We operate three digital centers. In the US, one digital center like this serves millions of subscribers. We have three centers for one million subscribers.”
As if Poraz had been talking with this source, he announced at an Economic Committee session last week that he supports the idea of addressing the issue of the cable companies’ merger in the law. “We are caught in Catch-22,” says the source. “How do we solve it? By getting rid of all the regulation. How will the assessor make his estimate? By the old economy or the new one? How will he factor in the damage competition has caused the cable companies? Today we are in a completely different world.”
You can't see the business for the regulators
Moshe Gavish is willing to speak openly. “The cable companies currently presented with several competitive markets: multi-channel television, high-speed Internet, and national inland communications. In the television field, they allowed Yes to use the cable companies’ infrastructure and permitted it to offer better service, with digital channels and tiering, but the prices did not fall. Our business results are bad. Suari, who wrote a report for us on the multi-channel television industry, talks about NIS 500 million in losses in 2000 for the three companies.”
The poor situation of the cable companies and Yes has led the competitors to have a unity of purpose vis-a-vis the US content companies. Gavish: “The Antitrust Authority director-general is not allowing us to join forces.” A query to the director-general, however, reveals a slightly different version. The request under consideration is not for joint negotiations with the major content companies – contracts with these companies are for four years, and who ever heard of a content provider agreeing to lower the price in the middle of a contract?
So what did the cable companies ask for? In order to more effectively compete against Yes’s tiering in the first nine months, the cable companies bought movies designated for pay-per-view broadcasting on Channel 4 – the movie channel, in an attempt to defeat the satellite company. Unfortunately for them, Channel 4 is also broadcast on satellite and the cable companies took it on the chin from two directions. They therefore asked the Antitrust Authority director-general to allow them to negotiate with the major content providers in order to broadcast those expensive movies in pay-per-view format.
Strum did not reject the concept of cooperation, but the idea itself. He claimed that if these movies are removed today from the basic package broadcast, the price of the package to the consumer should be lowered accordingly. The cable companies and Yes did not agree to this. The press leaks, however, were along the lines of, “We’re so unfortunate. They won’t let us combine to lower prices.”
Gavish: “We need approval for every move. No sector is as regulated as communications.” The cable companies are currently at war on two fronts. One is to improve the terms of Amendment 24 to the Telecommunications Law. The other is a petition to the High Court of Justice to enable the Ministry of Communications to grant them a temporary license for high-speed Internet, which the Attorney General has said is illegal.
Will the cable companies enter the national inland communications market when they are permitted?
Gavish: ”Yes. We will either set up an independent network or we will combine with a company receiving a license in the integrated national inland communications and wireless access tender.”
Are you negotiating with the four groups competing in the tender for an integrated license?
”I know that, on the technological side, all sorts of possibilities are being considered.”
Is there opposition to merging cable companies?
“Everyone we spoke to said they do not oppose mergers in principle. Mergers are a matter of necessity; each company operates in a single region, and their expenditures justify streamlining and a concentration of effort.”
Will the situation improve, or is the market unprofitable and should we start to focus more on communications?
“The situation can improve, but it won’t be in one year. Multi-channel television will become profitable again in a few years. It should be remembered that the content contracts with the major companies will end in 2003-04. We are now absorbing the rise in cost for content and investment. In two or three years, we will begin to see revenue from new fields and added value services connected to the digital network revolution equaling expenditures.”
YES – The investment isn’t supposed to fail
When will there be real competition between the cable and satellite broadcasting companies? When will there be competition between Bezeq and the cable companies?
The answer to the first question is related to the tiering rules for cable companies that the Cable and Satellite Broadcasting Council is currently discussing. The parties submitted documents to the council to consider during its hearing last week. The council will almost certainly decide on the final rules next week. Next month, the cable companies will be able to broadcast digital channels and offer tiering services, and the real competition will begin.
The answer to the second question was given by YES Satellite Television general manager Shlomo Liran, “I don’t think the cable companies will be Bezeq’s main future competitors. The real competition will come from companies like Cellcom or Ofek. If the cable companies had received licenses, they would have faced the technological problem of providing telephony and Internet services through cable networks.”
What is YES’s role in opening the market to competition?
Liran: “Our key roles are to improve the quality of television in Israel, and to totally change the cable companies’ behavior towards consumers. I do not have to speak on Bezeq’s behalf. I am merely a subsidiary of Bezeq, just like Eurocom. However, there is a global trend of communications companies providing added value services and content.”
Including high-speed Internet?
