NEW YORK-Israel plans to open its telecommunications market to full competition by January 1999, Communications Minister Limor Livnat said at a news conference, Nov. 3.
A week earlier, the Israeli government announced that three groups had made a tender offer to become the country’s third cellular carrier, building a Global System for Mobile Communications network. The award is expected next year.
Under the deregulation plan, any company meeting the government’s financial and technical standards will be allowed to provide basic telephone infrastructure and services. Companies awarded licenses for basic telephone service would have to be able to build their own infrastructure because Bezeq Israel Telecom, the state-owned carrier, would not be required to unbundle its services so that competitors can use its facilities.
Basic telephone service licenses would be awarded for 15 years, with 10-year extension options. License holders would be allowed to offer more advanced services, like broadband multimedia, and to install wireless local loops as alternatives to conventional wireline networks.
“We’re not going to issue any tender. We’ll issue licenses to whoever wants one. We’ll let market forces determine who participates,” said Daniel Rosenne, director-general of the Communications Ministry and chairman of the committee that prepared the telecommunications deregulation plan.
However, licenses for cellular and other wireless services would continue to be awarded by tender because, government officials said, they have limited bandwidth to allocate.
The program calls for licensing a fourth wireless carrier to offer personal communications services, and it opens the international telephony market to expanded competition, both by 2002. There already are two new international telephone service providers in Israel, both of which began operations in July.
The plan also would create a new telecommunications regulatory agency, although that entity probably will not be in operation before the basic telecommunications market is deregulated in 1999, Rosenne said.
Legislative approvals are required before the measure-which would remove any remaining monopoly held by Bezeq Israel Telecom-becomes law.
Disclosing terms of the telecommunications market liberalization plan was a requirement for the public sale, later this month, of a minority interest in Bezeq. The government will float domestically about 10 percent of Bezeq, worth about $193 million at the company’s current market valuation.
The Israeli government now holds about 76 percent of Bezeq, the public owns about 14 percent and Cable & Wireless plc of the United Kingdom owns about 10 percent. Cable & Wireless accumulated its stake by purchasing Bezeq shares on the Tel Aviv Stock Exchange a few years ago without the Israeli government’s knowledge, Reuters reported Nov 3. The British carrier has since been negotiating with Israeli government officials about increasing its holdings in order to become a strategic partner in Bezeq.
In February, the Israeli Cabinet approved a rule prohibiting any investors in Bezeq from increasing their holdings by more than 5 percent of what they already own. Cable & Wireless plc reportedly has sought official approval for purchasing up to 3 percentage points of the 10 percent stake in Bezeq to be offered publicly this month.
In addition to the November public offering in Israel, Merrill Lynch & Co. Inc. signed an agreement to take up to $250 million, or 12.5 percent, of Bezeq equity to resell to its clients. Merrill Lynch has until February to sell the shares, after which it can return most of the unsold portion, if any remains.
The Israeli government, which will retain 52 percent ownership of Bezeq after the two stock offerings are complete, has no plans for further privatization of the carrier, Livnat said.
