Israel’s mobile phone market has grown enough to ensure sufficient competition in the industry and the government is encouraging companies to enter the fixed- line and cloud computing markets to augment revenue.
Cellcom Israel Ltd. (CEL), Partner Communications Co. (PTNR) and Bezeq Israeli Telecommunication Corp. (BEZQ), the country’s three largest mobile phone operators, lost more than $15 billion in market value this year as government measures boosted competition in the industry and reduced costs for customers. Cellcom fell 5.9 percent to 21.3 shekels, or the equivalent of $5.32, the lowest level on record at the close in Tel Aviv today. Partner declined 6.9 percent to 12.8 shekels, or $3.20, the lowest since February 2003.
“The number of players in the market is the number we wanted,” Eden Bar Tal, the director general at Israel’s Ministry of Communication, said in a telephone interview on July 19. “Players who want to increase revenues should do this by providing additional services and not by taking advantage of a lack of competition.”
The three stocks are the worst performers on the benchmark TA-25 Index this year as the measure lags behind the Standard & Poor’s 500 Index and the Nasdaq Composite Index. (CCMP) The Bloomberg Israel-US Equity Index (ISRA25BN) of the most-traded Israeli companies in New York recorded the largest weekly rise this year as Mellanox Technologies Ltd. (MLNX) surged 35 percent.
The government required service providers cut fees by disbanding inter-network call charges and opening up the sector to new competition.
Hot Telecommunication System Ltd. (HOT), along with Golan Telecom Ltd., moved into Israel’s mobile-phone space on May 14. Golan, partly owned by French entrepreneur Xavier Niel, began offering unlimited wireless services for less than 100 shekels, or $24.96, per month.
The products compete with packages of Cellcom, Partner and Bezeq, which controlled 95 percent of the Israeli mobile-phone market, according to data from the Ministry of Communication.
“Pricing wars are heating up,” Michael Klahr, an analyst at Citigroup Inc., wrote in a an e-mailed report on July 16. New operators like Golan Telecom and Hot will grab 7.7 percent of mobile phone subscribers from the incumbents within a year, a number that is higher than initial expectations, Klahr said.
Bezeq, the Tel Aviv-based company, which operates in the mobile phone industry through its unit Pelephone, gained 3 percent to 4.17 shekels, trimming this year’s loss to 39 percent.
‘Dynamic and Developing’
Cellcom, Israel’s largest mobile phone provider, fell to the lowest level on record last week in New York as Partner, the nation’s second-largest, capped its biggest five-day slump in two months. The company’s New York shares have fallen 62 percent to $3.39 this year.
Rami Levi Chain Stores Hashikma Marketing 2006 Ltd. (RMLI), Israel’s third-largest supermarket operator, began offering mobile-phone services in December in cooperation with Pelephone. The company said last month that the service now has 56,000 customers and that it’s in talks with other operators to provide cheaper wireless packages to consumers.
“The telecom market is dynamic and developing all the time,” Bar Tal said. “Players who want to increase revenue should do this by providing additional services and not by taking advantage of a lack of competition.” Israel has a mobile phone subscription penetration rate of 130.2 percent compared to 130.5 percent for Europe, according to data compiled by Bloomberg Industries.
Israel’s TA-25 Index (TA-25) has dropped 1.2 percent this year, lagging behind an advance of 8.4 percent for the S&P Index and 12.3 percent on the Nasdaq Composite Index.
Israel, whose population of 7.8 million is similar in size to Switzerland, has about 60 companies trading on the Nasdaq Stock Market, the most of any nation outside the U.S. after China. The country is also home to more startup companies per capita than the U.S.
The Bloomberg Israel-U.S. index recorded the biggest weekly advance since December 2011, led by gains for Mellanox, the largest company on the gauge.
Mellanox fell 3.4 percent to 361 shekels, or the equivalent of $90.12, in Tel Aviv today. The New York-traded shares reached $89.24 last week.
The company more than doubled its second-quarter sales over the same period last year and its third-quarter revenue forecast was 50 percent more than analysts’ estimates.
Palo Alto Networks Inc. (PANW), the provider of Internet-firewall technology, climbed 27 percent to $53.13 in New York in its public offering debut on July 20. The company’s founder Nir Zuk was a former engineer at competitor Check Point Software Technologies Ltd. (CHKP)