Hot wreaks revenge on rivals

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Through Suny, Hot is hitting the soft underbelly of the mobile phone companies that compete against it in the TV and landline Internet infrastructure markets.

The announcement by Suny Cellular Communication Ltd. (TASE: SNCM) of a new mobile phone package for NIS 14.90 a month is a move by Hot Mobile aimed at causing further mayhem in Israel's mobile market, after it was learned earlier that Partner and Cellcom were deliberately delaying the launch of Hot's 500-megabyte high-speed Internet package.

Through Suny, Samsung's mobile phone importer in Israel, Hot Mobile will market the cheap mobile phone package with 50-gigabyte surfing. Such a package is usually sold at NIS 30 a month or more, so Hot Mobile is underselling the market by a wide margin. The measure constitutes direct competition with Xfone, the cheapest company in the market, and will cause heavy damage to its large competitors.

The market believes that Hot Mobile has decided to strike at the soft underbelly of the mobile phone companies that compete against it in the television and landline Internet infrastructure markets. It has already used such tactics more than once; when it launched Cellcom TV, it cut its mobile phone prices time after time in order to weaken the player competing against it.

Hot Mobile uses Suny to mask its measures only for marketing purposes. Underlying the measures, however, is the ambition to move some of the players in the market from their safe spots. Suny profits in all aspects: it will make hay from Hot Mobile and generate broader traffic of customers at its sales points. Suny sells Samsung's mobile devices and end-user equipment, which is increasing its market share in Israel and becoming the most prominent player there.

The Hot group uses Hot Mobile as a competitive arm. For Hot, this is an opportunity to damage Partner and Cellcom, which are operating against it in the Internet infrastructure and television market, not only by weakening them in the television and fiber-optic market, but also by lowering their market caps. Since the beginning of the year, Partner's share price has fallen 23.3% and Cellcom's share price by 62.4%. The share prices of Partner and Cellcom are still losing ground, following the report that Suny is launching the cheapest mobile phone package in the market.

Hot Mobile's measure is liable to escalate the competition in the mobile phone market and set new boundaries for it. If Hot Mobile's competitors respond to the measure, competition will intensify and further erode their profit margins. Such competition will arouse questions about their ability to survive the challenges facing them in 5G investments and their ability to deploy fiber-optics to provide Internet infrastructure.

The question is whether the Ministry of Communications will respond to this measure by Hot Mobile. The Ministry of Communications has established a special team to monitor what is happening in the market in order to prepare for a situation in which one of the companies collapses. It is believed that the Ministry of Communications will not intervene in the matter, because Minister of Communications David Amsalem has already declared that the market will correct itself, and that his ministry will not prevent mergers in the market.

Published by Globes, Israel business news - - on August 19, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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