In a post to her Facebook page, Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) CEO Stella Handler has responded to the public storm raised by the decision of the Ministry of Communications to allow Bezeq to cancel the structural separation between it and its subsidiaries and the Ministry of Finance's opposition to the move.
"Today, we saw an unprecedented attack on Bezeq, at the center of which is a letter from the Ministry of Finance to the Ministry of Communications. The Ministry of Finance opposes the Ministry of Communications' decision to allow Bezeq to offset the losses accumulated in Yes. The Ministry of Finance claims that 'the conditions are not yet ripe for removing the structural separation'.
"In fact, the Ministry of Finance knows that at stake is an archaic regulatory tool that no other regulator in the world uses, and recognizes that it needs to be changed. The Budgets Commissioner in the Ministry of Finance himself says that the structural separation ought to be abolished, but that this should be done gradually in order to allow conditions to ripen. So when exactly will conditions ripen?"
In her post, Handler complains of the cost of structural separation, whereby Bezeq and its subsidiaries are not allowed to cooperate to offer packages of services. "Today, Bezeq is the only telecommunications company in the world, the only dinosaur that sells fixed-line services separately from other services such as television and Internet. This makes no sense and the first to pay the price is the consumer. After all, the separation has costs, and who pays them? The consumer. Not to mention that the consumer could obtain service much more conveniently, and competition would be created against Hot's triple package."
The Bezeq CEO also comments on the state's foot-dragging, as she sees it, in dealing with the matter. "All the committees have reached the same conclusion. How much longer can it be discussed? The structural separation saga has gone on for over a decade, but instead of letting Bezeq become more efficient, cut costs and so reduce prices and offer the consumer cheap triple packages, the state continues with the approach that it is preferable to weaken Bezeq rather than strengthen competition."
In response to the concerns of the Ministry of Finance, Handler declares, "The structural separation has not been canceled. Bezeq is still obliged to separate between its businesses, so that it cannot sell triple packages like its competitors or share marketing information between its various operations. The move being introduced by the Ministry of Communications will allow Bezeq to recognize past losses, that's all… From the founding of Yes and for five years Bezeq invested huge sums in Yes in order to compete in the multi-channel television market. Despite the fact that Yes posted huge losses, Bezeq continued to invest in it money that it earned in its traditional business.
"Now, sixteen years after Yes went on air, Bezeq seeks to claw back some of those losses and offset them against profits on its other activities. An obvious business proceeding that any company that has invested in the past deserves. It's not a 'gift' as the media have been calling it. Even the Tax Authority, which is under the Ministry of Finance, has recognized this right."
Handler refers to operational structural separation, whereby Bezeq group companies cannot cooperate, and legal corporate separation, which prevents Bezeq utilizing tax losses in satellite broadcasting unit Yes. Current regulation imposes both on the company.
Published by Globes [online], Israel business news - www.globes-online.com - on December 26, 2016
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