Globes 8-1-2013

Landline interconnect fees to fall too

Landline interconnect (i.e. connections between different telephone networks) rates will be cut from around NIS 0.04 to NIS 0.01. As “Globes” revealed, consultancy firm Frontier Economics Ltd. found that landline connectivity rates should be cut to just NIS 0.01. The decision to cut the rate will presumably be made by the next communications minister, because Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) and Hot Telecommunication Systems Ltd.will have submit reservations about the measure, and such a decision does not end quickly in any case.

Landline interconnect rates were reduced as part of the supervision of Bezeq’s prices, but the reduction will affect the entire industry because all landline carriers are subject to the same rate. Landline interconnect rates were supposed to fall in 2008, but then-Minister of Communications Ariel Atias delayed the establishment of a committee to review the issue. His successor, Moshe Kahlon, established the Hayek Committee, which was supposed to set the rates, and handed the work over to Frontier.

The reduction in landline interconnect rates will affect Bezeq and Hot’s revenue because they will receive less money from calls to their networks. Bezeq will lose tens of millions of shekels a year; Hot will lose much less because its share of the landline market is much smaller, at 20-25%. A reduction in landline interconnect rates will have a much smaller effect than the reduction in mobile interconnect rates.

Published by Globes [online], Israel business news – www.globes-online.com – on January 8, 2013