New cell providers promise lower rates for phone customers

Mirs and 018 Xfone win bidding for new wireless frequencies.

By NADAV SHEMER
April 13, 2011 02:00
3 minute read.
New cell providers promise lower rates for phone customers

cell phones 88 224. (photo credit: Courtesy)

 
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Mirs Communications and 018 Xfone Communications won the Communications Ministry’s tender for two wireless frequency bands late on Monday – and on Tuesday promised that their victories would lead to lower prices for consumers.

Mirs will pay NIS 710 million and Xfone will pay NIS 705m. for the tender, around triple analysts’ predictions, after defeating Golan Telecom and Select Communications in the process.

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Communications Minister Moshe Kahlon (Likud) has called the tender, which delivers the companies frequency bands for wireless carriers using third generation technology, the most important step taken by the ministry during his tenure.

Speaking at a joint press conference alongside Mirs controlling shareholder Patrick Drahi and Xfone owner Hezi Bezalel, Kahlon joked that he would take back their licenses if they intend to cut rates by any less than 50 percent. Adopting a more serious tone, he said, “There is room to lower mobile prices, and we hope that they will fall. Prices have somewhere to fall to – and sharply.

This is a great push for the market, which has great economic importance.

Kahlon said that in his opinion this would be the last tender for these technologies in Israel.

“We were worried that the market was saturated, and that nobody would participate, but I am pleased that this was not the case,” he said.

Drahi, who is also the controlling shareholder in cable TV, Internet and telephone carrier Hot Telecommunication Systems, signaled that Mirs would push hard to lure customers away from the three other existing cellular communication providers Partner (which operates mobile carrier Orange), Cellcom and Pelephone, which dominate the market.

“The more we pay in the tender, the more aggressive we have to be,” he said, adding that he would consider merging Mirs and Hot into a single telecommunications group.

Israel Consumer Council CEO Ehud Peleg told The Jerusalem Post that the introduction of the new companies would ensure a level of competition and fairness that did not currently exist in the cellular market.


There were two problems prior to this tender, Peleg said, the first being that it was difficult to break a contract with a cellular company, and for which important regulatory steps were taken in the past two years to make it easier for consumer to do so.

The second problem, he said, was that consumers needed an alternative company to which they could move, which “until now did not exist.”

He said, “Today when new players join [the market], for which they erected a very smart incentive, a tender...

they [the mobile companies] will begin to offer attractive packages to the consumers.”

Peleg said Israeli consumers had ranked cellular companies in last place in terms of their level of fairness and transparency, adding that a million consumers had indicated they would move to a new operator should one emerge in the market, with 54.5% listing an “attractive price” as their main consideration when making that choice.

He called Tuesday’s announcement of the tender’s winners a “good result” for consumers, but added, “The responsibility rest also on the shoulders of the consumer to take advantage of this opportunity, and not to be lazy, but rather to make comparisons, to make calculations, and to choose the service that is most worthwhile for them, now, when the opportunity has opened up in front of them.”

Meanwhile, Leader Capital Markets predicted that Partner and Cellcom would be hit hard by the two new competitors, saying that “aggressive prices and determination by the bidders in the mobile carriers tender highlight the size of the competitive threat against the current carriers.

“Cellcom Israel and Partner Communication will be the main victims of the pending change, as their mobile business is, and will probably continue to be, their core activity even after the mergers with NetVision and 012 Smile Telecom, respectively,” it continued.

The effect on Bezeq Israeli Telecommunication Co., which owns mobile carrier Pelephone, will be less significant because of that company’s diversity, Leader said.

Globes contributed to this report.

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