JOHANNESBURG, South Africa-Israel is determined not to be shaken from its pristine position of having one of the highest cellular penetration rates in the Middle East by the current unrest in the region.
“Penetration in Israel is growing steadily at a double-digit rate for next year,” said Dr. Dan Eldar, Partner’s vice president, carrier, international and investor relations. “Traditionally, we are lagging behind Finland by approximately 18 months in terms of penetration. We believe that we will reach the Finnish present 75-percent penetration in about a year and a half.”
Israel is also planning to be one of the first countries to introduce third-generation (3G) technologies in the Middle East. The Communications Ministry has formally stated it will appoint a tender committee to allocate 1800 MHz and Universal Mobile Telecommunications System (UMTS) spectrum. “In terms of third generation, we expect to see three to four operators launching commercial service in the year 2003,” said Dr. Eldar.
In addition, it is also possible the ministry may issue a tender for a fourth cellular provider. The country currently has three cellular operators: Pelephone, jointly owned by Motorola and Israel’s Bezeq Telecom; CellCom, owned by Discount Investment Corp., BellSouth and Brazil’s Safra family; and Partner, owned by Hong Kong’s Hutchison Telecommunications and several Israeli partners.
Various sources noted the lack of a business case for a fourth operator in Israel. “Given the stiff competition in the local cellular market in Israel and a penetration level of pretty much 60 percent, profit margins are tightening, and there is a general sense that future profitability will be tough to achieve,” said Guy Zibi, regional manager, Africa/Middle East for U.S.-based Pyramid Research.
Given such competition, the Israeli cellular market is often seen as the “world’s test bed” for introducing new technologies. It is the only country in the Middle East where each one of the three operators uses a different technology standard. Pelephone uses CDMA technology, its rival Cellcom offers TDMA service and the third operator to enter the arena, Partner, uses a GSM 900 MHz network.
“We do see significant advantages in using GSM in our environment. One obvious is seamless roaming, as we are the only network in Israel which currently can offer our customers the service to take their phone and SIM card abroad. …There is also the added advantage of GSM that our entire customer base can send and receive short message service (SMS). Through the popularity of the GSM service worldwide, we have a wide variety of handsets available from major manufacturers, including Ericsson, Motorola, Mitsubishi and Nokia. All four of these operators manufacture handsets specifically for Israel, which enable subscribers to generate SMS messages in Hebrew,” added Dr. Eldar.
Partner also ventured into e-commerce services several months ago in conjunction with the Bank Leumi of Israel. “We can now supply various banking applications to our customers so that they can access information about their accounts and can also perform banking transactions like purchasing stocks and transferring funds from one account to another,” said Dr. Eldar.
During an Internet conference call held in October, Partner, reporting on its operational results, said it added 129,000 new subscribers during the third quarter, ending the quarter with a customer base of approximately 633,000. This is the highest quarterly subscriber growth recorded by the company since its launch in January 1999. Of the total new subscribers, 53,000 are prepaid customers, which joined Partner’s Big Talk program, launched in June 2000.
At the end of October, CellCom had a subscriber base of 1.8 million, and Pelephone’s subscribers are estimated at around 1.4 million. The estimated prepaid market in Israel is currently between 30 percent and 35 percent of the total subscriber base. Both CellCom and Pelephone declined to offer details on their strategic plans.
To that end, the ownership of Pelephone could change in the near future, as Motorola is looking at selling its 50-percent stake. Telef
