Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) will commit to investing NIS 5 billion in infrastructures over the coming few years in exchange for cancellation of structural separation. The compromise proposal follows talks between Bezeq and the Ministry of Communications.
Bezeq's investment will be in fiber optic deployment and increasing surfing speeds. In return the Ministry of Communications will remove the Israeli company's structural separation in the first stage between Bezeq and its international calls and Internet service provider unit Bezeq International. Details about the separation have still got to be clarified in light of the concerns of Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) and Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL).
The understanding reached between Bezeq and the Ministry of Communications have become a plan of action. The ministry prefers cooperating with the companies it supervises instead of acting through instructions.
Cancelling Bezeq's structural separation was adopted as policy during Moshe Kahlon's tenure at the Ministry of Communications. Kahlon determined that the process would be linked to progress in reform in the landline market.
However, Cellcom and Partner fear this process and claim that it could bring the market to a point of collapse due to the preferential terms enjoyed by Bezeq even before the structural separation is cancelled. Cellcom and Partner insist that any benefits given to Bezeq, which they claim is a monopoly, will only adversely affect competition in the market.
It should be noted that Bezeq already invests hundreds of millions of shekels annually in fiber optic infrastructures to 1.5 million Israeli households. So any commitment it makes are for investments that are vital for its future rivalry with HOT Telecommunication Systems Ltd. (TASE: HOT).
In actual fact, structural separation is the main means currently available to the Ministry of Communications in supervising Bezeq. Consequently, Partner and Cellcom are making every effort to convince the ministry to permit separation in more effective circumstances so that they won't be pushed out of the market and their future growth engines won't be harmed.
Published by Globes [online], Israel business news - www.globes-online.com - on December 21, 2015
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