The tender, scheduled for early December, is arousing great interest among the cellular companies.
Israel Minister of Communications Gilad Erdan has decided to open the cellular market to additional potential competitors. Erdan also made concessions in deployment of 4G networks that will enable the operators to deploy the new network in stages. The request by Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Golan Telecom to complete jointly in the tender was rejected. Internet surfing on 4G networks is much faster, and requires the allocation of frequencies to the operators.
The tenders committee met with Erdan last Thursday, and discussed the operators’ complaints about the 4G tender terms. The tender, scheduled for early December, is arousing great interest among the cellular companies.
One of the important complaints by the market players concerned the entry of new players into the market, who will be able to buy 4G frequencies and connect to an existing operator for the purpose of setting up a cellular network with it. The existing operators opposed this possibility, fearing that the entry of additional players would raise the price of frequencies and have a negative impact on the older players, who will have to pay a lot more.
It is feared that the opening of the market to additional players will cause so much damage to the existing players that one of them may collapse.
It was eventually decided not to close the market, and to enable new players to compete in the tender, because an open tender will facilitate more efficient allocations of frequencies and better reflect the players’ motivation. If a new player believes there is room for him in the market, he will compete and bid the maximum price he believes he should invest in order to enter.
One argument by the operators that was accepted concerned the speed at which a tender winner must set up his 4G network. Erdan agreed to a concession on this point; it was agreed that there was no hurry in reaching maximum deployment of 4G, which is in its infancy.
The request by Cellcom and Golan Telecom to submit a joint bid in the tender has apparently been rejected. The companies met yesterday with Erdan, and made their arguments on the question, as first reported in “Globes” last week. The companies want to submit a joint bid because they have reached agreement on setting up a joint network, and it is therefore unreasonable and illogical for them to submit separate bids when they have an agreement for a shared network.
The ministry believes that a joint bid by the two companies will immediately lead to a joint bid by Hot Telecommunication Systems Ltd. (TASE: HOT.B1) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), which have also agreed to unify their networks. In this situation, it is clear that new players will have no chance to compete, because the existence of large and strong entities would prevent the entry of new players by taking over the 4G frequencies.
Published by Globes [online], Israel business news – www.globes-online.com