A growing number of telecommunications industry sources are saying that mobile carrier Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) is planning to launch its television service by August. The reports are backed by the company's recent request to expand its television pilot to more employees, and sent an internal e-mail for this purpose. The sources also say that the company has ordered new set-top boxes that support HDTV, because the current set-top boxes in the pilot do not support HDTV because of the Idan+ DTT method.
In the past few months, Cellcom and the Second Television and Radio Broadcasting Authority have been heavily involved in upgrading Idan+ reception in order to maximize national coverage so that the carrier can offer Idan+ channels together with Internet-protocol content.
Cellcom's venture is one of the most interesting ventures in the telecommunications market, because the carrier has targeted television strategically to be able to offer customers service at a level like cable company Hot Telecommunication Systems Ltd. (TASE: HOT.B1). Cellcom has invested in the sector for years, and is ready for launch, but is held back because the regulations are not ready to allow it to use the Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) network more efficiently in term of finance (because of the rental prices for the infrastructures) and in terms of engineering (because the engineering file is not yet closed).
Belying the reports of an August launch, Cellcom continues to state that it will not enter the television market if Bezeq's infrastructure prices are not lowered. This argument is at the center of discussions with the Ministry of Communications, and the carrier says that at the price levels set by the ministry, it is impossible to make a profit in television. The carrier's preparations somewhat contradict this argument, but the explanation is found in the day after the prices are set, from which the arrangements will follow.
Cellcom has concluded that the threat from Bezeq, once its structural separation is lifted and it will be able to sell combined telecommunications plans, is far greater than not entering the television market and risking an unprofitable venture.
This point should be elaborated. The chance of making a profit in television using Cellcom's model is very low. The carrier will enter a market with two powerful players Hot and Bezeq's satellite television subsidiary DBS Satellite Services (1998) Ltd. (YES), even as the market is declining as more and more young people abandon television in favor of online viewing of programs or Idan+ service.
Cellcom CEO Nir Sztern seems to have set a clear strategy: offering a basket of products - Internet, telephony, and television - that will give the mobile carrier the tools for meeting the challenges of the new telecommunications market.
Cellcom declined to comment to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on April 17, 2014
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