Cellular firms barred from using free minutes to push sales

Decision undertaken in attempt at opening handset market to new companies and retail chains.

By MATTHEW KRIEGER
October 24, 2007 08:01
2 minute read.
The Jerusalem Post

cellular biz 88 224. (photo credit: Bloomberg)

 
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In an unprecedented decision, the Communications Ministry on Tuesday informed cell phone companies that it intends to make it illegal for them to continue to subsidize purchases of more expensive handsets by offering free minutes to customers. "Disconnecting the ties between the purchase of cell phones and free airtime will remove the corruption that currently exists in the cell phone market, will close the gaps between companies and will increase transparency in monthly phone bills ahead of the introduction of the number portability program," said Communications Minister Ariel Attias. "This decision will also increase competition in the market and allow new players to gain a foothold by increasing their market share," he said. The country's cell phone companies will be given approximately a month in order to prepare a defense or offer an alternative plan, a Communications Ministry spokesman said. Calls to cell phone companies for comment on the decision were not returned by press time. While the decision will help bring clarity to what is often time a very murky and obtuse industry, one analyst said he was not sure the decision would offer any additional benefits to customers. "It will open the market to greater competition, but the question is, greater competition in what?" asked Tsahi Avraham, a technology and communications analyst at Clal Finance Batucha. "It will give a push to the handset market in terms of bringing new players into the game, as up until now, only cell phone service providers sold handsets, but I am not sure that individual clients will benefit." Meanwhile, the Public Trust organization welcomed the ministry's decision. "This decision is a major advance for the cell phone industry," the organization told The Jerusalem Post. "It will remove a significant roadblock in terms of opening up competition in the cell phone sector and for the consumers, we believe that it will significantly lower prices." The decision was undertaken as an attempt at opening the handset market to new companies and retail chains, the ministry said. "In order to move new players into the market we have to make it fair. Therefore, cell phone service providers will no longer be allowed to subsidize the price of expensive handsets by offering free minutes," it noted in its decision. The added transparency that the ministry believes this decision will bring comes about a month and a half before the beginning of the number portability program, set to begin on December 1. Number portability will allow cell phone subscribers to take their numbers with them between phone companies within three hours of making the request. The ministry suspects that the lack of portability is one of the main barriers preventing consumers from switching providers.

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