“We will offer super-speed Internet of 3.5 Gbps, but with limitations. We will take the highest demand webpages that are important for consumers to view, and enable them to surf these pages on the television using a remote.”
Cellcom – Bidding on every tender?
There was a reason why Liran mentioned Cellcom as a strong competitor of Bezeq. Cellcom is one of the four companies that will participate in the integrated inland communications operator and wireless access frequencies tender next week, in an attempt to compete with Bezeq. Cellcom, Israel’s only profitable communications provider, is going for broke.
Cellcom also has problems, however. The company has been unable to hold an IPO, negotiations with Ofek ended in failure, and it still doesn’t have a foothold in the Internet market after several failed attempts to acquire existing concerns. In addition, its technological horizon is limited and it has to set up new GSM infrastructure. The numbers show that the company faces all the problems of a growing enterprise that changed from a cute start-up to a cumbersome, mature company, which is not exactly the image it wishes to portray.
Cellcom’s petition to postpone the application for the inland communications operator and wireless access frequencies tender shows that you have a time problem.
Cellcom deputy CEO Oren Most: “We set up the New Game division to enter the inland communications market over a year ago, even before there was talk of partnering with another group. During this period, our team expanded and continued its work, while the Ofek talks were continuing. I want to emphasize that we worked on both channels simultaneously. We did not stop preparations.”
Who will manage the new subsidiary which was set up to build the inland communications network?
“We have a 50-man team within Cellcom, in a separate division. Lipa Ogman, the head of Cellcom’s technology organization, is heading the team.”
You didn’t answer my question.
“Lipa is heading the division.”
Are you planning to resume negotiations with (the company) Barak?
“We notified the Ministry of Communications that we’re going it alone.”
Were there other talks besides the ones between Ofek and Barak?
“If there were, I wouldn’t tell you.”
There were other talks, however. Most won’t admit it, but Cellcom negotiated with Golden Lines, although these discussions were not as advanced as the negotiations with Ofek. Commenting on the negotiations with Ofek, Most says, “Our disagreement with Ofek was commercial. I think there was convergence on the strategic matters.”
A shareholder in one of the parties told “Globes” that Eurocom rejected control by Cellcom, agreeing to the condition on Wednesday evening in the final week of negotiations, only to retract within 24 hours. At the same time, Cellcom backed out of agreements on other issues.
Will Cellcom compete against Bezeq only in the business market?
“Because we face fierce competition, I have no intention of commenting on Cellcom’s strategy. That is a very valuable commercial secret, especially for Bezeq.”
It is no secret at all. Bezeq knows the facts too, and has been digging up a lot of dirt in the past two years, hooking up every high-tech industrial park, which constitute the bulk of the business market, with fiber optic cables. Cellcom won’t have the element of surprise, or a market. It will be very hard to convince Bezeq customers to transfer to Cellcom. Bezeq doesn’t provide bad service these days, and is competitive with Cellcom on pricing. Bezeq is now stronger than ever, despite the losses incurred from its employee retirement agreements, as reflected by the company’s 2000 balance sheet, which was published a few days ago.
You have been unable to issue shares in Cellcom. Will you have financing troubles?
“The fact that the condition of the capital market is now unsuitable for issuing shares, and the fact that Cellcom has not issued shares to date, are undeniable. On the other hand, Cellcom’s financial performance over the past few years guarantee that the company will have a very attractive financing round. Our total financing needs for the coming years are guaranteed by several sources, at a reasonable cost.”
What sums are you talking about for the next two years?
“Last year alone, we invested NIS 1 billion in our present network. This was a relatively quiet year, in which we only began deploying for the future. Nevertheless, we posted record profits and a good cash flow.”
Although with a weaker fourth quarter.
“The fourth quarter is allowed to be weaker.”
A cloud over Ofek
After the failure of the Cellcom-Ofek negotiations, it is a good idea to examine the latter company. Ofek is the realization of a dream by Shaul Alovitz, who long ago decided to build Israel’s leading communications concern.
Ofek is the only company without wireless access frequencies that decided to bid for the inland communications operator license. The company decided to bid even though it cannot build an inland communications network without wireless access. The company will only be able to launch such a network if can use Bezeq’s infrastructure - which is currently not the case. Furthermore, the winners will receive a wireless access license, which Ofek cannot presently utilize. It seems that Ofek will also be the only company that will commit to providing residential services.
It appears that Alovitz’s desire to protect himself has put him at risk. This is why he has the only inland communications operator license other than the permit held by Bezeq, but is doing nothing with it. He just wants to have it. His motive appears to have been concern that there would be too many participants for the integrated tender and he would lose out. One thing is now obvious, however: There will not be many participants in the tender for the three integrated licenses.
