TEL AVIV, Israel-Just as the cellular fight in Israel intensified with the latest marketing campaigns, the Ministry of Communications announced it may license a fourth and maybe a fifth provider by the end of next year.
Deputy Prime Minister and Communications Minister Benjamin Ben-Eliezer recently confirmed that at least 11 companies or consortia, not yet identified, expressed interest in the additional licenses.
“I want to wait for next year’s developments before deciding to license the additional providers,” said Ben-Eliezer.
In response to the announcement, third operator Partner Communications’ External Public Relations Manager Ita Elhanai asserted that three operators in a market like Israel are enough to cover the needs of the sector.
Ofra Preuss, spokesperson for cellular operator CellCom Israel, declined to comment on the Ministry’s announcement of additional licenses. “We were not asked about it by the minister. When we are asked about it, we will respond,” Preuss said.
In a country where people are passionate about wireless phones and their need to be available at all times, the issue will certainly generate a lot of controversy, most of it carried out over the air waves. With 2.6 million cellular phones, Israel claims one of the highest cellular penetration rates in the world-42 percent.
“Israel is a crazy country. It is not uncommon for families here to have three, four or even five cellular phones,” remarked Ben-Eliezer.
“I still don’t get it,” added a telecom executive who has been in this country for more than 15 years. “That they will leave their phones on during a conference, I reluctantly accept. But that they will actually take a call when the lecturer is speaking is beyond me.”
Market positioning
There are currently three providers of mobile service in Israel.
Pele-Phone, the first operator, a joint venture between fixed-line incumbent Bezeq and Motorola Israel, was recently plagued with stolen phones, cloning and security problems. Pele-Phone, with 1.1 million subscribers, is facing stiff competition from CellCom, which is a joint venture between BellSouth, Safra Bank and others, and newcomer Partner, partially owned by Hong Kong-based Hutchison Telecom.
While Pele-Phone managed to differentiate itself from CellCom as the elitist company, this strategy backfired when Partner started marketing its Orange-brand service in the country. With aggressive promotions-such as handsets for less than US$20, free handsets for CellCom and Pele-Phone customers, and lower prices-Orange gained 270,000 subscribers in less than one year.
The stiff competition prompted a reshuffling of Pele-Phone’s strategy, culminating in the recent campaign promoting its Next sub-brand of digital service. The campaign emphasizes superior CDMA technology, which would allow users to be connected to two or three cells at the same time, minimizing dropped calls. In addition, the new technology enables the provision of value-added services such as news information services tailored to subscribers, said Pele-Phone.
The company expects to increase its share of digital subscribers, currently at 350,000, but will continue to offer its narrowband-AMPS analog service.
To address the security and cloning problems, the company has installed analog authentication systems over the past six months. According to Yigal David, Pele-Phone’s strategic project manager in the marketing division, the system is now 99.9-percent clone-free.
“We never experienced a drop in the number of subscribers; we always acquired more than the churn rate,” said David. “During the last three months, we signed an average of 35,000 subscribers per month.”
Because of company policy, he wouldn’t divulge the churn rate.
In response to Pele-Phone’s lowered prices, Partner in turn came out with a new campaign. “Orange Discover competes with Pele-Phone Next and offers better services and options to businessmen or high-tech employees,” explained Partner’s Elhanai.
According to CellCom’s Preuss, the operator is not changing its market strategy in view of Pele-Phone’s new campaign. “We offer a value proposition to our subscribers,” Preuss said.
With more than 1.3 million subscribers, a low churn rate, and 40,000 to 50,000 new subscribers per month, “we continue with our plans, like the recent promotion offering campus students 3.5 (U.S.) cents per minute,” added Preuss.
Partner’s IPO
As the marketing battles intensify, Partner raised US$525 million in an initial public offering of American Depository Receipts, simultaneously in New York and London, to pay back loans from when it launched service and to fund the company’s expansion plans. After the IPO, Hutchison Telecom’s stake in Partner dropped to 33 percent.
Pele-Phone and CellCom are not currently publicly listed.
