Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) group companies Pelephone Communications Ltd. and Walla! are in talks about cooperation in the cellular field, sources inform "Globes." The two companies plan to join forces to make Walla! a kind of MVNO (mobile virtual network operator). In the first stage, Walla! will become a marketer for Pelephone, but as of now, it is unclear whether it will apply to the Ministry of Communications for a license.
Sources inform "Globes" that the companies plan to take advantage of the digital marketing power of Walla!, which will enter the mobile sector and begin selling cellular packages, as is currently done by companies like 012 Mobile, which uses the infrastructure of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR). 012 Mobile is a subsidiary of 012 Smile, owned by Partner. 012 Mobile is a sub-brand, through which Partner sells mainly cellular packages at low prices through a special cellular website, and through which customers order a line and select their preferred cellular package. Pelephone and Walla! plan to cooperate in the same way.
An important strategic move Walla!'s entry into the cellular market is expected to intensify and deepen competition in it, and cause some companies in the sector real distress as a result. Prices as low as NIS 37 a package can already be found in the market, and even prices of NIS 20 below the line (packages not offered to the public in advertisements). The entry of another player like Walla! in combination with Pelephone is likely to give the market a real shakeup. Cooperation between the companies in a way that makes Walla! a marketer requires no approval from the Ministry of Communications, and it therefore cannot be ruled out that another and unexpected price war will take place in the market. Walla!'s entry could also affect the decision of new players whether to enter the cellular market, because as one of Israel's leading websites, the company has enormous marketing power.
This is an important strategic measure for Pelephone in preparation for 2015, expected to be a very difficult year for all the players in the sector. Pelephone will lose Hot Mobile, which will use the former's network until the end of 2014, but will switch to Partner's network starting in 2015. The entry of Walla! into the cellular market is designed to partially compensate Pelephone for the loss of revenue, and help it capture market share. Pelephone's strategy is aimed at preserving its market share, while aggressively cutting its marketing expenses. Up until now, the Bezeq group's companies have not openly cooperated with each other. In view of the intensified completion the cellular field, however, Pelephone is searching for strategic advantages at the group level, and Walla! is just such an asset for it.
Published by Globes [online], Israel business news - www.globes-online.com - on November 30, 2014
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