Israel's largest mobile carriers have been mired in a months-long dispute with Samsung's local branch. The tension has led the firms to purchase more of the devices through parallel import instead of the official distribution line of Samsung Israel.
Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) and Pelephone Communications Ltd. are the official importers of Samsung devices through Samsung Israel. Suny Electronics, on the other, sells Samsung devices on the open market at places like Bug, Dynamica, and Hot Mobile.
The impasse has its roots in several disagreements between the companies. According to one industry source, the most significant point of contention is a crisis of faith, with the mobile operators claiming they received assurances from Samsung Israel, which had not been implemented; they say they do not feel like they have a partner they can trust.
Thus, not one representative of Israel's three largest cellular operators was present at the launch event for Samsung's flagship phablet, the Note 5, two weeks ago in New York. Usually, senior staffers are keen to get their hands on the latest device at the unveiling ceremony.
Another cause for the crisis is the cost of the devices. Samsung Israel set higher prices for its smartphones then the operators expected, leading them to set higher prices on their network. As such, the providers decided to purchase the devices through parallel import and install Hebrew-language support independently.
The carriers have consistently tried to make the device cost more competitive, in an attempt to persuade the consumer to buy their next smartphone with his service provider.
As is customary in the industry, the mobile providers receive fixed payouts and incentives for selling Samsung devices. However, Samsung decided to raise the threshold for those benefits from a sales target of $12 million to $20 million, which the local carriers cannot reach.
The service providers, realizing they are unlikely to see those returns, decided not to make an effort to sell phones imported through Samsung Israel, choosing to increase their efforts on parallel import.
The three operators have, however, decided to purchase the new Note 5 directly from Samsung Israel though they are waiting for prices to drop in other countries in order to purchase them through parallel import and pass the savings on to their consumers.
Samsung Israel chose not to comment.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2015
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