Relations between the Israeli shareholders in the IBC fiber optic venture (now called Unlimited) and Swedish company Via Europa, which is leading the project, are tense. Sources inform "Globes" that the reason why Lipa Ogman was brought to the company as a deputy to the Swedish COO was the Israelis' dissatisfaction with how Via Europa was leading the venture and its rate of progress.
A cautious assessment can be made that if no change occurs, a crisis will take place in relations between the parties, although everyone is currently hopeful that things will not reach this stage.
The company announced the appointment of former Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) CTO Ogman last week as deputy to the COO, appointed by Via Europa chairman Jonas Birgersson, who is leading the venture jointly with Cisco Systems.
What is behind this appointment is the great disappointment of the shareholders in the venture with its progress, and the COO's part in the failure. They believe that he is not the right man for the job.
The wording of the announcement was very unclear. It said that Ogman would be the COO's deputy, but it is believed that he will be taking charge for the purpose of moving the venture forward. Ogman was previously a candidate for CEO of the venture, but was ruled out by Via Europa, which believed that he was too old.
"Globes" revealed this week that the venture was suffering from very high churn rates, with one of the reasons being that the company was not providing its customers with routers that supported WiFi. Without a router, home customers cannot use high-speed Internet on their tablets and smartphones, and cannot connect more than one computer in a home, because the company hooks up only one computer directly from the socket to the computer.
Via Europa is opposing the sale of routers in an attempt to distinguish itself from Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and Hot Telecommunication Systems Ltd. (TASE: HOT.B1), and show that it is a company of the new world, meaning that it is a neutral network facilitating open surfing with no infrastructure restrictions. The absence of an advertising campaign, which means that the public has not been exposed to its activity, is also being criticized.
The model in Israel has encountered difficulties, because the Israeli consumer is used to getting a router from the infrastructure company or the provider, whether through lease or installment purchase, and it is therefore very difficult to get him to independently purchase a router. Another difficulty in the venture is working with Israel Electric Corporation (IEC) (TASE: ELEC.B22) and its pace of deployment. IEC is both the chief contractor and a shareholder in the project, and therefore cheaper and quicker external contractors cannot be employed to do the work. Adding to this the high cost of the workers gives a clearer picture of why deployment is proceeding slowly.
Sources also told "Globes" that some buildings will not let the company put a communications box in them. If a customer wants to be hooked up, but a majority of the residents in the building are opposed to the idea because they are concerned about the communications box, the customer's hookup will be delayed.
When the venture was experiencing problems getting started, the shareholders regarded it as reasonable. Now, however, it appears that the Israeli partners are unwilling to accept the arguments and excuses, because even if they are correct, the business is still not catching on.
The company recently began deployment in additional areas: Tel Aviv, Rishon Lezion, and Ra'anana. The state has put NIS 75 million into the venture to date, after the owners undertook to inject up to NIS 300 million. The shareholders are now being asked to provide an additional NIS 100 million to continue deployment, so that the state can also inject its share. State support is an important element for the venture.
The shareholders in the venture are IEC (40%), Via Europa (30%), and Israeli investors (Rapac Communication and Infrastructure Ltd. (TASE: RPAC), BATM Advanced Communications Ltd. (LSE: BVC; TASE: BATM), Tamares, and Yehuda Zisapel - 7.5% each).
Unlimited said in response, "There is no doubt that our entry into the telecommunications market is already causing a welcome consumer change. The company will not stop; it will continue deployment of the world's most advanced fiber-optic network in more cities in Israel with the help of its partners, headed by IEC, day and night, and in all weather conditions. Every change is difficult, and certainly an enormously complex nationwide project that presents daily challenges. Other than the legal proceedings, which we will not comment on in the media, the company and its partners and providers continue to move forward in order to meet the challenges and change the Israeli communications world into a new, advanced communications world that will change the Israeli customer's consumption habits."
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014