Golan rattles cellular market with NIS 49 plan

Golan Telecom, the mobile start-up that shook the market last spring with discount service packages, was back at it again yesterday. The company said it was offering unlimited calls and Internet connection for NIS 49 a month to people who sign up between now and election day eve on January 21. The price is valid for the first six months, after which it bumps up to Golan’s regular NIS 99 a month rate.

This is the second time in two months that Golan has offered a sharply discounted package. In early October, it offered family members of existing subscribers the first four months for free.”The first time, we wanted to say thank you to our users,” French-Israeli entrepreneur Michael Golan, the company’s founder and CEO, told TheMarker yesterday. “The [latest] idea was conceived during the war. We wanted to do something, contribute to the community, and we thought only about the south. But wherever you were was the south. Rishon Letzion? Tel Aviv? So we said, ‘Let’s do something nationwide NIS 49.”

In the cell-phone industry yesterday, executives were debating whether Golan Telecom was offering the discounted packages in a desperate attempt to recruit new customers or as part of a long-term strategy. The company is not alone in cutting rates an activity that has continued in the six months since the entry of six new rivals into the market sparked a price war. Recently, 012 Mobile, a brand of Partner Communications, offered “light” users a NIS 9 a month package while YouPhone, of the Blue Square group, offered a NIS 49 package.

Golan, which launched last May, counts 150,000 customers to date, putting it well behind the 400,000 its big rival, HOT Telecom, has amassed. Between the two of them, they have offered the biggest competition to Cellcom Israel, Partner and Bezeq’s Pelephone unit forcing the three veteran companies to slash rate.”
Golan’s Telecom’s discounting campaign was not unexpected, but that doesn’t make it any less pleasant for the other operators,” said Gil Dattner, an equities analyst at Leumi Capital Markets. “Golan was expected to do something extreme.”

The moment Golan offered an all-inclusive package last spring, its competitors followed suit  some of them offering even lower prices complicating the new companies’ bids to become major players themselves, said Dattner.
Indeed, Golan’s announcement took the shine off telecommunications stock on the Tel Aviv Stock Exchange yesterday. The TA-Telecommunications index had risen as much as 2% during the session on reports that Ilan Ben-Dov was close to selling his controlling stake in Partner Communications to Israeli-American media mogul Haim Saban.

Partner, which had risen as much as 5%, shed all its gains to end unchanged (although its parent company, Scailex, ended the day up close to 44%). Cellcom Israel likewise shed a gain of more than 5% to end just 0.3% higher. HOT Telecom ended just 0.2% up for the session.

“The phenomenon testifies to how crowded the market is, and the new players’  difficulty in continuing to gaining market share as the price differences have  grown smaller,” Dattner said. “From the point of view of the veteran companies, the Golan reductions will likely bring further erosion in the average revenue per user for the market.”

Michael Golan denied industry speculation that his latest discounting plan meant he was having trouble recruiting new customers. “Every time we do something new, they say we’re having a problem with winning new customers, but we keep acting and do something else,” he said.”

The day we launched, all the tycoons, analysts and journalists said Golan Telecom wouldn’t last through the summer, but we are here. Then they said we wouldn’t last to the end of the year, and here we are with unprecedented offers,” Golan said.

He said Golan Telecom could weather the competition because it doesn’t have debt and doesn’t need to pay dividends.