By last November, Ofek had already chosen Nortel as its network integrator and equipment supplier. So far as is known, Nortel was chosen virtually without competition. Lucent fell by the wayside, because it would not promise to implement a pure IP network, while Alcatel was unenthusiastic about Ofek’s technical demands. Nortel, which did promise a pure IP network, is now considerably less eager.
Naturally, everyone, not just Ofek, is facing financing problems. However, Ofek announced last November that Nortel would provide it with financing, both to buy equipment and to build the network. The sum mentioned at the time was $800 million. Unfortunately, Ofek neglected to make Nortel sign on the bottom line, and it is now clear that Nortel will not provide Ofek with $800 million. Nortel may not even offer $400 million. Nortel may just give Ofek a recommendation to take to the banks, and may also provide a guarantee of some kind.
Ofek director-general Reuven Segen-Cohen is unwilling to talk to the press following recent reports about the breakdown of the negotiations with Cellcom and his company’s relationship with Nortel. He is only ready to make a vague comment. “We will see who is speaking the truth and who is not when we get down to reality.”
Barak has learned from Ofek’s mistake
Barak is demanding that Ericsson and Siemens, which are bidding for the tender to build Barak’s inland communications network, provide detailed and binding financing package agreements. The estimated cost of the network is $500 million. Barak vice president of marketing and sales Gil Sharon has learned from Ofek’s mistake, and financing is one of the four criteria that will determine the winner of the tender. The other considerations are engineering-technology, cost, including equipment and labor, and management ability and professional resources.
Sharon says, “Work on the first three items is effectively completed. Only the financing package is still unfinished.”
Is it feasible to compete against Bezeq in the inland communications market?
Sharon: “It is feasible according to our business plan. There are courses of action that might make it become unfeasible, such as a massive network deployment and huge early investment. The network should be deployed gradually in accordance with demand. The main reason for CLEC failure is heavy infrastructure investment before appropriate demand existed. Moreover, in our case, I see us as an expanding existing communications company, and not as a company that is just getting off the ground.”
Do you plan to offer private sector services?
“In the future, yes, but it won’t be our main focus. Ultimately, Israeli communications companies cannot be based on a single sector.”
Golden Lines
Until now, Golden Lines has been an unknown factor in the tender. The company purchased the tender, carried out internal work, but published an equipment tender only last week. Golden Channels CEO Ram Belinkov has always been known as a man who only bets on a sure thing.
In late March, Golden Lines convened a meeting of network equipment suppliers. Alcatel, Ericsson, Lucent and Nortel attended. Golden Lines VP of business development Stella Handler said, “We recently carried out a great deal of market research and detailing planning of the network, all of which has been approved by the board of directors. Like Barak and Cellcom, Golden Lines will concentrate on the business sector. We are not going for all sectors like Ofek. Our business plan emphasized the business sector.”
Will there be room for three competitors?
Handler: “Business will be tough. Three companies will start out, but it is not clear what will happen afterwards. There is a consolidation trend.”
Is Golden Lines planning a traditional or IP network?
“We are planning a traditional ATM switches-based network. There is virtually no IP. There is no pure IP network anywhere in the world yet; the technology is not ready.”
How much will you invest in the network?
“We will invest approximately $120 million in the first 3-4 years.”
Hapoalim Electronic Communications is investing in Ofek
Poalim Investments, through its subsidiary Hapoalim Electronic Communications, controlled by Yitzhak Shrem, is one of the most important players in the communications market. The group is closely linked with Eurocom. It began as a partner in Tapuz, which participated in the third cellular operator tender. Later, the group partnered with Eurocom in Partner, and then was involved in the founding of YES. The question is whether Poalim Investments is a candidate to acquire the controlling interest in Bezeq.
Hapoalim Electronic Communications CEO Itzhak Gat says, “The Bezeq deal is too big for me. We’re talking about billions. As much as I’d like to be a significant player in the field, it’s not realistic.”
This leaves the company with the option of partnering with one of Bezeq’s competitors for the wireless access frequencies tender. Ofek, which Hapoalim Electronic Communications jointly owns with Eurocom, might be a good bet, especially now that its negotiations with Cellcom have failed.
Is Hapoalim Electronic Communications willing to invest in Ofek?
Gat: “I’ll tell you why I’m ready. I think that Hapoalim Electronic Communications is able to invest $100 million. I believe in the communications market, and I’m not investing for the short-term.”
Published by Israel's Business Arena on 9 April 2001