Regulators look to MVNOs to ramp up competition in Israeli mobile market - Mobile World Live

Regulators look to MVNOs to ramp up competition in Israeli mobile market

27 JAN 2011

Around a dozen MVNOs and two new mobile licensees are set to be approved in Israel this year, representing a significant challenge to the country’s four existing mobile players. Regulatory pressures – notably mobile termination rate (MTR) cuts – are also expected to impact operator profitability.

Israeli regulators have been mulling the introduction of MVNOs since 2007 in a bid to ramp up competitiveness in a market dominated by three high-margin incumbent mobile networks: Cellcom, Orange (Partner Communications) and Pelephone, the latter the mobile arm of fixed-line incumbent Bezeq. The decision to allow MVNOs was granted in December 2009 and the first wave of virtual operators were given licences last June and instructed to begin negotiations with the networks. Regulators forecast that MVNOs will eventually account for around 5-10 percent of the country’s mobile market.

However, early progress in introducing MVNOs has been mixed, primarily due to operator reluctance to reach agreements. Last month it was reported that the very first MVNO licensee – Telecom 365, a unit of retail group Hamashbir – had returned its licence to the government citing limitations with the MVNO model with regards to mobile data services. Instead, the firm signed a separate deal with Pelephone to offer mobile services as part of a branding deal. This meant that in December 2010 another MVNO licensee, Free Telecom, became the first Israeli MVNO to agree terms with a network partner (Pelephone). According to Wireless Intelligence, while no Israeli MVNOs have officially launched to date, some thirteen firms have either been awarded MVNO licences or are waiting for approval. These include several major national retailers and the Israeli post office.

Meanwhile, the regulator has moved forward with plans to license two new full mobile operators in a further bid to stimulate competition. The deadline for applications is 1 February 2011 though existing players (with the exception of fourth-placed Mirs) are barred from bidding. The minimum bid for a licence is ILS10 million (US$2.71 million), with a framework in place to reimburse fees over this amount if certain conditions are met. Licensees will have seven years to deploy their new networks to meet coverage requirements.

Of more immediate concern for the incumbent operators is the regulator’s targeting of MTRs, which are due to be slashed by more than half this month (January 2011) from ILS0.25 to ILS0.0687, as part of a process that will see them eventually reduced to ILS0.0555 by 2014. Other regulatory moves in the pipeline include plans to limit cancellation fees on contract tariffs, which operators fear could encourage churn.

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